Document:

Exhibit
10.16

 

OFFICE
BUILDING LEASE

 

BETWEEN

 

SUNNYVALE
MATHILDA INVESTORS, LLC

a California limited liability company

 

LANDLORD

 

AND

 

MONOLITHIC
SYSTEM TECHNOLOGY, INC., dba MOSYS,

a Delaware corporation

 

TENANT

 

 

OFFICE
BUILDING LEASE

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
  OFFICE BUILDING LEASE

  	
  1

  
	
  1.

  	
  BASIC LEASE TERMS

  	
  1

  
	
  2.

  	
  PREMISES AND COMMON AREAS

  	
  2

  
	
  3.

  	
  TERM

  	
  3

  
	
  4.

  	
  POSSESSION

  	
  3

  
	
  5.

  	
  RENT

  	
  3

  
	
  6.

  	
  OPERATING EXPENSES

  	
  4

  
	
  7.

  	
  SECURITY DEPOSIT

  	
  5

  
	
  8.

  	
  USE.

  	
  5

  
	
  9.

  	
  NOTICES

  	
  6

  
	
  10.

  	
  BROKERS

  	
  6

  
	
  11.

  	
  SURRENDER; HOLDING OVER

  	
  6

  
	
  12.

  	
  TAXES ON TENANT’S PROPERTY

  	
  7

  
	
  13.

  	
  ALTERATIONS

  	
  7

  
	
  14.

  	
  REPAIRS

  	
  9

  
	
  15.

  	
  LIENS

  	
  9

  
	
  16.

  	
  ENTRY BY LANDLORD

  	
  10

  
	
  17.

  	
  UTILITIES AND SERVICES

  	
  10

  
	
  18.

  	
  ASSUMPTION OF RISK AND INDEMNIFICATION

  	
  10

  
	
  19.

  	
  INSURANCE

  	
  11

  
	
  20.

  	
  DAMAGE OR DESTRUCTION

  	
  13

  
	
  21.

  	
  EMINENT DOMAIN

  	
  15

  
	
  22.

  	
  DEFAULTS AND REMEDIES

  	
  15

  
	
  23.

  	
  LANDLORD’S DEFAULT

  	
  17

  
	
  24.

  	
  ASSIGNMENT AND SUBLETTING

  	
  17

  
	
  25.

  	
  SUBORDINATION

  	
  19

  
	
  26.

  	
  ESTOPPEL CERTIFICATE

  	
  20

  
	
  27.

  	
  RULES AND REGULATIONS

  	
  20

  
	
  28.

  	
  MODIFICATION AND CURE RIGHTS OF LANDLORD’S MORTGAGEES AND
  LESSORS

  	
  20

  
	
  29.

  	
  DEFINITION OF LANDLORD

  	
  21

  
	
  30.

  	
  WAIVER

  	
  21

  
	
  31.

  	
  PARKING

  	
  21

  
	
  32.

  	
  FORCE MAJEURE

  	
  22

  
	
  33.

  	
  SIGNS

  	
  22

  
	
  34.

  	
  LIMITATION ON LIABILITY

  	
  22

  
	
  35.

  	
  FINANCIAL STATEMENTS

  	
  22

  
	
  36.

  	
  QUIET ENJOYMENT

  	
  22

  
	
  37.

  	
  MISCELLANEOUS

  	
  22

  
	
  38.

  	
  EXECUTION OF LEASE

  	
  24

  
	
  39.

  	
  EARLY OCCUPANCY

  	
  24

  
	
  40.

  	
  OPTION TO EXTEND

  	
  24

  
	
  41.

  	
  CONDITIONS PRECEDENT

  	
  25

  

 

EXHIBITS:

 

	
  A

  	
  Outline of Floor Plan
  of Premises

  	
   

  
	
  B

  	
  Tenant Improvements

  	
   

  
	
  C

  	
  Definition of Operating
  Expenses

  	
   

  
	
  D

  	
  Standards for Utilities
  and Services

  	
   

  
	
  E

  	
  Rules and Regulations

  	
   

  
	
  F

  	
  Memorandum of Lease

  	
   

  
	
  G

  	
  Quitclaim of Memorandum
  of Lease

  	
   

  

 

 

OFFICE BUILDING LEASE

 

This OFFICE BUILDING
LEASE (“Lease”) is entered into as of the 6th day of May, 2005 by and between SUNNYVALE
MATHILDA INVESTORS, LLC, a California limited liability company (“Landlord”),
and MONOLITHIC SYSTEM TECHNOLOGY, INC., dba MOSYS , a Delaware corporation (“Tenant”).

 

1.         BASIC LEASE TERMS.  For purposes of this Lease, the following
terms have the following definitions and meanings:

 

(a)       Landlord:  SUNNYVALE MATHILDA INVESTORS, LLC, a
California limited liability company.

 

(b)       Landlord’s Address (For
Notices):

 

SUNNYVALE MATHILDA
INVESTORS, LLC

c/o Matteson Real Estate Equities, Inc.

1991 Broadway, Suite 300

Redwood City, CA 94063-1994

Attention:  James A. Blake

 

or such other place as
Landlord may from time to time designate by notice to Tenant.

 

(c)       Tenant:  MONOLITHIC SYSTEM TECHNOLOGY, INC., dba MOSYS , a Delaware corporation.

 

(d)       Tenant’s Address (For
Notices):

 

MOSYS, INC.

755 No. Mathilda
Avenue, Suite 100

Sunnyvale,
California 94086

Attention:  Chief Financial Officer

 

(e)       Project:  The parcel(s) of real property (the “Land”)
commonly known as 755 N. Mathilda Avenue/680 Vaqueros Avenue, and located in
the City of Sunnyvale (the “City”), County of Santa Clara (the “County”), State
of California (“State”).  The project
(the “Project”) includes the Land, the Building (described below) and appurtenant surface parking areas,
landscaping, walkways and other common areas located on the Land.

 

(f)        Building:  A two (2) story office/research and
development building within the Project (the “Building”), which Building
contains approximately 52,500 Rentable Square Feet, with the street address of
755 North Mathilda Avenue, Sunnyvale, California.

 

(g)       Premises:  Those certain premises comprising all of the First Floor of the Building as
generally shown on the floor plan attached hereto as Exhibit ”A”,
which Premises contains approximately 26,250
total Rentable Square Feet.

 

(h)       Tenant’s Percentage:  Tenant’s percentage of the Building on a
Rentable Square Foot basis, which is 50%.

 

(i)        Term:  Five
(5) years.

 

(j)        Commencement Date:  June
27, 2005.  The Commencement Date shall
not be delayed by reason of a delay resulting from Force Majeure (as defined in
Paragraph 32 below), or for any other reason.

 

            Expiration Date:  June
30, 2010.

 

(k)       Intentionally Omitted.

 

(l)        Intentionally Omitted.

 

m)        Monthly Base Rent:  This Lease is intended to be a “triple net
lease” as more fully described in Paragraph 6 below.  Monthly Base Rent is set forth below in the
following table, subject to adjustment as provided in this Lease:

 

1

 

	
  Months

  	
   

  	
  Monthly Rent/RSF

  	
   

  	
  Monthly

  Base Rent

  	
   

  
	
  1 – 12

  	
   

  	
  $

  	
  1.00

  	
   

  	
  $

  	
  26,250.00

  	
   

  
	
  13 – 24

  	
   

  	
  $

  	
  1.05

  	
   

  	
  $

  	
  27,562.50

  	
   

  
	
  25 – 36

  	
   

  	
  $

  	
  1.10

  	
   

  	
  $

  	
  28,875.00

  	
   

  
	
  37 – 48

  	
   

  	
  $

  	
  1.15

  	
   

  	
  $

  	
  30,187.50

  	
   

  
	
  49 – 60

  	
   

  	
  $

  	
  1.20

  	
   

  	
  $

  	
  31,500.00

  	
   

  

 

Tenant’s obligation to
pay its share of Operating Expenses shall be 100% abated for the first month of
the Term but not thereafter.

 

(n)       Intentionally Omitted.

 

(o)       Security Deposit:  $31,500.00.

 

(p)       Intentionally
Omitted.

 

(q)       Intentionally
Omitted.

 

(r)        Permitted Use:  General office use and administration,
research and development and related uses, but no other use without the written
consent of Landlord.

 

(s)       Parking:  Eighty-three
(83) unassigned parking spaces,
subject to the terms and conditions of Paragraphs 32 and 43 below and the Rules
and Regulations regarding parking contained in Exhibit ”E”.

 

(t)        Intentionally
Omitted.

 

(u)       Intentionally
Omitted.

 

(v)       Interest Rate:  The greater of ten percent (10%) per annum or
two percent (2%) in excess of the prime lending or reference rate of Wells
Fargo Bank N.A. or any successor bank in effect on the twenty-fifth (25th) day
of the calendar month immediately prior to the event giving rise to the Interest
Rate imposition; provided, however, the Interest Rate will in no event exceed
the maximum interest rate permitted to be charged by California law.

 

(w)      Exhibits:  A through E, inclusive, which Exhibits are
attached to this Lease and incorporated herein by this reference.

 

This Paragraph 1
represents a summary of the basic terms and definitions of this Lease.  In the event of any inconsistency between the
terms contained in this Paragraph 1 and any specific provision of this Lease,
the terms of the more specific provision shall prevail.

 

2.         PREMISES AND COMMON AREAS.

 

(a)       Premises.  Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the Premises as improved or to be improved with the
Tenant Improvements described in Exhibit ”B”.

 

(b)       Mutual Covenants.  Landlord and Tenant agree that the letting
and hiring of the Premises is upon and subject to the terms, covenants and
conditions contained in this Lease and each party covenants as a material part
of the consideration for this Lease to keep and perform their respective
obligations under this Lease.

 

(c)       Tenant’s Use of Common
Areas.  During the Term of
this Lease, Tenant shall have the nonexclusive right to use in common with
Landlord and all persons, firms and corporations conducting business in the
Project and their respective customers, guests, licensees, invitees,
subtenants, employees and agents (collectively, “Project Occupants”), subject
to the terms of this Lease, the Rules and Regulations referenced in Paragraph
32 below and all covenants, conditions and restrictions now or hereafter
affecting the Project, the following common areas of the Building and/or the
Project (collectively, the “Common Areas”):

 

2

 

(i)        The Building’s common entrances,
hallways, lobbies, public restrooms on multi-tenant floors, elevators,
stairways and accessways, loading docks, ramps, drives and platforms and any
passageways and serviceways thereto, and the common pipes, conduits, wires and
appurtenant equipment within the Building which serve the Premises
(collectively, “Building Common Areas”); and

 

(ii)       The parking facilities of the Project
which serve the Building, loading and unloading areas, trash areas, roadways,
sidewalks, walkways, parkways, driveways, landscaped areas, plaza areas,
fountains and similar areas and facilities situated within the Project and
appurtenant to the Building which are not reserved for the exclusive use of any
Project Occupants (collectively, “Project Common Areas”).

 

(d)       Landlord’s Reservation of
Rights.  Provided Tenant’s use
of and access to the Premises and parking to be provided to Tenant under this
Lease is not interfered with in an unreasonable manner, Landlord reserves for
itself the right from time to time to: (i) 
install, use, maintain, repair, replace and relocate pipes, ducts,
conduits, wires and appurtenant meters and equipment above the ceiling
surfaces, below the floor surfaces, within the walls and in the central core
areas of the Building; (ii) make changes to the design and layout of the
Project, including, without limitation, changes to buildings, driveways,
entrances, loading and unloading areas, direction of traffic, landscaped areas
and walkways, and parking spaces and parking areas; provided, however, that any
material adverse changes to the Building Common Areas, or any reduction in the
parking available to Tenant, shall require Tenant’s prior approval, which shall
not be unreasonably withheld; and (iii) use or close temporarily the Building
Common Areas, the Project Common Areas and/or other portions of the Project
while engaged in making improvements, repairs or alterations to the Building,
the Project, or any portion thereof.

 

3.         TERM.  The term of this Lease (“Term”) will be for
the period designated in Subparagraph 1(i), commencing on the Commencement
Date, and ending on the Expiration Date, subject to the terms of this
Lease.  Each consecutive twelve (12)
month period of the Term of this Lease, commencing on the first day of the
month following the month in which the Commencement Date occurs, will be
referred to herein as a “Lease Year”.

