Document:

Exhibit 10.7

 

FIRST AMENDMENT TO

LEASE
AGREEMENT

This First
Addendum to Lease Agreement (the “First Amendment”) is entered into this  25  
day of  July         , 2003
by and between Griffin Properties, LLC, a California limited liability company
(“Landlord”) and 1st Pacific Bank of California, a California
Corporation (“Tenant”), and is made with reference to the following facts and
objectives:

R
E  C  I  T  A  L  S

A.            Landlord and Tenant have previously entered into that
certain Lease Agreement dated April 18, 2003 (the “Lease”) whereby Tenant
agreed to lease from Landlord, and Landlord agreed to lease to Tenant, certain
premises commonly known as 8889 Rio San Diego Drive, Suite     ,
San Diego, California (the “Premises”), and being more particularly described in
the Lease.

B.            Landlord and Tenant desire to amend the terms of the
Lease in accordance with the terms of this First Amendment.

NOW, THEREFORE,
the parties hereto hereby agree as follows:

1.                                      Premises:  The parties agree
that Section 1.2 of the Lease is hereby amended to provide that, for all
purposes of the Lease, the size of the Premises is hereby deemed to be Three
Thousand Nine Hundred Four (3,904) rentable square feet.

2.                                      Base Rent:  Section 1.8 is hereby
modified by adding the following Base Rent schedule thereto, which indicates
the Base Rent which is payable by Tenant throughout the Term:

	
  

  	
   

  	
  Monthly

  	
   

  
	
  Months

  	
   

  	
  Base Rent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  01-12

  	
   

  	
  $

  	
  9,955.20

  	
   

  
	
  13-24

  	
   

  	
  $

  	
  10,253.86

  	
   

  
	
  25-36

  	
   

  	
  $

  	
  10,561.47

  	
   

  
	
  37-48

  	
   

  	
  $

  	
  10,878.32

  	
   

  
	
  49-60

  	
   

  	
  $

  	
  11,204.67

  	
   

  
	
  61-72

  	
   

  	
  $

  	
  11,540.81

  	
   

  
	
  73-84

  	
   

  	
  $

  	
  11,887.03

  	
   

  
	
  85-96

  	
   

  	
  $

  	
  12,243.64

  	
   

  
	
  97-108

  	
   

  	
  $

  	
  12,610.95

  	
   

  
	
  109-120

  	
   

  	
  $

  	
  12,989.28

  	
   

  

 

 1
 

3.                                      First Month’s Rent: 
Pursuant to Section 1.10, Tenant paid to Landlord, on the execution of
the Lease, an amount equal to Seven Thousand One Hundred Seventeen and 05/100
Dollars ($7,117.05) on account of the first month’s Base Rent.  Tenant agrees to pay to Landlord, concurrent
with the execution of this First Amendment, the sum of Two Thousand Eight
Hundred Thirty-eight and 15/100 Dollars ($2,838.15) to fully pay Landlord for
the first month’s Base Rent.

4.                                      Tenant Allowance: 
Section 1.15 is hereby amended to provide that the maximum Tenant
Improvement Allowance to be paid by Landlord shall be One Hundred Sixty-three
Thousand Nine Hundred Sixty-eight and 00/100 Dollars ($163,968.00).

5.                                      Refurbishment Allowance: 
Section 1.16 is hereby amended to provide that the maximum amount to be
paid to Tenant pursuant to Section 1.16 is Eleven Thousand Seven Hundred Twelve
and 00/100 Dollars ($11, 712.00).

6.                                      Remaining Provisions Unchanged: 
Except as specifically provided in this First Amendment, all other
provisions of the Lease shall remain in full force and effect in accordance
with their terms.

IN WITNESS
WHEREOF, the undersigned have executed this First Amendment as of the date and
year first above written.

	
  Griffin Properties, LLC, a California

  	
   

  	
  1st Pacific Bank of
  California, a

  
	
  limited liability company

  	
   

  	
  California Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ Gary Beyler

  	
   

  	
  By:

  	
   /s/ James Burgess

  
	
   

  	
  Gary Beyler, Member

  	
   

  	
  Title:

  	
   EVP & CFO

  	
   

  

 

 2Exhibit 10.8

TABLE
OF CONTENTS

	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE 1

  	
   

  	
  - PREMISES

  	
   

  	
  3

  
	
  ARTICLE 2

  	
   

  	
  - TERM

  	
   

  	
  3

  
	
  ARTICLE 3

  	
   

  	
  - RENT; LATE CHARGES

  	
   

  	
  4

  
	
  ARTICLE 4

  	
   

  	
  - ADDITIONAL RENTAL

  	
   

  	
  4

  
	
  ARTICLE 5

  	
   

  	
  - ADDITIONAL TAXES

  	
   

  	
  8

  
	
  ARTICLE 6

  	
   

  	
  - SECURITY DEPOSIT

  	
   

  	
  9

  
	
  ARTICLE 7

  	
   

  	
  - USE OF PREMISES

  	
   

  	
  9

  
	
  ARTICLE 8

  	
   

  	
  - UTILITIES AND SERVICES

  	
   

  	
  10

  
	
  ARTICLE 9

  	
   

  	
  - MAINTENANCE AND REPAIRS

  	
   

  	
  11

  
	
  ARTICLE 10

  	
   

  	
  - ALTERATIONS, ADDITIONS AND IMPROVEMENTS

  	
   

  	
  12

  
	
  ARTICLE 11

  	
   

  	
  - INDEMNIFICATION AND INSURANCE

  	
   

  	
  13

  
	
  ARTICLE 12

  	
   

  	
  - DAMAGE OR DESTRUCTION

  	
   

  	
  15

  
	
  ARTICLE 13

  	
   

  	
  - CONDEMNATION

  	
   

  	
  15

  
	
  ARTICLE 14

  	
   

  	
  - RELOCATION

  	
   

  	
  16

  
	
  ARTICLE 15

  	
   

  	
  - ASSIGNMENT AND SUBLETTING

  	
   

  	
  16

  
	
  ARTICLE 16

  	
   

  	
  - DEFAULT AND REMEDIES

  	
   

  	
  18

  
	
  ARTICLE 17

  	
   

  	
  - ATTORNEYS FEES; COSTS OF SUIT

  	
   

  	
  20

  
	
  ARTICLE 18

  	
   

  	
  - SUBORDINATION AND ATTORNMENT

  	
   

  	
  21

  
	
  ARTICLE 19

  	
   

  	
  - QUIET ENJOYMENT

  	
   

  	
  21

  
	
  ARTICLE 20

  	
   

  	
  - PARKING

  	
   

  	
  21

  
	
  ARTICLE 21

  	
   

  	
  - RULES AND REGULATIONS

  	
   

  	
  22

  
	
  ARTICLE 22

  	
   

  	
  - ESTOPPEL CERTIFICATES

  	
   

  	
  22

  
	
  ARTICLE 23

  	
   

  	
  - ENTRY BY LANDLORD

  	
   

  	
  22

  
	
  ARTICLE 24

  	
   

  	
  - LANDLORD’S LEASE UNDERTAKINGS-EXCULPATION FROM
  PERSONAL LIABILITY TRANSFER OF LANDLORD’S INTEREST

  	
   

  	
  22

  
	
  ARTICLE 25

  	
   

  	
  - HOLDOVER TENANCY

  	
   

  	
  23

  
	
  ARTICLE 26

  	
   

  	
  - NOTICES

  	
   

  	
  23

  
	
  ARTICLE 27

  	
   

  	
  - BROKERS

  	
   

  	
  23

  
	
  ARTICLE 28

  	
   

  	
  - SIGNAGE RIGHTS

  	
   

  	
  23

  
	
  ARTICLE 29

  	
   

  	
  - FINANCIAL STATEMENTS

  	
   

  	
  24

  
	
  ARTICLE 30

  	
   

  	
  - MISCELLANEOUS

  	
   

  	
  24

  

 

	
  EXHIBIT A

  	
   

  	
  Depiction of the Premises

  
	
  EXHIBIT B

  	
   

  	
  Notice of Lease Term Dates

  
	
  EXHIBIT C

  	
   

  	
  Work Letter Agreement

  
	
  EXHIBIT D

  	
   

  	
  Rules and Regulations

  
	
  EXHIBIT E

  	
   

  	
  Form of Tenant Estoppel Certificate

  

 

 i

OFFICE
LEASE

THIS OFFICE LEASE (“Lease”) is made and entered into by and
between FSP REGENTS SQUARE, LLC, a
Delaware limited liability company (“Landlord”)
and the Tenant described in Item I of the Basic Lease Provisions as of
September 17, 2004 (the “Effective Date”).

BASIC
LEASE PROVISIONS

1.                          Tenant: 1ST PACIFIC BANK OF CALIFORNIA, a
California corporation (“Tenant”)

2.                          Description of Premises/Building/Project:

2.1                   Premises: 4275 Executive Square, Suite 650
(the Premises is shown on Exhibit “A”)

2.2                    Rentable Area:        Approximately
5,061 rentable square feet (approximately 4,307 usable square feet). (Section 1.3)

2.3                   Building:      The
building located at 4275 Executive Square, La Jolla, California

2.4                   Project:         That
certain project, with all common areas and appurtenant parking facilities,
commonly known as “Regents Square” and containing building improvements located
at 4250, 4270 and 4275 Executive Square, La Jolla, California

3.                          Term:

3.1                   Initial Term: Thirty-six (36) months.

3.2                   Option(s) to Extend the Term: None.

3.3                   Commencement Date: February 1, 2005.
(Section 2.2)

4.                          Base Rent (Article 3):

	
  Months

  	
   

  	
  Monthly

  Base Rent

  	
   

  	
  Annual

  Base Rent

  	
   

  
	
  1 - 12

  	
   

  	
  $

  	
  13,411.65

  	
   

  	
  $

  	
  160,939.80

  	
   

  
	
  13 - 24

  	
   

  	
  $

  	
  13,814.00

  	
   

  	
  $

  	
  165,768.00

  	
   

  
	
  25 - 36

  	
   

  	
  $

  	
  14,228.42

  	
   

  	
  $

  	
  170,741.04

  	
   

  

5.                          Additional Rent (Article 4):

5.1                   Base Year: The calendar year 2005

5.2                   Tenant’s Percentage Share: 3.09% (Section
4.2)

6.                          Security Deposit: $14,228.42. (Article 6)

7.                          Parking Privileges: Tenant shall lease from
Landlord: (i) Nine (9) Unreserved Parking Privileges (defined in Section 20.1,
below) at the rate of Fifty Dollars ($50.00) per Unreserved Parking Privilege
per month during the first six (6) months of the Initial Term, (ii) Thirteen
(13) Unreserved Parking Privileges at the rate of Fifty Dollars ($50.00) per
Unreserved Parking Privilege per month commencing in month seven (7) of the
Initial Term and continuing through the remainder of the Initial Term, and
(iii) Four (4) Reserved Parking Privileges (defined in Section 20.1, below) at
the rate of One Hundred Dollars per Reserved Parking Privilege per month during
the Initial Term. Subject to availability, Tenant shall have the right to lease
from Landlord on a month-to-month basis additional Unreserved Parking
Privileges and additional Reserved Parking Privileges at Landlord’s then
prevailing charge for such additional Parking Privileges. As of the Effective
Date, Landlord’s prevailing charge for Unreserved Parking Privileges is Fifty
Dollars ($50.00) per Unreserved Parking Privilege per month and for Reserved
Parking Privileges is One Hundred Dollars ($100.00) per Reserved Parking
Privilege per month. (Article 20)

8.                          Broker(s): Irving Hughes, representing
Tenant, and CommonWealth Partners Management Services, L.P., representing
Landlord (Article 27)

9.                          Permitted Use: General office use
consistent with a first class high-rise office project. (Section 7.1)

 1
 

10.                    Addresses for Notices (Article 26):

To:
Tenant

	
  Prior to the Commencement Date:

  	
  After the Commencement Date

  
	
   

  	
   

  
	
  1st Pacific Bank of California 

  7728 Regents Road, Suite 503 

  San Diego, California 92122

  Attn: Vincent Siciliano

  	
  At the Premises:

  Attn: Vincent Siciliano

  

To:
Landlord

FSP Regents Square, LLC

c/o CWP Capital Management, LLC

633 West Fifth Street, 72nd Floor

Los Angeles, California 90071

Attn: Sharyl Gabriel, Senior Vice President

With a copy to:

Paul, Hastings, Janofsky
& Walker, LLP

515 South Flower Street

25th Floor

Los Angeles, CA 90071-2228

Attn: Patrick A. Ramsey, Esq.

FAX: (213) 627-0705

And with a copy to:

CommonWealth Partners
Management Services, L.P. 

4275 Executive Square, Suite 300

La Jolla, California 92037

Attn: Property Manager

11.                    Address for Payments: All payments payable
to Landlord under this Lease shall be sent to the following address or to such
other address as Landlord may designate, or by wire transfer.

Regents Square, a property of Fifth Street Properties, LLC

File #56684

Los Angeles, California 90074-6684

If by wire transfer:

Bank of America, Account Name: Fifth St. Properties LLC - Regents
Square

Collection, Account No.: 004782289653, ABA#: 111000025

12.                    Guarantor: None.

This Lease shall consist
of the foregoing Basic Lease Provisions, and the provisions of the Standard
Lease Provisions (the “Standard Lease
Provisions”) (consisting of Sections 1 through 30 which follow) and Exhibits
“A” through “E”, inclusive, all of which are
incorporated herein by this reference as of the Effective Date. In the event of
any conflict between the provisions of the Basic Lease Provisions and the
provisions of the Standard Lease Provisions, the Standard Lease Provisions
shall control. Any initially capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Standard Lease Provisions.

 2
 

STANDARD LEASE PROVISIONS

ARTICLE
1 - PREMISES

1.1 Lease of Premises. Landlord hereby
leases the Premises to Tenant, and Tenant hereby leases the Premises from
Landlord, upon all of the terms, covenants and conditions contained in this
Lease.

1.2 Acceptance of Premises. Tenant
acknowledges that Landlord has not made any representation or warranty with
respect to the condition of the Premises, the Building or the Project with
respect to the suitability or fitness of any of the same for the conduct of
Tenant’s Permitted Use, its business or for any other purpose.

1.3 Measurement of the Rentable Area of Premises and the
Building.

1.3.1          For
purposes of this Lease, subject to the provisions of Section 1.3.2, the parties
hereby stipulate that the number of rentable square feet contained within the
Premises is as set forth in Item 2.2 of the Basic Lease Provisions.

1.3.2          The
“Rentable Area” or “rentable square feet” and “Usable Area” or “usable square feet” shall
be calculated by Landlord substantially in accordance with the Standard Method
for Measuring Floor Area in Office Buildings, ANSI Z65.1 - 1996 (“BOMA”); provided, however, that in any case
the Rentable Area of the Building shall include all of, and the Rentable Area
of the Premises shall include a portion of, the square footage of the ground
floor common areas located within the Building and the common area and occupied
space of the portion of the Building or Project dedicated to the service of the
Building. Landlord reserves the right to modify (i) the standards utilized
hereunder for the measurement of Rentable Area and Usable Area (so long as any
such modification is reasonably consistent with then prevailing Institutional
Owner Practices (defined below)) and (ii) consistent with any such
modifications of measurement standards, the totals of Rentable Area and Usable
Area set forth or utilized herein with respect to the Premises, the Building
and/or portions thereof and any economic terms set forth herein (such as Annual
Base Rent, Security Deposit and Tenant’s Percentage Share) (“Economic Terms”) calculated on the basis
thereof; provided, however, that during the Initial Term, such modification
shall not cause any increase in the Annual Base Rent.

1.4 Common Areas. “Common Areas” shall mean the lobby, plaza
and sidewalk areas, accessways, Garage, and the area on individual floors in
the Building devoted to corridors, fire vestibules, elevators, foyers, lobbies,
electric and telephone closets, restrooms, mechanical rooms, janitor’s closets,
and other similar facilities for the benefit of all tenants and invitees and
shall also mean those areas of the Building devoted to mechanical and service
rooms servicing the Building. The Common Areas shall be subject to the
exclusive management and control of Landlord, and Tenant shall comply with all
Rules and Regulations (defined in Section 21) pertaining to the Common Areas.
Landlord shall have the right from time to time to designate, relocate and
limit the use of particular areas or portions of the Common Areas; provided
that any such designation, relocation or limitation shall not materially
adversely affect Tenant’s use of and access to the Premises. Landlord shall
also have the right to close all or any portion of the Common Areas as may, in
the sole discretion of Landlord, be necessary to prevent a dedication thereof
or the accrual of any rights in any person.

ARTICLE
2 - TERM

2.1 Term. Unless earlier terminated in
accordance with the provisions hereof, the initial term of this Lease shall be
the period shown in Item 3.1 of the Basic Lease Provisions. For purposes of
this Lease, the term “Lease Year”
shall mean each consecutive twelve (12) month period during the Lease Term;
provided, however, that the first Lease Year shall commence on the Lease
Commencement Date and end on the last day of the twelfth (12th) month
thereafter and the second and each succeeding Lease Year shall commence on the
first day of the next calendar month. At any time during the Lease Term,
Landlord may deliver to Tenant a notice in the form as set in Exhibit “B” attached hereto, which Tenant shall execute and
return to Landlord within five (5) business days of receipt thereof. As used
herein, “Term” shall refer to the
initial term described in Item 3.1 of the Basic Lease Provisions.

2.2 Commencement. The Term shall commence
on the Commencement Date as defined in Item 3.3 of the Basic Lease Provisions;
provided, however, that in the event the Term shall commence on a day other
than the first day of any calendar month, for purposes of calculating the
Expiration Date and the timing of all scheduled increases in Base Rent during
the Term, the Commencement Date shall be deemed to be the first day of the
calendar month following the Commencement Date. The term “Ready for Occupancy” means the date
determined by Landlord’s architect or space planner to be the date of
substantial completion of the Tenant Improvements (defined in the Work Letter
attached hereto as Exhibit “C”
(the “Work Letter”)); provided,
however, in the event that Landlord is delayed in achieving substantial
completion of the Tenant Improvements by reason of any Tenant Delay (defined in
the Work Letter), the Premises shall be deemed Ready for Occupancy on the date
substantial completion of the Tenant Improvements would have occurred had the
Tenant Delay(s) not occurred, as determined by Landlord’s architect or space
planner. This Lease shall be a binding contractual obligation effective upon
execution hereof by Landlord and Tenant notwithstanding the later commencement
of the Term of this Lease.

2.3  Delay in Commencement; Beneficial Occupancy.
Landlord may deliver the Premises to Tenant prior to, on or after the
Commencement Date specified in Item 3.3 of the Basic Lease Provisions;
provided, however, that in the event the Commencement Date is delayed or
otherwise does not occur on the Commencement Date this Lease shall not be void
or voidable, the Term of this Lease shall not be extended, and Landlord shall
not be liable to Tenant for any loss or damage resulting therefrom. Notwithstanding the foregoing.
Landlord shall use commercially reasonable efforts to substantially
complete the Tenant Improvements (defined in the Work Letter) and deliver the
Premises to Tenant on or about November 30, 2004 (the “Target Delivery Date”). If Tenant takes
possession of the Premises before the Commencement Date, Tenant hereby agrees
that each and every provision of this Lease shall be in full force and effect
from such date of possession; provided however, that Tenant shall have no
obligation to pay to Landlord Monthly Base Rent for the period commencing on the
date the Premises is Ready for Occupancy through the Commencement Date (such
period, the “Beneficial Occupancy Period”).

 3
 

ARTICLE 3 - RENT; LATE
CHARGES

3.1 Base Rent; Rent.

3.1.1          Tenant
agrees to pay during each Lease Year of the Term of this Lease as Base Rent (“Base Rent”) for the Premises the sums shown
for such periods in Item 4 of the Basic Lease Provisions.

3.1.2          Except
as expressly provided to the contrary herein, Annual Base Rent shall be payable
in equal consecutive monthly installments, in advance, without abatement,
deduction or offset, commencing on the Commencement Date and continuing on the
first day of each calendar month thereafter. The first full monthly installment
of Annual Base Rent, described in Item 4 of the Basic Lease Provisions, shall
be payable upon Tenant’s execution of this Lease. If the Commencement Date is a
day other than the first day of a calendar month, then the Base Rent for the
Partial Lease Month (the “Partial Lease Month
Rent”) shall be calculated on a per diem basis determined by
dividing the initial Monthly Base Rent shown in Item 4 of the Basic Lease
Provisions by the number thirty (30) and by multiplying such amount by the
number of remaining days of such month from and including the Commencement Date.
The Partial Lease Month Rent shall be payable by Tenant prior to the date that
Tenant takes possession or commences use of the Premises for any business
purpose (including moving in). Annual Base Rent, all forms of Additional Rent
(defined below) payable hereunder by Tenant and all other amounts, fees,
payments or charges payable hereunder by Tenant shall (i) each constitute rent
payable hereunder (and shall sometimes collectively be referred to herein as “Rent”), (ii) be payable to Landlord when
due without any prior notice or demand therefor in lawful money of the United
States and, except as may be expressly provided to the contrary herein, without
any abatement, offset or deduction whatsoever and (iii) be payable to Landlord
at the address of Landlord described in Item 10 of the Basic Lease Provisions
or to such other person or to such other place as Landlord may from time to
time designate in writing to Tenant.

3.1.3          No
payment by Tenant or receipt by Landlord of a lesser amount than the correct
Rent due hereunder shall be deemed to be other than a payment on account; nor
shall any endorsement or statement on any check or any letter accompanying any
check or payment be deemed to effect or evidence an accord and satisfaction;
and Landlord may accept such check or payment without prejudice to Landlord’s
right to recover the balance or pursue any other remedy in this Lease or at law
or in equity provided.

3.2 Late Charge; Interest. Tenant
acknowledges that the late payment of Base Rent, Additional Rent or any other
amounts payable by Tenant to Landlord hereunder will cause Landlord to incur
administrative costs and other damages, the exact amount of which would be
impracticable or extremely difficult to ascertain. Landlord and Tenant agree
that if Landlord does not receive any such payment on or before the date five
(5) days after the date the payment is due, Tenant shall pay to Landlord, as
Additional Rent, (i) a late charge (“Late
Charge”) equal to five percent (5%) of the overdue amount to cover
such additional administrative costs, and (ii) interest on all delinquent
amounts at the lesser of (1) eighteen percent (18%) per annum or (2) the
maximum amount allowed by Law, from the date due until the date paid.

3.3 Additional Rent. For purposes of this
Lease, all amounts (other than Base Rent) payable by Tenant to Landlord
pursuant to this Lease, whether or not denominated as such, shall constitute
additional rent (“Additional Rent”)
hereunder.

ARTICLE
4 - ADDITIONAL RENTAL

4.1 Payment of Excess Operating Expenses and Excess
Property Taxes.

4.1.1          Subject
to the provisions of this Lease, in addition to paying Base Rent pursuant to
Article 3 of this Lease, with respect to each Expense Year (defined below)
Tenant shall also pay as Additional Rent Tenant’s Percentage Share (defined
below) of the positive excess, if any, of Operating Expenses (defined below)
for the Building allocable hereunder to such Expense Year over Operating
Expenses for the Building allocable hereunder to the Base Year (defined below).

4.1.2          Subject
to the provisions of this Lease, in addition to paying Base Rent pursuant to
Article 3 of this Lease, with respect to each Expense Year Tenant shall also
pay as Additional Rent Tenant’s Percentage Share of the positive excess, if
any, of the Property Taxes (defined below) for the Building allocable hereunder
to such Expense Year over the Property Taxes for the Building allocable
hereunder to the Base Year.

4.2 Definitions.

4.2.1          “Base Year” shall mean the calendar year
specified in Item 5.1 of the Basic Lease Provisions. “Expense Year” shall mean each calendar year
in which any portion of the Term of this Lease falls, through and including the
calendar year in which the Term of this Lease expires.

4.2.2          “Property Taxes” shall mean all real
property taxes, assessments, fees, charges, or impositions and other similar
governmental or quasi-governmental ad valorem or other charges levied on or
attributable to the Building or its ownership, operation or transfer of any and
every type, kind, category or nature, whether direct or indirect, general or
special, ordinary or extraordinary and all taxes, assessments, fees, charges or
similar impositions imposed in lieu or substitution (partially or totally) of
the same including, without limitation, all taxes, assessments, levies, charges
or impositions (i) on any interest of Landlord or any mortgagee of Landlord in
the Project, the Building, the Premises or in this Lease, or on the occupancy
or use of space in the Building or the Premises; (ii) on the gross or net rentals
or income from the Building, including, without limitation, any gross income
tax, excise tax, sales tax or gross receipts tax levied by any federal, state
or local governmental entity with respect to the receipt of Rent; (iii) on any
transit taxes or charges, business or license fees or taxes, annual or periodic
license or use fees, park and/or school fees, arts charges, parks charges,
housing fund charges; (iv) imposed for street, refuse, police, sidewalks, fire
protection and/or similar services and/or maintenance, whether previously
provided without charge or for a different charge,

 4
 

whether provided by governmental agencies or private
parties, and whether charged directly or indirectly through a funding mechanism
designed to enhance or augment benefits and/or services provided by
governmental or quasi-governmental agencies; (v) on any possessory taxes
charged or levied in lieu of real estate taxes; and (vi) any costs or expenses
incurred or expended by Landlord in investigating, calculating, protesting,
appealing or otherwise attempting to reduce or minimize such taxes. There shall
be excluded from Property Taxes all income taxes, capital stock, inheritance,
estate, gift, or any other taxes imposed upon or measured by Landlord’s gross
income or profits unless the same is specifically included within the
definition of Property Taxes above or otherwise shall be imposed in lieu of
real estate taxes or other ad valorem taxes. Notwithstanding the foregoing, at
all times that the Project is owned by a state public retirement system, the
State of California, any local public entity, or any entity in which any of the
same hold an interest (collectively, “Public
Entity”), (a) this Lease and the Tenant’s interest hereunder may
constitute a possessory interest subject to property taxation and as a result
may be subject to the payment of property taxes levied on such interest, (b)
such property taxes shall be based upon the full cash value of the possessory
interest which will equal the greater of (i) the full cash value of the
possessory interest or (ii) if Tenant has leased less than all of the Building,
Tenant’s Percentage Share of the full cash value which would have been enrolled
if the entire Building had been subject to property tax upon acquisition by the
entity and (c) in the event possessory interest taxes are applicable, Landlord
shall have the right to make such adjustments to the foregoing as Landlord
shall determine in good faith from time to time are required to most closely
approximate the amount of Property Taxes which would be payable hereunder under
circumstances where the Project is not owned by a Public Entity.

4.2.3          “Operating Expenses” shall mean all costs,
fees, amounts, disbursements and expenses of every kind and nature paid or
incurred by or on behalf of Landlord with respect to any Expense Year in
connection with the operation, ownership, maintenance, insurance, restoration,
management, replacement or repair of the Building in a first class manner,
including, without limitation, any amounts paid or incurred with respect to:

(i)          Premiums
for property, casualty, liability, rent interruption, earthquake, flood or
other types of insurance carried by Landlord from time to time, and any
deductibles thereunder actually paid by Landlord with respect to the Building.

(ii)         Salaries,
wages and other amounts paid or payable for personnel (including, without
limitation, the Building manager, superintendent, operation and maintenance
staff, the Parking Facilities (defined below) manager, concierge (if any) and
other employees of Landlord) involved in the maintenance and operation of the
Building or the Project, including contributions and premiums towards fringe
benefits, unemployment taxes and insurance, social security taxes, disability
and worker’s compensation insurance, pension plan contributions and similar
premiums and contributions which may be levied on such salaries, wages,
compensation and benefits and the total charges of any independent contractors
or property managers engaged in the operation, repair, care, maintenance and
cleaning of any portion of the Building or the Project.

(iii)        Cleaning
expenses, including without limitation, janitorial services, window cleaning,
and garbage and refuse removal.

(iv)       Landscaping
and hardscape expenses, including without limitation, irrigating, trimming,
mowing, fertilizing, seeding, and replacing plants, trees and hardscape.

(v)        Subject
to the provisions of Section 4.3.4, the cost of providing fuel, gas,
electricity, water, sewer, telephone, steam and other utility services.

(vi)       Subject
to the provisions of Section 4.2.3(x) below, the cost of maintaining,
operating, restoring, renovating, managing, repairing and replacing components
of equipment or machinery, including, without limitation, heating, refrigeration,
ventilation, electrical, plumbing, mechanical, elevator, escalator, sprinklers,
fire/life safety, security and energy management systems, including service
contracts, maintenance contracts, supplies and parts with respect thereto.

(vii)      The
costs of security for, and supervision of, the Building.

(viii)     Rental,
supplies and other costs with respect to the operation of the management office
for the Building.

(ix)        All
cost and fees for licenses, certificates, permits and inspections, and the cost
incurred in connection with the implementation of a transportation system
management program or similar program.

(x)         The
cost of replacement, repair, acquisition, installation and modification of (A)
carpeting and wallcoverings, ceiling systems and fixtures in the Common Areas,
and other furnishings in the Common Areas, (B) materials, tools, supplies and
equipment purchased by Landlord which are used in the maintenance, operation
and repair of the Building, and (C) any other form of improvements, additions,
repairs, or replacements to the Building or the systems, equipment or machinery
operated or used in connection with the Building; provided, however, that with
respect to the items described in clauses (A), (B) and (C) above which
constitute a capital item, addition, repair or improvement (collectively “Capital Items”) under sound accounting and
property management principles consistently applied and determined by Landlord,
in each case the cost of such Capital Items shall be amortized (with interest
at the Interest Rate) over the useful life (the “Useful Life”) of such Capital Item, as determined by the
Landlord in accordance with sound accounting and property management principles
consistently applied or such other period as shall be consistent with
Institutional Owner Practices.

(xi)        Attorneys’,
accountants’ and consultants’ fees and expenses in connection with the
management, operation, administration, maintenance and repair of the Building,
including, but not limited to, such expenses that relate to seeking or
obtaining reductions in or refunds of Property Taxes, or components thereof, or
the costs of contesting the validity of applicability of any governmental
enactments which may affect Operating Expenses.

 

 5
 

(xii)       Fees
for the administration and management of the Building in an amount equal to
three percent (3%) of the gross revenues of the Building (which shall be
grossed by Landlord up to one hundred percent (100%) occupancy on an annual
basis), without regard to whether actual fees so paid are greater or less than
such amount.

(xiii)      Sales,
use and excise taxes on goods and services purchased by Landlord for the
management, maintenance, administration or operation of the Building or the
Project.

(xiv)      Fees
for local civic organizations and dues for professional trade associations.

(xv)       Payments
under any covenants, conditions and restrictions pertaining to the Building or
any easement, license or operating agreement or similar instrument which
affects the Building.

(xvi)      Costs
and expenses of investigating, testing, documenting, monitoring, responding to,
abating and remediating Hazardous Materials (defined below), other than
abatement and remediation costs with respect to Hazardous Materials (a)
actually known by Landlord (on the Effective Date) to require abatement and/or
remediation under applicable Environmental Laws (defined below) and/or (b)
caused at any time by Landlord, its agents or employees.

(xvii)     The
costs of repairing, restoring and maintaining the Parking Facilities of the
Building, including, without limitation, the resurfacing, restriping and
cleaning of such facilities.

(xviii)    Any
costs, fees, amounts, disbursements and expenses which are generally included
in Operating Expenses under Institutional Owner Practices.

4.2.4          The
following costs and expenses shall be excluded from Operating Expenses:

(i)          expenses
relating to leasing space in the Building (including tenant improvements,
leasing and brokerage commissions and advertising expenses);

(ii)         legal
fees and disbursements incurred for collection of tenant accounts or
negotiation of leases, or relating to disputes between Landlord and other
tenants and occupants of the Building;

(iii)        Capital
Items unless specifically permitted by Section 4.2.3, parts (i) through
(xviii), inclusive;

(iv)       Property
Taxes;

(v)        amounts
received by Landlord on account of proceeds of insurance to the extent the
proceeds are reimbursement for expenses which were previously included in
Operating Expenses;

(vi)       except
to the extent specifically provided in Section 4.2.3, parts (i) through
(xviii), inclusive, depreciation or payments of principal and interest on any
mortgages upon the Building;

(vii)      payments
of ground rent pursuant to any ground lease covering the Building;

(viii)     subject
to Section 4.3.1, the costs of gas, steam or other fuel; operation of elevators
and security systems; heating, cooling, air conditioning and ventilating;
chilled water, hot and cold domestic water, sewer and other utilities or any
other service work or facility, or level or amount thereof, provided to any
other tenant or occupant in the Building which either (a) is not required to be
supplied or furnished by Landlord to Tenant under the provisions of this Lease
or (b) is supplied or furnished to Tenant pursuant to the terms of this Lease
with separate or additional charge;

(ix)        the
cost of any Landlord Work (defined in the Work Letter); and

(x)         any
cost expressly excluded from Operating Expenses in an express provision
contained in this Lease.

4.2.5          “Tenant’s Percentage Share” shall mean the
percentage set forth in Item 5.2 of the Basic Lease Provisions; provided,
however, that Landlord reserves the right from time to time during the Term of
this Lease to recalculate Tenant’s Percentage Share, in which case Tenant’s
Percentage Share shall be calculated by dividing the number of square feet of
Rentable Area in the Premises by the number of square feet of Rentable Area in
the Building, and expressing such quotient in the form of a percentage.

4.3 Calculation Methods and Adjustments.

4.3.1          The
variable components of Operating Expenses (“Variable
Expenses”) for all or any portion of any Expense Year (including the
Base Year) during which actual occupancy of the Building is less than one
hundred percent (100%) of the Rentable Area of the Building shall be adjusted
by Landlord, as determined in good faith by Landlord applying sound accounting
and property management principles (and the provisions of this Lease) to
reflect one hundred percent (100%) occupancy of the Rentable Area of the
Building during such period. If during all or any part of any Expense Year,
including the Base Year, Landlord does not provide any particular Item of
benefit, work or service (the cost of which is a Variable Expense) to portions
of the Building due to the fact that such Item of benefit, work or service is
not required or desired by the tenant of such space, or such tenant is itself
obtaining and providing such Item of benefit, work or service, or for any other
reason, then for purposes of computing Variable Expenses for such Expense Year,
Operating Expenses shall be increased by an amount equal to the additional
Variable Expenses

 6
 

which would have been paid or incurred by Landlord
during such period if it had furnished such Item of benefit, work or service to
such portions of the Building.

4.3.2          Subject
to the provisions of this Section 4.3, all calculations, determinations,
allocations and decisions to be made hereunder with respect to Operating
Expenses or Property Taxes shall be made in accordance with the good faith determination
of Landlord applying sound accounting and property management principles
consistently applied which are consistent with the practices of the majority of
the institutional owners of institutional grade first-class office projects in
San Diego County, California (“Institutional
Owner Practices”). Landlord shall have the right to equitably
allocate some or all of Operating Expenses among particular classes or groups
of tenants in the Building (for example, retail tenants) to reflect Landlord’s
good faith determination that measurably different amounts or types of
services, work or benefits associated with Operating Expenses are being
provided to or conferred upon such classes or groups. Subject to the provisions
of this Section 4.3, from time to time Landlord shall have the right to expand
or contract the amount, scope, level or types of services, work, items or
benefits, the cost of which is included within Operating Expenses, so long as
Landlord’s treatment of the same for purposes of the calculation of Operating
Expenses is (a) generally consistent with Institutional Owner Practices, and
(b) does not materially adversely affect Tenant’s use of the Premises. Whenever
services, benefits or work are provided to the Building and to additional
projects (where allocation of the cost thereof among such projects is required
for calculation of Operating Expenses hereunder), in allocating the overall
cost thereof (for all such projects) to Operating Expenses hereunder, there
shall be excluded from Operating Expenses Landlord’s good faith determination
of the additional overall cost comparison allocable to the provision of such
services, benefits or work to the additional projects. All discounts,
reimbursements, rebates, refunds, or credits (collectively, “Reimbursements”) attributable to Operating
Expenses or Property Taxes received by Landlord in a particular year shall be
deducted from Operating Expenses or Property Taxes in the year the same are
received; provided, however, if such practice is consistent with Institutional
Owner Practices, Landlord may treat Reimbursements generally (or under
particular circumstances) on a different basis. Landlord shall have the right
to exclude from Base Year Operating Expenses the cost of items of service, work
or benefits (i) not provided following the Base Year, (ii) incurred due to
circumstances not applicable following the Base Year or due to market-wide
labor-rate increases in Operating Expenses due to extraordinary circumstances,
including, without limitation, boycotts, embargoes and strikes, and utility
rate increases due to extraordinary circumstances, and (iii) amortized costs
relating to capital improvements. All assessments and premiums of Operating
Expenses or Property Taxes which can be paid by Landlord in periodic
installments shall be paid by Landlord in the maximum number of periodic
installments permitted by Law; provided, however, that if the then prevailing
Institutional Owner Practice is to pay such assessments or premiums on a
different basis, Landlord may utilize such different basis of payment.

4.3.3          If
in any one or more Expense Years following the Base Year (a “Comparison Year”), Property Taxes decrease
below the amount of Property Taxes for the Base Year as a result of any
reassessment or any similar governmental act or Law, including, without
limitation, as the result of a Proposition 8 reduction (collectively, a “Tax Reduction”), for purposes of
calculation of excess Property Taxes for such Comparison Year and all
subsequent Comparison Years, Property Taxes allocable to the Base Year shall be
reduced to the amount of Property Taxes allocable to such Comparison Year (a “Base Year Tax Reduction”); provided,
however, that if in any subsequent Comparison Year the amount of such Tax
Reduction is decreased (other than to the extent by virtue of the application
of the annual percentage increase (presently 2.0%) in Property Taxes currently
provided by statute (or any substitute therefor hereafter adopted)), for
purposes of calculation of excess Property Taxes for such subsequent Comparison
Year, the Base Year Tax Reduction shall be correspondingly decreased. Property
Taxes allocable to the Base Year shall not include any Property Taxes or any
taxes, assessments, costs charges or fees not applicable following the Base
Year.

4.3.4          The
parties acknowledge that Tenant shall pay, as Additional Rent, for its share of
all utility costs, including, without limitation, electricity, fuel, gas, water
and similar utility services for the Building (collectively, the “Utility Services”) directly to Landlord and
the costs of the same shall not be a part of Operating Expenses (allocable to
the Base Year or any Comparison Year). In connection with the foregoing,
subject to the provisions of this Lease, in addition to paying Base Rent and
Tenant’s Percentage Share of the positive excess, if any, of Operating Expenses
and Property Taxes above the Base Year, as set forth in Section 4.1, during
each Comparison Year, Tenant shall, on a monthly basis commencing on the
Commencement Date, pay to Landlord (for the Base Year and for each Comparison
Year, or any portion thereof) Tenant’s Percentage Share of the cost of the
Utility Services (the “Utility Costs”)
for the Building; provided, however that Utility Costs shall be adjusted for
each Expense Year during which actual occupancy of the Building is less than
one hundred percent (100%) of the Rentable Area of the Building in accordance
with sound accounting principles, to reflect one hundred percent (100%)
occupancy of the existing Rentable Area of the Building during such period.
Subject to applicable Laws, Landlord shall solely determine all decisions with
respect to the method and manner by which all Utility Services shall be billed
and provided in the Building, which determinations shall be made by Landlord in
good faith and on a basis consistent with Institutional Owner Practices
(including the right to allocate utility expenses based upon studies which
allocate utility usages among the tenants or occupants of the Building based
upon the estimated use by the respective tenants). On or prior to the
Commencement Date (or within a reasonable period of time thereafter), Landlord
shall deliver to Tenant its estimate of monthly Utility Costs payable by Tenant
pursuant to this Section 4.3.4. Landlord may, from time to time during each
Expense Year, by written notice to Tenant, revise its estimate for such costs,
and all subsequent payments under this Section 4.3.4 by Tenant during each
Expense Year shall be based on such revised estimate.

4.4 Payment Procedure; Estimates. During
each Comparison Year, Landlord may elect to give Tenant written notice of its
estimate of any increased amounts payable under Section 4.1 for that Comparison
Year. On or before the first day of each calendar month during such Comparison
Year, Tenant shall pay to Landlord one-twelfth (l/12th) of such estimated
amounts; provided, however, that, not more often than quarterly, Landlord may,
by written notice to Tenant, revise its estimate for such Comparison Year, and
all subsequent payments under this Section 4.4 by Tenant for such Comparison
Year shall be based upon such revised estimate. Landlord shall endeavor to
deliver to Tenant within one hundred fifty (150) days after the close of each
Comparison Year or as soon thereafter as is practicable, a statement of that
year’s Property Taxes and Operating Expenses, and Tenant’s Percentage Share of
actual excess Property Taxes and actual excess Operating Expenses payable for
such Comparison Year pursuant to Section 4.1, as determined by Landlord (the “Landlord’s Statement”) and such Landlord’s
Statement shall be binding upon Landlord and Tenant, except as provided in
Section 4.5. If the amount of Tenant’s Percentage Share of actual excess
Property Taxes and Operating Expenses for any Comparison Year is more than the
estimated payments with

 7
 

respect thereto made by Tenant, Tenant shall pay the
deficiency to Landlord upon receipt of Landlord’s Statement. If the amount of
Tenant’s Percentage Share of actual excess Property Taxes and Operating
Expenses for any Comparison Year is less than the estimated payments for such
Comparison Year made by Tenant, such excess payments shall be credited against
Rent next payable by Tenant under this Lease or, if the Term of this Lease has
expired, such excess shall be paid to Tenant. No delay in providing any
Landlord’s Statement described in this Section 4.4 shall act as a waiver of
Landlord’s right to receive payment from Tenant under Section 4.1 above with
respect to Tenant’s Percentage Share of excess Property Taxes and/or Operating
Expenses for the period covered thereby. If this Lease shall terminate on a day
other than the end of a calendar year, the amount of Tenant’s Percentage Share
of actual excess Property Taxes and actual excess Operating Expenses payable
under Section 4.1 that is applicable to the calendar year in which such
termination occurs shall be prorated on the basis that the number of days from
January 1 of such calendar year to the termination date bears to 365. The
expiration or early termination of this Lease shall not affect the obligations
of Landlord and Tenant pursuant to this Section 4.4 to be performed after such
expiration or early termination.

4.5 Review of Landlord’s Statement.

4.5.1          Provided
that Tenant is not then in default with respect to its obligations under this
Lease and provided further that Tenant strictly complies with the provisions of
this Section 4.5, Tenant shall have the right to reasonably review Landlord’s
supporting books and records for any portion of the Property Taxes or Operating
Expenses for a particular Comparison Year covered by Landlord’s Statement, in
accordance with the following procedure:

4.5.2          Tenant
shall, within ninety (90) days after any such Landlord’s Statement is delivered
to Tenant, deliver a written notice (a “Dispute
Notice”) to Landlord specifying the items described in the Landlord’s
Statement that are claimed to be incorrect, and Tenant shall simultaneously pay
to Landlord all amounts remaining due from Tenant to Landlord as specified in
the Landlord’s Statement. Except as expressly set forth in Section 4.5.3, in no
event shall Tenant be entitled to withhold, deduct, or offset any monetary
obligation of Tenant to Landlord under this Lease (including without
limitation, Tenant’s obligation to make all payments of Base Rent and all
payments of Additional Rent pending the completion of and regardless of the
results of any review of records under this Section 4.5). The right of Tenant
under this Section 4.5 may only be exercised once for each Expense Year covered
by any Landlord’s Statement, and if Tenant fails to deliver a Dispute Notice
within the ninety (90) day period described above or fails to meet any of the
other above conditions of exercise of such right, the right of Tenant to audit
a particular Landlord’s Statement (and all of Tenant’s rights to make any claim
relating thereto) under this Section 4.5 shall automatically be deemed waived
by Tenant.

4.5.3          Tenant
acknowledges that Landlord maintains its records for the Building at Landlord’s
manager’s corporate offices and Tenant agrees that any review of records under
this Section 4.5 shall be at the sole expense of Tenant and shall be conducted
by independent certified public accountants of national standing which are not
compensated on a contingency fee or similar basis relating to the results of
such audit. Tenant acknowledges and agrees that any records of Landlord
reviewed under this Section 4.5 (and the information contained therein)
constitute confidential information of Landlord, which Tenant shall not
disclose, nor permit to be disclosed by Tenant’s accountant, to anyone other
than the Tenant’s accountants performing the review and the principals of
Tenant who receive the results of the review. The disclosure of such information
by Tenant or any of Tenant’s employees or contractors (including, without
limitation, Tenant’s accountant) to any other person, whether or not caused by
the conduct of Tenant, shall constitute a material breach of this Lease.

4.5.4          If
Landlord disagrees with Tenant’s contention that an error exists with respect
to Landlord’s Statement (and the Operating Expenses and Real Property Taxes
described therein) in dispute, Landlord shall have the right to cause another
review of that portion of Landlord’s Statement (and the Operating Expenses and
Real Property Taxes stated therein) to be made by a firm of independent
certified public accountants of national standing selected by Landlord (“Landlord’s Accountant”). In the event of a
disagreement between the two accounting firms, the review of Landlord’s
Accountant shall be deemed to be correct and shall be conclusively binding on
both Landlord and Tenant. In the event that the results of Landlord’s
Accountant’s review of a particular Landlord’s Statement indicates that total
Operating Expenses and Property Taxes for the period covered by the Landlord’s
Statement in question have been overstated by more than five percent (5%), then
Landlord shall reimburse Tenant for the reasonable cost of Tenant’s accountant
and the amount of any overpayment by Tenant of estimated excess Operating
Expenses and/or Property Taxes for the period in question shall be credited
against Tenant’s obligations to pay Additional Rent next coming due; in all
other cases, Tenant shall be liable for Landlord’s Accountant’s actual fees and
expenses, and the amount of any underpayment shall be paid by Tenant to
Landlord with the next succeeding installment of estimated excess Property
Taxes and Operating Expenses.

ARTICLE
5 - ADDITIONAL TAXES

In addition
to the Base Rent and all other forms of Additional Rent payable by Tenant
hereunder, Tenant shall reimburse Landlord upon demand as Additional Rent for
any and all taxes, impositions or similar fees or charges (other than any of
the same actually included by Landlord in Property Taxes with respect to the
Expense Year in question) payable by or imposed or assessed upon Landlord upon
or with respect to (or measured by or otherwise attributable to the cost or
value of): (i) any fixtures, equipment or other personal property located in or
about the Premises; (ii) any leasehold improvements made in or to the Premises
by or for Tenant (without regard to ownership of such improvements) if and to
the extent the original cost, replacement cost or value thereof exceeds the
cost of Landlord’s then effective “Building Standard” tenant improvements, as
determined in good faith by Landlord; (iii) the Rent payable hereunder,
including, without limitation, any gross receipts tax, license fee or excise
tax levied by any governmental authority; (iv) the possession, leasing,
operation, management, maintenance, alteration, repair, use or occupancy of any
portion of the Premises; or (v) this transaction or any document to which
Tenant is a party creating or transferring an interest or an estate in the
Premises.

 8

ARTICLE 6 - SECURITY
DEPOSIT

Upon
the execution of this Lease, Tenant shall deposit with Landlord the Security
Deposit described in Item 6 of the Basic Lease Provisions. The Security Deposit
is made by Tenant to secure the faithful performance of all the terms,
covenants and conditions of this Lease to be performed by Tenant. The Security
Deposit is not an advance payment of Rent or a measure or limit of Landlord’s
damages upon an Event of Default by Tenant. If Tenant commits an Event of
Default with respect to any provision of this Lease, Landlord may, but shall
not be required to, use, apply or retain all or any part of the Security
Deposit (i) for the payment of any Rent or any other sum in default, (ii) for
the payment of any other amount which Landlord may spend or become obligated to
spend by reason of such default by Tenant, and (iii) to compensate Landlord for
any other loss or damage which Landlord may suffer by reason of such default by
Tenant. If any portion of the Security Deposit is so used or applied, Tenant
shall, upon demand therefor by Landlord, deposit with Landlord cash in an
amount sufficient to restore the Security Deposit to the amount required to be
maintained by Tenant hereunder. Upon expiration or the sooner termination of
this Lease, provided that Tenant has performed all of its obligations
hereunder, Landlord shall return to Tenant the remaining portion of the
Security Deposit no later than two weeks after the date Landlord receives
possession of the Premises in accordance with the provisions of this Lease. The
Security Deposit may be commingled by Landlord with Landlord’s other funds, and
no interest shall be paid thereon. If Landlord transfers its interest in the
Premises, then Landlord may assign the Security Deposit to the transferee and
thereafter Landlord shall have no further liability or obligation for the
return of the Security Deposit. Tenant hereby waives the provisions of Section
1950.7 of the California Civil Code, and all other provisions of Law, now or
hereinafter in force, which restricts the amount or types of claim that a
landlord may make upon a security deposit or imposes upon a landlord (or its
successors) any obligation with respect to the handling or return of security
deposits.

ARTICLE
7 - USE OF PREMISES

7.1 Tenant’s Permitted Use. Tenant shall
use the Premises only for Tenant’s Permitted Use as set forth in Item 9 of the
Basic Lease Provisions and shall not use or permit the Premises to be used for
any other purpose. Tenant shall, at its sole cost and expense, obtain and
maintain in full force and effect all governmental licenses, approvals and
permits required to allow Tenant to conduct Tenant’s Permitted Use. Landlord
disclaims any warranty that the Premises are suitable for Tenant’s use and
Tenant acknowledges that it has had a full opportunity to make its own
determination in this regard. In no case shall Tenant use any portion of the
Premises for (i) offices of any division, agency or bureau of the United States
or any state or local government of any foreign government or subdivision
thereof, (ii) offices of any health care professionals or for the provision of
any health care services, (iii) any schools or other training facility, (iv)
any retail or restaurant uses, (v) any residential use, or (vi) any communications
uses such as broadcasting radio and/or television stations. Tenant shall not
permit any use of the Premises or any portion thereof for any occupancy density
which is greater than the average occupancy density associated with the
occupancies of the other tenants of the Project.