 

4.         POSSESSION.  Landlord represents and warrants to Tenant
that as of the Commencement Date only,(i) the roof, exterior and structural
components of the Project shall be in good condition and repair and
water-tight, and the electrical, mechanical, plumbing, HVAC, security, elevator
and lighting systems shall be in good working condition, free of material
defects and in compliance with all applicable laws and (ii) to Landlord’s
actual knowledge, there are no Hazardous Materials (as defined in Section 8(c)
in, on, under or about the Premises, the Building or the Project (collectively,
the “Landlord Reps”).  Landlord agrees to
deliver possession of the Premises to Tenant in accordance with the terms of Exhibit
“B”.  By taking possession of the
Premises, subject only to the Landlord Reps, Tenant is deemed to have accepted
the Premises in its “AS-IS” and “WITH ALL FAULTS” condition on the Commencement
Date except as to any latent defects and to have acknowledged that there are no
items known to Tenant needing work or repair which are Landlord’s
responsibility.  Tenant acknowledges that
except for the Landlord Reps, neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the Premises, the Building,
the Project or any portions thereof or with respect to the suitability of same
for the conduct of Tenant’s business and Tenant further acknowledges that
Landlord will have no obligation to construct or complete any improvements
within the Project.

 

5.         RENT.

 

(a)       Monthly Base Rent.  Tenant agrees to pay Landlord the Monthly
Base Rent for the Premises (subject to adjustment as hereinafter provided) in
advance on the first day of each calendar month during the Term without prior
notice or demand, except that Tenant agrees to pay (i) the Monthly Base Rent
for the first month of the Term and (ii) estimated Operating Expenses for the
second month of the Term directly to Landlord concurrently with Tenant’s
delivery of the executed Lease to Landlord. 
If the Term of this Lease commences or ends on a day other than the
first day of a calendar month, then the rent for such period will be prorated
in the proportion that the number of days this Lease is in effect during such
period bears to the number of days in such month.  All rent must be paid to Landlord, without
any deduction or offset, in lawful money of the United States of America, at
the address designated by Landlord or to such other person or at such other
place as Landlord may from time to time designate in writing.  Monthly Base Rent will be adjusted during the
Term of this Lease as provided in Subparagraph l(m).

 

(b)       Additional Rent.  All amounts and charges to be paid by Tenant
hereunder, including, without limitation, payments for Operating Expenses,
insurance, repairs and parking, will be considered additional rent for purposes
of this Lease, and the word “rent” as used in this Lease will include all such
additional rent unless the context specifically or clearly implies that only
Monthly Base Rent is intended.

 

3

 

(c)       Late Payments.  Late payments of Monthly Base Rent and/or any
item of additional rent will be subject to interest and a late charge as
provided in Subparagraph 22(f) below.

 

6.         OPERATING EXPENSES.

 

(a)       Operating Expenses.  Commencing on the date which is one (1) month
following the Commencement Date and throughout the Term of this Lease, Tenant
agrees to pay Landlord as additional rent in accordance with the terms of this
Paragraph 6, Tenant’s Percentage of Operating Expenses as defined in Exhibit
“C” attached hereto.  It is intended
that this Lease be a “triple net lease” and, except as expressly provided to
the contrary in this Lease, Landlord shall not be required to make any
expenditure or incur any liability in connection with this Lease or the
ownership, construction, maintenance, operation or repair of the Premises which
is not to be reimbursed by Tenant on a pro rata basis as Tenant’s Percentage of
Operating Expenses.

 

(b)       Estimate Statement.  Prior to the Commencement Date and on or
about March 1st of each subsequent calendar year during the Term of this Lease,
Landlord will endeavor to deliver to Tenant a statement (“Estimate Statement”)
wherein Landlord will estimate both the Operating Expenses and Tenant’s
Percentage of Operating Expenses for the then current calendar year.  Tenant agrees to pay Landlord, as “Additional
Rent”, one-twelfth (1/12th) of Tenant’s Percentage of Operating Expenses each
month thereafter, beginning with the next installment of rent due, until such
time as Landlord issues a revised Estimate Statement or the Estimate Statement
for the succeeding calendar year; except that, concurrently with the regular monthly
rent payment next due following the receipt of each such Estimate Statement,
Tenant agrees to pay Landlord an amount equal to one monthly installment of
Tenant’s Percentage of Operating Expenses (less any applicable Operating
Expenses already paid) multiplied by the number of months from January, in the
current calendar year, to the month of such rent payment next due, all months
inclusive.  If at any time during the
Term of this Lease, but not more often than quarterly, Landlord reasonably
determines that Tenant’s Percentage of Operating Expenses for the current
calendar year will be greater than the amount set forth in the then current
Estimate Statement, Landlord may issue a revised Estimate Statement and Tenant
agrees to pay Landlord, within thirty (30) days of receipt of the revised
Estimate Statement, the difference between the amount owed by Tenant under such
revised Estimate Statement and the amount owed by Tenant under the original
Estimate Statement for the portion of the then current calendar year which has
expired.  Thereafter Tenant agrees to pay
Tenant’s Percentage of Operating Expenses based on such revised Estimate
Statement until Tenant receives the next calendar year’s Estimate Statement or
a new revised Estimate Statement for the current calendar year.

 

(c)       Actual Statement.  By June 1st of each calendar year during
the Term of this Lease, Landlord will also endeavor to deliver to Tenant a
statement (“Actual Statement”) which states the actual Operating Expenses for
the preceding calendar year.  If the
Actual Statement reveals that Tenant’s Percentage of the actual Operating
Expenses is more than the total Additional Rent paid by Tenant for Operating
Expenses on account of the preceding calendar year, Tenant agrees to pay
Landlord the difference in a lump sum within thirty (30) days of receipt of the
Actual Statement.  If the Actual
Statement reveals that Tenant’s Percentage of the actual Operating Expenses is
less than the Additional Rent paid by Tenant for Operating Expenses on account
of the preceding calendar year, Landlord will credit any overpayment toward the
next monthly installment(s) of Tenant’s Percentage of the Operating Expenses
due to Tenant under this Lease; provided that in the last year of the Term,
Landlord shall refund any overpayment within thirty (30) days of the end of the
Term.

 

(d)       Miscellaneous.  Any delay or failure by Landlord in
delivering any Estimate Statement or Actual Statement pursuant to this
Paragraph 6 will not constitute a waiver of its right to require an increase in
rent nor will it relieve Tenant of its obligations pursuant to this Paragraph
6, except that Tenant will not be obligated to make any payments based on such
Estimate Statement or Actual Statement until thirty (30) days after receipt of
such Estimate Statement or Actual Statement. 
Even though the Term has expired and Tenant has vacated the Premises,
when the final determination is made of Tenant’s Percentage of the actual
Operating Expenses for the year in which this Lease terminates, Tenant agrees
to promptly pay any increase due over the estimated expenses paid and,
conversely, any overpayment made in the event said expenses decrease shall
promptly be rebated by Landlord to Tenant. 
Such obligation will be a continuing one which will survive the
expiration or earlier termination of this Lease.  Prior to the expiration or sooner termination
of the Lease Term and Landlord’s acceptance of Tenant’s surrender of the
Premises, Landlord will have the right to estimate the actual Operating
Expenses for the then current Lease Year and to collect from Tenant prior to
Tenant’s surrender of the Premises, Tenant’s Percentage of any excess of such
actual Operating Expenses over the estimated Operating Expenses paid by Tenant
in such Lease Year. Landlord shall maintain its books and records pertaining to
Operating Expenses for at least three (3) years. Tenant shall
have the right, upon reasonable notice and during ordinary business hours, to
inspect Landlord’s books and records relating to Operating Expenses at Landlord’s
offices.  If Tenant disputes the amount
of Operating Expenses set forth in any Actual Statement, Tenant shall have the
right to cause Landlord’s books and records to be audited by a certified public
accountant who is paid on an hourly 

 

4

 

basis (and not contingent
fee basis).  The amounts payable
hereunder by Landlord to Tenant or by Tenant to Landlord as the case may be
shall be appropriately adjusted on the basis of such audit.

 

7.         SECURITY DEPOSIT.  Concurrently with Tenant’s execution of this
Lease, Tenant will deposit with Landlord the Security Deposit designated in
Subparagraph 1(o).  The Security Deposit
will be held by Landlord as security for the full and faithful performance by Tenant
of all of the terms, covenants, and conditions of this Lease to be kept and
performed by Tenant during the Term hereof. 
If Tenant fully and faithfully performs its obligations under this
Lease, including, without limitation, surrendering the Premises upon the
expiration or sooner termination of this Lease in compliance with Subparagraph
11(a) below, the Security Deposit or any balance thereof will be returned to
Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest
hereunder) within thirty (30) days following the expiration of the Lease Term
or as required under applicable law, provided that Landlord may retain the
Security Deposit until such time as any outstanding rent or additional rent
amount has been determined and paid in full. 
The Security Deposit is not, and may not be construed by Tenant to
constitute, rent for the last month or any portion thereof.  If Tenant defaults with respect to any
provisions of this Lease including, but not limited to, the provisions relating
to the payment of rent or additional rent, Landlord may (but will not be
required to) use, apply or retain all or any part of the Security Deposit for
the payment of any rent or any other sum in default, or for the payment of any
other amount which Landlord may spend or become obligated to spend by reason of
Tenant’s default or to compensate Landlord for any loss or damage which
Landlord may suffer by reason of Tenant’s default.  If any portion of the Security Deposit is so
used or applied, Tenant agrees, within five (5) days after Landlord’s written
demand therefor, to deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount and Tenant’s failure to do
so shall constitute a default under this Lease. 
Landlord is not required to keep Tenant’s Security Deposit separate from
its general funds, and Tenant is not entitled to interest on such Security
Deposit.  Should Landlord sell its
interest in the Premises during the Term hereof, Landlord will comply with its
obligations under California Civil Code Section 1950.7(d) with regard to
the relief of Landlord for further liability with respect to the Security
Deposit.

 

8.         USE.

 

(a)       Tenant’s Use of the
Premises.  The Premises may be
used for the use or uses set forth in Subparagraph 1(r) only, and Tenant will
not use or permit the Premises to be used for any other purpose without the
prior written consent of Landlord, which consent Landlord may withhold in its
sole discretion.  Nothing in this Lease
will be deemed to give Tenant any exclusive right to such use in the Building
or the Project.

 

(b)       Compliance.  At Tenant’s sole cost and expense, Tenant
agrees to procure, maintain and hold available for Landlord’s inspection, all
governmental licenses and permits required for the proper and lawful conduct of
Tenant’s business from the Premises, if any. 
Tenant agrees not to use, alter or occupy the Premises or allow the
Premises to be used, altered or occupied in violation of, and Tenant, at its
sole cost and expense, agrees to use and occupy the Premises and cause the
Premises to be used and occupied in compliance with:  (i) any and all laws, statutes, zoning
restrictions, ordinances, rules, regulations, orders and rulings now or
hereafter in force and any requirements of any insurer, insurance authority or
duly constituted public authority having jurisdiction over the Premises, the
Building or the Project now or hereafter in force, including, without
limitation, the provisions of Title III of the Americans With Disabilities Act
of 1990, as same has been and may be subsequently amended, and all rules and
regulations promulgated pursuant thereto (the “ADA”), as it relates to Tenant’s
particular use, alteration and occupancy of the Premises, (ii) the requirements
of the Board of Fire Underwriters and any other similar body, and (iii) any
recorded covenants, conditions and restrictions and similar regulatory
agreements, if any, which affect the use, occupation or alteration of the
Premises and/or the Building. 
Notwithstanding the foregoing, Landlord shall be responsible for
ensuring that the Building Common Areas are in compliance with all laws,
statutes, zoning restrictions, ordinances, rules, regulations, orders and
rulings (including those promulgated pursuant to the ADA) as they pertain generally
to facilities for office, administration, research and development use.  Tenant agrees to comply with the Rules and
Regulations referenced in Paragraph 28 below. 
Tenant agrees not to do or permit anything to be done in or about the
Premises which will unreasonably obstruct or interfere with the rights of other
tenants or occupants of the Building, or injure or unreasonably annoy them, or
use or allow the Premises to be used for any unlawful or unreasonably
objectionable purpose.  Tenant agrees not
to cause, maintain or permit any nuisance or waste in, on, under or about the
Premises or elsewhere within the Project.

 

(c)       Hazardous Materials.  Except for ordinary and general office
supplies typically used in the ordinary course of business within office
buildings, such as copier toner, liquid paper, glue, ink and common household
cleaning materials (some or all of which may constitute “Hazardous Materials”
as defined in this Lease) which are used in strict compliance with all
applicable environmental laws, Tenant agrees not to cause or permit any
Hazardous Materials to be brought upon, stored, used, handled, generated,
released or disposed of on, in, under or about the Premises, the Building, the
Common Areas or any other portion of the Project by Tenant, its agents,
employees, subtenants, 

 

5

 

assignees, licensees,
contractors or invitees (collectively, “Tenant’s Parties”), without the prior
written consent of Landlord, which consent Landlord may withhold in its sole
and absolute discretion.  Notwithstanding
the foregoing, Tenant shall have the right to use acetone in amounts reasonably
necessary for the conduct of its business if and only if the acetone is used,
treated, stored, handled, transported and disposed of in strict compliance with
all environmental laws and such use does not expose the Premises, the Building
or the soil, air or groundwater in or around the Premises to risk of
contamination or expose Landlord to any liability therefor.  Landlord shall have the right to review and
inspect Tenant’s use, treatment, storage, handling, transportation and disposal
of the acetone and Tenant’s records pertaining to the same.  Upon the expiration or earlier termination of
this Lease, Tenant agrees to promptly remove from the Premises, the Building
and the Project, at its sole cost and expense, any and all Hazardous Materials,
including any equipment or systems containing Hazardous Materials which are
installed, brought upon, stored, used, generated or released upon, in, under or
about the Premises, the Building and/or the Project or any portion thereof by
Tenant or any of Tenant’s Parties. 
Except for ordinary and general office supplies typically used in the
ordinary course of business within office buildings, such as copier toner,
liquid paper, glue, ink and common household cleaning materials (some or all of
which may constitute “Hazardous Materials” as defined in this Lease), Landlord
agrees not to cause or permit any Hazardous Materials to be brought upon, stored,
used, handled, generated, released or disposed of on, in, under or about the
Premises, the Building, the Common Areas or any other portion of the Project by
Landlord, its agents, employees, assignees, or s (collectively, “Landlord’s
Parties”).  To the fullest extent
permitted by law, Tenant agrees to promptly indemnify, protect, defend and hold
harmless Landlord and Landlord’s partners, officers, directors, employees,
agents, successors and assigns (collectively, “Landlord Indemnified Parties”)
from and against any and all claims, damages, judgments, suits, causes of
action, losses, liabilities, penalties, fines, expenses and costs (including,
without limitation, clean-up, removal, remediation and restoration costs, sums
paid in settlement of claims, attorneys’ fees, consultant fees and expert fees
and court costs) which arise or result from the presence of Hazardous Materials
on, in, under or about the Premises, the Building or any other portion of the
Project and which are caused or permitted by Tenant or any of Tenant’s Parties
(regardless of whether or not Landlord consented to Tenant’s use of such
Hazardous Materials). To the fullest extent permitted by law, Landlord agrees
to promptly indemnify, protect, defend and hold harmless Tenant and Tenant’s
partners, officers, directors, employees, agents, successors and assigns
(collectively, “Tenant Indemnified Parties”) from and against any and all
claims, damages, judgments, suits, causes of action, losses, liabilities,
penalties, fines, expenses and costs (including, without limitation, clean-up,
removal, remediation and restoration costs, sums paid in settlement of claims,
attorneys’ fees, consultant fees and expert fees and court costs) which arise
or result from the presence of Hazardous Materials on, in, under or about the
Premises, the Building or any other portion of the Project and which are caused
or permitted by Landlord or any of Landlord’s Parties.

 

 Each party agrees to promptly notify the other
of any release of Hazardous Materials at the Premises, the Building or any
other portion of the Project which such party becomes aware of during the Term
of this Lease, whether caused by such party or any other persons or
entities.  In the event of any release of
Hazardous Materials caused or permitted by Tenant or any of Tenant’s Parties,
Landlord shall have the right, but not the obligation, to cause Tenant to
immediately take all steps Landlord deems necessary or appropriate to remediate
such release and prevent any similar future release to the satisfaction of
Landlord and Landlord’s mortgagee(s).  As
used in this Lease, the term “Hazardous Materials” shall mean and include any
hazardous or toxic materials, substances or wastes as now or hereafter
designated under any law, statute, ordinance, rule, regulation, order or ruling
of any agency of the State, the United States Government or any local
governmental authority, including, without limitation, asbestos, petroleum,
petroleum hydrocarbons and petroleum based products, urea formaldehyde foam
insulation, polychlorinated biphenyls (“PCBs”), and freon and other
chlorofluorocarbons.  The provisions of
this Subparagraph 8(c) will survive the expiration or earlier termination
of this Lease.

 

9.         NOTICES.  Any notice required or permitted to be given
hereunder must be in writing and may be given by personal delivery (including
delivery by overnight courier or an express mailing service) or by mail, if
sent by registered or certified mail. 
Notices to Tenant shall be sufficient if delivered to Tenant at the address
designated in Subparagraph 1(d) and notices to Landlord shall be sufficient if
delivered to Landlord at the address designated in Subparagraph 1(b).  Either party may specify a different address
for notice purposes by written notice to the other, except that the Landlord
may in any event use the Premises as Tenant’s address for notice purposes.

 

10.       Intentionally
Omitted.

 

11.       SURRENDER; HOLDING OVER.

 

(a)       Surrender.  The voluntary or other surrender of this
Lease by Tenant, or a mutual cancellation thereof, shall not constitute a
merger, and shall, at the option of Landlord, operate as an assignment to
Landlord of any or all subleases or subtenancies.  Upon the expiration or earlier termination of
this 

 

6

 

Lease, Tenant agrees to
peaceably surrender the Premises to Landlord broom clean and in a state of good
order, repair and condition, ordinary wear and tear and casualty damage (if
this Lease is terminated as a result thereof pursuant to Paragraph 20) excepted,
with all of Tenant’s personal property and Alterations (as defined in Paragraph
13) removed from the Premises to the extent required under Paragraph 13 and all
damage caused by such removal repaired as required by Paragraph 13.  Prior to the date Tenant is to actually
surrender the Premises to Landlord, Tenant agrees to give Landlord reasonable
prior notice of the exact date Tenant will surrender the Premises so that
Landlord and Tenant can schedule a walk-through of the Premises to review the condition
of the Premises and identify the Alterations and personal property which are to
remain upon the Premises and which items Tenant is to remove, as well as any
repairs Tenant is to make upon surrender of the Premises.  The delivery of keys to any employee of
Landlord or to Landlord’s agent or any employee thereof alone will not be
sufficient to constitute a termination of this Lease or a surrender of the
Premises.

 

(b)       Holding Over.  Tenant will not be permitted to hold over
possession of the Premises after the expiration or earlier termination of the
Term without the express written consent of Landlord, which consent Landlord
may withhold in its sole and absolute discretion.  If Tenant holds over after the expiration or
earlier termination of the Term, Landlord may, at its option, treat Tenant as a
tenant at sufferance only, and such continued occupancy by Tenant shall be
subject to all of the terms, covenants and conditions of this Lease, so far as
applicable, except that the Monthly Base Rent for any such holdover period
shall be equal to the greater of (i) one hundred twenty-five percent (125%) of
the Monthly Base Rent in effect under this Lease immediately prior to such
holdover, or (ii) the then currently scheduled rental rate for comparable space
in the Building, in either event prorated on a daily basis.  Acceptance by Landlord of rent after such
expiration or earlier termination will not result in a renewal of this
Lease.  The foregoing provisions of this
Paragraph 11 are in addition to and do not affect Landlord’s right of re-entry
or any rights of Landlord under this Lease or as otherwise provided by
law.  If Tenant fails to surrender the
Premises upon the expiration of this Lease in accordance with the terms of this
Paragraph 11 despite demand to do so by Landlord, Tenant agrees to promptly
indemnify, protect, defend and hold Landlord harmless from all claims, damages,
judgments, suits, causes of action, losses, liabilities, penalties, fines,
expenses and costs (including attorneys’ fees and costs), including, without
limitation, costs and expenses incurred by Landlord in returning the Premises
to the condition in which Tenant was to surrender it and claims made by any
succeeding tenant founded on or resulting from Tenant’s failure to surrender
the Premises.  The provisions of this
Subparagraph 11(b) will survive the expiration or earlier termination of this
Lease.

 

12.       TAXES ON TENANT’S
PROPERTY.  Tenant agrees to
pay before delinquency, all taxes and assessments (real and personal) levied
against (a) any personal property or trade fixtures placed by Tenant in or
about the Premises (including any increase in the assessed value of the
Premises based upon the value of any such personal property or trade fixtures);
and (b) any Tenant Improvements or Alterations in the Premises (whether
installed and/or paid for by Landlord or Tenant) to the extent such items are
assessed at a valuation higher than the valuation at which tenant improvements
conforming to Landlord’s building standard tenant improvements are
assessed.  If any such taxes or
assessments are levied against Landlord or Landlord’s property, Landlord may,
after written notice to Tenant (and under proper protest if requested by
Tenant) pay such taxes and assessments, in which event Tenant agrees to
reimburse Landlord all amounts paid by Landlord within thirty (30) business
days after demand by Landlord; provided, however, Tenant, at its sole cost and
expense, will have the right, with Landlord’s cooperation, to bring suit in any
court of competent jurisdiction to recover the amount of any such taxes and
assessments so paid under protest.

 

13.       ALTERATIONS.  After installation of the initial Tenant
Improvements for the Premises pursuant to Exhibit ”B”, Tenant may,
at its sole cost and expense, make alterations, additions, improvements and
decorations to the Premises (collectively, “Alterations”) subject to and upon
the following terms and conditions:

 

(a)       Prohibited Alterations.  Tenant may not make any Alterations
which:  (i) affect any area outside
the Premises; (ii) affect the Building’s structure, equipment, services or
systems, or the proper functioning thereof, or Landlord’s access thereto;
(iii) affect the outside appearance, character or use of the Building or
the Building Common Areas; (iv) in the reasonable opinion of Landlord,
lessen the value of the Building; or (v) will violate or require a change
in any occupancy certificate applicable to the Premises.

 

(b)       Landlord’s Approval.  Before proceeding with any Alterations which
are not prohibited in Subparagraph 13(a) above, Tenant must first obtain
Landlord’s written approval of the plans, specifications and working drawings
for such Alterations, which approval Landlord will not unreasonably withhold or
delay; provided, however, Landlord’s prior approval will not be required for
any such Alterations which are not prohibited by Subparagraph 13(a) above
and which cost less than Five Thousand Dollars ($ 5,000) as long as
(i) such Alterations do not require a building permit, (ii) Tenant delivers
to Landlord notice and a copy of any final plans, specifications and working
drawings for any such Alterations at least ten (10) days prior to commencement
of the work thereof and (iii) the 

 

7

 

other conditions of this
Paragraph 13 are satisfied, including, without limitation, conforming to
Landlord’s rules, regulations and insurance requirements which govern
contractors.  Landlord’s approval of
plans, specifications and/or working drawings for Alterations will not create
any responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with applicable permits, laws, rules and
regulations of governmental agencies or authorities.  In approving any Alterations, Landlord
reserves the right to require Tenant to increase its Security Deposit to
provide Landlord with additional reasonable security for the removal of such
Alterations by Tenant as may be required by this Lease.

 

(c)       Contractors.  Alterations may be made or installed only by
contractors and subcontractors which have been approved by Landlord, which
approval Landlord will not unreasonably withhold or delay.  Before proceeding with any Alterations,
Tenant agrees to provide Landlord with ten (10) days prior written notice and
Tenant’s contractors must obtain and maintain, on behalf of Tenant and at
Tenant’s sole cost and expense: 
(i) all necessary governmental permits and approvals for the
commencement and completion of such Alterations; and (ii) if requested by Landlord,
a completion and lien indemnity bond, or other surety, reasonably satisfactory
to Landlord for such Alterations. 
Throughout the performance of any Alterations, Tenant agrees to obtain,
or cause its contractors to obtain, workers compensation insurance and general
liability insurance in compliance with the provisions of Paragraph 19 of
this Lease.