7.2 Compliance With Laws and Other Requirements.

7.2.1          Tenant
shall timely take all action required to cause the Premises to comply in all
respects with all laws, ordinances, building codes, rules, regulations, orders
and directives of any governmental authority having jurisdiction (including
without limitation any certificate of occupancy) now or in the future
applicable to the Premises (collectively, “Laws”),
including, without limitation, any Law requiring any form of improvement or
alteration to the Premises.

7.2.2          Tenant
shall not use the Premises, or permit the Premises to be used, in any manner,
or do or suffer any act in or about the Premises which: (i) violates or
conflicts with any applicable Law; (ii) causes or is reasonably likely to cause
damage to the Project, the Premises or the Building systems, including, without
limitation, the life safety, electrical, heating, ventilation and air
conditioning (“HVAC”), plumbing or
sprinkler systems (collectively, the “Building
Systems”) for the Building and/or the Project; (iii) violates a
requirement or condition of any policy of insurance covering the Project and/or
the Premises, or increases the cost of such policy; (iv) constitutes or is
reasonably likely to constitute a nuisance, annoyance or inconvenience to other
tenants or occupants of the Project or its equipment, facilities or systems;
(v) interferes with, or is reasonably likely to interfere with, the
transmission or reception of microwave, television, radio, telephone, or other
communication signals by antennae or other facilities located in the Project;
or (vi) violates the Rules and Regulations. Should any federal, state or local
governmental agency having jurisdiction with respect to the establishment,
regulation or enforcement of occupational, health or safety standards for
employers, employees or tenants impose on Landlord or on Tenant at any time now
or in the future any requirement or Law relating in any manner to the Premises
or occupancy thereof, Tenant shall, at its sole cost and expense, comply
promptly (or at Landlord’s election, bear the cost of such compliance as
effected by Landlord) with such requirement or Law.

7.3 Hazardous Materials. No Hazardous
Materials (defined below) shall be Handled (defined below) upon, about, in,
above or beneath the Premises or any portion of the Project by or on behalf of
Tenant, its subtenants or its assignees, or their respective contractors,
clients, officers, directors, employees, agents, or invitees (collectively, a “Tenant Party”). Notwithstanding the
foregoing, normal quantities of those Hazardous Materials customarily used in
the conduct of general administrative and executive office activities (e.g.,
copier fluids and cleaning supplies) may be used and stored at the Premises
without Landlord’s prior written consent, but only in compliance with all
applicable Environmental Laws (defined below), and with the highest prevailing
industry standards. Tenant shall, at its sole cost and expense, promptly take
all actions (or at Landlord’s election, reimburse Landlord for taking all
actions) required by any Law or necessary for Landlord to make full economic
use of the Premises or any portion of the Project which arises in connection
with the Handling (defined below) of Tenant’s Hazardous Materials upon, about,
above or beneath the Premises or any portion of the Project. Such actions shall
include, but not be limited to, the investigation of the environmental
condition of the Premises or any portion of the Building, the preparation of
any feasibility studies or reports and the performance of any cleanup,
remedial, removal or restoration work. Tenant shall take all actions (or at
Landlord’s election, reimburse Landlord for taking all actions) necessary to
restore the Premises or any portion of the Building to the condition existing
prior to the introduction of Tenant’s Hazardous Materials, notwithstanding any
less stringent standards or remediation allowable under applicable
Environmental Laws. “Environmental Laws”
means

 9
 

and includes all now and hereafter existing statutes,
laws, ordinances, codes, regulations, rules, rulings, orders, decrees,
directives, policies and requirements by any federal, state or local
governmental authority regulating, relating to, or imposing liability or
standards of conduct concerning public health and safety or the environment “Hazardous Materials” means: (a) any
material or substance: (i) which is defined or becomes defined as a “hazardous substance”, “hazardous waste,” “infectious waste,” “chemical mixture or substance,” or “air pollutant” under Environmental Laws;
(ii) containing petroleum, crude oil or any fraction thereof; (iii) containing
polychlorinated biphenyls (PCB’s); (iv) which constitutes asbestos or
asbestos-containing material; (v) which is radioactive; (vi) which is
infectious; or (b) any other material or substance displaying toxic, reactive,
ignitable or corrosive characteristics, as all such terms are used in their
broadest sense. “Handle,” “Handled,” or “Handling” shall mean any installation, handling, generation,
storage, treatment, use, disposal, discharge, release, manufacture, refinement,
presence, migration, emission, abatement, removal, transportation, or any other
activity of any type in connection with or involving Hazardous Materials.

ARTICLE
8 - UTILITIES AND SERVICES

8.1 Building Services. As long as Tenant is
not committing an Event of Default under this Lease, Landlord agrees to furnish
or cause to be furnished, subject to the provisions of this Lease, as part of
Operating Expenses to the Premises, the following utilities and services,
subject to the conditions and standards set forth herein:

8.1.1          Non-attended
automatic elevator service.

8.1.2          Subject
to all governmental Laws, rules, regulations and guidelines applicable thereto,
HVAC to the Premises, which in Landlord’s good faith judgment, is required for
the comfortable use and occupancy of the Premises from 8:00 AM. to 6:00 P.M.
Monday through Friday (collectively, the “Business
Hours”), and if Tenant delivers a written request to Landlord
twenty-four (24) hours in advance, 8:00 AM. to 1:00 P.M., Saturdays, except for
the date of observation of New Year’s Day, Independence Day, Labor Day,
Memorial Day, Thanksgiving Day, and Christmas Day, and at Landlord’s
discretion, other state and nationally recognized holidays selected by Landlord
which are consistent with Institutional Owner Practices (collectively, the “Holidays”); provided, however, that if
Tenant desires to use HVAC during hours (“Non-Business
Hours”) other than Business Hours (“After Hours HVAC”), Tenant shall provide Landlord with prior
written notice (which at a minimum shall be 24 hours’ written notice for
weekday use (and written notice prior to 12 Noon on Friday for weekend use) of
Tenant’s desired After Hours HVAC use and upon such additional conditions as
shall be determined by Landlord from time to time. Tenant shall pay to Landlord
Landlord’s then prevailing charges (the “After
Hours HVAC Rate”) for supplying such After Hours HVAC within ten
(10) days of receipt of a reasonably detailed bill therefor. Tenant shall be
responsible for and shall pay to Landlord any additional costs (including,
without limitation, the costs of installation of additional HVAC equipment)
incurred by Landlord because of the failure of the HVAC system to perform its
function due to arrangement of partitioning in the Premises or changes or
alterations thereto or from any use by Tenant of heat-generating machinery or
equipment other than normal office equipment, including small photocopying
machines and personal computers not linked to a central mainframe at the
Premises.

8.1.3          At
all reasonable times, electric current as required for Building Standard
lighting and fractional horsepower office machines and adequate electrical
wiring and facilities for connection to the lighting fixtures and incidental
use equipment of Tenant; provided, however, that notwithstanding any provision
of this Lease to the contrary the total connected electrical load for all of
the incidental use equipment located in the Premises shall in no case exceed an
average of two and one-half (2.5) watts per usable square foot of the Premises
during Business Hours, with the electricity so furnished for incidental use
equipment to be at a nominal one hundred twenty (120) volts and with no
electrical circuit for the supply of such equipment to require a current
capacity exceeding twenty (20) amperes, and the total connected electrical load
for Tenant’s lighting fixtures within the Premises shall in no case exceed
Landlord’s per usable square foot Business Hours standard, and the electricity
so furnished for Tenant’s lighting to be at a nominal one hundred twenty (120)
volts. Without Landlord’s consent, Tenant shall not install, or permit the
installation, in the Premises of any computers, word processors, electronic
data processing equipment or other type of equipment or machines which will
increase Tenant’s use of electric current in excess of that which Landlord is
obligated to provide pursuant to this Section 8.1.3 (“Excess Electrical Requirements”). If Tenant
shall require or utilize Excess Electrical Requirements or electric current
which may disrupt the provision of electrical service to other tenants in the
Building or the Project, Landlord, at its election (a) may refuse to grant its
consent or (b) may condition its consent upon Tenant’s payment in advance of
Landlord’s total direct and indirect cost (including, without limitation, a
reasonable administration fee) of designing, installing, maintaining and
providing any additional facilities determined by Landlord to be required to
satisfy such Excess Electrical Requirements (or otherwise related to the
additional wear on Building Systems associated therewith). If Tenant’s actual
electricity consumption for any portion of the Premises, as determined in good
faith by Landlord pursuant to such measurement method or methods as Landlord
shall employ from time to time (including, without limitation, the use of
submeters and/or pulse meters, electrical surveys and/or engineer’s estimates)
exceeds Landlord’s nondiscriminatory standard for excess electrical consumption
for any reasonable calculation period determined by Landlord, Tenant shall pay
to Landlord, as Additional Rent in addition to those costs otherwise payable by
Tenant pursuant to Section 4.3.4, the sum of (a) Landlord’s actual direct and
indirect costs of supplying such excess consumption, including, without
limitation, all taxes thereon, and the cost of additional wear on Building
Systems resulting from such excess consumption, (b) all of Landlord’s costs of
monitoring and measuring such excess consumption and (c) Landlord’s reasonable
administration fee. If Tenant’s increased electrical requirements will
materially affect the temperature level in the Premises or in the Building,
Landlord’s consent may be conditioned upon Tenant’s payment of all direct and
indirect costs of installation and operation of any machinery or equipment
necessary to restore the temperature level to that otherwise required to be
provided by Landlord, including, but not limited to, the cost of modifications
to the Building Systems and increased wear and tear on existing HVAC equipment.
Landlord shall not, in any way, be liable or responsible to Tenant for any loss
or damage or expense which Tenant may incur or sustain if, for any reasons
beyond Landlord’s reasonable control, either the quantity or character of
electric service is changed or is no longer available or suitable for Tenant’s
requirements. Tenant covenants that at all times its use of electric current
shall never exceed the capacity of the feeders, risers or electrical
installations of the Building or the Project.

8.1.4          City
water for drinking and rest room purposes.

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8.1.5          Janitorial
and cleaning services conforming to the Landlord’s Project standards in effect
from time to time (which shall be consistent with Institutional Owner
Practices), provided that the Premises are used exclusively for office purposes
and are kept reasonably in order by Tenant. Landlord shall not be required to provide
janitorial services for portions of the Premises used for preparing or
consuming food or beverages, for storage, as a mailroom, or for a lavatory
(other than the Common Area lavatory rooms) other than normal “light”
janitorial services such as emptying of waste containers, standard vacuuming,
mopping and sweeping. Landlord shall not be responsible for more extensive
lunch room cleaning such as the washing of dishware or cleaning any
refrigerator located therein. In all events, Tenant shall pay to Landlord the
cost of removal of Tenant’s refuse and rubbish, to the extent that the same
exceeds the refuse and rubbish attendant to normal office usage.

Any amounts which Tenant
is required to pay to Landlord pursuant to this Section 8.1 shall be payable upon
demand by Landlord and shall constitute Additional Rent. From time to time
during the Term, Landlord shall have the right to modify the services provided
to Tenant hereunder; provided such modified services are consistent with
Institutional Owner Practices.

8.2 Interruption of Services. Landlord
shall not be liable for any failure to furnish, stoppage of, or interruption in
furnishing any of the services or utilities described in Section 8.1 when such
failure is caused by accident, breakage, repairs, strikes, lockouts, labor
disputes, labor disturbances, governmental regulation, civil disturbances, acts
of war, moratorium or other governmental action, or any other cause beyond
Landlord’s reasonable control, and, in such event, Tenant shall not be entitled
to any damages nor shall any failure or interruption abate or suspend Tenant’s
obligation to pay Base Rent and Additional Rent required under this Lease or
constitute or be construed as a constructive or other eviction of Tenant. In
the event any governmental or quasi-governmental authority or public utility
promulgates or revises any Law or issues mandatory controls or voluntary
controls relating to the use or conservation of energy, water, gas, light or
electricity, the reduction of automobile or other emissions, or the provision
of any other utility or service, Landlord may take any reasonably appropriate
action to comply with such Law, mandatory control or voluntary guideline
without affecting Tenant’s obligations hereunder. Tenant recognizes that any security
services provided by Landlord at the Project are for the protection of Landlord’s
property and under no circumstances shall Landlord be responsible for, and
Tenant waives any rights with respect to, providing security or other
protection for Tenant or its employees, invitees or property in or about the
Premises or the Project. Landlord makes no representation with respect to the
adequacy or fitness of the Project’s HVAC system to maintain temperatures as
may be required for the operation of any computer, data processing or other
special equipment.

ARTICLE
9 - MAINTENANCE AND REPAIRS

9.1 Landlord’s Obligations. Landlord shall
endeavor to keep the Common Areas of the Building and the Project in a clean
and neat condition. Subject to Section 9.2 below, Landlord shall make all
necessary repairs, within a reasonable period following receipt of notice of
the need therefor from Tenant, to the exterior walls, exterior doors and
windows of the Building, and to public corridors and other public areas of the
Project not constituting a portion of any tenant’s premises and shall use
commercially reasonable efforts to keep all Building Systems used by Tenant in
common with other tenants in reasonable condition and repair, reasonable wear
and tear excepted (and Landlord shall use commercially reasonable efforts in
the performance of its obligations under this Section 9.1 not to materially and
adversely affect Tenant’s access to or use of the Premises). Notwithstanding
the foregoing, Tenant shall be solely responsible for the repair and
maintenance of, and all damage to, the Building or the Project (or any
component thereof) resulting from the design and operation of all improvements
which are not Building Standard Installations (described in the Work Letter) in
or serving the Premises installed at the request of Tenant (regardless of
whether installed by Landlord, its agents or contractors or third party
contractors). Except as provided in Article 12, there shall be no abatement of
Rent, nor shall there be any liability of Landlord, by reason of any injury to,
or damage suffered by Tenant, including without limitation, any inconvenience
to, or interference with, Tenant’s business or operations arising from the
making of, or failure to make, any maintenance or repairs, alterations or
improvements in or to any portion of the Building. Tenant waives the right to
make repairs at Landlord’s expense under Sections 1941 and 1942 of the
California Civil Code, and under all other similar laws, statutes or ordinances
now or hereafter in effect. No provision of this Lease shall be construed as
obligating Landlord to perform any repairs, Alterations or decorations to the
Premises or the Project except as otherwise expressly agreed to be performed by
Landlord pursuant to the provisions of this Lease.

9.2 Tenant’s Obligations. No
representations, except as contained herein or endorsed hereon, have been made
to Tenant respecting the condition of the Premises, and the acceptance of
possession of the Premises by Tenant shall be conclusive evidence as against
Tenant that the Premises are now in tenantable and good condition. During the
Term of this Lease, Tenant shall, at its sole cost and expense, maintain the
Premises in good order and repair and in a safe, clean and neat condition.
Tenant shall make all repairs to the Premises not required to be made by
Landlord under Section 9.1 above (including, without limitation, all damaged
and broken fixtures and appurtenances) with replacements of any materials to be
made by use of materials of equal or better quality. Further, Tenant shall be
responsible for, and upon demand by Landlord shall promptly reimburse Landlord
for, any damage to any portion of the Project or the Premises caused by (a)
activities of Tenant or any Tenant Party in the Building or the Premises; (b)
the performance or existence of any alterations, additions or improvements made
by Tenant or any Tenant Party in or to the Premises; (c) the installation, use,
operation or movement of Tenant’s property in or about the Building or the
Premises; or (d) any act or omission by Tenant or any Tenant Party or any other
person permitted in or invited to the Premises or the Project by Tenant or any
Tenant Party.

9.3 Landlord’s Rights. Landlord and its
contractors shall have the right, at all reasonable times, to enter upon the
Premises to make any repairs to the Premises or the Building or the Project
reasonably required or deemed reasonably necessary by Landlord and to erect
such equipment, including scaffolding, as is reasonably necessary to effect
such repairs. In the event of any failure of Tenant to perform any of its
obligations under this Article 9, or under Article 7, 10 or 11, where such
failure remains uncured for ten (10) days after delivery by Landlord to Tenant
of written notice of such failure (or in the case of an emergency, after such
oral or written notice, if any, as may be practical under the circumstances),
Landlord may (but shall not be obligated to) elect to perform such obligation
of Tenant at Tenant’s sole cost and expense, and in the event of such
performance by Landlord, Tenant shall pay to Landlord within ten (10) days of
written demand therefor one hundred ten percent (110%) of Landlord’s actual
direct

 11
 

and indirect costs (including interest, overhead,
general conditions and administration) in performing such obligations of
Tenant.

ARTICLE
10 - ALTERATIONS, ADDITIONS AND

IMPROVEMENTS

10.1
Landlord’s Work; As-Is.
Tenant hereby accepts the Premises in its existing “As-Is” condition, and
Landlord shall have no obligation to make any improvements (other than the
Tenant Improvements, as defined in the Work Letter), alterations or other
modifications to the Premises or, except as specifically provided in this
Section 10.1 and in Section 2.1 of the Work Letter, to provide Tenant any
allowance, rent credit or abatement in connection with Tenant’s entering into
this Lease. Landlord’s sole construction obligation under this Lease shall be
as set forth in the Work Letter attached hereto as Exhibit “C”. Provided that an Event of Default
has not occurred under this Lease and subject to the provisions of this Section
10.1, in addition to the Allowance Amount (as defined in Section 2.1 of the
Work Letter), Landlord shall provide Tenant with an additional allowance in an
amount equal to Sixty Thousand Two Hundred Ninety-Eight Dollars ($60,298.00)
(the “Additional Allowance”)
payable by Landlord to Tenant in two (2) equal installments of Thirty Thousand
One Hundred Forty-Nine Dollars ($30,149.00) each, payable in months twenty-four
(24) and thirty-six (36) of the Initial Term; provided, however, that at Tenant’s
election and upon written notice from Tenant to Landlord of such election, the
Additional Allowance may be credited against Tenant’s obligation to pay Base
Rent for such months (and subsequent months until such installment of the
Additional Allowance is exhausted). Should an Event of Default (as defined in
Section 16.1) occur at any time (after the expiration of the applicable cure
period, if any), then any such installment of the Additional Allowance which
has previously been paid by Landlord to Tenant shall become immediately due and
payable by Tenant to Landlord at once without notice or demand, and any
installment of the Additional Allowance which would have been payable by Landlord
to Tenant in the future as set forth in this Section 10.1 shall be null and
void. Tenant hereby acknowledges and agrees that any improvements,
modifications or alterations performed by Tenant during the Term shall be
subject to the provisions of this Article 10.

10.2
Landlord’s Consent; Conditions.
Tenant shall not make or permit to be made any alterations, additions, or
improvements in or to the Premises (“Alterations”)
without first obtaining the prior written consent of Landlord, which consent
shall be requested in writing not less than fifteen (15) business days prior to
the scheduled and actual commencement of any work therein (which consent shall
not be unreasonably withheld, provided that each of Landlord and Tenant
acknowledge that Landlord’s denial of its consent to any proposed Alteration
which does not meet and/or comply with the requirements of the following
sentence shall be deemed a reasonable denial of Landlord’s consent to such
proposed Alteration). All such Alterations (i) shall comply with all applicable
Laws, (ii) shall be compatible (as determined in good faith by Landlord) with
the Building and its mechanical, electrical, heating, ventilating,
air-conditioning, and life safety systems; (iii) shall not interfere with the
use and occupancy of any other portion of the Building or the Project by any
other tenant or their invitees; (iv) shall not be visible from the exterior of
the Building or from any Common Areas; and (v) shall not affect the integrity
of the structural portions of the Building. In addition, Landlord may impose as
a condition to such consent such additional requirements as Landlord deems
reasonably necessary or desirable including without limitation: (A) Tenant’s
submission to Landlord, for Landlord’s prior written approval, of all plans and
specifications relating to the Alterations; (B) Landlord’s prior written
approval of the time or times when the Alterations are to be performed; (C)
Landlord’s prior written approval of the contractors and subcontractors
performing work in connection with the Alterations; (D) Tenant’s receipt of all
necessary permits and approvals from all governmental authorities having
jurisdiction over the Premises prior to the construction of the Alterations;
(E) Tenant’s written notice of whether the Alterations include the Handling of
any Hazardous Materials; (F) Tenant’s delivery to Landlord of such bonds and
insurance as Landlord shall customarily require; (G) Tenant’s payment to
Landlord within ten (10) days of written demand therefor of all costs and
expenses incurred by Landlord because of Tenant’s Alterations, including but
not limited to costs incurred in reviewing the plans and specifications for,
and the progress of, the Alterations and Landlord’s supervision fee (which
shall equal ten percent (10%) of the cost of the Alterations in question) and
(H) Tenant’s (and Tenant’s contractor’s) compliance with such construction
rules and regulations and building standards as Landlord may promulgate from
time to time. All direct and indirect costs relating to any modifications,
alterations or improvements of the Project or the Building, whether outside or
inside of the Premises, required by any governmental agency or by Law as a
condition or as the result of any Alteration requested or effected by Tenant shall
be borne by Tenant, and in connection therewith, Landlord may elect to perform
such modifications, alterations or improvements (at Tenant’s sole cost and
expense) or require such performance directly by Tenant.

10.3
Performance of Alterations Work.
All work relating to the Alterations shall be performed in compliance with the
plans and specifications approved by Landlord, all applicable laws, ordinances,
rules, regulations and directives of all governmental authorities having
jurisdiction (including without limitation Title 24 of the California
Administrative Code) and the requirements of all carriers of insurance on the
Premises and the Building, the Board of Underwriters, Fire Rating Bureau, or
similar organization. All work shall be performed by Tenant at Tenant’s sole
cost and expense and shall be prosecuted to completion in a diligent, first
class manner and so as not to interfere with any other tenants or occupants of
the Building. Without Landlord’s prior written consent, which Landlord may
withhold in its sole and absolute discretion, Tenant shall not use any portion
of the Common Areas in connection with the making of any Alterations, and
Tenant shall not modify or alter any improvements or components of the Building
or the Project outside of the Premises. Upon completion of any Alterations,
Tenant agrees to cause a timely Notice of Completion to be recorded in the
office of the Recorder of the County of San Diego in accordance with the terms
of Section 3093 of the Civil Code of the State of California or any successor
statute, and Tenant shall deliver to the Building management office, within
thirty (30) days following completion of the Alterations, a reproducible copy
of the “as built” drawings of the Alterations together with a CAD file of the “as
built” documents of the Alterations (current version of AutoCad).

10.4
Liens. Tenant shall pay
when due all costs for work performed and materials supplied to the Premises.
Tenant shall keep Landlord, the Premises and the Project free from all liens,
stop notices and violation notices relating to the Alterations or any other
work performed for, materials furnished to or obligations incurred by Tenant
and Tenant shall indemnify, defend and hold harmless Landlord, the Premises and
the Project of and from any and all loss, cost, damage, liability and expense,
including attorneys’ fees, arising out of or related to any such liens or
notices. Tenant shall give Landlord not less than seven (7) business days prior
written notice before commencing any Alterations in or about the Premises to
permit Landlord to post appropriate notices of non-responsibility. Tenant shall
also secure, prior to commencing any Alterations, at Tenant’s sole expense, a
completion and lien indemnity bond satisfactory to

 12
 

Landlord for such work. During the progress of such
work, Tenant shall, upon Landlord’s request, furnish Landlord with sworn
contractor’s statements and lien waivers covering all work theretofore
performed. Tenant shall satisfy or otherwise discharge all liens, stop notices
or other claims or encumbrances within ten (10) days after Landlord notifies
Tenant in writing that any such lien, stop notice, claim or encumbrance has
been filed. If Tenant fails to pay and remove such lien, claim or encumbrance
within such ten (10) day period, Landlord, at its election, may pay and satisfy
the same and in such event the sums so paid by Landlord, with interest from the
date of payment at the Interest Rate, shall be deemed to be Additional Rent due
and payable by Tenant at once without notice or demand.

10.5
Surrender. Except as
provided in Section 7.3 and in this Section 10.5, upon expiration or earlier
termination of this Lease, Tenant shall surrender the Premises to Landlord in
the same condition as when received at the inception of this Lease, subject to
ordinary wear and tear. All Alterations shall become a part of the Premises and
shall become the property of Landlord upon the expiration or earlier
termination of this Lease, unless Landlord shall, by written notice given to
Tenant, require Tenant to remove some or all of Tenant’s Alterations, in which
event Tenant shall promptly remove prior to the date of such expiration or
termination the Alterations designated by Landlord to be so removed and shall
promptly restore, patch and repair any resulting damage, all at Tenant’s sole
expense. Failure by Tenant to strictly comply with the provisions of this
Section 10.5 shall constitute a failure of Tenant to validly surrender the
Premises. In the event of any failure of Tenant to perform its obligations
under this Section 10.5, in addition to (and without prejudice to) any and all
other remedies of Landlord, Landlord may use, apply or retain all or any part
of the Security Deposit with respect to such failure. All business and trade
fixtures, machinery and equipment, furniture, movable partitions,
wallcoverings, telecommunications equipment, data cabling and items of personal
property owned by Tenant or installed by Tenant at its expense in the Premises
shall be and remain the property of Tenant; upon the expiration or earlier
termination of this Lease, Tenant shall, at its sole expense, remove all such
items and repair any damage to the Premises or the Project caused by such
removal. If Tenant fails to remove any such items or repair such damage
promptly after the expiration or earlier termination of this Lease, Tenant
shall be deemed to have abandoned the same, in which case Landlord may store
the same at Tenant’s expense (and Tenant shall pay Landlord the cost thereof
upon demand), or appropriate the same for itself, and/or sell the same in its
discretion, with no liability to Tenant.

ARTICLE
11 - INDEMNIFICATION AND INSURANCE

11.1
Waiver of Liability and Indemnification.

Except
to the extent expressly provided to the contrary herein, Tenant hereby waives
all claims and causes of action against Landlord, its partners, advisors,
mortgagees and ground lessors and each of their respective officers, managers,
directors, employees, contractors, agents, successors and assigns
(collectively, “Landlord Parties”)
for any damage to persons or property (including, without limitation, loss of
profits and intangible property) in any way relating to Tenant’s use and
occupancy of the Premises. Tenant shall indemnify, defend, protect and hold
harmless Landlord and each of the Landlord Parties (except to the extent of the
losses described below are caused by the gross negligence or willful misconduct
of Landlord, its agents or employees), from and against:

(a)
any and all claims, losses, damages, obligations, liabilities, costs and
expenses (including but not limited to reasonable attorneys’ fees and legal
costs) (collectively, “Claims, Damages and
Costs”) which arises out of, is occasioned by or is in any way
attributable to (i) the use or occupancy of the Premises or any portion of the
Project by Tenant, (ii) or the acts or omissions of Tenant or any Tenant Party
or (iii) any default of this Lease by Tenant.

(b)
any and all environmental damages which arise from: (i) the Handling of any
Tenant’s Hazardous Materials, or (ii) the breach of any of the provisions of
this Lease. For the purpose of this Lease, “environmental
damages” shall mean (X) all claims, judgments, damages, penalties,
fines, costs, liabilities, and losses (including without limitation, diminution
in the value of the Premises or any portion of the Project, damages for the
loss of or restriction on use of rentable space, and from any adverse impact of
Landlord’s marketing of space); (Y) all sums paid for settlement of claims,
reasonable attorneys’ fees, consultants’ fees and experts’ fees; and (Z) all
costs incurred by Landlord in connection with investigation or remediation
relating to the Handling of Tenant’s Hazardous Materials, necessary for
Landlord to make full economic use of the Premises.

11.2 Property Insurance.

11.2.1        At
all times during the Term of this Lease, Tenant shall procure and maintain, at
its sole expense, “All-Risk” (and at Landlord’s option earthquake, earthquake
sprinkler leakage and/or flood) property insurance, in an amount not less than
one hundred percent (100%) of replacement cost covering (i) all leasehold and
tenant improvements in and to the Premises (including, without limitation, any
existing leasehold improvements, the Tenant Improvements (as defined in the
Work Letter), and any Alterations); (ii) all floor and wall coverings; and
(iii) Tenant’s office furniture, business and personal trade fixtures,
equipment, furniture system and other personal property from time to time
situated in the Premises. The proceeds of such insurance shall be used for the
repair and replacement of the property so insured, except that if not so
applied or if this Lease is terminated following a casualty, the proceeds
applicable to the leasehold improvements shall be paid to Landlord and the proceeds
applicable to Tenant’s personal property shall be paid to Tenant.

11.2.2        At
all times during the Term of this Lease, Tenant shall procure and maintain
business interruption insurance in such amount as will reimburse Tenant for
direct or indirect loss of earnings attributable to all perils insured against
in Section 11.2.1 for a period of not less than twelve (12) months.

11.3 Liability Insurance.

11.3.1        At
all times during the Term of this Lease, Tenant shall procure and maintain, at
its sole expense for the protection of Landlord and Tenant, commercial general
liability insurance applying to the use and occupancy of the Premises and the
business operated by Tenant. Such insurance shall have a minimum combined
single limit of liability of at least $1,000,000 per occurrence and a general
aggregate limit of at least $2,000,000, and

 13
 

Tenant shall provide in addition excess liability
insurance on a following form basis, with overall limits of at least
$5,000,000. All such policies shall be written to apply to all bodily injury
(including death), property damage and personal injury losses, shall include
blanket contractual liability, broad form property damage, independent
contractor’s coverage, completed operations, products liability, cross
liability and severance of interest clauses, and shall be endorsed to include
Landlord, the State of California Public Employees’ Retirement System (“CalPERS”), and each of their respective
agents, beneficiaries, partners, employees, and any Holder (defined in Section
18.1) of any Security Document (defined in Section 18.1) designated by Landlord
as additional insureds.

11.3.2        At
all times during the Term of this Lease, Tenant shall procure and maintain, at
its sole expense for the protection of Landlord and Tenant, primary automobile
liability insurance with limits of not less than $1,000,000 per occurrence
covering owned, hired and non-owned vehicles used by Tenant.

11.3.3        Prior
to the sale, storage, use or giving away of alcoholic beverages on or from the
Premises by Tenant or another person, Tenant, at its own expense, shall obtain
a policy or policies of insurance issued by a responsible insurance company and
in a form acceptable to Landlord saving harmless and protecting Landlord and
the Premises against any and all damages, claims, liens, judgments, expenses
and costs, including actual attorneys’ fees, arising under any present or
future law, statute, or ordinance of the State of California or other
governmental authority having jurisdiction of the Premises, by reason of any
storage, sale, use or giving away of alcoholic beverages on or from the
Premises. Such policy or policies of insurance shall have a minimum combined
single limit of $3,000,000 per occurrence and shall apply to bodily injury,
fatal or nonfatal; injury to means of support; and injury to property of any
person. Such policy or policies of insurance shall name the Landlord and its
agents, beneficiaries, partners, employees and any Holder of any Security
Document designated by Landlord as additional insureds.

11.3.4        At
all times during the Term of this Lease, Tenant shall procure and maintain
Workers’ Compensation Insurance in accordance with the laws of the State of
California, and Employer’s Liability insurance with a limit not less than
$1,000,000 Bodily Injury Each Accident; $1,000,000 Bodily Injury By Disease -
Each Person; and $1,000,000 Bodily Injury By Disease - Policy Limit.

11.4
Policy Requirements. All
insurance required to be maintained by Tenant shall be issued by insurance
companies authorized to do insurance business in the State of California and
rated not less than A:X in Best’s Insurance Guide. All such insurance policies
shall be written as primary policies, not excess or contributing with or
secondary to any other insurance as may be available to Landlord or to the
additional insureds. A certificate of insurance (or, at Landlord’s option,
copies of the applicable policies) evidencing the insurance required under this
Article 11 shall be delivered to Landlord not less than thirty (30) days prior
to the Commencement Date. No such policy shall be subject to cancellation or
modification without thirty (30) days prior written notice to Landlord and to
any Holder of any Security Document designated by Landlord and such policy
shall be endorsed to provide that the insurer thereunder shall provide Landlord
with written notice of any failure by Tenant to pay any premium thereunder when
due and such failure continues for a period of ten (10) days after such date.
Tenant shall furnish Landlord with a replacement certificate with respect to
any insurance not less than thirty (30) days prior to the expiration of the
current policy. Tenant shall have the right to provide the insurance required
by this Article 11 pursuant to blanket policies, but only if such blanket
policies expressly provide coverage to the Premises and the Landlord as
required by this Lease without regard to claims made under such policies with
respect to other persons.

11.5
Waiver of Subrogation.
Notwithstanding any provision of this Article 11 to the contrary, in the event
that Landlord’s insurance policies with respect to the Premises, the Building
or the Project permit a waiver of subrogation, Landlord hereby waives any and
all rights of recovery against Tenant for or arising out of damage to, or
destruction of, the Premises, the Building or the Project from causes then
included under standard “All-Risk” insurance policies or endorsements;
provided, however, that such waiver of subrogation shall be limited exclusively
to insurance proceeds actually received by Landlord for such damage or
destruction. In the event that Tenant’s insurance policies with respect to the
Premises permit a waiver of subrogation, Tenant waives any and all rights of
recovery against Landlord for or arising out of damage to or destruction of,
any property of Tenant, from causes then included under standard “All Risk”
insurance policies or endorsements. Tenant represents that its present
insurance policies now in force permit such waiver. If at any time during the
Term of this Lease (i) either party shall give less than five (5) days’ prior
written notice to the other party certifying that any insurance carrier which
has issued any such policy shall refuse to consent to the aforesaid waiver of
subrogation, or (ii) such insurance carrier shall consent to such waiver only
upon the payment of an additional premium (and such additional premium is not
paid by the other party hereto), or (iii) such insurance carrier shall revoke a
consent previously given or shall cancel or threaten to cancel any policy
previously issued and then in force and effect, because of such waiver of
subrogation, then, in any of such events, the waiver of subrogation contained
herein shall thereupon be of no further force or effect as to the loss, damage
or destruction covered by such policy. If, however, at any time thereafter, a
consent to such waiver of subrogation shall be obtainable without a substantial
additional premium from any existing or substitute insurance carrier, the
waiver hereinabove provided for shall again become effective.

11.6
Failure to Insure. If
Tenant fails to maintain any insurance which Tenant is required to maintain
pursuant to this Article 11, Tenant shall be liable to Landlord for any loss or
cost resulting from such failure to maintain. Landlord shall have the right, in
its sole discretion, to procure and maintain such insurance which Tenant is
required to maintain hereunder and the cost thereof shall be deemed Additional
Rent due and payable by Tenant. Tenant may not self-insure against any risks
required to be covered by insurance provided by Tenant hereunder.

11.7
Miscellaneous. Landlord
makes no representation that the insurance coverage specified to be carried by
Tenant pursuant to this Article 11 is adequate to protect Tenant against Tenant’s
undertaking under the terms of this Lease or otherwise, and in the event Tenant
believes that any such insurance coverage called for under this Lease is
insufficient, Tenant shall provide, at its own expense, such additional insurance
as Tenant deems adequate. Tenant shall not keep, use, sell or offer for sale in
or upon the Premises any article which may be prohibited by any insurance
policy periodically in force covering the Premises, the Building or the
Project. If any of Landlord’s insurance policies shall be cancelled or
cancellation shall be threatened or the coverage thereunder reduced or
threatened to be reduced in any way because of the use of the Premises or any
part thereof by Tenant or any assignee, subtenant, licensee or invitee of
Tenant and, if Tenant fails to remedy the condition giving rise to such
cancellation, threatened cancellation,

 14
 

reduction of coverage, or threatened reduction of
coverage, within 48 hours after notice thereof, Landlord may, at its option, either
terminate this Lease or enter upon the Premises and attempt to remedy such
condition, and Tenant shall promptly pay the cost thereof to Landlord as
Additional Rent. Landlord shall not be liable for any damage or injury caused
to any property of Tenant or of others located on the Premises resulting from
such entry. If Landlord is unable, or elects not to remedy such condition, then
Landlord shall have all of the remedies provided for in this Lease upon the
occurrence of an Event of Default. Tenant shall not do or permit to be done any
act or things upon or about the Premises or the Project, which will (i) result
in the assertion of any defense by the insurer to any claim under, (ii)
invalidate or (iii) be in conflict with, the insurance policies of Landlord or
Tenant covering the Building, the Premises or fixtures and property therein, or
which would increase the rate of fire insurance applicable to the Building or
the Project to an amount higher than it otherwise would be; and Tenant shall
neither do nor permit to be done any act or thing upon or about the Premises or
the Building which shall or might subject Landlord to any liability or
responsibility for injury to any person or persons or to property. If, as a
result of any act or omission by or on the part of Tenant or violation of this
Lease, whether or not Landlord has consented to the same, the rate of “All Risk”
or other type of insurance maintained by Landlord on or with respect to the
Building and fixtures and property therein, shall be increased to an amount
higher than it otherwise would be, Tenant shall reimburse Landlord for all
increases of Landlord’s insurance premiums so caused within ten (10) days after
delivery of written demand therefor by Landlord. In any action or proceeding
wherein Landlord and Tenant are parties, a schedule or “make-up” of rates for
the Project or the Premises issued by the body making fire insurance rates or
established by insurance carrier providing coverage for the Building or demised
premises shall be presumptive evidence of the facts stated therein including
the items and charges taken into consideration in fixing the “All Risk”
insurance rate then applicable to the Building or the Premises.

ARTICLE
12 - DAMAGE OR DESTRUCTION

12.1
Repair of the Premises.
Tenant shall promptly notify Landlord in writing (a “Damage Notice”) of any casualty event, damage or condition to
which this Article 12 is or may be applicable. Landlord shall, within a
reasonable time after the discovery by Landlord of any damage resulting from any
casualty event (“Casualty”),
subject to reasonable delays for insurance adjustment or other matters beyond
Landlord’s reasonable control, and subject to all other terms of this Article
12, begin to repair the damage to the Project and the Premises resulting from
such Casualty and shall proceed with reasonable diligence to restore the
Project and Premises to substantially the same condition as existed immediately
before such Casualty, except for modifications required by applicable Laws or
covenants, conditions and restrictions, and modifications to the Building or
the Project deemed desirable in good faith by Landlord; provided, however, that
Landlord shall not be required to repair or replace any of the Alterations,
furniture, equipment, fixtures, and other improvements which may have been
placed by, or at the request of, Tenant or other occupants in the Project or
the Premises. Landlord shall have no liability for any inconvenience or
annoyance to Tenant or injury to Tenant’s business as a result of any Casualty,
or Landlord’s Restoration (defined in Section 12.2) activities hereunder,
regardless of the cause therefor. Base Rent, and Additional Rent payable under
Article 4, shall abate if and to the extent a Casualty damages the Premises and
as a result thereof all or any material portion of the Premises are rendered
unfit for occupancy, and are not occupied by Tenant, for the period of time
commencing on the date Tenant vacates the portion of the Premises affected on
account thereof and continuing until the date the Restoration to be performed
by Landlord hereunder with respect to the Premises is substantially complete,
as determined by Landlord’s architect; provided, however, that such abatement
shall be limited to the proceeds of rental interruption insurance proceeds with
respect to the Premises and such Casualty collected by 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 this Lease
with respect to the leasehold improvements in the Premises, provided that if
the cost of Restoration of improvements in the Premises by Landlord exceeds the
amount of insurance proceeds received by Landlord from Tenant’s insurance
carrier, as assigned by Tenant, the cost of repairs to such improvements shall
be paid by Tenant to Landlord prior to Landlord’s repair of the damage, or at
Landlord’s election, at any later time following Landlord’s discovery of any
insufficiency of such insurance proceeds.

12.2
Exceptions to Landlord’s Obligations.
Notwithstanding anything to the contrary contained in this Article 12, Landlord
shall have no obligation to repair the Premises and shall have the right to
terminate this Lease in any case where (a) any portion of the Premises or any
material portion of the Project is damaged and (b) (i) Landlord estimates in
good faith that the repair and restoration of such damage under Section 12.1 (“Restoration”) cannot reasonably be
completed (without the payment of overtime) within one hundred eighty (180)
days of Landlord’s actual discovery of such damage, (ii) the Holder of any
Security Document requires the application of any insurance proceeds with
respect to such Casualty to be applied to the outstanding balance of the
obligation secured by such Security Document, (iii) the cost of such
Restoration is not fully covered by insurance proceeds available to Landlord
and/or payments received by Landlord from tenants, (iv) Tenant shall be
entitled to an abatement of rent under this Section 12 for any period of time
in excess of thirty-three percent (33%) of the remainder of the Term, or (v)
such Casualty occurs (or Landlord discovers the damage relating thereto) at any
time within the last eighteen (18) months of the then applicable Term (disregarding
Extension Terms if any). Such right of termination shall be exercisable by
Landlord by delivery of written notice to Tenant at any time following the
Casualty until forty-five (45) days following the later of (X) delivery of the
Damage Notice or (Y) Landlord’s discovery or determination of any of the events
described in clauses (i) through (v) of the preceding sentence and shall be
effective upon delivery of such notice of termination (or if Tenant has not
vacated the Premises, upon the expiration of thirty (30) days thereafter).

12.3
Waiver. Landlord and Tenant
agree that the provisions of this Article 12 and the remaining provisions of
this Lease shall exclusively govern the rights and obligations of the parties
with respect to any and all damage to, or destruction of, all or any portion of
the Premises or the Project, and Landlord and Tenant hereby waive and release
each and all of their respective common law and statutory rights inconsistent
herewith, whether now or hereinafter in effect (including, without limitation,
Sections 1932(2) and 1933(4) of the California Civil Code, as amended from time
to time).

ARTICLE
13 - CONDEMNATION

13.1
Taking. In the event the
whole or a material portion of the Premises, the Building or the Project shall
be taken under the power of eminent domain, or sold to prevent the exercise
thereof (collectively, a “Taking”),
this Lease shall automatically terminate as of the date of such Taking. In the
event of a Taking of such portion of the Project, the Building or the Premises
as shall, in the opinion of Landlord, substantially interfere with Landlord’s
operation thereof,

 15
 

Landlord may terminate this Lease upon thirty (30)
days’ written notice to Tenant given at any time within sixty (60) days
following the date of such Taking. For purposes of this Lease, the date of
Taking shall be the earlier of the date of transfer of title resulting from
such Taking or the date of transfer of possession resulting from such Taking.

13.2
Restoration of Premises. In
the event that a portion of the Premises is so taken and this Lease is not
terminated, Landlord shall, with reasonable diligence, proceed to restore (to
the extent permitted by Law and covenants, conditions and restrictions then
applicable to the Project) the Premises (other than Tenant’s personal property
and fixtures, and tenant improvements not constituting Building Standard
Installations) to a complete, functioning unit, to the extent of the
condemnation award received by Landlord. In such case, the Annual Base Rent
shall be reduced proportionately based on the portion of the Premises so taken.

13.3
Award. In the event of any
Taking, the entire award for such taking shall belong to Landlord, except that
Tenant shall be entitled to independently pursue a separate award relating to
the loss of, or damage to, Tenant’s personal property and trade fixtures and
Tenant’s relocation costs directly associated with the taking. Except as
provided herein, Tenant shall not assert any claim against Landlord or the
condemning authority for, and hereby assigns to Landlord, any compensation in
connection with any such Taking, and Landlord shall be entitled to receive the
entire amount of any award therefor, without deduction for any estate or
interest of Tenant. Notwithstanding any provision to the contrary contained in
this Section 13.3, in the event of any such Taking, Tenant may claim and
recover from the condemning authority a separate award for Tenant’s moving
expenses, business dislocation damages and Tenant’s personal property and trade
fixtures. Subject to the provisions of this Section 13.3, each party shall seek
its own award, as limited above, at its own expense, and neither shall have any
right to the award made to the other.

13.4
Temporary Taking. No
temporary taking of the Premises shall terminate this Lease or entitle Tenant
to any abatement of the Rent payable to Landlord under this Lease; provided,
further, that any award for such temporary taking shall belong to Tenant to the
extent that the award applies to any time period during the Term of this Lease
and to Landlord to the extent that the award applies to any time period outside
the Term.

13.5
Exclusive Remedy. This
Article 13 shall be Tenant’s sole and exclusive remedy in the event of a
Taking. Each party hereby waives the provisions of Sections 1265.130 and
1265.150 of the California Code of Civil Procedure and the provisions of any
successor or other law of like import.

ARTICLE
14 - RELOCATION

Landlord
shall have the right, in its sole discretion, upon not less than thirty (30)
days prior written notice to Tenant, to relocate Tenant and to substitute for
the Premises described above to other space in the Project containing at least
as much rentable area as the Premises described in Item 2 of the Basic Lease
Provisions. If Tenant is already in occupancy of the Premises, then Landlord
shall also reimburse Tenant for Tenant’s reasonable moving, telephone and data
cabling relocation expenses and for reasonable quantities of new stationery
upon submission to Landlord of receipts for such expenditures incurred by
Tenant.

ARTICLE
15 - ASSIGNMENT AND SUBLETTING

15.1
Restriction. Without the
prior written consent of Landlord, Tenant shall not, either involuntarily or
voluntarily or by operation of law or otherwise, assign, mortgage, pledge,
hypothecate, encumber or permit any lien to attach to, or transfer this Lease
or any interest herein, or sublet the Premises or any part thereof, or permit
the Premises to be occupied by anyone other than Tenant or Tenant’s employees
(each a “Transfer” and any person
or entity to whom a Transfer is made or sought to be made is referred to herein
as a “Transferee”). Any Transfer
in violation of the provisions of this Article 15 shall be void and, at
Landlord’s option, shall constitute an Event of Default. For purposes of this
Lease, the term “Transfer” shall
also include (i) if a Tenant is a partnership or limited liability company, the
withdrawal or change, voluntary, involuntary or by operation of law, of fifty
percent (50%) or more of the partners, members or managers thereof, or transfer
of twenty-five percent (25%) or more of partnership or membership interests
therein within a twelve (12) month period, or the dissolution of the
partnership or the limited liability company without immediate reconstitution
thereof, and (ii) if Tenant is a corporation whose stock is not publicly held
and not traded through an exchange or over the counter or any other form of
entity, (A) the dissolution, merger, consolidation or other reorganization of
Tenant, the sale or other transfer of more than an aggregate of fifty percent
(50%) of the voting shares or other interests of or in Tenant (other than in to
trust for estate planning purposes or to immediate family members by reason of
gift or death), within a twelve (12) month period, or (B) the sale, mortgage,
hypothecation or pledge of more than an aggregate of fifty percent (50%) of the
value of the unencumbered assets of Tenant within a twelve (12) month period.
Notwithstanding anything contained in this Article 15 to the contrary, Tenant
expressly covenants and agrees not to enter into any lease, sublease, license,
concession or other agreement for use, occupancy or utilization of the Premises
which provides for rental or other payment for such use, occupancy or utilization
based in whole or in part on the net income or profits derived by any person
from the property leased, used, occupied or utilized (other than an amount
based on a fixed percentage or percentages of receipts or sales), and that any
such purported lease, sublease, license, concession or other agreement shall be
absolutely void.

15.2
Notice to Landlord. If
Tenant desires to Transfer this Lease or any interest herein, then at least
twenty (20) business days (but no more than one hundred eighty (180) days)
prior to the effective date of the proposed Transfer, Tenant shall submit to
Landlord a written request (a “Transfer
Notice”) for Landlord’s consent, which notice shall include:

15.2.1        A
statement containing (i) the name and address of the proposed Transferee; (ii)
current financial statements of the proposed Transferee certified by an
officer, partner or owner thereof, and any other information and materials
(including, without limitation, credit reports, business plans, operating
history, bank and character references) required by Landlord to assist Landlord
in reviewing the financial responsibility, character, and reputation of the
proposed Transferee; (iii) the nature of such Transferee’s business and
proposed use of the Premises; (iv) the proposed effective date of the Transfer;
(v) a description of the portion of the Premises subject to the proposed
Transfer; (vi) all of the principal terms of the proposed Transfer (including a
calculation of the Transfer Profits (defined below)); and (vii) such other
information or materials as Landlord may reasonably request (provided, that if
Landlord

 16
 

requests such additional information or materials, the
Transfer Notice shall not be deemed to have been received until Landlord
receives such additional materials).

15.2.2        Four
(4) originals of the proposed assignment or sublease or other Transfer on a
form approved by Landlord and four (4) originals of the Landlord’s Consent to
Sublease or Assignment and Assumption of Lease and Consent executed by Tenant
and the proposed Transferee.

15.2.3        If
Tenant modifies any of the terms and conditions relevant to a proposed Transfer
specified in the Transfer Notice such that Landlord would be entitled to
withhold its consent to such Transfer under Section 15.4, Tenant shall re-submit
such Transfer Notice to Landlord for its consent pursuant to all of the terms
and conditions of this Article 15.

15.3
Landlord’s Recapture Rights.
At any time within twenty (20) business days after Landlord’s receipt of all
(but not less than all) of the information and documents described in Section
15.2, Landlord may, at its option, in its sole and absolute discretion, by
written notice to Tenant, elect to: (i) sublease the Premises or the portion
thereof proposed to be sublet by Tenant upon the same terms as those offered to
the proposed subtenant; (ii) take an assignment of this Lease upon the same
terms as those offered to the proposed assignee; or (iii) terminate this Lease
in its entirety or as to the portion of the Premises subject to the proposed
Transfer, with a proportionate adjustment in the Rent payable hereunder if this
Lease is terminated as to less than all of the Premises. If Landlord does not
exercise any of the options described in the preceding sentence, then, during
the above-described twenty (20) business day period. Landlord shall either
consent or deny its consent to the proposed Transfer.