 

(d)       Manner of Performance.  All Alterations must be performed:
(i) in accordance with the approved plans, specifications and working
drawings; (ii) in a lien-free and first-class and workmanlike manner;
(iii) in compliance with all applicable permits, laws, statutes,
ordinances, rules, regulations, orders and rulings now or hereafter in effect
and imposed by any governmental agencies and authorities which assert
jurisdiction; (iv) in such a manner so as not to unreasonably interfere
with the occupancy of any other tenant in the Building, nor impose any
additional expense upon nor delay Landlord in the maintenance and operation of
the Building; and (v) at such times, in such manner, and subject to such
rules and regulations as Landlord may from time to time reasonably designate.

 

(e)       Ownership.  The Tenant Improvements, including, without
limitation, all affixed sinks, dishwashers, microwave ovens and other fixtures,
and all Alterations will become the property of Landlord and will remain upon
and be surrendered with the Premises at the end of the Term of this Lease;
provided, however, Landlord may, by written notice delivered to Tenant
concurrently with Landlord’s approval of the final working drawings for any
Alterations, identify those Alterations which Landlord will require Tenant to
remove at the end of the Term of this Lease. 
Landlord may also require Tenant to remove Alterations which Landlord
did not have the opportunity to approve as provided in this Paragraph 13.  If Landlord requires Tenant to remove any
Alterations, Tenant, at its sole cost and expense, agrees to remove the
identified Alterations on or before the expiration or earlier termination of
this Lease and repair any damage to the Premises caused by such removal (or, at
Landlord’s option, Tenant agrees to pay to Landlord all of Landlord’s costs of
such removal and repair).

 

(f)        Plan Review.  Tenant agrees to pay Landlord, as additional
rent, the reasonable costs of professional services and costs for general
conditions of Landlord’s third party consultants if utilized by Landlord (but
not Landlord’s “in-house” personnel) for review of all plans, specifications
and working drawings for any Alterations, within thirty (30) business days
after Tenant’s receipt of invoices either from Landlord or such consultants.

 

(g)       Personal Property.  All articles of personal property owned by
Tenant or installed by Tenant at its expense in the Premises (including Tenant’s
business and trade fixtures, furniture, movable partitions and equipment [such
as telephones, copy machines, computer terminals, refrigerators and facsimile
machines]) will be and remain the property of Tenant, and must be removed by
Tenant from the Premises, at Tenant’s sole cost and expense, on or before the
expiration or earlier termination of this Lease.  Tenant agrees to repair any damage caused by
such removal at its cost on or before the expiration or earlier termination of this
Lease.

 

(h)       Removal of Alterations.  If Tenant fails to remove by the expiration
or earlier termination of this Lease all of its personal property, or any
Alterations identified by Landlord for removal, Landlord may, at its option,
treat such failure as a hold-over pursuant to Subparagraph 11(b) above, and/or
Landlord may (without liability to Tenant for loss thereof) treat such personal
property and/or Alterations as abandoned and, at Tenant’s sole cost and
expense, and in addition to Landlord’s other rights and remedies under this
Lease, at law or in equity: (a) remove and store such items; and/or
(b) upon ten (10) days prior notice to Tenant, sell, discard or otherwise
dispose of all or any such items at private or public sale for such price as
Landlord may obtain or by other commercially reasonable means.  Tenant shall be liable for all costs of
disposition of Tenant’s abandoned property and Landlord shall have no liability
to Tenant with respect to any such abandoned property.  Landlord agrees to apply the proceeds of any
sale of any such property to any amounts due to Landlord under this Lease from 

 

8

 

Tenant (including
Landlord’s attorneys’ fees and other costs incurred in the removal, storage
and/or sale of such items), with any remainder to be paid to Tenant.

 

14.       REPAIRS.

 

(a)       Landlord’s Obligations.  Landlord agrees to repair and maintain in
good condition and working order the structural portions of the Building and
the plumbing, heating, ventilating, air conditioning, elevator and electrical
systems installed or furnished by Landlord, unless such maintenance and repairs
are (i) attributable to items installed in Tenant’s Premises which are above
standard interior improvements (such as, for example, custom lighting, special
HVAC and/or electrical panels or systems, kitchen or restroom facilities and
appliances constructed or installed within Tenant’s Premises) or (ii) caused in
part or in whole by the act, neglect or omission of any duty by Tenant, its
agents, servants, employees or invitees, in which case Tenant will pay to
Landlord as direct reimbursement and not as part of shared Operating Expenses,
as additional rent, the cost of such maintenance and repairs.  Landlord will not be liable for any failure
to make any such repairs or to perform any maintenance unless such failure
shall persist for an unreasonable time after written notice of the need of such
repairs or maintenance is given to Landlord by Tenant.  Except as provided in Paragraph 20, Tenant
will not be entitled to any abatement of rent and Landlord will not have any
liability by reason of any injury to or interference with Tenant’s business
arising from the making of any repairs, alterations or improvements in or to
any portion of the Building or the Premises or in or to fixtures, appurtenances
and equipment therein.  Landlord shall
use commercially reasonable efforts to minimize any unreasonable interference
with Tenant’s use and enjoyment of the Premises.  Tenant waives the right to make repairs at
Landlord’s expense under any law, statute, ordinance, rule, regulation, order
or ruling (including, without limitation, the provisions of California Civil
Code Sections 1941 and 1942 and any successor statutes or laws of a
similar nature).

 

(b)       Tenant’s Obligations.  Tenant agrees to keep, maintain and preserve
the Premises in good condition and repair and, when and if needed, at Tenant’s
sole cost and expense, to make all repairs to the Premises and every part
thereof which are not Landlord’s obligation hereunder.   Tenant agrees to cause any mechanics’ liens
or other liens arising as a result of work performed by Tenant or at Tenant’s
direction to be eliminated as provided in Paragraph 15 below.  Except as provided in Subparagraph 14(a)
above and Exhibit “B”, Landlord has no obligation to alter, remodel,
improve, repair, decorate or paint the Premises or any part thereof.

 

(c)       Tenant’s Failure to
Repair.  Tenant shall have ten
(10) days from the date on which Landlord makes a written demand on Tenant to repair
and maintain the Premises properly, as required hereunder to the reasonable
satisfaction of Landlord, to perform such repairs and maintenance (or commence
to perform, if the nature of the performance is such that more than ten (10)
days is reasonably required), or, if Tenant is required to use the Landlord’s
contractor, as provided in Paragraph 14(b), upon such date as Landlord’s
contractor is able to complete such repairs. 
If Tenant fails to perform such repairs or maintenance as required under
this Lease, Landlord may enter upon the Premises and make such repairs and/or
maintenance.  If Landlord does enter upon
the Premises for such purposes as discussed herein, Landlord shall exercise
commercially reasonable efforts to not unreasonably interfere with Tenant’s use
of the Premises in performing such repairs and/or maintenance, shall perform
such repairs and/or maintenance in the presence of a representative of Tenant
(except in the case of emergencies) and shall take appropriate measures to
protect the confidentiality of Tenant’s files. 
Upon completion of such repairs and/or maintenance, Tenant agrees to pay
to Landlord as additional rent, Landlord’s costs for making such repairs plus
an amount not to exceed ten percent (10%) of such costs for overhead, within
thirty (30) days of receipt from Landlord of a written itemized bill
therefor.  Any amounts not reimbursed by
Tenant within such thirty (30) day period will bear interest at the Interest
Rate until paid by Tenant.

 

15.       LIENS.  Tenant agrees not to permit any mechanic’s,
materialmen’s or other liens to be filed against all or any part of the
Project, the Building or the Premises, nor against Tenant’s leasehold interest
in the Premises, by reason of or in connection with any repairs, alterations, improvements
or other work contracted for or undertaken by Tenant or any other act or
omission of Tenant or Tenant’s agents, employees, contractors, licensees or
invitees.  At Landlord’s request, Tenant
agrees to provide Landlord with enforceable, conditional and final lien
releases (or other evidence reasonably requested by Landlord to demonstrate
protection from liens) from all persons furnishing labor and/or materials at
the Premises.  Landlord will have the
right at all reasonable times to post on the Premises and record any notices of
non-responsibility which it deems necessary for protection from such
liens.  If any such liens are filed,
Tenant will, at its sole cost, promptly cause such liens to be released of record
or bonded so that it no longer affects title to the Project, the Building or
the Premises.  If Tenant fails to cause
any such liens to be so released or bonded within ten (10) days after filing
thereof, such failure will be deemed a material breach by Tenant under this
Lease without the benefit of any additional notice or cure period described in
Paragraph 22 below, and Landlord may, without waiving its rights and remedies
based on such breach, and without releasing Tenant from any of its obligations,
cause such liens to be released by any means it shall deem proper, including
payment in satisfaction of the claims giving rise to such liens.  Tenant agrees to pay to 

 

9

 

Landlord within ten (10)
days after receipt of invoice from Landlord, any sum paid by Landlord to remove
such liens, together with interest at the Interest Rate from the date of such
payment by Landlord.

 

16.       ENTRY BY LANDLORD.  Landlord and its employees and agents will at
all times have the right to enter the Premises to inspect the same, to supply
janitorial service and any other service to be provided by Landlord to Tenant
hereunder, to show the Premises to prospective purchasers or tenants, to post
notices of nonresponsibility, and/or to repair the Premises as permitted or required
by this Lease.  In exercising such entry
rights, Landlord will endeavor to minimize, as reasonably practicable, the
interference with Tenant’s business, and will provide Tenant with reasonable
advance notice of any such entry (except in emergency situations).  Landlord may, in order to carry out such
purposes, erect scaffolding and other necessary structures where reasonably
required by the character of the work to be performed.  Landlord will at all times have and retain a
key with which to unlock all doors in the Premises, excluding Tenant’s vaults
and safes.  Landlord will have the right
to use any and all means which Landlord may reasonably deem proper to open said
doors in an emergency in order to obtain entry to the Premises.  Any entry to the Premises obtained by
Landlord by any of said means, or otherwise, will not be construed or deemed to
be a forcible or unlawful entry into the Premises, or an eviction of Tenant
from the Premises.  Landlord will not be liable
to Tenant for any damages or losses for any entry by Landlord effected by the
foregoing.

 

17.       UTILITIES AND SERVICES.  Throughout the Term of the Lease so long as
the Premises are occupied, Landlord agrees to furnish or cause to be furnished
to the Premises the utilities and services described in the Standards for
Utilities and Services attached hereto as Exhibit “D”, subject to the
conditions and in accordance with the standards set forth therein.  Landlord may require Tenant from time to time
to provide Landlord with a list of Tenant’s employees and/or agents which are
authorized by Tenant to subscribe on behalf of Tenant for any additional
services which may be provided by Landlord. 
Any such additional services will be provided to Tenant at Tenant’s
cost.  Landlord will not be liable to
Tenant for any failure to furnish any of the foregoing utilities and services
if such failure is caused by all or any of the following: (i) accident,
breakage or repairs; (ii) strikes, lockouts or other labor disturbance or labor
dispute of any character; (iii) governmental regulation, moratorium or other
governmental action or inaction; (iv) inability despite the exercise of
reasonable diligence to obtain electricity, water or fuel; or (v) any other
cause beyond Landlord’s reasonable control. 
In addition, in the event of any stoppage or interruption of services or
utilities, Tenant shall not be entitled to any abatement or reduction of rent
(except as expressly provided below or in Subparagraphs 20(f) or 21(b) if such
failure results from a damage or taking described therein), no eviction of
Tenant will result from such failure and Tenant will not be relieved from the
performance of any covenant or agreement in this Lease because of such failure;
provided, however, that if such failure is caused solely by the negligence or
willful misconduct of Landlord or Landlord’s Parties and Tenant is unable to
conduct its business in the Premises for a period exceeding five (5)
consecutive calendar days, then and only in such event, Base Rent shall be
abated from the sixth calendar day of such interruption until such time as
Tenant is able to recommence its business operations in the Premises.  In the event of any failure, stoppage or
interruption thereof, Landlord agrees to diligently attempt to resume service
promptly.  If Tenant requires or utilizes
more water or electrical power than is considered reasonable or normal by
Landlord, Landlord may at its option require Tenant to pay, as additional rent,
the cost, as fairly determined by Landlord, incurred by such extraordinary
usage and/or Landlord may install separate meter(s) for the Premises, at Tenant’s
sole expense, and Tenant agrees thereafter to pay all charges of the utility
providing service and Landlord will make an appropriate adjustment to Tenant’s
Operating Expenses calculation to account for the fact Tenant is directly
paying such metered charges, provided Tenant will remain obligated to pay its
proportionate share of Operating Expenses subject to such adjustment.  Landlord shall have the right at any time and
from time-to-time during the Term of the Lease to contract for service from any
company or companies providing electricity service (“Service Provider”).  Tenant shall cooperate with Landlord and the
Service Provider at all times and, as reasonably necessary, shall allow
Landlord and Service Provider reasonable access to the Building’s electric
lines, feeders, risers, wiring, and any other machinery within the
Premises.  Landlord shall in no way be
liable or responsible for any loss, damage, or expense that Tenant may sustain
or incur by reason of any change, failure, interference, disruption, or defect
in the supply or character of the electric energy furnished to the Premises, or
if the quantity or character of the electric energy supplied by the Service Provider
is no longer available or suitable for Tenant’s requirements, no such change,
failure, defect, unavailability, or unsuitability shall constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any abatement
or diminution of rent, or relieve Tenant from any of its obligations under the
Lease.