15.4
Landlord’s Consent; Standards.

15.4.1        Subject
to the provisions of Section 15.3, Landlord’s consent to any proposed Transfer
shall not be unreasonably withheld; provided, however, that in addition to any
other grounds available hereunder or under applicable Law for properly
withholding consent to such proposed Transfer, Landlord’s consent with respect
thereto shall be deemed reasonably withheld if in Landlord’s good faith
judgment: (i) the proposed Transferee does not have the financial strength
(taking into account all of the Transferee’s other actual or potential
obligations and liabilities) to perform its obligations with respect to the proposed
Transfer (or otherwise does not satisfy Landlord’s standards for financial
standing with respect to tenants under direct leases of comparable economic
scope); (ii) the business and operations of the proposed Transferee are not of
comparable quality to the business and operations being conducted by direct
tenants of Landlord in the Project; (iii) the proposed Transferee intends to
use any part of the Premises for a purpose not permitted under this Lease; (iv)
either the proposed Transferee, or any person which directly or indirectly
controls, is controlled by, or is under common control with the proposed
Transferee occupies space in the Project or has negotiated with Landlord within
the preceding one hundred eighty (180) days (or is currently negotiating with
Landlord) to lease space in the Project; (v) the proposed Transferee is of a
character or reputation or engaged in a business which is not consistent with
the quality of the Project as evidenced by the parameters consistently applied
in Landlord’s direct leasing activities; (vi) the use of the Premises, the
Building or the Project by the proposed Transferee would, in Landlord’s
judgment, significantly increase the pedestrian traffic in and out of the
Building and/or the Project, would generate increased loitering in Common
Areas, would increase security risk, or would require any alterations to the
Building or the Project to comply with applicable Laws; (vii) the proposed
Transfer would result in more than three subleases per each full floor of the Premises
being in effect at any one time during the Term; (viii) any ground lessor or
mortgagee whose consent to such Transfer is required fails to consent thereto;
(ix) at the time Tenant delivers the Transfer Notice, there is then in effect
an uncured Event of Default; (x) the terms of the proposed Transfer will allow
the Transferee to exercise a right of renewal, right of expansion, right of
first offer, or other similar rights held by Tenant (or will allow the
Transferee to occupy space leased by Tenant pursuant to any such right); (xi)
the proposed Transfer would cause Landlord to be in violation of another lease
or agreement to which Landlord is a party or would give an occupant of the
Project a right to cancel or modify its lease; (xii) the proposed Transfer
would be on economic terms (based upon effective rental rates) more favorable
to the Transferee than the economic terms then being accepted by Landlord for
comparable direct leasing transactions in the Project; or (xiii) the proposed
Transferee has the power of eminent domain, is a governmental agency or an
agency or subdivision of a foreign government.

15.4.2        Notwithstanding
anything to the contrary in this Lease, if Tenant or any proposed Transferee
claims that Landlord has unreasonably withheld or delayed its consent or
otherwise acted in a manner not permitted under this Article 15, then the sole
remedy of Tenant and such proposed Transferee if such claim is determined by a
court of competent jurisdiction to be successful shall be a declaratory judgment
and an injunction for the relief sought without any monetary damages or other
monetary relief. Tenant and each proposed Transferee hereby waive to the
maximum extent permitted by Law any and all other remedies, including, without
limitation, any right at law or equity to terminate this Lease with respect to
any such claim. Tenant shall indemnify, defend, protect and hold harmless
Landlord from any and all Claims, Damages and Costs involving or asserted by
any third party or parties (including, without limitation, Tenant’s proposed
Transferee and any broker representing Tenant and/or such Transferee) claiming
they were damaged by Landlord’s wrongful withholding or delaying of Landlord’s
consent to such proposed Transfer or other breach of this Article 15. Tenant
acknowledges that Tenant’s rights under this Article 15 satisfy the conditions
set forth in Section 1951.4 of the California Civil Code with respect to the
availability to Landlord of certain remedies for a default by Tenant under this
Lease.

15.5
Transfer Profits. Subject
to the provisions of this Article 15, if Landlord consents to any Transfer,
Tenant shall pay to Landlord fifty percent (50%) of any Transfer Profits
(defined below). “Transfer Profits”
shall mean all rent, additional rent or other consideration paid by or on
behalf of such Transferee in connection with the Transfer in excess of Monthly
Base Rent and Additional Rent payable by Tenant under this Lease during the
Term of the Transfer. Tenant shall provide Landlord with a detailed statement
setting forth the calculation of any Transfer Profits Tenant either has or will
derive from such Transfer. In addition, Landlord or its representative shall
have the right at all reasonable times to audit the books and records of Tenant
with respect to the calculation of the Transfer profits. If such inspection
reveals that the amount of Transfer Profits paid to Landlord was incorrect,
then within ten (10) days of Tenant’s receipt of the results of such audit.
Tenant, shall pay Landlord the deficiency and the cost of Landlords audit.

 17
 

15.6 Landlord’s Costs. With respect to each
Transfer proposed to be consummated by Tenant, whether or not Landlord shall
grant consent, Tenant shall pay all of Landlord’s review and processing fees,
and costs, as well as any reasonable professional, attorneys’, accountants’,
engineers’ or other consultants’ fees incurred by Landlord relating to such
proposal Transfer within thirty (30) days after written request by Landlord.

15.7
Continuing Liability of Tenant.
Notwithstanding the consummation or attempted consummation of any Transfer
under this Article 15, Tenant shall remain as fully and primarily liable for
the payment of Rent and for the performance of all other obligations of tenant
contained in this Lease to the same extent as if the Transfer had not occurred;
provided, however, that any act or omission of any Transferee, other than
Landlord, that violates the terms of this Lease shall be deemed a violation of
this Lease by Tenant. If any Transferee defaults beyond applicable cure and
grace periods in the performance of any of the terms hereof, Landlord may
proceed directly against Tenant without the necessity of exhausting its
remedies against such Transferee. Landlord may consent to subsequent Transfers
of this Lease with Transferees of Tenant, upon notice to Tenant, but without
obtaining its or their consent thereto, and such action shall not relieve
Tenant of its liability under this Lease.

15.8
Non-Waiver. The consent by
Landlord to any Transfer shall not relieve Tenant, or any person claiming
through or by Tenant, of the obligation to obtain the consent of Landlord,
pursuant to this Article 15, to any further Transfer. In the event of a
Transfer, Landlord may collect rent from the Transferee without waiving any rights
hereunder and collection of the rent from a person other than Tenant shall not
be deemed a waiver of any of Landlord’s rights under this Article 15, an
acceptance of Transferee as Tenant, or a release of Tenant from the performance
of Tenant’s obligations under this Lease.

ARTICLE
16 - DEFAULT AND REMEDIES

16.1
Events of Default By Tenant.
The occurrence of any of the following shall constitute a material default and
breach of this Lease by Tenant (an “Event of Default”):

16.1.1        Any
failure by Tenant to pay any Rent or any other charge required to be paid under
this Lease, or any part thereof, within three (3) days of notice that the same
is due, which notice shall be in lieu of any notice required under California
Code of Civil Procedure Section 1161 or any similar or successor law.

16.1.2        The
abandonment of the Premises by Tenant, or the vacation of the Premises by
Tenant for a period of ten (10) consecutive days (with or without the payment
of Rent), or the failure of Tenant to take occupancy of the Premises within
thirty (30) days of the Commencement Date, it being agreed that the fact that
any of Tenant’s Property remains in the Premises shall not be evidence that
Tenant has not vacated or abandoned the Premises.

16.1.3        Any
failure by Tenant to execute and deliver any statement or document described in
Articles 18 and 22 requested by Landlord within the time periods specified
therein, where such failure continues for three (3) days after delivery of
written notice of such failure by Landlord to Tenant; provided, however, that
any such notice shall be in lieu of, and not in addition to, any notice
required under Section 1161 et seq., of the California Code of Civil Procedure.

16.1.4        The
failure by Tenant to observe or perform any other provision of this Lease to be
observed or performed by Tenant, other than those described in Sections 16.1.1,
16.1.2 and 16.1.3 above, if such failure continues for twenty (20) days (except
where a different period of time is specified in this Lease, in which case such
different time period shall apply) after written notice thereof by Landlord to
Tenant; provided, however, that if the nature of the default is such that it
cannot be cured within the twenty (20) day period, no default shall exist if
Tenant commences the curing of the default within the twenty (20) day period
and thereafter diligently prosecutes the same to completion. The twenty (20)
day notice described herein shall be in lieu of, and not in addition to, any
notice required under Section 1161 of the California Code of Civil Procedure or
any other law now or hereafter in effect requiring that notice of default be
given prior to the commencement of an unlawful detainer or other legal
proceeding.

16.1.5        The
making or furnishing by Tenant of any warranty, representation or statement to
Landlord in connection with this Lease, or any other agreement to which Tenant
and Landlord are parties, which is false or misleading in any material respect
when made or furnished.

16.1.6        The
assignment, subletting or other Transfer, or any attempted assignment,
subletting or other Transfer, of this Lease in violation of Article 15.

16.1.7        Any
instance whereby Tenant or any general partner of Tenant shall cease doing
business as a going concern, make an assignment for the benefit of creditors,
generally not pay its debts as they become due or admit in writing its
inability to pay its debts as they become due, file a petition commencing a
voluntary case under any chapter of the Bankruptcy Code, be adjudicated an
insolvent, file a petition seeking for itself any reorganization, composition,
readjustment, liquidation, dissolution or similar arrangement under the
Bankruptcy Code or any other present or future similar statute, law, rule or
regulation, or file an answer admitting the material allegations of a petition
filed against it in any such proceeding, consent to the filing of such a
petition or acquiesce in the appointment of a trustee, receiver, custodian or
other similar official for it or of all or any substantial part of its assets
or properties, or take any action looking to its dissolution or liquidation.

16.1.8        Any
instance whereby a case, proceeding or other action shall be instituted against
Tenant or any general partner of Tenant seeking the entry of an order for
relief against Tenant or any general partner thereof as debtor, to adjudicate
Tenant or any general partner thereof as a bankrupt or insolvent, or seeking
reorganization, arrangement, readjustment, liquidation, dissolution or similar
relief against Tenant or any general partner thereof under the Bankruptcy Code
or any other present or future similar statute, law, rule or regulation, which
case, proceeding or other action either results in such entry, adjudication or
issuance or entry of any other order or judgment having a similar effect, or
remains undismissed for 60 days, or within 60 days after the appointment
(without Tenant’s or such general partner’s consent) of any trustee, receiver,
custodian or other similar official for it or such

 18
 

general partner, or of all or any substantial part of
its or such general partner’s assets and properties, such appointment shall not
be vacated.

16.1.9        The
appointment of a receiver, trustee or custodian to take possession of all or
any substantial portion of the assets of Tenant, or the formation of any
committee of Tenant’s creditors, or any class thereof, for the purpose of
monitoring or investigating the financial affairs of Tenant or enforcing such
creditors’ rights.

16.1.10      The
default by any guarantor of Tenant’s obligations hereunder under any guaranty
of this Lease, the attempted repudiation or revocation of any such guaranty or
the participation by any such guarantor in any other event described in this
Section 16.1 (as if this Section 16.1.10 referred to such guarantor in place of
Tenant).

16.2
Landlord’s Right To Terminate Upon Tenant
Default. In the event of any default by Tenant as provided in
Section 16.1 above, Landlord shall have the right to terminate this Lease and
recover possession of the Premises by giving written notice to Tenant of
Landlord’s election to terminate this Lease, in which event Landlord shall be
entitled to receive from Tenant:

16.2.1        The
worth at the time of award or any unpaid Rent which had been earned at the time
of such termination; plus

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

16.2.3        The
worth at the time of award of the amount by which the unpaid Rent for the
balance of the Term after the time of award exceeds the amount of such rental
loss that Tenant proves could be reasonably avoided; plus

16.2.4        Any
other amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant’s failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result therefrom; and

16.2.5        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. As used in
Sections 16.2.1 and 16.2.2 above, “worth at
the time of award”  shall be computed by allowing
interest at the then highest lawful contract rate of interest. As used in
Section 16.2.3 above, “worth at
the time of award” shall be
computed by discounting such amount at the Interest Rate. As used herein, the
term “Interest
Rate” means the lesser of (i) the “prime rate” or “reference
rate” announced from time to time by Bank of America, N.T. & S.A. (or such
reasonable comparable national banking institution as is selected by Landlord
in the event Bank of America, N.T. & S.A. ceases to publish a prime rate or
reference rate) (the “Reference Rate”), plus one percent (1%), or (ii) the
maximum rate permitted by Law.

16.3
Landlord’s Right To Continue Lease Upon
Tenant Default. In the event of a default of this Lease and
abandonment of the Premises by Tenant, if Landlord does not elect to terminate
this Lease as provided in Section 16.2 above, Landlord may from time to time,
without terminating this Lease, enforce all of its rights and remedies under
this Lease. Without limiting the foregoing, Landlord has the remedy described
in California Civil Code Section 1951.4 (Landlord may continue this Lease in
effect after Tenant’s breach and abandonment and recover Rent as it becomes
due, if Tenant has the right to sublet or assign, subject only to reasonable
limitations). To the fullest extent permitted by law, the proceeds of any
reletting shall be applied first to pay to Landlord all costs and expenses of
such reletting (including without limitation, costs and expenses of retaking or
repossessing the Premises, removing persons and property therefrom, securing
new tenants, including expenses for redecoration, alterations and other costs
in connection with preparing the Premises for the new tenant, and if Landlord
shall maintain and operate the Premises, the costs thereof) and receivers’ fees
incurred in connection with the appointment of and performance by a receiver to
protect the Premises and Landlord’s interest under this Lease and any necessary
or reasonable alterations; second, to the payment of any indebtedness of Tenant
to Landlord other than Rent due and unpaid hereunder; third, to the payment of
Rent due and unpaid hereunder; and the residue, if any, shall be held by
Landlord and applied in payment of other or future obligations of Tenant to
Landlord as the same may become due and payable, and Tenant shall not be
entitled to receive any portion of such revenue. No re-entry or taking of
possession of the Premises by Landlord pursuant to this Section 16.3 shall be
construed as an election to terminate this Lease unless a written notice of
such election shall be given to Tenant or unless the termination thereof be
decreed by a court of competent jurisdiction. Notwithstanding any reletting
without termination by Landlord, Landlord may, at any time after such
reletting, elect to terminate this Lease for any such default. Upon the occurrence
of a default by Tenant under Section 16.1 above, if the Premises or any portion
thereof are sublet, Landlord, in addition and without prejudice to any other
remedies herein provided or provided by Law, may, at its option, collect
directly from the sublessee all rentals becoming due to the Tenant and apply
such rentals against other sums due hereunder to Landlord.

16.4
Right of Landlord to Perform.
All covenants and agreements to be performed by Tenant under this Lease shall
be performed by Tenant at Tenant’s sole cost and expense. If Tenant shall fail
to pay any sum of money, other than Annual Base Rent, required to be paid by it
hereunder or shall fail to perform any other act on its part to be performed
hereunder, then, in addition to and without prejudice to any other right or
remedy of Landlord (including, without limitation, any right or remedy provided
under Article 9), Landlord may cure the same at the expense of Tenant (i)
immediately and without notice in the case (a) of emergency, (b) where such default
unreasonably interferes with any other tenant in the Project, or (c) where such
default will result in the violation of Law or the cancellation of any
insurance policy maintained by Landlord and (ii) in any other case if such
default continues for ten (10) days from the receipt by Tenant of notice of
such default from Landlord. Any sums so paid by Landlord and all incidental
costs, together with interest thereon at the maximum rate permitted by law from
the date of such payment, shall be payable to Landlord as Additional Rent on
demand, and Landlord shall have the same rights and remedies in the event of
nonpayment as in the case of default by Tenant in the payment of Rent.

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16.5 Late Payments of Rent. Following the
occurrence of three instances of payment of Rent more than 10 days late in any
twelve month period, Landlord may, without prejudice to any other rights or
remedies available to it, upon written notice to Tenant, (i) require that all
remaining monthly installments of Rent shall be payable three months in
advance; and in addition or in the alternative at Landlord’s election, (ii)
require that Tenant increase the amount of the Security Deposit (if any) by an
amount equal to one month’s Rent.

16.6
Default Under Other Leases.
If the term of any lease, other than this Lease, heretofore or hereafter made
by Tenant for any space in the Building shall be terminated or terminable after
the making of this Lease because of any default by Tenant under such other
lease, such fact shall empower Landlord, at Landlord’s sole option, to
terminate this Lease by notice to Tenant or to exercise any of the rights or
remedies set forth in Section 16.2.

16.7
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 16, 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.

16.8
Efforts to Relet. For the
purposes of this Article 16, Tenant’s right to possession shall not be deemed
to have been terminated by efforts of Landlord to relet the Premises, by its
acts of maintenance or preservation with respect to the Premises, or by
appointment of a receiver to protect Landlord’s interests hereunder. The
foregoing enumeration is not exhaustive, but merely illustrative of acts which
may be performed by Landlord without terminating Tenant’s right to possession.

16.9
Waiver of Right of Redemption.
Tenant hereby waives for Tenant and for all those claiming under Tenant all
right now or hereafter existing to redeem by order or judgment of any court or
by any legal process or writ, Tenant’s right of occupancy of the Premises after
any termination of this Lease. Notwithstanding any provision of this Lease to
the contrary, the expiration or termination of this Lease and/or the
termination of Tenant’s rights to possession of the Premises shall not
discharge, relieve or release Tenant from any obligation or liability
whatsoever under any indemnity provision of this Lease, including without
limitation the provisions of Section 11.1 hereof.

16.10
Non-Waiver. Nothing in this
Article 16 shall be deemed to affect Landlord’s rights to indemnification for
liability or liabilities arising prior to termination of this Lease for
personal injury or property damages under the indemnification clause or clauses
contained in this Lease. No acceptance by Landlord of a lesser sum than the
Rent then due shall be deemed to be other than on account of the earliest
installment of such rent due, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord’s right to recover the balance of such installment or
pursue any other remedy provided in this Lease. The delivery of keys to any
employee of Landlord or to Landlord’s agent or any employee thereof shall not
operate as a termination of this Lease or a surrender of the Premises.

16.11
Waiver of Trial by Jury.
Landlord and Tenant each expressly waive their right to trial by jury in any
trial held as a result of a claim arising out of or in connection with this
Lease in which Landlord and Tenant are adverse parties. The filing of a
cross-complaint by one against the other is sufficient to make the parties “adverse.”

16.12
Cumulative Remedies. The
specific remedies to which Landlord may resort under the terms of this Lease
are cumulative and are not intended to be exclusive of any other remedies or
means of redress to which it may be lawfully entitled in case of any breach or
threatened breach by Tenant of any provisions of this Lease. In addition to the
other remedies provided in this Lease, Landlord shall be entitled to a
restraint by injunction of the violation or attempted or threatened violation
of any of the covenants, conditions or provisions of this Lease or to a decree
compelling specific performance of any such covenants, conditions or
provisions.

16.13
Default by Landlord.
Landlord’s failure to perform or observe any of its obligations under this
Lease shall constitute a default by Landlord under this Lease only if such
failure shall continue for a period of thirty (30) days (or the additional
time, if any, that is reasonably necessary promptly and diligently to cure the
failure) after Landlord receives written notice from Tenant specifying the
default, which notice shall describe in reasonable detail the nature and extent
of the failure and shall identify the Lease provision(s) containing the
obligation(s) in question. Subject to the remaining provisions of this Lease,
following the occurrence of any such default, Tenant shall have the right to
pursue any remedy available under Law for such default by Landlord; provided,
however, that in no case shall Tenant have any right to terminate this Lease on
account of any such default.

ARTICLE
17 - ATTORNEYS FEES; COSTS OF SUIT

17.1
Attorneys Fees. If either
Landlord or Tenant shall commence any action or other proceeding against the
other arising out of, or relating to, this Lease or the Premises, the
prevailing party shall be entitled to recover from the losing party, in
addition to any other relief, its actual attorneys fees irrespective of whether
or not the action or other proceeding is prosecuted to judgment and
irrespective of any court schedule of reasonable attorneys’ fees. In addition,
Tenant shall reimburse Landlord, upon demand, for all reasonable attorneys’
fees incurred in collecting Rent or otherwise seeking enforcement against
Tenant, its sublessees and assigns, of Tenant’s obligations under this Lease.

17.2
Indemnification. Except if
caused by the gross negligence or willful misconduct of Landlord or its agents,
employees or contractors, should Landlord be made a party to any litigation
instituted by Tenant against a party other than Landlord, or by a third party
against Tenant, Tenant shall indemnify, hold harmless and defend Landlord from
any and all loss, cost, liability, damage or expense incurred by Landlord,
including attorneys’ fees, in connection with the litigation.

 20

ARTICLE 18 -
SUBORDINATION AND ATTORNMENT

18.1
Subordination. This Lease,
and the rights of Tenant hereunder, are and shall be subordinate to the
interests of (i) all present and future ground leases and master leases of all
or any part of the Building; (ii) present and future mortgages and deeds of
trust encumbering all or any part of the Building; (iii) all past and future
advances made under any such mortgages or deeds of trust; and (iv) all
renewals, modifications, replacements and extensions of any such ground leases,
master leases, mortgages and deeds of trust (collectively, “Security Documents”) which now or hereafter
constitute a lien upon or affect the Project, the Building or the Premises.
Such subordination shall be effective without the necessity of the execution by
Tenant of any additional document for the purpose of evidencing or effecting
such subordination. In addition, Landlord shall have the right to subordinate
or cause to be subordinated any such Security Documents to this Lease and in such
case, in the event of the termination or transfer of Landlord’s estate or
interest in the Project by reason of any termination or foreclosure of any such
Security Documents, Tenant shall, notwithstanding such subordination, attorn to
and become the Tenant of the successor in interest to Landlord at the option of
such successor in interest. Furthermore, Tenant shall within ten (10) days of
demand therefor execute any instruments or other documents which may be
required by Landlord or the holder (“Holder”)
of any Security Document and specifically shall execute, acknowledge and
deliver within five (5) days of demand therefor a subordination of lease or
subordination of deed of trust, in the form required by the Holder of the
Security Document requesting the document; the failure to do so by Tenant
within such time period shall be a material default hereunder. Such instruments
may contain, among other things, provisions to the effect that such lessor,
mortgagee or beneficiary (hereafter, for the purposes of this Section 18.1, a “Successor Landlord”) shall (a) not be
liable for any act or omission of Landlord or its predecessors, if any, prior
to the date of such Successor Landlord’s succession to Landlord’s interest
under this Lease; (b) not be subject to any offsets or defenses which Tenant
might have been able to assert against Landlord or its predecessors, if any,
prior to the date of such Successor Landlord’s succession to Landlord’s
interest under this Lease; (c) not be liable for the return of any security
deposit under this Lease unless the same shall have actually been deposited
with such Successor Landlord; and (d) be entitled to receive notice of any
Landlord default under this Lease plus a reasonable opportunity to cure such
default prior to Tenant having any right or ability to terminate this Lease as
a result of such Landlord default. Landlord is hereby irrevocably appointed and
authorized as agent and attorney-in-fact of Tenant to execute and deliver all
such subordination instruments in the event that Tenant fails to execute and
deliver said instruments within five days after notice from Landlord requesting
execution and delivery thereof.

18.2
Attornment. If requested to
do so, Tenant shall attorn to and recognize as Tenant’s landlord under this
Lease any superior lessor, superior mortgagee or other purchaser or person
taking title to the Building by reason of the termination of any superior lease
or the foreclosure of any superior mortgage or deed of trust, and Tenant shall,
within five (5) days of demand therefor execute any instruments or other
documents which may be required by Landlord or the Holder of any such Security
Document to evidence the attornment described in this Section 18.2.

18.3
Mortgage and Ground Lessor Protection.
Tenant agrees to give each Holder of any Security Document, by registered or
certified mail, a copy of any notice of default served upon the Landlord by
Tenant, provided that prior to such notice Tenant has been notified in writing
of the address of such Holder (hereafter the “Notified Party”). Tenant further
agrees that if Landlord shall have failed to cure such default within thirty
(30) days after such notice to Landlord (or if such default cannot be cured or
corrected within that time, then such additional time as may be necessary if
Landlord has commenced within such thirty (30) days and is diligently pursuing
the remedies or steps necessary to cure or correct such default), then prior to
Tenant pursuing any remedy for such default provided hereunder, at law or in
equity, the Notified Party shall have an additional thirty (30) days within
which to cure or correct such default (or if such default cannot be cured or
corrected within that time, then such additional time as may be necessary if
the Notified Party has commenced within such thirty (30) days and is diligently
pursuing the remedies or steps necessary to cure or correct such default).

ARTICLE
19 - QUIET ENJOYMENT

Provided
that Tenant performs all of its obligations hereunder, Tenant shall have and
peaceably enjoy the Premises during the Term of this Lease, subject to all of
the terms and conditions contained in this Lease, from and against all persons
holding an interest in the Project from and through Landlord.