 

18.       ASSUMPTION OF RISK AND
INDEMNIFICATION.

 

(a)       Assumption of Risk.  Tenant, as a material part of the
consideration to Landlord, hereby agrees that neither Landlord nor any Landlord
Indemnified Parties (as defined in Subparagraph 8(c) above) will be liable to
Tenant for, and Tenant expressly assumes the risk of and waives any and all
claims it may have against Landlord or any Landlord Indemnified Parties with
respect to, (i) any and all damage to property or injury to persons in,
upon or about the Premises, the Building or the Project 

 

10

 

resulting from any act or
omission of Landlord (except for Landlord’s or any Landlord Parties’ active
negligence or intentionally wrongful act or omission or breach of this Lease),
(ii) any such damage caused by other tenants or persons in or about the
Building or the Project, or caused by quasi-public work,  (iii) any damage to property entrusted to
employees of the Building, (iv) any loss of or damage to property by theft
or otherwise, or (v) any injury or damage to persons or property resulting
from any casualty, explosion, falling plaster or other masonry or glass, steam,
gas, electricity, water or rain which may leak from any part of the Building or
any other portion of the Project or from the pipes, appliances or plumbing
works therein or from the roof, street or subsurface or from any other place,
or resulting from dampness; provided that in no event shall the foregoing
waiver apply to any damage or injury to the extent caused by the active
negligence, willful misconduct or breach of this Lease by Landlord or any
Landlord Parties.  Notwithstanding
anything to the contrary contained in this Lease, neither Landlord nor any
Landlord Indemnified Parties will be liable for any special, consequential or
punitive damages arising out of any loss of the use of the Premises or any
equipment or facilities therein by Tenant or any Tenant Parties.  Tenant agrees to give prompt notice to
Landlord in case of fire or accidents in the Premises or the Building, or of
defects therein or in the fixtures or equipment.

 

(b)       Indemnification.  Tenant will be liable for, and agrees, to the
maximum extent permissible under applicable law, to promptly indemnify,
protect, defend and hold harmless Landlord and all Landlord Indemnified
Parties, from and against, any and all claims, damages, judgments, suits,
causes of action, losses, liabilities, penalties, fines, expenses and costs,
including attorneys’ fees and court costs (collectively, “Indemnified Claims”),
arising or resulting from (i) any act or omission of Tenant or any Tenant
Parties (as defined in Subparagraph 8(c) above); (ii) the use of the
Premises and Common Areas and conduct of Tenant’s business by Tenant or any
Tenant Parties, or any other activity, work or thing done, permitted or
suffered by Tenant or any Tenant Parties, in or about the Premises, the
Building or elsewhere within the Project; and/or (iii) any default by
Tenant of any obligations on Tenant’s part to be performed under the terms of
this Lease. In case any action or proceeding is brought against Landlord or any
Landlord Indemnified Parties by reason of any such Indemnified Claims, Tenant,
upon written notice from Landlord, agrees to promptly defend the same at Tenant’s
sole cost and expense by counsel approved in writing by Landlord, which
approval Landlord will not unreasonably withhold.

 

Landlord will be liable
for, and agrees, to the maximum extent permissible under applicable law, to
promptly indemnify, protect, defend and hold harmless Tenant and all Tenant
Indemnified Parties, from and against, any and all claims, damages, judgments,
suits, causes of action, losses, liabilities, penalties, fines, expenses and
costs, including attorneys’ fees and court costs (collectively, “Indemnified
Claims”), arising or resulting from (i) any active negligence or willful
misconduct of Landlord or any Landlord Parties (as defined in Subparagraph 8(c)
above) and/or (ii) any default by Landlord of any obligations on Landlord’s
part to be performed under the terms of this Lease. In case any action or
proceeding is brought against Tenant or any Tenant Indemnified Parties by
reason of any such Indemnified Claims, Landlord, upon written notice from
Tenant, agrees to promptly defend the same at Landlord’s sole cost and expense
by counsel approved in writing by Tenant, which approval Tenant will not
unreasonably withhold.

 

(c)       Survival; No Release of
Insurers.  Tenant’s indemnification
obligations under Subparagraph 18(b) are not in any way limited by the amount
of insurance proceeds available to Tenant under Tenant’s Insurance Policies
described in Section 19 below and will survive the expiration or earlier
termination of this Lease.  Tenant’s
covenants, agreements and indemnification obligation in Subparagraphs 18(a) and
18(b) above, are not intended to and will not relieve any insurance carrier of
its obligations under policies required to be carried by Tenant pursuant to the
provisions of this Lease.

 

19.       INSURANCE.

 

(a)       Tenant’s Insurance.  On or before the earlier to occur of (i) the
Commencement Date, or (ii) the date Tenant commences any work of any type in
the Premises pursuant to this Lease (which may be prior to the Commencement
Date), and continuing throughout the entire Term hereof and any other period of
occupancy, Tenant agrees to keep in full force and effect, at its sole cost and
expense, the following insurance:

 

(i)        “All Risks” property insurance including
at least the following perils:  fire and
extended coverage, smoke damage, vandalism, malicious mischief, sprinkler
leakage (including earthquake sprinkler leakage).  This insurance policy shall insure all
property owned by Tenant, for which Tenant is legally liable, or which is
installed at Tenant’s expense, and which is located in the Building including,
without limitation, any Tenant Improvements which satisfy the foregoing
qualification and any Alterations, and all furniture, fittings, installations,
fixtures and any other personal property of Tenant, in an amount not less than
the full replacement cost thereof.

 

11

 

(ii)       One (1) year insurance coverage for
business interruption and loss of income and extra expense insuring the same
perils described in Subparagraph 19(a)(i) above, in such amounts as will
reimburse Tenant for any direct or indirect loss of earnings attributable to
any such perils including prevention of access to the Premises, Tenant’s
parking areas or the Building as a result of any such perils.

 

(iii)      Commercial General Liability Insurance or
Comprehensive General Liability Insurance (on an occurrence form) insuring
bodily injury, personal injury and property damage including the following divisions
and extensions of coverage:  Premises and
Operations; blanket contractual liability (including coverage for Tenant’s
indemnity obligations under this Lease); products and completed operations; and
fire and water damage legal liability including Tenant Improvements, that are
rented under the terms of this Lease. 
Such insurance must have the following minimum limits of liability:  bodily injury, personal injury and property
damage - $2,000,000 each occurrence; provided that if liability coverage is provided
by a Commercial General Liability policy the general aggregate limit shall
apply separately and in total to this location only (per location general
aggregate), and provided further, such minimum limits of liability may be
adjusted from year to year to reflect reasonable and prudent increases in
coverages as recommended by Landlord’s insurance carrier as being prudent and
commercially reasonable for tenants of buildings comparable to the Building,
rounded to the nearest five hundred thousand dollars, as reasonably agreed by
Landlord and Tenant.

 

(iv)      Comprehensive Automobile Liability
insuring bodily injury and property damage arising from all owned, non-owned
and hired vehicles, if any, with minimum limits of liability of $1,000,000 per
accident.

 

(v)       Worker’s Compensation as required by the
laws of the State with the following minimum limits of liability:  Coverage A - statutory benefits; Coverage B -
$1,000,000 per accident and disease. 
Tenant shall also obtain and furnish evidence to Landlord of the waiver
by Tenant’s worker’s compensation insurance carrier of all rights of recovery
by way of subrogation against Landlord, so long as the insurance is not
invalidated thereby.

 

(vi)      Any other form or forms of insurance as
Tenant or Landlord or any mortgagees of Landlord may reasonably require from
time to time in form, in amounts, and for insurance risks against which, a
prudent tenant would protect itself, but only to the extent coverage for such
risks and amounts are available in the insurance market at commercially
acceptable rates.  Landlord makes no
representation that the limits of liability required to be carried by Tenant
under the terms of this Lease are adequate to protect Tenant’s interests and
Tenant should obtain such additional insurance or increased liability limits as
Tenant deems appropriate.

 

(b)       Supplemental Tenant
Insurance Requirements.

 

(i)        All policies must be in a form
reasonably satisfactory to Landlord and issued by an insurer admitted to do
business in the State.

 

(ii)       All policies must be issued by insurers
with a policyholder rating of “A-” and a financial rating of “VII” in the most
recent version of Best’s Key Rating Guide.

 

(iii)      All policies must contain a requirement to
notify Landlord (and Landlord’s property manager and any mortgagees or ground
lessors of Landlord who are named as additional insureds, if any) in writing
not less than thirty (30) days prior to any material change, reduction in
coverage, cancellation or other termination thereof.  Tenant agrees to deliver to Landlord, as soon
as practicable after placing the required insurance, but in any event within
the time frame specified in Subparagraph 19(a) above, certificate(s) of
insurance evidencing the existence of such insurance and Tenant’s compliance
with the provisions of this Paragraph 19. 
Tenant agrees to cause certificates of insurance to be delivered to
Landlord not less than thirty (30) days prior to the expiration of any such
policy or policies.  If any such initial
or replacement policies or certificates are not furnished within the time(s)
specified herein, Tenant will be deemed to be in material default under this
Lease without the benefit of any additional notice or cure period provided in
Subparagraph 22(a)(iii) below, and Landlord will have the right, but not
the obligation, to procure such insurance as Landlord deems necessary to
protect Landlord’s interests at Tenant’s expense.  If Landlord obtains any insurance that is the
responsibility of Tenant under this Paragraph 19, Landlord agrees to deliver
to Tenant a written statement setting forth the cost of any such insurance and
showing in reasonable detail the manner in which it has been computed and
Tenant agrees to promptly reimburse Landlord for such costs as additional rent.

 

(iv)      General Liability policies under
Subparagraphs 19(a)(iii) and 19(a)(iv) must name Landlord and Landlord’s
property manager (and at Landlord’s request, Landlord’s mortgagees and ground
lessors of which Tenant has been informed in writing) as additional insureds
and 

 

12

 

must also contain a provision that the insurance
afforded by such policy is primary insurance and any insurance carried by
Landlord and Landlord’s property manager or Landlord’s mortgagees or ground
lessors, if any, will be excess over and non-contributing with Tenant’s
insurance.

 

(c)       Tenant’s Use.  Tenant will 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 Building or the Project
Common Areas.  If Tenant’s occupancy or
business in, or on, the Premises, whether or not Landlord has consented to the
same, results in any increase in premiums for the insurance periodically
carried by Landlord with respect to the Building or the Project Common Areas or
results in the need for Landlord to maintain special or additional insurance,
Tenant agrees to pay Landlord the cost of any such increase in premiums or
special or additional coverage as additional rent within thirty (30)  days after being billed therefor by
Landlord.  In determining whether
increased premiums are a result of Tenant’s use of the Premises, a schedule
issued by the organization computing the insurance rate on the Building, the
Project Common Areas or the Tenant Improvements showing the various components
of such rate, will be conclusive evidence of the several items and charges
which make up such rate.  Tenant agrees
to promptly comply with all reasonable requirements of the insurance authority or
any present or future insurer relating to the Premises.