ARTICLE
20 - PARKING

20.1         Pursuant
to Item 7 of the Basic Lease Provisions, Tenant shall lease from Landlord each
month during the Term the number of (i) unreserved parking privileges (“Unreserved Parking Privileges”) and (ii)
covered and reserved parking spaces (“Reserved
Parking Privileges”), at the rates set forth in Item 7 of the Basic
Lease Provisions; provided that, subject to availability (as determined by
Landlord in its sole but good faith discretion), Tenant shall have the right to
lease from Landlord on a month-to-month basis additional Unreserved Parking
Privileges and/or additional Reserved Parking Privileges at Landlord’s then
prevailing charge. Tenant shall have the right to use on a first come, first
served basis, the number of Unreserved Parking Privileges leased by Tenant from
Landlord pursuant to Item 7 of the Basic Lease Provisions. All Reserved Parking
Privileges and Unreserved Parking Privileges are referred to herein
collectively as “Parking Privileges”,
and such Parking Privileges shall be at a location designated by Landlord in
its sole discretion.

20.2         Tenant
shall pay to Landlord, as Additional Rent, on the first day of each calendar
month during the Initial Term, for the Reserved Parking Privileges (if any) and
the Unreserved Parking Privileges then rented by Tenant for such calendar month
at the rates set forth in Item 7 of the Basic Lease Provisions. Such parking
charges shall be in addition to all taxes, assessments or other impositions
imposed by any governmental entity (“Parking
Taxes”) in connection with Tenant’s use of such Parking Privileges,
which Parking Taxes shall be paid by Tenant, or if required to be paid by
Landlord, shall be reimbursed to Landlord by Tenant (in either case as
Additional Rent) concurrently with the payment of the parking charges described
above.

20.3         The Parking
Privileges are with respect to, subject to the provisions of this Article 20,
use of the Project’s parking facilities (the “Parking
Facilities”). The specific location of the Reserved Parking
Privileges in the

 21
 

Parking Facilities shall be specified by, and may,
from time to time, be relocated by Landlord in its sole discretion. Landlord
shall have the right to modify, change, add to or delete the design,
configuration, layout, size, ingress, egress, areas, method of operation, and
other characteristics of or relating to the Parking Facilities at any time,
and/or to provide for nonuse, partial use or restricted use of portions
thereof.

20.4         Tenant
shall cause each of its employees and occupants utilizing Tenant’s Parking
Privileges to abide by all rules and regulations for the use of the Parking
Facilities prescribed from time to time by Landlord. If any employee,
contractor or other individual using one of Tenant’s Parking Privileges
violates any of the terms and conditions of this Article or such parking rules
and regulations, then Landlord may revoke the license granted hereunder with
respect to the particular violating party’s use of the Parking Facilities.
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 Privileges provided to Tenant
pursuant to this Article 20 are provided to Tenant solely for use by officers,
directors, and employees of Tenant, its Affiliates, sublessees and assignees,
and such passes may not otherwise be transferred, assigned, subleased or
otherwise alienated by Tenant to any other type of transferee without Landlord’s
prior approval.

20.5         Tenant’s
business visitors may park on the Parking Facilities on a space-available
basis, upon payment of the prevailing fee for parking charged to visitors to
the Project.

ARTICLE
21 - RULES AND REGULATIONS

The “Rules and Regulations” attached hereto as Exhibit
“D” are hereby incorporated by reference herein and made a part hereof.
Tenant shall abide by, and faithfully observe and comply with the Rules and
Regulations and any reasonable and non-discriminatory amendments, modifications
and/or additions thereto as may hereafter be adopted and published by written
notice to tenants by Landlord for the safety, care, security, good order and/or
cleanliness of the Premises and/or the Project. Landlord shall not be liable to
Tenant for any violation of such rules and regulations by any other tenant or
occupant of the Project.

ARTICLE
22 - ESTOPPEL CERTIFICATES

Tenant
agrees at any time and from time to time upon not less than five (5) days’
prior written notice from Landlord, execute, acknowledge and deliver to
Landlord a statement in writing certifying to those facts for which
certification has been requested by Landlord or any current or prospective
purchaser, holder of any Security Document, ground lessor or master lessor,
including, but without limitation, that (i) this Lease is unmodified and in
full force and effect (or if there have been modifications, that the same is in
full force and effect as modified and stating the modifications), (ii) the
dates to which the Annual Base Rent, Rent and other charges hereunder have been
paid, if any, and (iii) whether or not to the best knowledge of Tenant,
Landlord is in default in the performance of any covenant, agreement or
condition contained in this Lease and, if so, specifying each such default of
which Tenant may have knowledge. The form of the statement attached hereto as Exhibit
“E” is hereby approved by Tenant for use pursuant to this Article 22;
however, at Landlord’s option, Landlord shall have the right to use other forms
for such purpose. Tenant’s failure to execute and deliver such statement within
such time shall, at the option of Landlord, constitute a material default under
this Lease and, in any event, shall be conclusive upon Tenant that this Lease
is in full force and effect without modification except as may be represented
by Landlord in any such certificate prepared by Landlord and delivered to
Tenant for execution. In the event that such certificate is being given to any
Holder or ground lessor, such statement may contain any other provisions
customarily required by such Holder or ground lessor including, without
limitation, an agreement on the part of Tenant to furnish to such Holder or
ground lessor, as applicable, written notice of any Landlord default and a
reasonable opportunity for such Holder or ground lessor to cure such default
prior to Tenant being able to terminate this Lease. In addition, Landlord is
hereby irrevocably appointed and authorized as agent and attorney-in-fact of
Tenant to execute and deliver such statement in the event that Tenant fails to
execute and deliver such statement within five (5) days after notice from
Landlord requesting execution and delivery thereof. Any statement delivered
pursuant to this Article 22 may be relied upon by any prospective purchaser of
the fee of the Building or the Project or any mortgagee, ground lessor or other
like encumbrancer thereof or any assignee of any such encumbrance upon the
Building or the Project.

ARTICLE
23 - ENTRY BY LANDLORD

Landlord
may enter the Premises at all reasonable times to: inspect the same; exhibit
the same to prospective purchasers, lenders or tenants; determine whether
Tenant is complying with all of its obligations under this Lease; supply
janitorial and other services to be provided by Landlord to Tenant under this
Lease; post notices of non-responsibility; and make repairs or improvements in
or to the Project or the Premises; provided, however, that all such work shall
be done as promptly as reasonably possible and so as to cause as little
interference to Tenant as reasonably possible. Tenant hereby waives any claim for
damages for any injury or inconvenience to, or interference with, Tenant’s
business, any loss of occupancy or quiet enjoyment of the Premises or any other
loss occasioned by such entry. Landlord shall at all times have and retain a
key with which to unlock all of the doors in, on or about the Premises
(excluding Tenant’s vaults, safes and similar areas designated by Tenant in
writing in advance), and Landlord shall have the right to use any and all means
by which Landlord may deem proper to open such doors to obtain entry to the
Premises, and any entry to the Premises obtained by Landlord by any such means,
or otherwise, shall not under any circumstances be deemed or construed to be a
forcible or unlawful entry into or a detainer of the Premises or an eviction,
actual or constructive, of Tenant from any part of the Premises. Such entry by
Landlord shall not act as a termination of Tenant’s duties under this Lease. If
Landlord shall be required to obtain entry by means other than a key provided
by Tenant, the cost of such entry shall be payable by Tenant to Landlord as
Additional Rent.

ARTICLE
24

LANDLORD’S LEASE UNDERTAKINGS-EXCULPATION FROM PERSONAL 

LIABILITY TRANSFER OF LANDLORD’S INTEREST

24.1
Landlord’s Lease Undertakings.
Notwithstanding anything to the contrary contained in this Lease or in any
exhibits, riders or addenda hereto attached (collectively the “Lease Documents”), it is expressly
understood and

 22
 

agreed by and between the parties hereto that: (a) the recourse of
Tenant or its successors or assigns against Landlord (and the liability of
Landlord to Tenant, its successors and assigns) with respect to (i) any actual
or alleged breach or breaches by or on the part of Landlord of any
representation, warranty, covenant, undertaking or agreement contained in any
of the Lease Documents or (ii) any matter relating to Tenant’s occupancy of the
Premises (collectively, “Landlord’s Lease
Undertakings”) shall be limited to solely an amount equal to the
lesser of (x) only to Landlord’s interest in the Project and (y) the equity
interest Landlord would have in the Project if the Project were encumbered by
independent secured financing equal to eighty percent (80%) of the value of the
Project; (b) Tenant shall have no recourse against any other assets of Landlord
or its officers, directors or shareholders; (c) except to the extent of
Landlord’s interest in the Project, no personal liability or personal
responsibility of any sort with respect to any of Landlord’s Lease Undertakings
or any alleged breach thereof is assumed by, or shall at any time be asserted
or enforceable against. Landlord, CalPERS, CWP Capital Management, LLC,
Commonwealth Pacific, LLC, Commonwealth Partners, LLC, Commonwealth Partners
Management Services, L.P. or against any of their respective directors,
officers, shareholders, members, employees, agents, constituent partners,
beneficiaries, trustees or representatives, and (d) at no time shall Landlord
be responsible or liable to Tenant for any lost profits, lost economic
opportunities or any form of consequential damage as the result of any actual
or alleged breach by Landlord of Landlord’s Lease Undertakings.

24.2 Transfer of
Landlord’s Interest. Landlord and each successor to Landlord
shall be fully released from the performance of Landlord’s obligations
hereunder upon their transfer of Landlord’s interest in the Building to a third
party. Landlord shall not be liable for any obligation hereunder after a
transfer of its interest in the Building.

ARTICLE
25 - HOLDOVER TENANCY

If
Tenant holds possession of the Premises after the expiration or termination of
the Term of this Lease, by lapse of time or otherwise, with or without the
express or implied consent of Landlord, Tenant shall become a tenant at
sufferance upon all of the terms contained herein, except as to Term and Base
Rent and any other provision reasonably determined by Landlord to be
inapplicable. During such holdover period, Tenant shall pay to Landlord a
monthly Base Rent equivalent to the greater of one hundred fifty percent (150%)
of (i) Landlord’s then published asking rental rate or (ii) the Base Rent and
Additional Rent payable by Tenant to Landlord during the last month of the Term
of this Lease. The monthly rent payable for such holdover period shall in no
event be construed as a penalty or as liquidated damages for such retention of
possession. Neither any provision hereof nor any acceptance by Landlord of any
rent after any such expiration or earlier termination shall be deemed a consent
to any holdover hereunder or result in a renewal of this Lease or an extension
of the Term, or any waiver of any of Landlord’s rights or remedies with respect
to such holdover. Notwithstanding any provision to the contrary contained
herein, (a) Landlord expressly reserves the right to require Tenant to
surrender possession of the Premises upon the expiration of the Term of this
Lease or upon the earlier termination hereof or at any time during any holdover
and the right to assert any remedy at law or in equity to evict Tenant and
collect damages in connection with any such holdover, and (b) Tenant shall
indemnify, defend and hold Landlord harmless from and against any and all
claims, demands, actions, proceedings, losses, damages, liabilities,
obligations, penalties, costs and expenses, including, without limitation, all
lost profits and other consequential damages, attorneys’ fees, consultants’
fees and court costs incurred or suffered by or asserted against Landlord by
reason of Tenant’s failure to surrender the Premises on the expiration or earlier
termination of this Lease in accordance with the provisions of this Lease.

ARTICLE
26 - NOTICES

All
notices which Landlord or Tenant may be required, or may desire, to serve on
the other may be served, as an alternative to personal service, by mailing the
same by registered or certified mail, postage prepaid, or by a reputable
overnight courier service, which provides evidence of delivery, addressed to
the Landlord at the address for Landlord set forth in Item 10 of the Basic
Lease Provisions and to Tenant at the address for Tenant set forth in Item 10
of the Basic Lease Provisions, or, from and after the Commencement Date, to the
Tenant at the Premises whether or not Tenant has departed from, abandoned or
vacated the Premises, or addressed to such other address or addresses as either
Landlord or Tenant may from time to time designate to the other in writing. Any
notice shall be deemed to have been served at the time the same was posted.

ARTICLE
27 - BROKERS

The
parties recognize as the broker(s) who procured this Lease the firm(s)
specified in Item 8 of the Basic Lease Provisions and agree that Landlord shall
be solely responsible for the payment of any brokerage commissions to said
broker(s), and that Tenant shall have no responsibility therefor unless written
provision to the contrary has been made a part of this Lease. If Tenant has
dealt with any other person or real estate broker in respect to leasing,
subleasing or renting space in the Building, Tenant shall be solely responsible
for the payment of any fee due said person or firm and Tenant shall protect,
indemnify, hold harmless and defend Landlord from any liability in respect
thereto.

ARTICLE
28 - SIGNAGE RIGHTS

28.1
Except to the extent expressly provided in this Section 28, Tenant shall not
(i) place or install (or permit to be placed or installed by any Tenant Party)
any signs, advertisements, logos, identifying materials, pictures or names of
any type on the roof, exterior areas or Common Areas of the Building or the
Project or in any area of the Building, Premises or Project which is visible
from the exterior of the Building or outside of the Premises or (ii) place or
install (or permit to be placed or installed by any Tenant Party) in or about
any portion of the Premises any window covering (even if behind Building
standard window coverings) or any other material visible from outside of the
Premises or from the exterior of the Building.

28.2 Subject to
compliance with applicable Laws and such Building signage criteria as Landlord
shall apply from time to time and subject to receipt of Landlord’s prior
written consent, (i) in the case where Tenant occupies an entire floor in the
Building, Tenant may place in any portion of such floor which is not visible
from the exterior of the Building such identification signage as Tenant shall
desire and (ii) in the case where Tenant occupies less than an entire

 23
 

floor in the Building (A) Tenant may require Landlord
to install, at Tenant’s sole cost and expense, in such portion of the
multi-tenant corridor on such floor as is called for by Landlord’s signage
program (as the same may exist from time to time) identification signage of the
type prescribed by Landlord’s signage program identifying Tenant and (B) Tenant
may place in any portion of the inside of the Premises not visible from the
exterior of the Building or from outside of the Premises such identification
signage as Tenant shall desire. All signage described in this Section 28 shall
be treated as Tenant’s personal property under the provisions of Section 10.5
with respect to Tenant’s obligation at the expiration or early termination of
this Lease.

ARTICLE
29 - FINANCIAL STATEMENTS

Prior
to execution of this Lease, Tenant shall provide Landlord with current
financial statements for each of the three (3) calendar (or fiscal) years
immediately prior to the execution date of this Lease. Thereafter, at any time
during the Term, Tenant shall, upon ten (10) days’ prior notice from Landlord,
provide Landlord with then current financial statements and financial statements
for each of the two (2) years prior to the then current calendar year for each
of Tenant and Tenant’s Guarantor, provided, however, (i) if the financial
statements of either Tenant or the Guarantor are not available to the general
public, except in the case where Landlord is requesting such financial
statements for delivery to an existing or prospective lender (a “Requesting Lender”) (A) in connection with
a new loan (a “Project Loan”) (or
modification or extension of an existing loan) secured in whole or in part by
some form of mortgage, deed of trust or other security interest in the Project
(or some interest therein) or (B) under circumstances where the failure to so
deliver such financial statements would (or could, with notice, the passage of
time, or both) constitute a default under any document relating to a Project
Loan, Tenant shall not be required to provide those financial statements which
are not available to the general public; provided, further, however, that
notwithstanding the foregoing, in the circumstances described in either
exception (A) or (B) of the foregoing proviso, Tenant shall be required to
provide the financial statements of Tenant and Guarantor in the form required
hereunder only to the Requesting Lender (but not to Landlord). Such statements
shall be prepared in accordance with generally accepted accounting principles,
consistently applied, and shall be audited by an independent certified public
accountant.

ARTICLE
30 - MISCELLANEOUS

30.1         Entire Agreement. This Lease contains
all of the agreements and understandings relating to the leasing of the
Premises and the obligations of Landlord and Tenant in connection with such
leasing. Landlord has not made, and Tenant is not relying upon, any warranties,
or representations, promises or statements made by Landlord or any agent of
Landlord, except as expressly set forth herein. This Lease supersedes any and
all prior agreements and understandings between Landlord and Tenant and alone
expresses the agreement of the parties.

30.2         Amendments. This Lease shall not be
amended, changed or modified in any way unless in writing executed by Landlord
and Tenant. Landlord shall not have waived or released any of its rights
hereunder unless in writing and executed by the Landlord.

30.3         Successors. Except as expressly
provided herein, this Lease and the obligations of Landlord and Tenant
contained herein shall bind or inure to the benefit of Landlord and Tenant and
their respective successors and assigns, provided this clause shall not permit
any Transfer by Tenant contrary to the provisions of Article 15.

30.4         Sale by Landlord. An arm’s length sale
or conveyance by Landlord of the Project shall operate to release Landlord from
any future liability upon any of the agreements, obligations, covenants or
conditions, express or implied, herein contained in favor of Tenant, and Tenant
agrees to look solely to the responsibility of the successor in interest of
Landlord in and to this Lease except for obligations and liabilities incurred
by Landlord prior to such sale or conveyance. This Lease shall not be affected
by any such sale, however, and Tenant agrees to attorn to the purchaser or
assignee, such attornment to be effective and self-operative without the
execution of any further instruments by any of the parties to this Lease.

30.5         Force Majeure. Landlord shall incur no
liability to Tenant with respect to, and shall not be responsible for any
failure to perform, any of Landlord’s obligations hereunder if such failure is
caused by any reason beyond the control of Landlord including, but not limited
to, strike, labor trouble, governmental rule, regulations, ordinance, statute
or interpretation, or by fire, earthquake, civil commotion, or failure or
disruption of utility services. The amount of time for Landlord to perform any
of Landlord’s obligations shall be extended by the amount of time Landlord is
delayed in performing such obligation by reason or any force majeure occurrence
whether similar to or different from the foregoing types of occurrences.

30.6         Survival of Obligations. Any
obligations of Tenant accruing prior to the expiration of this Lease shall
survive the termination of this Lease, and Tenant shall promptly perform all
such obligations whether or not this Lease has expired.

30.7         Light and Air. No diminution or
shutting off of any light, air or view by any structure now or hereafter
erected shall in any manner affect this Lease or the obligations of Tenant
hereunder, or increase any of the obligations of Landlord hereunder.

30.8         Governing Law. This Lease shall be
governed by, and construed in accordance with, the laws of the state of
California.

30.9         Prohibition Against Recording. Neither
this Lease nor any memorandum, affidavit or other writing with respect thereto
shall be recorded by Tenant or by anyone acting through, under or on behalf of
Tenant

30.10       Severability.
In the event any provision of this Lease is found to be unenforceable, the
remainder of this Lease shall not be affected, and any provision found to be
invalid shall be enforceable to the extent permitted by law. The parties agree
that in the event two different interpretations may be given to any provision
hereunder, one of

 24
 

which will render the provision unenforceable, and one
of which will render the provision enforceable, the interpretation rendering
the provision enforceable shall be adopted.

30.11       Captions. All captions, headings,
titles, numerical references and computer highlighting are for convenience only
and shall have no effect on the interpretation of this Lease.

30.12       Interpretation. Tenant acknowledges
that it has read and reviewed this Lease and that it has had the opportunity to
confer with counsel in the negotiation of this Lease. Accordingly, this Lease
shall be construed neither for nor against Landlord or Tenant, but shall be
given a fair and reasonable interpretation in accordance with the meaning of
its terms and the intent of the parties.

30.13       Independent Covenants. Each covenant,
agreement, obligation or other provision of this Lease to be performed by Tenant
are separate and independent covenants of Tenant, and not dependent on any
other provision of this Lease.

30.14       Number and Gender. All terms and words
used in this Lease, regardless of the number or gender in which they are used,
shall be deemed to include the appropriate number and gender, as the context
may require.

30.15       Time is of the Essence. Time is of the
essence of this Lease and the performance of all obligations hereunder.

30.16       Joint and Several Liability. If Tenant
comprises more than one person or entity, or if this Lease is guaranteed by any
party, all such persons shall be jointly and severally liable for payment of
rents and the performance of Tenant’s obligations hereunder.

30.17       No Offer to Lease. The submission of
this Lease to Tenant or its Broker or other agent, does not constitute an offer
to Tenant to lease the Premises. This Lease shall have no force and effect
until (i) it is executed and delivered by Tenant to Landlord and (ii) it is
fully reviewed and executed by Landlord; provided, however, that, upon
execution of this Lease by Tenant and delivery to Landlord, such execution and
delivery by Tenant shall, in consideration of the time and expense incurred by
Landlord in reviewing this Lease and Tenant’s credit, constitute an offer by
Tenant to Lease the Premises upon the terms and conditions set forth herein
(which offer to Lease shall be irrevocable for twenty (20) business days
following the date of delivery).

30.18       No Counterclaim; Choice of Laws. It is
mutually agreed that in the event Landlord commences any summary proceeding for
non-payment of Rent, Tenant will not interpose any counterclaim of whatever
nature or description in any such proceeding. In addition, Tenant hereby
submits to local jurisdiction in the State of California and agrees that any
action by Tenant against Landlord shall be instituted in the State of
California and that Landlord shall have personal jurisdiction over Tenant for
any action brought by Landlord against Tenant in the State of California.

30.19       Rights Reserved by Landlord. Landlord
reserves the following rights exercisable without notice (except as otherwise
expressly provided to the contrary in this Lease) and without being, deemed an
eviction or disturbance of Tenant’s use or possession of the Premises or giving
rise to any claim for set-off or abatement of Rent: (i) to change the name or
street address of the Building and/or the Project; (ii) to install, affix and
maintain all signs on the exterior and/or interior of the Building and/or the
Project; (iii) to designate and/or approve prior to installation, all types of
signs, window shades, blinds, drapes, awnings or other similar items, and all
internal lighting that may be visible from the exterior of the Premises and,
notwithstanding the provisions of Article 10, the design, arrangement, style,
color and general appearance of the portion of the Premises visible from the
exterior, and contents thereof, including, without limitation, furniture,
fixtures, signs, art work, wall coverings, carpet and decorations, and all
changes, additions and removals thereto, shall, at all times have the
appearance of premises having the same type of exposure and used for
substantially the same purposes that are generally prevailing in first class
office buildings in the area. Any violation of this provision shall be deemed a
material breach of this Lease; (iv) to display the Premises and/or the Building
and/or the Project to mortgagees, prospective mortgagees, prospective
purchasers and ground lessors at reasonable hours upon reasonable advance
notice to Tenant; (v) to change the arrangement of entrances, doors, corridors,
elevators and/or stairs in the Building and/or the Project, provided no such
change shall materially adversely affect access to the Premises; (vi) to grant
any party the exclusive right to conduct any business or render any service in
the Building or in the Project, provided such exclusive right shall not operate
to prohibit Tenant from using the Premises for the purposes permitted under
this Lease; (vii) to prohibit the placement of vending or dispensing machines
of any kind in or about the Premises other than for use by Tenant’s employees;
(viii) to prohibit the placement of video or other electronic games in the
Premises; (ix) to have access for Landlord and other tenants of the Building to
any mail chutes and boxes located in or on the Premises according to the rules
of the United States Post Office and to discontinue any mail chute business in
the Building and/or the Project; (x) to close the Building after normal
business hours, except that Tenant and its employees and invitees shall be
entitled to admission at all times under such rules and regulations as Landlord
prescribes for security purposes; (xi) to install, operate and maintain
security systems which monitor, by closed circuit television or otherwise, all
persons entering or leaving the Building and/or the Project; (xii) to install
and maintain pipes, ducts, conduits, wires and structural elements located in
the Premises which serve other parts or other tenants of the Building and/or
the Project; and (xiii) to retain at all times master keys or pass keys to the
Premises.

30.20       Modification of Lease. Should any
current or prospective mortgagee or ground lessor for the Building require a
modification or modifications of the Lease, which modification or modifications
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 required therefor and deliver the same
to Landlord within ten (10) days following the request therefor.

30.21       Authority. If Tenant signs as a
corporation or a partnership, each of the persons executing this Lease on
behalf of Tenant does hereby covenant and warrant that Tenant is a duly
authorized and existing entity, that

 25
 

Tenant has and is qualified to do business in
California, that Tenant has full right and authority to enter into this Lease,
and that each of both of the persons signing on behalf of Tenant are authorized
to do so. Upon Landlord’s request, Tenant shall provide Landlord with evidence
reasonably satisfactory to Landlord confirming the foregoing covenants and
warranties. The person executing this Lease on behalf of Landlord hereby
covenants and warrants that Landlord has full right and authority to enter into
this Lease and that the person signing on behalf of Landlord is authorized to
do so.

30.22       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.

30.23       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, in its sole and absolute
discretion, 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 Operating 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 Project in connection with the
improvement, construction, and/or excavation of the Other Improvements and/or
the Project. 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.