 

(d)       Cancellation of Landlord’s
Policies.  If any of Landlord’s
insurance policies are cancelled or cancellation is threatened or the coverage
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 or subtenant of Tenant
or by anyone Tenant permits on the Premises and, if Tenant fails to remedy the
condition giving rise to such cancellation, threatened cancellation, reduction
of coverage, threatened reduction of coverage, increase in premiums, or
threatened increase in premiums, within forty-eight (48)  hours after notice thereof, Tenant will be
deemed to be in material default of this Lease and 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 Landlord the reasonable costs of
such remedy as additional rent.  If
Landlord is unable, or elects not to remedy such condition, then Landlord will
have all of the remedies provided for in this Lease in the event of a default
by Tenant.

 

(e)       Waiver of Claims; Waiver
of Subrogation.

 

(i)            Landlord
and Tenant hereby waive their rights against each other with respect to any
claims or damages or losses which are caused by or result from (a) damage
to property or loss of income insured against under any insurance policy
carried by Landlord or Tenant (as the case may be) pursuant to the provisions
of this Lease and enforceable at the time of such damage or loss, or
(b) damage to property or loss of income which would have been covered
under any insurance required to be obtained and maintained by Landlord or
Tenant (as the case may be) under this Paragraph 19 of this Lease (as
applicable) had such insurance been obtained and maintained as required
therein.  The foregoing waivers shall be
in addition to, and not a limitation of, any other waivers or releases
contained in this Lease.

 

(ii)           Each
party shall cause each property and loss of income insurance policy required to
be obtained by it pursuant to this Paragraph 19 to provide that the insurer
waives all rights of recovery by way of subrogation against either Landlord or
Tenant, as the case may be, in connection with any claims, losses and damages covered
by such policy.  If either party fails to
maintain property or loss of income insurance required hereunder, such
insurance shall be deemed to be self-insured with a deemed full waiver of
subrogation as set forth in the immediately preceding sentence.

 

20.       DAMAGE OR DESTRUCTION.

 

(a)       Partial Destruction.  If the Premises or the Building are damaged
by fire or other casualty to an extent not exceeding twenty-five percent (25%)
of the full replacement cost thereof, and Landlord’s contractor reasonably estimates
in a writing delivered to Landlord and Tenant that the damage thereto may be
repaired, reconstructed or restored to substantially its condition immediately
prior to such damage within two hundred forty (240) days from the date of such
casualty, and Landlord will receive insurance proceeds sufficient to cover the
costs of such repairs, reconstruction and restoration (including proceeds from
Tenant and/or Tenant’s insurance which Tenant is required to deliver to
Landlord pursuant to Subparagraph 20(e) below to cover Tenant’s obligation for
the costs of repair, reconstruction and restoration of any portion of the
Tenant Improvements and any Alterations for which Tenant is responsible under
this Lease), then Landlord agrees to commence and proceed diligently with the
work of repair, reconstruction and restoration and this Lease will continue in
full force and effect.

 

(b)       Substantial Destruction.  Any damage or destruction to the Premises or
the Building which Landlord is not obligated to repair pursuant to Subparagraph
20(a) above will be deemed a substantial destruction.  In the event of a substantial destruction,
Landlord may elect to either

 

13

 

(i) repair, reconstruct
and restore the portion of the Building or the Premises damaged by such
casualty, in which case this Lease will continue in full force and effect,
subject to Tenant’s termination right contained in Subparagraph 20(d) below; or
(ii) terminate this Lease effective as of the date which is thirty (30) days
after Tenant’s receipt of Landlord’s election to so terminate.

 

(c)       Notice.  Under any of the conditions of Subparagraph
20(a) or (b) above, Landlord agrees to give written notice to Tenant of its
intention to repair or terminate, as permitted in such paragraphs, within the
later of thirty (30) days after the occurrence of such casualty, or ten (10)
days after Landlord’s receipt of the estimate from Landlord’s contractor (the
applicable time period to be referred to herein as the “Notice Period”).

 

(d)       Tenant’s Termination
Rights.  If Landlord elects to
repair, reconstruct and restore pursuant to Subparagraph 20(b)(i) hereinabove,
and if Landlord’s contractor estimates that as a result of such damage, Tenant
cannot be given reasonable use of and access to the Premises within two hundred
forty (240) days after the date of such damage, then Tenant may terminate this
Lease effective upon delivery of written notice to Landlord within ten (10)
days after Landlord delivers notice to Tenant of its election to so repair,
reconstruct or restore.

 

(e)       Tenant’s Costs and
Insurance Proceeds.  In the
event of any damage or destruction of all or any part of the Premises, Tenant
agrees to immediately (i) notify Landlord thereof, and (ii) deliver to Landlord
all property insurance proceeds received by Tenant with respect to any Tenant
Improvements installed by or at the cost of Tenant and any Alterations, but
excluding proceeds for Tenant’s furniture, fixtures, equipment and other
personal property, whether or not this Lease is terminated as permitted in this
Paragraph 20, and Tenant hereby assigns to Landlord all rights to receive such
insurance proceeds.  If, as a result of
Tenant’s failure to obtain insurance required pursuant to this Lease Tenant
fails to receive insurance proceeds covering the full replacement cost of any
Tenant Improvements installed by or at the cost of Tenant and any Alterations
which are damaged, Tenant will be deemed to have self-insured the replacement
cost of such items, and upon any damage or destruction thereto, Tenant agrees
to immediately pay to Landlord the full replacement cost of such items, less
any insurance proceeds actually received by Landlord from Landlord’s or Tenant’s
insurance with respect to such items.

 

(f)        Abatement of Rent.  In the event of any damage, repair,
reconstruction and/or restoration described in this Paragraph 20, rent will be
abated or reduced, as the case may be, from the date of such casualty, in
proportion to the degree to which Tenant’s use of the Premises is impaired
during such period of repair until such use is restored.  Except for abatement of rent as provided
hereinabove, Tenant will not be entitled to any compensation or damages for
loss of, or interference with, Tenant’s business or use or access of all or any
part of the Premises or for lost profits or any other consequential damages of
any kind or nature, which result from any such damage, repair, reconstruction
or restoration.

 

(g)       Inability to Complete.  Notwithstanding anything to the contrary contained
in this Paragraph 20, if Landlord is obligated or elects to repair, reconstruct
and/or restore the damaged portion of the Building or the Premises pursuant to
Subparagraph 20(a) or 20(b)(i) above, but is delayed from completing such
repair, reconstruction and/or restoration beyond the date which is ninety (90)
days after the date estimated by Landlord’s contractor for completion thereof
by reason of any causes (other than delays caused by Tenant, its subtenants,
employees, agents or contractors or delays which are beyond the reasonable
control of Landlord as described in Paragraph 33), then either Landlord or
Tenant may elect to terminate this Lease upon ten (10) days prior written
notice given to the other after the expiration of such ninety (90) day period.

 

(h)       Damage Near End of Term.  Landlord and Tenant shall each have the right
to terminate this Lease if any damage to the Premises occurs during the last
twelve (12) months of the Term of this Lease where Landlord’s contractor
estimates in a writing delivered to Landlord and Tenant that the repair,
reconstruction or restoration of such damage cannot be completed within sixty
(60) days after the date of such casualty. 
If either party desires to terminate this Lease under this Subparagraph
(h), it shall provide written notice to the other party of such election within
ten (10) days after receipt of Landlord’s contractor’s repair estimates.

 

(i)        Waiver of Termination
Right.  Landlord and Tenant
agree that the foregoing provisions of this Paragraph 20 are to govern their
respective rights and obligations in the event of any damage or destruction and
supersede and are in lieu of the provisions of any applicable law, statute,
ordinance, rule, regulation, order or ruling now or hereafter in force which provide
remedies for damage or destruction of leased premises (including, without
limitation, the provisions of California Civil Code Section 1932, Subsection 2,
and Section 1933, Subsection 4 and any successor statute or laws of a similar
nature).

 

(j)        Termination.  Upon any termination of this Lease under any
of the provisions of this Paragraph 20, the parties will be released
without further obligation to the other from the date 

 

14

 

possession of the Premises
is surrendered to Landlord except for any items which have accrued and are
unpaid as of the date of termination and matters which are to survive any
termination of this Lease as provided herein.

 

21.       EMINENT DOMAIN.

 

(a)       Substantial Taking.  If the whole of the Premises or the Project,
or such part thereof as shall substantially interfere with Tenant’s use and
occupancy of the Premises, as contemplated by this Lease, is taken for any
public or quasi-public purpose by any lawful power or authority by exercise of
the right of appropriation, condemnation or eminent domain, or sold to prevent
such taking, either party will have the right to terminate this Lease effective
as of the date possession is required to be surrendered to such authority.

 

(b)       Partial Taking; Abatement
of Rent.  In the event of a
taking of a portion of the Premises, the Project, or the parking spaces for the
Project or any portion thereof, which does not substantially interfere with
Tenant’s use and occupancy of the Premises, then, neither party will have the
right to terminate this Lease and Landlord will thereafter proceed to make a
functional unit of the remaining portion of the Premises or the Project (but
only to the extent Landlord receives proceeds therefor from the condemning authority),
and rent will be abated with respect to the part of the Premises which Tenant
is deprived of on account of such taking.

 

(c)       Condemnation Award.  In connection with any taking of the Premises
or the Building, Landlord will be entitled to receive the entire amount of any
award which may be made or given in such taking or condemnation, without
deduction or apportionment for any estate or interest of Tenant, it being
expressly understood and agreed by Tenant that no portion of any such award
will be allowed or paid to Tenant for any so-called bonus or excess value of
this Lease, and such bonus or excess value will be the sole property of
Landlord.  Tenant agrees not to assert
any claim against Landlord or the taking authority for any compensation because
of such taking (including any claim for bonus or excess value of this Lease);
provided, however, if any portion of the Premises is taken, Tenant will have
the right to recover from the condemning authority (but not from Landlord) the
value of Tenant Improvements or Alterations to the Premises installed by or at
the cost of Tenant, and any other compensation as may be separately awarded or
recoverable by Tenant for the taking of Tenant’s furniture, fixtures, equipment
and other personal property within the Premises, for Tenant’s relocation
expenses, and for any loss of goodwill or other damage to Tenant’s business by
reason of such taking.

 

(d)       Temporary Taking.  In the event of taking of the Premises or any
part thereof for temporary use, (i) this Lease will remain unaffected
thereby and rent will abate for the duration of the taking in proportion to the
extent Tenant’s use of the Premises is interfered with, and (ii) Landlord
will be entitled to receive such portion or portions of any award made for such
use provided that if such taking remains in force at the expiration or earlier
termination of this Lease, Tenant will then pay to Landlord a sum equal to the
reasonable cost of performing Tenant’s obligations under Paragraph 11 with
respect to surrender of the Premises and upon such payment Tenant will be
excused from such obligations.  For
purpose of this Subparagraph 21(d), a temporary taking shall be defined as a
taking for a period of ninety (90) days or less.

 

22.       DEFAULTS AND REMEDIES.

 

(a)       Defaults.  The occurrence of any one or more of the
following events will be deemed a default by Tenant:

 

(i)            The
abandonment of the Premises as defined in California Civil Code Section 1951.3.

 

(ii)           The
failure by Tenant to make any payment of rent or additional rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure continues for a period of three (3) days after written notice thereof
from Landlord to Tenant; provided, however, that Landlord shall only be
required to give written notice of such monetary default once in any twelve
(12) month period, and thereafter Tenant shall be in default of this Lease if
Tenant fails to pay rent or additional rent or any other payment required to be
made by Tenant hereunder on its due date without any requirement that Landlord
give Tenant written notice of such default; and provided further that such
three (3) day notice will be in lieu of, and not in addition to, any notice
required under applicable law (including, without limitation, the provisions of
California Code of Civil Procedure Section 1161 regarding unlawful detainer
actions or any successor statute or law of a similar nature).

 

(iii)          The
failure by Tenant to observe or perform any of the express or implied covenants
or provisions of this Lease to be observed or performed by Tenant, other than
as specified in Subparagraph 22(a)(i) or (ii) above, where such failure
continues (where no other period of time is expressly provided) for a period of
ten (10) days after written notice thereof from Landlord to Tenant.  

 

15

 

The provisions of any such notice will be in lieu of,
and not in addition to, any notice required under applicable law (including,
without limitation, California Code of Civil Procedure Section 1161 regarding
unlawful detainer actions and any successor statute or similar law).  If the nature of Tenant’s default is such
that more than ten (10) days are reasonably required for its cure, then Tenant
will not be deemed to be in default if Tenant, commences such cure within such
ten (10) day period and thereafter diligently prosecutes such cure to
completion.

 

(iv)          (A)
The making by Tenant of any general assignment for the benefit of creditors;
(B) the filing by or against Tenant of a petition to have Tenant adjudged a
bankrupt or a petition for reorganization or arrangement under any law relating
to bankruptcy (unless, in the case of a petition filed against Tenant, the same
is dismissed within sixty (60) days); (C) the appointment of a trustee or
receiver to take possession of substantially all of Tenant’s assets located at
the Premises or of Tenant’s interest in this Lease, where possession is not
restored to Tenant within thirty (30) days; or (D) the attachment, execution or
other judicial seizure of substantially all of Tenant’s assets located at the
Premises or of Tenant’s interest in this Lease where such seizure is not
discharged within thirty (30) days.

 

(b)       Landlord’s Remedies;
Termination.  In the event of
any default by Tenant, in addition to any other remedies available to Landlord
at law or in equity under applicable law (including, without limitation, the
remedies of Civil Code Section 1951.4 and any successor statute or similar
law), Landlord will have the immediate right and option to terminate this Lease
and all rights of Tenant hereunder.  If
Landlord elects to terminate this Lease then, to the extent permitted under
applicable law, Landlord may recover from Tenant (i) The worth at the time of
award of any unpaid rent which had been earned at the time of such termination;
plus (ii) 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 rent loss that Tenant proves could have been reasonably
avoided; plus (iii) 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 rent loss that Tenant proves could be reasonably avoided; plus
(iv) 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, results therefrom including,
but not limited to: reasonable attorneys’ fees and costs; brokers’ commissions;
the costs of refurbishment, alterations, renovations and repair of the Premises
and removal (including the repair of any damage caused by such removal) and
storage (or disposal) of Tenant’s personal property, equipment, fixtures,
Alterations, the Tenant Improvements and any other items which Tenant is
required under this Lease to remove but does not remove, as well as the
unamortized value of any free rent, reduced rent, free parking, reduced rate
parking and any Tenant Improvement allowance or other costs or economic
concessions provided, paid, granted or incurred by Landlord pursuant to this
Lease.  The unamortized value of such
concessions shall be determined by taking the total value of such concessions
and multiplying such value by a fraction, the numerator of which is the number
of months of the Lease Term not yet elapsed as of the date on which the Lease
is terminated, and the denominator of which is the total number of months of
the Lease Term.  As used in Subparagraphs
22(b)(i) and (ii) above, the “worth at the time of award” is computed by
allowing interest at the Interest Rate. 
As used in Subparagraph 22(b)(iii) above, the “worth at the time of
award” is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%).

 

(c)       Landlord’s Remedies;
Re-Entry Rights.  In the event
of any default by Tenant, in addition to any other remedies available to Landlord
under this Lease, at law or in equity, Landlord will also have the right, with
or without terminating this Lease, to re-enter the Premises and remove all
persons and property from the Premises; such property may be removed and stored
in a public warehouse or elsewhere and/or disposed of at the sole cost and
expense of and for the account of Tenant in accordance with the provisions of
Subparagraph 13(h) of this Lease or any other procedures permitted by
applicable law.  No re-entry or taking
possession of the Premises by Landlord pursuant to this Subparagraph 22(c) will
be construed as an election to terminate this Lease unless a written notice of
such intention is given to Tenant or unless the termination thereof is decreed
by a court of competent jurisdiction.

 

(d)       Landlord’s Remedies;
Re-Letting.  In the event of
abandonment of the Premises by Tenant under Paragraph 22(a)(i) above or in the
event that Landlord elects to re-enter the Premises or takes possession of the
Premises pursuant to legal proceeding or pursuant to any notice provided by
law, then if Landlord does not elect to terminate this Lease, Landlord may from
time to time, without terminating this Lease, either recover all rent as it
becomes due or relet the Premises or any part thereof on terms and conditions
as Landlord in its sole and absolute discretion may deem advisable with the
right to make alterations and repairs to the Premises in connection with such
reletting.  If Landlord elects to relet
the Premises, then rents received by Landlord from such reletting will be
applied: first, to the payment of any indebtedness other than rent due
hereunder from Tenant to Landlord; second, to the payment of any cost of such
reletting; third, to the payment of the cost of any alterations and repairs to
the Premises incurred in connection with such reletting; fourth, to the 

 

16

 

payment of rent due and
unpaid hereunder and the residue, if any, will be held by Landlord and applied
to payment of future rent as the same may become due and payable
hereunder.  Should that portion of such
rents received from such reletting during any month, which is applied to the
payment of rent hereunder, be less than the rent payable during that month by
Tenant hereunder, then Tenant agrees to pay such deficiency to Landlord
immediately upon demand therefor by Landlord. 
Such deficiency will be calculated and paid monthly.

 

(e)       Landlord’s Remedies;
Performance for Tenant.  All
covenants and agreements to be performed by Tenant under any of the terms of
this Lease are to be performed by Tenant at Tenant’s sole cost and expense and
without any abatement of rent except as expressly set forth herein.  If Tenant fails to pay any sum of money owed
to any party other than Landlord, for which it is liable under this Lease, or
if Tenant fails to perform any other act on its part to be performed hereunder,
and such failure continues for ten (10) days after notice thereof by Landlord,
Landlord may, without waiving or releasing Tenant from its obligations, but
shall not be obligated to, make any such payment or perform any such other act
to be made or performed by Tenant. 
Tenant agrees to reimburse Landlord upon demand for all sums so paid by
Landlord and all necessary incidental costs, together with interest thereon at
the Interest Rate, from the date of such payment by Landlord until reimbursed
by Tenant.  This remedy shall be in
addition to any other right or remedy of Landlord set forth in this
Paragraph 22.

 

(f)        Late Payment.  If Tenant fails to pay any installment of
rent within five (5) days of when due or if Tenant fails to make any other
payment for which Tenant is obligated under this Lease within five (5) days of
when due, such late amount will accrue interest at the Interest Rate and Tenant
agrees to pay Landlord as additional rent such interest on such amount from the
date such amount becomes due until such amount is paid.  In addition, Tenant agrees to pay to Landlord
concurrently with such late payment amount, as additional rent, a late charge
equal to five percent (5%) of the amount due to compensate Landlord for the
extra costs Landlord will incur as a result of such late payment.  The parties agree that (i) it would be
impractical and extremely difficult to fix the actual damage Landlord will
suffer in the event of Tenant’s late payment, (ii) such interest and late
charge represents a fair and reasonable estimate of the detriment that Landlord
will suffer by reason of late payment by Tenant, and (iii) the payment of
interest and late charges are distinct and separate in that the payment of
interest is to compensate Landlord for the use of Landlord’s money by Tenant,
while the payment of late charges is to compensate Landlord for Landlord’s
processing, administrative and other costs incurred by Landlord as a result of
Tenant’s delinquent payments.  Acceptance
of any such interest and late charge will not constitute a waiver of the Tenant’s
default with respect to the overdue amount, or prevent Landlord from exercising
any of the other rights and remedies available to Landlord.  If Tenant incurs a late charge more than
three (3) times in any period of twelve (12) months during the Lease Term,
then, notwithstanding that Tenant cures the late payments for which such late
charges are imposed, Landlord will have the right to require Tenant thereafter
to pay all installments of Monthly Base Rent quarterly in advance throughout
the remainder of the Lease Term.

 

(g)       Rights and Remedies
Cumulative.  All rights,
options and remedies of Landlord contained in this Lease will be construed and
held to be cumulative, and no one of them will be exclusive of the other, and
Landlord shall have the right to pursue any one or all of such remedies or any
other remedy or relief which may be provided by law or in equity, whether or
not stated in this Lease.  Nothing in
this Paragraph 22 will be deemed to limit or otherwise affect Tenant’s
indemnification of Landlord pursuant to any provision of this Lease.

 

23.       LANDLORD’S DEFAULT.  Landlord will not be in default in the
performance of any obligation required to be performed by Landlord under this
Lease unless Landlord fails to perform such obligation within thirty (30) days
after the receipt of written notice from Tenant specifying in detail Landlord’s
failure to perform; provided however, that if the nature of Landlord’s
obligation is such that more than thirty (30) days are required for
performance, then Landlord will not be deemed in default if it commences such
performance within such thirty (30) day period and thereafter diligently
pursues the same to completion.  Upon any
default by Landlord, Tenant may exercise any of its rights provided at law or
in equity, subject to the limitations on liability set forth in Paragraph 35 of
this Lease.

 

24.       ASSIGNMENT AND SUBLETTING.

 

(a)       Restriction on Transfer.  Except as expressly provided in this
Paragraph 24, Tenant will not, either voluntarily or by operation of law,
assign or encumber this Lease or any interest herein or sublet the Premises or
any part thereof, or permit the use or occupancy of the Premises by any party
other than Tenant (any such assignment, encumbrance, sublease or the like will
sometimes be referred to as a “Transfer”), without the prior written consent of
Landlord, which consent Landlord will not unreasonably withhold.

 

(b)       Corporate and Partnership
Transfers.  For purposes of
this Paragraph 24, if Tenant is a corporation, partnership or other entity, any
transfer, assignment, encumbrance or hypothecation of 

 

17

 

fifty percent (50%) or
more (individually or in the aggregate) of any stock or other ownership
interest in such entity, and/or any transfer, assignment, hypothecation or
encumbrance of any controlling ownership or voting interest in such entity,
will be deemed a Transfer and will be subject to all of the restrictions and
provisions contained in this Paragraph 24. 
Notwithstanding the foregoing, the immediately preceding sentence will
not apply to any transfers of stock of Tenant if Tenant is a publicly-held
corporation and such stock is transferred publicly over a recognized security
exchange or over-the-counter market.

 

(c)       Permitted Controlled
Transfers.  Notwithstanding
the provisions of this Paragraph 24 to the contrary, Tenant may assign this
Lease or sublet the Premises or any portion thereof (“Permitted Transfer”),
without Landlord’s consent and without extending any sublease termination
option to Landlord, to any parent, subsidiary or affiliate corporation which
controls, is controlled by or is under common control with Tenant, or to any
corporation resulting from a merger or consolidation with Tenant, or to any
person or entity which acquires all the assets of Tenant’s business as a going
concern, provided that: (i) at least twenty (20) days prior to such
assignment or sublease, Tenant delivers to Landlord the financial statements
and other financial and background information of the assignee or sublessee
described in Subparagraph 24(d) below; (ii) if an assignment, the
assignee assumes, in full, the obligations of Tenant under this Lease (or if a
sublease, the sublessee of a portion of the Premises or Term assumes, in full,
the obligations of Tenant with respect to such portion); (iii) the
financial net worth of the assignee or sublessee as of the time of the proposed
assignment or sublease equals or exceeds that of Tenant as of the date of
execution of this Lease or is adequate, in Landlord’s reasonable judgment, to
perform the Tenant’s obligations herein; (iv) Tenant remains fully liable
under this Lease; and (v) the use of the Premises under Paragraph 8
remains unchanged.

 

(d)       Transfer Notice.  If Tenant desires to effect a Transfer, other
than a Permitted Transfer, then at least thirty (30) days prior to the date
when Tenant desires the Transfer to be effective (the “Transfer Date”), Tenant
agrees to give Landlord a notice (the “Transfer Notice”), stating the name,
address and business of the proposed assignee, sublessee or other transferee
(sometimes referred to hereinafter as “Transferee”), reasonable information
(including references) concerning the character, ownership, and financial
condition of the proposed Transferee, the Transfer Date, any ownership or
commercial relationship between Tenant and the proposed Transferee, and the
consideration and all other material terms and conditions of the proposed
Transfer, all in such detail as Landlord may reasonably require.  If Landlord reasonably requests additional
detail, the Transfer Notice will not be deemed to have been received until
Landlord receives such additional detail, and Landlord may withhold consent to
any Transfer until such information is provided to it.