30.24       Renovation of the 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. It is expressly understood and agreed that Landlord has made no
representation or warranty to Tenant and has no obligation to alter, remodel,
improve, renovate, repair or decorate the Premises, the Building, or the
Project or any portion thereof. It is further agreed and acknowledged that no
representations respecting the condition of the Premises, the Building or the
Project have been made by Landlord to Tenant except as specifically set forth
in this Lease. Tenant acknowledges and agrees that Landlord may alter, remodel,
improve and/or renovate (collectively, the “Renovation
Work”) the Building, Premises, and/or the Project, and in connection
with any Renovation Work, Landlord may, among other things, erect scaffolding
or other necessary structures in the Building, or the Project, restrict access
to portions of the Project, including portions of the Common Areas, or perform
work in the Building and/or the Project. Tenant hereby agrees that such
Renovation Work and Landlord’s actions in connection with such Renovation Work
shall in no way constitute a constructive eviction of Tenant nor entitle Tenant
to any abatement of Rent. Landlord shall have no responsibility or liability to
Tenant for any injury to or interference with Tenant’s business arising from
any such Renovation Work, and Tenant shall not be entitled to any damages from
Landlord for loss of use of the Premises, in whole or in part, or for loss of
Tenant’s personal property or improvements, resulting from the Renovation Work
or Landlord’s actions in connection therewith or for any inconvenience
occasioned by such Renovation Work or Landlord’s actions in connection
therewith.

30.25       No Partnership or Joint Venture.
Nothing contained in this Lease shall be deemed or construed to create the
relationship of principal and agent, or partnership, or joint venturer, or any
other relationship between Landlord and Tenant other than landlord and tenant.

30.26       Right to Lease. Landlord reserves the
absolute right to lease space in the Project and to create such other tenancies
in the Project as Landlord, in its sole business judgment, shall determine is
in the best interests of the Project. Landlord does not represent and Tenant
does not rely upon any specific type or number of tenants occupying any space
in the Building and/or the Project during the Term of this Lease.

30.27       Building Name and Signage. Landlord
shall have the right at any time to change the name of the Building and/or the
Project and to install, affix and maintain any and all signs on the exterior
and on the interior of the Building and/or the Project as Landlord may so
desire, in its sole discretion. Tenant shall not, without the prior written
consent of Landlord, use the name of the Building and/or the Project, or any
pictures or illustrations of the Building and/or the Project, in Tenant’s
advertising or in any other publicity.

 26
 

30.28       Confidentiality.
Tenant agrees that (i) the terms and provisions of this Lease are confidential
and constitute proprietary information of Landlord and (ii) except if required
by law, it shall not disclose, and it shall cause its partners, officers,
directors, shareholders, employees, brokers, financial professionals and
attorneys to not disclose any term or provision of this Lease to any other
person without first obtaining the prior written consent of Landlord.

30.29       Right to Eliminate Lease Concessions by Purchase.
Upon written notice to Tenant, Landlord shall have the right (but not the
obligation) at any time during the Term of this Lease to eliminate all or any
portion of the Lease Concessions from Tenant by purchasing from Tenant such
Lease Concessions at the Concession Amount (as each such term is defined in
this Section 30.29). As used herein, “Lease
Concessions” shall mean the Additional Allowance, and/or any other
payment, offset, deduction or economic concessions (or any portion thereof as
determined by Landlord) of which the timing and amount can be reasonably
quantified or estimated by Landlord and which would be payable by Landlord to
Tenant or would be deducted from or otherwise reduce Tenant’s obligation to pay
to Landlord Rent. As used herein, “Concession
Amount” shall mean the present value of the Lease Concessions to be
eliminated by Landlord by purchase as of the date of payment by Landlord to
Tenant of the Concession Amount. The present value of the Lease Concessions
shall be calculated by Landlord (i) by reasonably estimating the date that such
Lease Concession would be payable by Landlord to Tenant (or the date that such
Lease Concession or portion thereof would otherwise be deducted from or
otherwise reduce Tenant’s obligation to pay to Landlord Rent), and (ii) using a
discount rate for each such Lease Concession or portion thereof equal to eleven
percent (11%) per annum. Upon such payment by Landlord to Tenant of any
Concession Amount, the Lease Concession (or portion thereof) purchased by
Landlord shall be eliminated and shall be deemed null, void and of no further
force or effect.

IN
WITNESS WHEREOF, this Lease is hereby executed as of the Effective Date.

	
  

  	
   

  	
   

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  FSP REGENTS SQUARE, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  CWP Capital Management, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Sharyl Gabriel

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Sharyl Gabriel

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  OCT 6 2004

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  1ST PACIFIC BANK OF CALIFORNIA,

  a California corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
  /s/ A. Vincent Siciliano

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  A. Vincent Siciliano

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
  CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
  /s/ James Burgess

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
  James Burgess

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
  CFO

  
								

 

 27
 

DEPICTION OF THE PREMISES

EXHIBIT “A”

 

 28
 

EXHIBIT B

NOTICE OF LEASE TERM
DATES

To: 

 

 

 

Re: Office Lease dated September 17, 2004 (the “Lease”) between FSP Regents Square, LLC, a
Delaware limited liability company (“Landlord”),
and 1st Pacific Bank of California, a California corporation (“Tenant”) concerning Suite 650 on floor six
(6) of the office building located at 4275 Executive Square, La Jolla,
California.

Ladies and Gentlemen:

In accordance with the
Lease, we wish to advise you and/or confirm as follows:

1. The Premises are
substantially completed, and the Term shall commence on or has commenced on                           
for a term of                   
(        ) months ending on                           .

2. Monthly Base Rent
commenced to accrue on                           ,
in the amount of $                          
per month and as more particularly set forth in Item 4 of the Basic Lease
Provisions of the Lease.

3. If the 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 Regents Square, a property of Fifth Street
Properties, LLC, File #56684, Los Angeles, California 90074-6684.

5. The approximate number
of rentable square feet within the Premises is                           
rentable square feet.

6. Tenant’s
Proportionate Share is                 %.

 

	
  

  	
   

  	
   

  	
   

  	
  “Landlord”:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  FSP REGENTS SQUARE, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  CWP Capital Management, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Agreed to and Accepted as

  of                   ,
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  “Tenant”:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  1st Pacific Bank of California,

  a California corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  	
   

  
												

 

 29

EXHIBIT “C”

REGENTS
SQUARE

WORK
LETTER

THIS WORK LETTER (this “Work
Letter”) is attached as Exhibit “C” to that certain Office Lease
dated concurrently herewith (the “Lease”)
by and between FSP REGENTS SQUARE, LLC,
a Delaware limited liability company (“Landlord”)
and 1ST PACIFIC BANK OF CALIFORNIA,
a California corporation (“Tenant”).
All capitalized terms used herein not otherwise defined herein shall have the
meanings attributed to such terms in the Lease.

SECTION
1

PREPARATION OF THE CONSTRUCTION DRAWINGS

1.1       Selection of Tenant’s Architect and the Engineers.
On or before the date therefor specified in the Time Schedule attached hereto
as Exhibit “C-l” (the “Time Schedule”),
Tenant shall engage (a) EN Studio Interior Design or another qualified interior
architect reasonably approved in advance by Landlord (“Tenant’s Architect”) to prepare the
Construction Drawings (defined below) for the Premises and (b) engineering
consultants (if required) designated by Landlord (the “Engineers”) to prepare all engineering
plans and drawings for the structural, mechanical, electrical, plumbing, HVAC,
life safety, and sprinkler work relating to the Tenant Improvements for the
Premises.

1.2       Final Space Plan.
Tenant and Tenant’s Architect shall prepare and deliver to Landlord for
Landlord’s approval four (4) copies signed by the Tenant of the final space
plan for all Tenant Improvements in the Premises (“Final Space Plan”), which Final Space Plan shall reflect a
layout and description of all offices, rooms and other partitions, their
intended use, and the equipment to be contained therein. Landlord may request
reasonable clarification or more specific drawings for special use items not
included in the Final Space Plan. Landlord shall, within a reasonable period
after Landlord receives such Final Space Plan, (i) approve the Final Space
Plan, (ii) approve the Final Space Plan subject to specified conditions to be
complied with in connection with the Final Working Drawings (defined below), or
(iii) disapprove the Final Space Plan and return the same to Tenant with
required revisions. If Landlord disapproves the Final Space Plan, within three
(3) business days of receipt of such disapproval, Tenant shall make all changes
thereto required to satisfy Landlord’s required revisions and shall resubmit to
Landlord for approval such revised Final Space Plan, with the foregoing
procedure to be repeated until the Final Space Plan is ultimately approved by
Landlord.

1.3       Final Working Drawings. Based upon the
Final Space Plan for the Premises approved by Landlord (and any conditions of
approval thereof imposed by Landlord), on or before the date therefor set forth
in the Time Schedule, Tenant shall cause the Architect and the Engineers (if
any) to complete and deliver to Landlord for Landlord’s approval four (4)
copies of complete fully coordinated architectural and (to the extent required)
structural, mechanical, electrical and plumbing working drawings and
specifications for the Tenant Improvements for the Premises in a form which is
sufficiently complete to allow all subcontractors to bid on the work shown
therein and to obtain all applicable Permits therefor (defined below)
(collectively, the “Final Working Drawings”).
Landlord shall, within a reasonable period after Landlord receives the Final
Working Drawings, either (i) approve the Final Working Drawings, (ii) approve
the Final Working Drawings subject to specified conditions to be satisfied by
Tenant prior to submission of the same by Tenant for the Permits, or (iii)
disapprove and return the same to Tenant with required revisions. If Landlord
disapproves the Final Working Drawings, within three (3) business days of
receipt of such disapproval, Tenant shall make all changes thereto required to
satisfy Landlord’s required revisions and shall resubmit to Landlord such Final
Working Drawings, with the foregoing procedure to be repeated until the Final
Working Drawings for the Premises are ultimately approved by Landlord (as so
approved, the “Approved Working Drawings”).
The Approved Working Drawings for the Premises and all parts or components
thereof are sometimes referred to herein as the “Construction Drawings.”

1.4       Changes in the Approved Working Drawings.
No changes, modifications or alterations in the Approved Working Drawings or in
the Tenant Improvements for the Premises contemplated thereby (a “Change”) may be made by Tenant without the
prior written consent of Landlord; provided, however, that Landlord may
withhold its consent in its sole discretion to any Change which in Landlord’s
judgment would directly or indirectly delay Substantial Completion (defined
below) of the Tenant Improvements.

1.5       The Tenant Improvements; Standards for Approval. The term “Tenant Improvements” means all
improvements, fixtures and equipment to be permanently affixed to the Premises
pursuant to this Work Letter. Any approval or consent of Landlord hereunder
with respect to any portion or component of the Construction Drawings or the
Tenant Improvements shall be granted or withheld on the basis of such standards
as Landlord shall establish in good faith from time to time.

SECTION
2

COST OF THE TENANT IMPROVEMENTS

2.1       Allocation
of Costs. Landlord shall bear all Tenant Improvement Costs
(defined below) to the extent the total Tenant Improvement Costs do not exceed
an amount (the “Allowance Amount”)
equal to: (a) Eighteen Dollars ($18.00) multiplied by (b) the number of square
feet of Usable Area contained within the Premises as determined by Landlord’s
Architect (defined below) (i.e., Seventy-Seven Thousand Five Hundred Twenty-Six
Dollars ($77,526.00)). Tenant shall bear all Tenant Improvement Costs in excess
of the Allowance Amount (“Excess Tenant
Improvement Costs”) in accordance with the provisions of this Work
Letter. Notwithstanding

 C-1
 

any provision of this Work Letter to the contrary,
Landlord shall have no obligation hereunder to make any payments or
disbursements, or incur any obligation to make any payment or disbursement, in
a total amount which exceeds the Allowance Amount.

2.2       Payment of Excess Tenant Improvement
Costs by Tenant.

(a)       Prior
to commencement of performance of the Tenant Improvements and not later than
three (3) business days following Landlord’s written request therefor, Tenant
shall pay in cash the full Estimated Excess Tenant Improvement Costs (defined
below) for the Premises, if any, estimated by Landlord. Prior to commencement
of performance of any Change and not later than three (3) business days
following Landlord’s written request therefor, Tenant shall pay in cash in full
Landlord’s estimate of the net increase in Estimated Excess Tenant Improvement
Costs, if any, expected by Landlord to result from such Change. If at any time
during the course of performance of the Tenant Improvements, Landlord in good
faith determines that the total Tenant Improvement Costs to be incurred in
connection with performance of the Tenant Improvements will exceed the sum of
(i) the Allowance Amount and (ii) the amount of any cash amounts (“Deposits”) previously deposited by Tenant
with Landlord pursuant to this Section 2.2(a) (“Excess Total Tenant Improvement Costs”), Tenant shall pay to
Landlord in cash the amount of such excess estimated by Landlord within five
(5) business days of Landlord’s written request therefor. Any failure by Tenant
to pay in cash in full any such Estimated Excess Tenant Improvement Costs or
the Excess Total Tenant Improvement Costs to Landlord within the time periods
specified above shall be deemed a Tenant Delay (defined below). Notwithstanding
anything in this Work Letter or the Lease to the contrary, (i) Landlord shall
have the right to discontinue its performance of the Tenant Improvements until
such time as Tenant complies with the requirements of this Section 2.2(a) and
(ii) Landlord shall not be liable to Tenant for any additional costs, lost
profits, lost economic opportunities or any form of consequential damage which
may result from any such discontinuance by Landlord under this Section 2.2(a).

(b)       Following
final completion of the Tenant Improvements, Landlord shall reconcile the
actual total Tenant Improvement Costs incurred hereunder with the total of (i)
the Allowance Amount and (ii) all cash amounts previously paid by Tenant to
Landlord pursuant to this Section 2.2 (collectively, “Tenant Credit Amount”). If the total Tenant
Improvement Costs exceed the Tenant Credit Amount, Tenant shall pay in cash to
Landlord the amount of the excess within five (5) business days of Landlord’s
written request therefor. If the Tenant Credit Amount exceeds the total Tenant
Improvement Costs, to the extent of any Deposits previously paid by Tenant,
Landlord shall promptly return the amount of such excess Deposits to Tenant. In
the event that the Allowance Amount exceeds the total Tenant Improvement Costs,
Tenant may credit any unused portion of the Allowance Amount against Tenant’s
costs of network cabling/IT costs, telecommunications systems, furniture costs,
Tenant’s relocation costs to the Premises, and Tenant’s obligation to pay Base
Rent next coming due under the Lease until the Allowance Amount is exhausted.

2.3       Selection of the Contractor and Preparation of the Bid
Estimates. The contractor which shall construct the Tenant
Improvements shall be a contractor selected pursuant to the following
procedure. The Approved Working Drawings shall be submitted by Landlord to
three (3) general contractors selected by Landlord in its good faith
discretion. Each such contractor shall be invited to submit a sealed, fixed
price contract bid (on such bid form as Landlord shall designate) to construct
the Tenant Improvements. Each contractor shall be notified in the bid package
of the time schedule for construction of the Tenant Improvements. The
contractors shall be required to promptly submit to Landlord bids and Landlord
shall reconcile all such promptly submitted bids to adjust inconsistent or
incorrect assumptions so that a like-kind comparison can be made and a low
bidder determined. Unless mutually agreed upon by Landlord and Tenant in
writing, Landlord shall select the contractor who shall be the lowest bidder
and who states that it will be able to meet Landlord’s construction schedule.
The contractor selected may be referred to herein as the “Contractor”). Upon the selection of the
Contractor, Landlord shall submit the fixed bid from the Contractor to Tenant,
together with Landlord’s nonbinding estimate of (i) the total Tenant
Improvement Costs and, if applicable, (ii) the total excess Tenant Improvement
Costs to be incurred in connection with such bid (“Estimated Excess Tenant Improvement Cost”) (the “Bid Estimate”). Within three (3) business
days of receipt of the Bid Estimate. Tenant shall pay to Landlord in cash the
amount of Landlord’s Estimated Excess Tenant Improvement Cost, if any,
associated with the Bid Estimate.

SECTION
3

CONSTRUCTION

3.1       Permits. Upon approval by Landlord of
the Approved Working Drawings, Tenant shall cause Tenant’s Architect and the
Engineers (if any) to submit the same to the appropriate governmental entities
and otherwise apply for all applicable building and other permits and approvals
(collectively, “Permits”)
necessary or required for the Contractor to commence, perform and fully
complete the construction of the Tenant Improvements (and to permit Tenant to
legally occupy the Premises) and Tenant shall cause all of the Permits to be
fully issued within five (5) business days of Landlord’s approval of the
Approved Working Drawings. Neither Landlord nor any Landlord Party shall have
any obligation or liability to Tenant if any Permit (including, without
limitation, any building permit, certificate of occupancy, or equivalent) is
not timely issued to Tenant.

3.2       Landlord’s Retention of the Contractor.
Landlord shall independently retain the Contractor selected pursuant to
Section 2.3 to construct the Tenant Improvements in accordance with the
Approved Working Drawings and
such Contractor’s Bid Estimate pursuant to such construction contract form as
Landlord shall reasonably determine. Landlord reserves the right to designate
the subcontractor or subcontractors to perform particular trades (or
components of) the Tenant Improvements such as fire/life safety, HVAC,
structural and electrical work. Tenant
shall pay to Landlord a supervisory fee (the “Supervision
Fee”) in an amount equal to three percent (3%) of an amount equal to
the sum of (a) the total Tenant Improvement Costs and (b) costs incurred by
Landlord in connection with the issuance of the Permits (collectively, the “Construction Costs”). Landlord

 C-2
 

reserves the absolute right, without the need for
consultation with or the consent of Tenant, to terminate the Contractor for
nonperformance (as determined in good faith by Landlord) and in such case
Landlord may select another Contractor (or another Contractor reasonably
approved by Tenant) to complete the Tenant Improvements. Notwithstanding any
provision of this Work Letter to the contrary, Tenant hereby waives all claims
against Landlord, and Landlord shall have no responsibility or liability to
Tenant, on account of any nonperformance or any misconduct of any Contractor (or
any subcontractor thereof) for any reason.

3.3       Record Set of Drawings. Immediately
after the Substantial Completion, Tenant shall cause Tenant’s Architect to
prepare and deliver to Landlord two (2) complete copies of a “record set” of
reproducible as-built drawings and two (2) complete sets of CAD files of the
as-built documents (current version of AutoCad) for the Tenant Improvements.

3.4       As-Is.

(a)       Tenant
shall, subject to the express provisions of this Work Letter, accept the
Premises in its then condition on the Delivery Date, “AS-IS,” “WITH ALL FAULTS”
and Landlord shall have no duty or obligation to improve, or pay for any
improvement for, the Premises or any portion thereof (or correct any violation
of any statutes, law, ordinance, code or regulation applicable thereto);
provided, however, that the Landlord shall be responsible to cause the existing
electrical, mechanical, HVAC, plumbing and restroom equipment and facilities
contained in the Premises to be in working condition (consistent with Institutional
Owner Practices) on the Delivery Date.

(b)       The base building work and base building systems and equipment
with respect to the Premises and the Building, as customarily defined by
Landlord (“Base Building” and “Base Building Systems,” respectively) shall
be provided on an “as is” basis, and Tenant accepts the same and the Premises
in its existing condition as of the date hereof.

SECTION
4

SUBSTANTIAL COMPLETION

4.1       Ready for Occupancy. The Premises shall
be deemed “Ready for Occupancy”
upon the earlier of (i) the date upon which Tenant occupies any portion of the
Premises, or (ii) Substantial Completion of the Tenant Improvements; provided,
however, if Tenant occupies all or any portion of the Premises prior to
Substantial Completion, Tenant shall not impede or otherwise disrupt the
Substantial Completion of the Premises. In addition, Tenant shall indemnify,
defend, protect and hold harmless Landlord with respect to any Claims, Damages
and Costs (as defined in Section 11.1(a) of the Lease) in connection with
Tenant’s occupancy of the Premises prior to Substantial Completion. For
purposes of this Lease, “Substantial
Completion” of the Premises shall occur upon the substantial
completion of construction of the Tenant Improvements pursuant to the Approved
Working Drawings, as evidenced by a “signoff’ on the building permit card by an
inspector of the City of San Diego and as otherwise determined by Landlord’s
Architect, with the exception of any punch list items and any tenant fixtures,
work-stations, built-in furniture, or equipment to be installed by Tenant or
under the supervision of Contractor. The “Delivery
Date” shall mean the date Landlord delivers to Tenant actual
possession of the Premises upon Substantial Completion of the Tenant
Improvements in accordance with the terms and conditions of the Lease and this
Work Letter.

4.2       Time Deadlines. Tenant shall use its
best, good faith, efforts and all due diligence to cause Tenant’s Architect and
the Engineers (if any) to complete (and to cooperate with Landlord and the
Contractor to complete) all phases of the Construction Drawings and the
permitting process and to receive the Permits, and to achieve Substantial
Completion as soon as possible, and, in that regard, shall meet with Landlord
on a scheduled basis to be determined by Landlord, to discuss Tenant’s progress
in connection with the same. The applicable dates for action by Tenant or by
Tenant’s Agents (defined below) under this Work Letter are set forth in the
Time Schedule (the “Time Deadlines”). Tenant agrees to strictly comply with
each Time Deadline.

4.3       Tenant Delays. A “Tenant Delay” shall mean any delay in the
Substantial Completion of the Premises as a direct, indirect, partial, or total
result of any act or omission of Tenant or any of Tenant’s Agents, including,
without limitation, Tenant’s Architect or any Engineer, including, without
limitation, any of the following: (a) Tenant’s failure to comply with any Time
Deadline; (b) Tenant’s failure to timely approve any matter requiring Tenant’s
approval hereunder; (c) any breach by Tenant of the provisions of this Work
Letter or of the Lease; (d) any Changes including, without limitation, any
Change required because the Construction Drawings do not comply with applicable
Codes or other applicable Laws; (e) any Tenant request for a Change; (f) any
requirement of Tenant for materials, components, finishes or improvements which
are not available within a commercially reasonable period, or which are
different from, or not included in, the Building Standards; (g) changes to the
Base Building and/or Base Building Systems required by the Approved Working
Drawings; and (h) failure to pay in cash in full any portion of the Estimated
Excess Tenant Improvement Costs or the Total Excess Tenant Improvement Costs in
accordance with Section 2.2(a) within the time periods specified in Section
2.2(a).

4.4       Disbursement of the Allowance Amount.

(a)       “Tenant Improvement Costs” means the
following: (i) the fees of the Architect and the Engineers (if any), which
payment shall not exceed an aggregate amount equal to Five Dollars ($5.00) per
square foot of Usable Area contained in the Premises, (ii) all fees and costs
incurred by, and the cost of documents and materials supplied by, Landlord and
Landlord’s consultants in connection with the preparation and review of the
Construction Drawings; (iii) the cost of any Changes in or to the Base Building
(or Base Building Systems) when such Changes are required by the Construction
Drawings; (iv) the cost of any Changes to the

 C-3
 

Construction Drawings or the Tenant Improvements
required by Code; (v) the Supervision Fee; (vi) all costs of (or relating to)
construction of the Tenant Improvements (without regard to the amount of the
Bid Estimate or Landlord’s estimate of total Tenant Improvement Costs),
including, without limitation, testing and inspection costs, trash removal
costs, parking fees, after-hours utilities usage, and contractors’ fees and
general conditions; (vii) the cost of cable and other telecommunications lines
installed as part of the Tenant Improvements, but specifically excluding any
costs in connection with the installation of Tenant’s telephone service (which
shall be separately installed by Tenant’s Agents); (viii) plan check, permit
fees, license fees, Title 24 fees and use taxes; and (ix) the cost of
installing Building Standard window coverings.

(b)       Landlord shall have the right to disburse
the Allowance Amount and the Deposits for such Tenant Improvement Costs and in
such order as Landlord shall determine. In the event that (i) Tenant desires
Landlord to disburse the Allowance Amount and the Deposits for Tenant
Improvement Costs payable directly by Tenant and (ii) in Landlord’s judgment,
the Allowance Amount and the Deposits are sufficient to cover the sum of (A)
the Tenant Improvement Costs directly payable by Landlord in connection with
this Work Letter and (B) the amounts desired to be so disbursed by Tenant,
Landlord shall make such disbursements to Tenant pursuant to this Section
4.4(b). Landlord shall not be required to make more than one such disbursement
to Tenant per calendar month and then only if on or before the twenty-fifty
(25th) day of the preceding calendar month, Tenant delivers to Landlord (i) a
request for payment substantially in the form of AIA Document G702, (ii)
invoices from all of Tenant’s Agents covered by Tenant’s request for
disbursement, (iii) executed mechanic’s lien releases from all of such Tenant’s
Agents that are entitled to lien rights, 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. Tenant’s request for payment shall be deemed Tenant’s acceptance
and approval of the work furnished and/or the materials supplied as set forth
in Tenant’s payment request vis-á-vis the Landlord. Provided that such request
for disbursement (and the work covered hereby) is in Landlord’s judgment in
compliance with the provisions of this Work Letter, on or before the last day
of the calendar month following Landlord’s receipt of such request, Landlord
shall deliver a check to Tenant made payable to either Tenant’s Agent or Tenant
(at the election of Landlord), in an amount equal to the lesser of: (A) ninety
percent (90%) of the amount so requested by Tenant and (B) the balance of any
remaining available portion of the Allowance Amount and the Deposits. Landlord’s
payment of such 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. In addition to the conditions set forth in this Section 4.5(b)
applicable to all disbursements on Tenant’s request, any disbursement of a
retention previously withheld and with respect to any such request by Tenant,
following Substantial Completion, the following conditions to payment shall
also be applicable: (i) Tenant shall deliver to Landlord properly executed
mechanic’s lien releases from all such Tenant’s Agents in compliance with both
California Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or
Section 3262(d)(4), (ii) Landlord shall determine 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, (iii) Landlord shall have determined that all other Tenant
Improvement Costs shall have been paid in full, and (iv) Landlord’s Architect
and Landlord shall have determined that Substantial Completion of the Tenant
Improvements has occurred.

4.5       Building
Standards. Landlord has established (or may establish in the
future) Building Standards for the components to be used in the construction of
the Tenant Improvements in the Premises (“Building
Standards”). The quality of all Tenant Improvements shall be equal
to or of greater quality than the quality specifications of the Building
Standards, provided, however that Landlord may, at Landlord’s option, require
the Tenant Improvements to comply with specific Building Standards. Landlord
reserves the right to promulgate, establish, modify, delete from, and make
other changes to the Building Standards from time to time.

SECTION
5 

GENERAL PROVISIONS

5.1       Tenant’s
Entry into the Premises Prior to Substantial Completion.
Provided that Tenant and Tenant’s Agents do not interfere in any respect with
Contractor’s work (or performance of the Tenant Improvements) in the Building
and the Premises, Landlord shall allow Tenant reasonable access to the Premises
prior to the Substantial Completion for the purpose of Tenant installing over
standard equipment or fixtures (including Tenant’s data and telephone
equipment). Not less than five (5) business days prior to Tenant’s entry as
permitted by the terms of this Section 5.1, Tenant shall submit a schedule to
Landlord and Contractor, for their approval, which schedule shall detail the
timing and purpose of Tenant’s entry and the particular Tenant’s Agents
involved, and a copy of any governmental permits and approvals required in
connection therewith. Tenant shall indemnify, protect, defend and hold Landlord
harmless from and against any Claims, Damages and Costs resulting in any way
from any such entry.

5.2       Tenant’s
Representative. Tenant has designated Vincent Siciliano as its
sole representative with respect to the matters set forth in this Work Letter,
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.

5.3       Landlord’s
Representative. Landlord has designated Meg Somers as its sole
representative with respect to the matters set forth in this Work Letter 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.

5.4       Construction
Drawings. Following Tenant’s request, Landlord shall make
available to Tenant and Tenant’s Architect, reasonable access to any base
building plans relating to the Premises in Landlord’s possession; provided,
however, Landlord hereby disclaims any express or implied representation or
warranty as to the accuracy of the same. Tenant, Tenant’s Architect and the
Engineers (if any) shall verify, in the field, the

 C-4
 

dimensions and conditions as shown on the relevant
portions of the base building plans, if any, and Tenant and Architect shall be
solely responsible for the same, and Landlord shall have no responsibility in
connection therewith. Tenant’s Final Working Drawings shall, at a minimum,
comply with the format requirements of Exhibit “C-2” attached hereto.
Landlord’s review of the Construction Drawings as set forth in this Work Letter
shall be solely for the purpose of protecting Landlord’s interests hereunder
and shall not imply Landlord’s review of the same, or obligate Landlord to
review the same, for quality, design, Code compliance or other like matters,
for the benefit of Tenant, the Contractor or any other party, and Landlord
shall have no liability whatsoever in connection therewith and shall not be
responsible for any omissions or errors contained in the Construction Drawings.
Tenant’s waiver and indemnity set forth in Section 11.1 of this Lease shall
specifically apply to the Construction Drawings. All references contained
herein to “Landlord’s Architect”
shall refer to such qualified licensed architect as shall be designated by
Landlord from time to time as “Landlord’s Architect.”

5.5       Tenant’s
Agents and Construction Matters. Tenant’s Architect, the
Engineers (if any) and all subcontractors, laborers, materialmen, and suppliers
retained directly by Tenant (collectively, “Tenants’ Agents”) shall conduct their activities in
and around the Premises, Building and the Project in a harmonious relationship
with all other subcontractors, laborers, materialmen and suppliers at the
Premises, Building and Project and, if required by Landlord, all
subcontractors, laborers, materialmen, and suppliers retained directly by
Tenant shall all be union labor in compliance with the master labor agreements
existing between trade unions and the Southern California Chapter of the
Associated General Contractors of America. Subject to the provisions of this
Work Letter, Tenant shall (a) timely pay in full all charges of each Tenant’s
Agents, (b) shall, on demand from Landlord, eliminate of record and satisfy in
full all mechanics liens, stop notices as similar liens or encumbrances on the
Building asserted or filed by any Tenant’s Agent, (c) prior to any entry into
the Building by Tenant or any Tenant’s Agent, evidence, in form satisfactory to
Landlord, compliance in full with the insurance requirements set forth in Exhibit
“C-3” attached hereto, and (d) indemnify, defend, protect and hold Landlord
harmless from any Claims, Damages and Costs asserted against or incurred by
Landlord in connection with any act or omission of any Tenant’s Agent in or
about the Building or the Premises or otherwise related to the Premises. Tenant
shall comply in full (and shall cause each of its Tenant’s Agents to comply in
full) with such construction rules and regulations as Landlord shall adopt from
time to time. Effective upon completion of the Tenant Improvements, Landlord
hereby assigns to Tenant all warranties and guaranties by Contractor relating
to the Tenant Improvements, and Tenant hereby waives all claims against
Landlord relating to, or arising out of the construction of, the Tenant
Improvements.

5.6       Time
of the Essence in This Work Letter. Unless otherwise indicated,
all references herein to a “number of days” shall mean and refer to calendar
days. In all instances where Tenant is required to approve or deliver an item,
if no written notice of approval is given or the item is not delivered within
the stated time period, at Landlord’s sole option, at the end of such period
the item shall automatically be deemed approved or delivered by Tenant and the
next succeeding time period shall commence. Except where specific time periods
are specified herein, all references to a “reasonable period” contained in this
Work Letter shall mean a reasonable amount of time to respond to the request or
submission in question, taking into consideration all of the circumstances
reasonably related to the amount of time required, assuming reasonable
diligence; provided, however, in no case shall such period ever be less than
five (5) business days.

5.7       Tenant’s
Lease Default. Notwithstanding any provision to the contrary
contained in this Lease, if an Event of Default as described in Section 16.1 of
the Lease, or a default by Tenant under this Work Letter, has occurred at any
time on or before the Substantial Completion, then (i) in addition to all other
rights and remedies granted to Landlord pursuant to the Lease, Landlord shall
have the right to withhold payment of all or any portion of the Allowance
Amount and/or Landlord may cause Contractor to cease the construction of the
Tenant Improvements in question (in which case, Tenant shall be responsible for
any delay in or increase in the cost of the Substantial Completion of the
Tenant Improvements caused by such work stoppage), and (ii) all other
obligations of Landlord under the terms of this Work Letter shall be forgiven
until such time as such default is cured pursuant to the terms of the Lease.

 C-5

EXHIBIT “C-1”

TIME
SCHEDULE

	
  Dates

  	
   

  	
  Actions to be Performed

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  September 8, 2004

  	
   

  	
  Final Space Plan to be completed by Tenant and
  delivered to Landlord.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  September 24, 2004

  	
   

  	
  Tenant to deliver to Landlord its Final Working
  Drawings.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  October 1, 2004

  	
   

  	
  Tenant to deliver all Permits to Landlord.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  November 30, 2004

  	
   

  	
  Estimated date of Substantial Completion.

  

 

EXHIBIT “C-2”

SPECIFICATIONS

Floor Plans Showing:

1.         Location and type of all partitions.

2.         Location and type of all doors. Indicate hardware and
provide keying schedule.

3.         Location and type of glass partitions, windows, and doors.
Indicate framing and reference full-height partitions.

4.         Locations of telephone equipment room.

5.         Critical dimensions necessary for construction and indicate
required clearances.

6.         Location and types of all electrical items: outlets,
switches, telephone outlets and lighting.

7.         Location and type of equipment that will require special
electrical requirements. Provide manufacturer’s specifications for use and
operation, including heat output.

8.         Location, weight per square foot, and description of any
heavy equipment or filing system and confirmation from a structural engineer
that loads created by any of Tenant’s systems, furniture, equipment, etc. are
in conformance with the allowable structural loads on any given floor.

9.         Requirements for special air conditioning or ventilation.

10.       Location and type of plumbing.

11.       Location and type of kitchen equipment.

12.       Location, type and color of floor
covering, wall covering, paint and finishes.

Details Showing:

1.         All millwork with verified dimensions of all equipment to be
built in.

2.         Corridor entrance.

3.         Bracing or support of special walls, glass partitions, etc.,
if desired. If not included with the plans, Tenant’s engineer will design all
support or bracing required at Tenant’s expense.

Additional Information:

1.         Provide Landlord with Title 24 energy calculations.   

 2

EXHIBIT “C-3”

INSURANCE REQUIREMENTS

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 Article 11 of the Lease.

2.         Special
Coverages. The Tenant Improvements shall be insured by Tenant
pursuant to Article 11 of the Lease immediately upon completion thereof.
All of Tenant’s Agents shall carry excess liability and Products and Completed
Operation Coverage insurance, each in amounts not less than $500,000 per
incident, $1,000,000 in aggregate, and in form and with companies as are
required to be carried by Tenant as set forth in Article 11 of the
Lease.

3.         General
Terms. Certificates for all insurance carried pursuant to this Exhibit
C-3 shall be delivered to Landlord before any entry into the Project by
Tenant or any Tenant’s Agent. 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 Tenant
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 Tenant Improvements are fully completed and accepted by
Landlord. All policies carried under this Exhibit C-3 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 Landlord and that any other insurance maintained by Landlord is
excess and noncontributing with the insurance required hereunder. The
requirements of the foregoing insurance shall not derogate from the provisions
for indemnification of Landlord by Tenant contained in this Work Letter.

EXHIBIT D

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.

1.      The
sidewalks, driveways, entrances, passages, courts, elevators, vestibules,
stairways, corridors or halls shall not be obstructed or used for any purpose
other than ingress and egress.

2.      No
awnings or other projection shall be attached to the outside walls of the
Project without Landlord’s prior written consent.

3.      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 Project shall
not be covered or obstructed, nor shall any bottles, parcels or other articles
be placed on the windowsills. If Tenant desires window curtains, the same must
be of such uniform shape, color, material and make as may be prescribed by
Landlord. Neither the interior nor the exterior of any windows shall be coated
or otherwise sunscreened without Landlord’s prior written consent.

4.      No sign,
advertisement or notice shall be exhibited, painted or affixed by Tenant on any
part of, or so as to be seen from the outside of, its Premises or the Project
without Landlord’s prior written consent. In the event of Tenant’s violation of
the foregoing, Landlord may remove the same without any liability and may
charge the expense incurred in such removal to Tenant. All signs whether on
doors, directory tablets or elsewhere, shall be inscribed, painted or affixed
for Tenant by Landlord at the expense of Tenant, and shall be of a size, color
and style acceptable to Landlord.

5.      The
bulletin board or directory of the Project will be provided exclusively for the
display of the name and location of Tenant only; and Landlord reserves the
right to exclude any other names therefrom, and each and every name in addition
to the name of Tenant placed upon such bulletin board or directory, shall be
subject to Landlord’s prior written consent (and if approved by Landlord, all
costs therefor shall be paid by Tenants). Any such listings or representations,
once installed, shall be subject to relocation or removal upon Landlord’s
written request for any reason (except that any such relocations or removals at
Landlord’s request, unless such request is based upon Tenant’s breach of the
Lease, of which these Rules and Regulations are a part, shall be paid for by
Landlord), and Tenant shall pay for the removal of any such listings or
representations upon its departure from its Premises.

6.      All doors
opening onto public corridors shall be kept closed, except when being used for
ingress and egress.

7.      Tenant
shall not mark, paint, drill or bore into, cut or string wires in, lay linoleum
or other floor coverings, in, or in any way deface any part of its Premises or
the Project, except with Landlord’s prior written consent and as Landlord may
direct.

8.      All keys
shall be obtained from Landlord. No additional locks or bolts of any kind shall
be placed upon any of the doors or windows by Tenant, nor shall any changes be
made in existing locks or the mechanisms thereof. Tenant must, upon the
termination of its tenancy, give to Landlord all keys pertaining to the
Premises and the Project, and in the event of the loss of any keys so
furnished, Tenant shall pay Landlord the cost of replacing same or changing the
lock or locks opened by such lost key(s) if Landlord shall deem it necessary to
make such change.

9.      No window
or other air conditioning or heating units or other similar apparatus shall be
installed or used by Tenant without Landlord’s prior written consent.

10.    The water
and wash closets and other plumbing fixtures shall not be used for any purpose
other than those for which they were constructed and no sweepings, rubbish,
rags or other substances shall be thrown therein. All damages resulting from
any misuse of the fixtures by Tenant or its servants, employees, agents,
visitors or licensees shall be borne by Tenant.

11.    All
removals from, or carrying in or out of, the Project of any safes, freight,
furniture, heavy or bulky matter of any description, must take place only prior
to 7:00 A.M. and/or after 5:30 P.M. of days other than Saturdays, Sundays and
holidays (no moving being permitted on Saturdays, Sundays or holidays without
special permission) and must be made upon previous written notice to Landlord
and under its supervision, and the persons employed by Tenant for such work
must be acceptable to Landlord. Tenant shall be responsible for any damage to
the Premises from any such activity. Landlord reserves the right to inspect all
safes or other heavy or bulky equipment or articles to be brought into the
Project and to exclude from the Project all such heavy or bulky equipment or
articles, the weight of which may exceed the floor load for which the Project
is designed, or such equipment or articles as may violate any of the provisions
of the Lease of which these Rules and Regulations are a part. Tenant shall not
use any machinery or other bulky articles in the Premises, even though its
installation may have been permitted, which may cause any noise, or jar, or
tremor to the floors or walks, or which by its weight might cause injury to the
floor of the Project.

12.    Neither
Tenant nor its servants, employees, agents, visitors or licensees shall at any
time bring or keep upon the Premises any flammable, combustible or explosive
fluid, chemical or substance, except for a reasonable quantity of such material
reasonably necessary for the conduct of Tenant’s business.

13.    Tenant’s
Premises shall not be used for manufacturing or for the storage of merchandise
except as such storage may be incidental to the permitted use of such Premises.
Tenant shall not, without Landlord’s

 30
 

prior written consent, occupy or permit any portion of its Premises to
be occupied or used for the manufacture or sale of liquor or tobacco in any
form, or as a barber or manicure shop, or as an employment bureau. The Premises
shall not be used for lodging or sleeping or for any immoral or illegal
purposes.

14.    Tenant
shall not make, or permit to be made, any unseemly or disturbing noises, or
disturb or interfere with occupants of the Project or neighboring buildings or
premises or those having business with it by the use of any musical instrument,
radio, phonographs or unusual noise, or in any other way. Neither Tenant nor
its servants, employees, agents, visitors or licensees shall throw anything out
of doors, windows or skylights or down the passageways.

15.    No
bicycles, vehicles or animals of any kind shall be brought into or kept in or
about Tenant’s Premises and no cooking shall be done or permitted by Tenant in
its Premises, except that the preparation of coffee, tea, hot chocolate and
similar items for Tenant, its employees and visitors shall be permitted
provided such activities do not otherwise violate the Lease of which these
Rules and Regulations are part. Tenant shall not cause or permit any unusual or
objectionable odors to be produced in or emanate from its Premises.

16.    There
shall not be used in any space, or in the public halls of the building, any
hand trucks except those equipped with rubber tires and side guards.

17.    No vending
or coin operated machines shall be placed by Tenant within the Premises without
Landlord’s prior written consent.

18.    No person
shall be employed by Tenant to do janitorial, maintenance, construction or
similar work in any part of said Project without Landlord’s prior written
consent. Any person employed by Tenant to do janitorial, maintenance or similar
work with Landlord’s consent shall, while in the Project, be subject to and
under the control and direction of Landlord or its agent or representative (but
not as an agent or servant of Landlord) and Tenant shall be responsible for all
acts of such persons.

19.    Landlord
shall have the right to prohibit any advertising by Tenant which, in Landlord’s
opinion, tends to impair the reputation of the Project or its desirability as
an office building, and upon written notice from Landlord, Tenant shall refrain
from or discontinue such advertising.

20.    Canvassing,
soliciting and peddling in the Project are prohibited and Tenant shall
cooperate to prevent same.

21.    Landlord
reserves the right to control access to the Project by all persons after
reasonable hours of generally recognized business days and at all hours on
Sundays and legal holidays. Tenant shall be responsible for all persons for
whom it requests after hours access and shall be liable to Landlord for all
acts of such persons. Landlord assumes no responsibility and shall not be
liable for any damage resulting from the admission of any unauthorized person
to the Project.

22.    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 the Rules and Regulations
of the Project.

23.    It is
understood and agreed between Landlord and Tenant that no assent or consent to
any waiver of any part hereof by Landlord in spirit or letter shall be deemed
or taken as made except if same is done in writing and attached to or endorsed
hereon by Landlord. Any such waiver shall not constitute a waiver of any other
rule or regulation or any subsequent application thereof to Tenant.

24.    Landlord
reserves the right at any time to change or rescind any one of 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 and Project, and
for the preservation of good order therein, as well as for the convenience of
other occupants and tenants therein. Landlord shall not be responsible to
Tenant herein or to any other person for the nonobservance of the Rules and
Regulations by any other tenant or other person. 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.

25.    Tenant
shall not suffer or permit smoking or carrying of lighted cigars or cigarettes
in areas reasonably designated by Landlord or by applicable governmental
agencies as nonsmoking areas.

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

27.    Tenant
assumes all risks from theft or vandalism and agrees to keep the Premises locked
as may be required.

 31
 

PARKING RULES

The following parking rules and regulations (“Parking Rules”) shall be in effect at the
Project. Landlord reserves the right to adopt reasonable, nondiscriminatory
modifications and additions to the Parking Rules by written notice to Tenant.
In the case of any conflict between these Parking Rules and the Lease, the
Lease shall control.

1.      Parking
areas shall be used only for parking vehicles no larger than full size,
passenger automobiles herein called “Permitted Size Vehicles.” Vehicles other
than Permitted Size Vehicles are herein referred to as “Oversized Vehicles.”

2.      Tenant
shall not permit or allow any vehicles that belong to or are controlled by
Tenant or Tenant’s employees, suppliers, shippers, customers, or invitees to be
loaded, unloaded, or parked in areas other than those designated by Landlord
for such activities.

3.      Parking
stickers, access cards or identification devices shall be the property of
Landlord and be returned to Landlord by the holder thereof upon termination of
the holder’s parking privileges. Tenant shall pay to Landlord refundable
deposits on such devices as reasonably established by Landlord from time to
time. Tenant will pay such replacement charge as is reasonably established by
Landlord for the loss of such devices.

4.      Landlord
reserves the right to refuse the sale of monthly identification devices and/or
parking access cards to any person or entity that willfully refuses to comply
with the applicable rules, regulations, laws and/or agreements.

5.      Landlord
reserves the right to relocate all or a part of the parking spaces on the
Property from one location on the Property to another and/or to reasonably
adjacent offsite location(s), and to reasonably allocate them between compact
and standard size spaces, so long as the same complies with applicable laws,
ordinances and regulations.

6.      Users of
the parking area will obey all posted signs and park only in the areas
designated for vehicle parking.

7.      Unless
otherwise instructed, every person using the parking area is required to park
and lock his own vehicle. Landlord will not be responsible or liable to Tenant,
its visitors or employees for any damage to vehicles, injury to persons or loss
of property, all of which risks are assumed by the party using the parking
area.

8.      Parking
validation, if established, will be permissible only by such method or methods
as Landlord and/or its licensee may establish at rates generally applicable.

9.      The
Parking Facilities shall be used only for parking vehicles. The maintenance,
washing, waxing or cleaning of vehicles in the parking structure or common
areas of the Project is prohibited. Tenant shall have no right to install any
fixtures, equipment or personal property (other than vehicles) in the Parking
Facilities, nor shall Tenant make any alteration to the Parking Facilities.

10.    Tenant
shall be responsible for seeing that all of its employees, agents and invitees
comply with all applicable parking rules, regulations, laws and agreements.

11.    Such
parking use as is herein provided is intended only as a license and no bailment
is intended or shall be created hereby.

12.    In no
event shall Tenant or its employees park in reserved spaces leased to other
tenants or in stalls within designated visitor parking zones. Tenant shall
comply with Landlord’s Parking Rules in its use (and in the use of its
visitors, patrons and employees) of the Parking Facilities.

13.    Tenant
shall, upon request of Landlord from time to time, furnish Landlord with a list
of its employees’ names and of Tenant’s and its employees’ vehicle license
numbers. Tenant agrees to notify its employees and visitors with these Parking
Rules as the same are modified from time to time, and assumes responsibility
for compliance by its employees and visitors with these Parking Rules as the
same are modified from time to time, and shall be liable to Landlord for all
unpaid parking charges incurred by its employees. Tenant authorizes Landlord to
tow away from the Building and/or Parking Facilities any vehicle belonging to
Tenant or its employees or visitors parked in violation of these Parking Rules,
and/or to attach violation stickers or notices to those vehicles.

14.    Persons
using the Parking Facilities shall observe all directional signs and arrows and
any posted speed limits. Unless otherwise posted, in no event shall the speed
limit of five (5) miles per hour be exceeded. All vehicles shall be parked
entirely within painted stalls, and no vehicles shall be parked in areas which
are posted or marked as “no parking” or on ramps, driveways and aisles. Only
one (1) vehicle may be parked in a parking space. In no event shall Tenant
interfere with the use and enjoyment of the Parking Facilities by other tenants
of the Building or their employees or invitees.

15.    Should any
parking spaces be allotted by Landlord or Tenant, either on a reserved or
unreserved basis, Tenant shall not assign or sublet any of those spaces, either
voluntarily or by operation of law, without the prior written consent of
Landlord, except in connection with an authorized assignment of this Lease or
subletting of the Premises.

16.    Landlord
reserves the right to modify these rules and regulations and to adopt such
other reasonable and non-discriminatory rules and regulations as it may from
time to time deem necessary for the proper operation and safety of the parking
area. Tenant agrees to abide by these and such other rules and regulations.

 32
 

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 and the Project, and for the preservation of good order therein, as
well as for the convenience of other occupants and tenants therein. 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. 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.

 33
 

EXHIBIT “E”

FORM OF TENANT ESTOPPEL CERTIFICATE

The undersigned as Tenant under that certain Office
Lease dated September 17, 2004 (the “Lease”)
between FSP Regents Square, LLC, a Delaware limited liability company, as
landlord, and the undersigned, as tenant, for Premises on the sixth (6th) floor
of the Office Building located at 4275 Executive Square, La Jolla, California
certifies as follows:

1.      True,
correct and complete copies of the Lease and all amendments, modifications and
supplements thereto are attached hereto and the Lease, as so amended, modified
and supplemented, is in full force and effect, and represents the entire
agreement between Tenant and Landlord with respect to the Premises and the
Property. There are no amendments, modifications or supplements to the Lease,
whether oral or written, except as follows (include the date of such amendment,
modification or supplement):

	
  

  
	
   

  
	
   

  

 

2.      The
undersigned has commenced occupancy of the Premises described in the Lease,
currently occupies the Premises, and the Commencement Date of the Lease
occurred on                 ,
20   .

	
  

  
	
   

  

 

3.      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:

4.      Base Rent
became payable on                                                  .

5.      In
accordance with the Lease, Rent commenced to accrue on         ,
20   .

6.      The Term
of the Lease expires on                                  .

7.      The Lease
provides for an option to extend the term of the Lease for         
years. The rental rate for such extension term is as follows:                                                                                                                          .
Except as expressly provided in the Lease, and other documents attached hereto,
Tenant does not have any right or option to renew or extend the term of the Lease,
to lease other space at the Property, nor any preferential right to purchase
all or any part of the Premises or the Property.

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. All space and improvements leased by Tenant have been completed and
furnished in accordance with the provisions of the Lease, and Tenant has
accepted and taken possession of the Premises.

9.      There are
no offsets or credits against rentals payable under the Lease and no free
periods or rental concessions have been granted to Tenant, except as follows:

	
  

  
	
   

  

 

10.    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 $                     .

11.    The
undersigned acknowledges that this Estoppel Certificate may be delivered to
Landlord’s prospective mortgagee, or a prospective purchaser, and acknowledges
that it recognizes that if same is done, said mortgagee, 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 in accepting an assignment of the Lease as collateral security, and that
receipt by it of this certificate is a condition of making of the loan or
acquisition of such property.

12.    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.

Executed at                      
on the              
day of            , 20    .

	
  

  	
   

  	
  “Tenant”:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1st Pacific Bank of California,

  
	
   

  	
   

  	
  a California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
						

 

 34

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