 

(e)       Landlord’s Options.  Within fifteen (15) days of Landlord’s
receipt of any Transfer Notice, and any additional information requested by
Landlord concerning the proposed Transferee’s financial responsibility,
Landlord will elect to do one of the following (i) consent to the proposed
Transfer; (ii) refuse such consent, which refusal shall be on reasonable
grounds including, without limitation, those set forth in
Subparagraph 24(f) below; or (iii) if the sublease or assignment is for
Sixty Percent (60%) or more of the Premises and for substantially the balance
of the Lease Term, terminate this Lease as to all or such portion of the
Premises which is proposed to be sublet or assigned and recapture all or such
portion of the Premises for reletting by Landlord.

 

(f)        Reasonable Disapproval.  Landlord and Tenant hereby acknowledge that
Landlord’s disapproval of any proposed Transfer pursuant to Subparagraph 24(e)
will be deemed reasonably withheld if based upon any reasonable factor,
including, without limitation, any or all of the following factors:  (i) the proposed Transferee is a
governmental entity; (ii) the portion of the Premises to be sublet or
assigned is irregular in shape with inadequate means of ingress and egress;
(iii) the use of the Premises by the Transferee (A) is not permitted
by the use provisions in Paragraph 8 hereof, (B) violates any exclusive
use granted by Landlord to another tenant in the Building, or (C) otherwise
poses a risk of increased liability to Landlord; (iv) the Transfer would
likely result in a significant and inappropriate increase in the use of the
parking areas or Project Common Areas by the Transferee’s employees or
visitors, and/or significantly increase the demand upon utilities and services
to be provided by Landlord to the Premises; (v) the Transferee does not
have the financial capability to fulfill the obligations imposed by the Transfer
and this Lease; (vi) the Transferee is not in Landlord’s reasonable
opinion consistent with Landlord’s desired tenant mix; or (vii) the Transferee
poses a business or other economic risk which Landlord reasonably deems
unacceptable.  Notwithstanding anything
to the contrary contained in this Lease, it is expressly understood and agreed
that no further subletting under any sublease shall be permitted under any
circumstances, except in the event Landlord (with no obligation to do so)
sub-subleases the Premises (or any portion thereof) from such sublessee.  Any sublease to which Landlord consents shall
expressly prohibit any such further subletting.

 

(g)       Additional Conditions.  A condition to Landlord’s consent to any
Transfer of this Lease will be the delivery to Landlord of a true copy of the
fully executed instrument of assignment, sublease, transfer or hypothecation,
and, in the case of an assignment, the delivery to Landlord of an 

 

18

 

agreement executed by the
Transferee in form and substance reasonably satisfactory to Landlord, whereby
the Transferee assumes and agrees to be bound by all of the terms and
provisions of this Lease and to perform all of the obligations of Tenant
hereunder.  As a condition for granting
its consent to any assignment or sublease, Landlord may require that in the
event of an uncured default by Tenant under this Lease, the assignee or
sublessee remit directly to Landlord on a monthly basis, all monies due to
Tenant by said assignee or sublessee.  As
a condition to Landlord’s consent to any sublease, such sublease must provide
that it is subject and subordinate to this Lease and to all mortgages; that
Landlord may enforce the provisions of the sublease, including collection of rent;
that in the event of termination of this Lease for any reason, including
without limitation a voluntary surrender by Tenant, or in the event of any
reentry or repossession of the Premises by Landlord, Landlord may, at its
option, either (i) terminate the sublease, or (ii) take over all of the right,
title and interest of Tenant, as sublessor, under such sublease, in which case
such sublessee will attorn to Landlord, but that nevertheless Landlord will not
(1) be liable for any previous act or omission of Tenant under such sublease,
(2) be subject to any defense or offset previously accrued in favor of the
sublessee against Tenant, or (3) be bound by any previous modification of any
sublease made without Landlord’s written consent, or by any previous prepayment
by sublessee of more than one month’s rent.

 

(h)       Excess Rent.  If Landlord consents to any assignment of
this Lease, Tenant agrees to pay to Landlord, as additional rent, one-half
(50%) of all sums and other consideration payable to and for the benefit of
Tenant by the assignee on account of the assignment, as and when such sums and
other consideration are due and payable by the assignee to or for the benefit
of Tenant (or, if Landlord so requires, and without any release of Tenant’s
liability for the same, Tenant agrees to instruct the assignee to pay such sums
and other consideration directly to Landlord). 
If for any sublease, Tenant receives rent or other consideration, either
initially or over the term of the sublease, in excess of the rent fairly
allocable to the portion of the Premises which is subleased based on square
footage, Tenant agrees to pay to Landlord as additional rent one-half (50%) of
the excess of each such payment of rent or other consideration received by
Tenant promptly after its receipt.  In
calculating excess rent or other consideration which may be payable to Landlord
under this paragraph, Tenant will be entitled to deduct solely (i) commercially
reasonable third party brokerage commissions and marketing costs (ii) reasonable
attorneys’ fees actually expended by Tenant in connection with such assignment
or subletting; (iii) the reasonable and properly documented costs of any tenant
improvements paid by Tenant in connection with the sublease; (iv) and any other
reasonable and customary costs incurred directly in connection with the
sublease if acceptable written evidence of such expenditures is provided to
Landlord.

 

(i)        (j)                No Release.  No
Transfer will release Tenant of Tenant’s obligations under this Lease or alter
the primary liability of Tenant to pay the rent and to perform all other
obligations to be performed by Tenant hereunder.  If Tenant is in default of this Lease after
expiration of any applicable cure or notice period, Landlord may require that
any Transferee remit directly to Landlord on a monthly basis, all monies due
Tenant by said Transferee, however, the acceptance of rent by Landlord from any
other person will not be deemed to be a waiver by Landlord of any provision
hereof.  Consent by Landlord to one
Transfer will not be deemed consent to any subsequent Transfer.  In the event of default by any Transferee of
Tenant or any successor of Tenant in the performance of any of the terms
hereof, Landlord may proceed directly against Tenant without the necessity of
exhausting remedies against such Transferee or successor.  Landlord may consent to subsequent
assignments of this Lease or sublettings or amendments or modifications to this
Lease with assignees of Tenant, without notifying Tenant, or any successor of
Tenant, and without obtaining its or their consent thereto and any such actions
will not relieve Tenant of liability under this Lease.

 

(k)       Administrative and
Attorneys’ Fees.  If Tenant
effects a Transfer or requests the consent of Landlord to any Transfer (whether
or not such Transfer is consummated), then, upon demand, Tenant agrees to pay
Landlord a non-refundable administrative fee of Two Hundred Fifty Dollars
($250.00), plus any reasonable attorneys’ and paralegal fees incurred by
Landlord in connection with such Transfer or request for consent (whether
attributable to Landlord’s in-house or outside attorneys or paralegals or
otherwise) not to exceed Two Thousand Dollars ($2000.00) if Tenant effects such
Transfer or requests the consent of Landlord to a transfer using Landlord’s
standard documents.  Acceptance of the
Two Hundred Fifty Dollar ($250.00) administrative fee and/or reimbursement of
Landlord’s attorneys’ and paralegal fees will in no event obligate Landlord to
consent to any proposed Transfer.

 

25.       SUBORDINATION.  Subject to the provisions of this Section 25,
at the election of Landlord or any mortgagee or beneficiary with a deed of
trust encumbering the Building and/or the Project, or any lessor of a ground or
underlying lease with respect to the Building, this Lease will be subject and
subordinate at all times to: 
(i) all ground leases or underlying leases which may now exist or
hereafter be executed affecting the Building; and (ii) the lien of any
mortgage or deed of trust which may now exist or hereafter be executed for
which the Building, the Project or any leases thereof, or Landlord’s interest
and estate in any of said items, is specified as security.  Landlord shall exercise its commercially
reasonable efforts to obtain from any existing ground lessor, mortgagee or
beneficiary 

 

19

 

under a deed of trust on
or before the date which is thirty (30) days following the Commencement Date a
commercially reasonable nondisturbance agreement pursuant to which such ground
lessor, mortgagee or beneficiary of a deed of trust agrees not to disturb
Tenant’s right to possession of the Premises so long as Tenant is not in
default under this Lease.  If,
notwithstanding Landlord’s exercise of its commercially reasonable efforts,
Landlord is unable to obtain the above-referenced nondisturbance agreement
within thirty (30) days following the Commencement Date of this Lease, Landlord
shall give Tenant written notice of Landlord’s inability to obtain such
nondisturbance agreement and Tenant shall have three (3) business days
following receipt of Landlord’s written notice in which to elect to terminate
this Lease, in which event this Lease shall terminate and the parties shall be
released from their respective obligations hereunder except that Landlord shall
promptly refund to Tenant the Security Deposit and any prepaid Rent.  Tenant’s obligation to subordinate to any
future mortgages, deeds of trust or ground leases affecting the Building shall
be subject to Tenant’s receipt of a commercially reasonable nondisturbance
agreement from any such future mortgagee, beneficiary under a deed of trust or
ground lessor.  Notwithstanding the
foregoing, Landlord reserves the right to subordinate any such ground leases or
underlying leases or any such liens to this Lease.  If any such ground lease or underlying lease
terminates for any reason or any such mortgage or deed of trust is foreclosed
or a conveyance in lieu of foreclosure is made for any reason, at the election
of Landlord’s successor in interest, Tenant agrees to attorn to and become the
tenant of such successor in which event Tenant’s right to possession of the
Premises will not be disturbed as long as Tenant is not in default under this
Lease.  Tenant hereby waives its rights
under any law which gives or purports to give Tenant any right to terminate or
otherwise adversely affect this Lease and the obligations of Tenant hereunder
in the event of any such foreclosure proceeding or sale.  Subject to Tenant’s receipt of a commercially
reasonable nondisturbance agreement, Tenant covenants and agrees to execute and
deliver, upon demand by Landlord and in the form reasonably acceptable to
Tenant and Landlord, any additional documents evidencing the priority or
subordination of this Lease and Tenant’s attornment agreement with respect to
any such ground lease or underlying leases or the lien of any such mortgage or
deed of trust.  If Tenant fails to
execute and acknowledge any such documents within ten (10) business days of
receipt of such documents from Landlord, Tenant will be in default hereunder.

 

26.       ESTOPPEL CERTIFICATE.

 

(a)       Tenant’s Obligations.  Within ten business (10) days following any
written request which Landlord may make from time to time, Tenant agrees to
execute and deliver to Landlord a statement, in a form as may reasonably be
required by Landlord or Landlord’s lender, certifying:  (i) the date of commencement of this
Lease; (ii) the fact that this Lease is unmodified and in full force and
effect (or, if there have been modifications, that this Lease is in full force
and effect, and stating the date and nature of such modifications);
(iii) the date to which the rent and other sums payable under this Lease
have been paid; (iv) that there are no current defaults under this Lease by
either Landlord or Tenant except as specified in Tenant’s statement; and
(v) such other matters reasonably requested by Landlord.  Landlord and Tenant intend that any statement
delivered pursuant to this Paragraph 26 may be relied upon by any mortgagee,
beneficiary, purchaser or prospective purchaser of the Building or any interest
therein.

 

(b)       Tenant’s Failure to
Deliver.  Tenant’s failure to
deliver such statement within such time will be conclusive upon Tenant
(i) that this Lease is in full force and effect, without modification
except as may be represented by Landlord, (ii) that there are no uncured
defaults in Landlord’s performance, and (iii) that not more than one (1)
month’s rent has been paid in advance. 
Without limiting the foregoing, if Tenant fails to deliver any such
statement within such ten (10) business day period, Landlord may deliver to
Tenant an additional request for such statement and Tenant’s failure to deliver
such statement to Landlord within ten (10) business days after delivery of such
additional request will constitute a default under this Lease.  Tenant agrees to indemnify and protect
Landlord from and against any and all claims, damages, losses, liabilities and
expenses (including attorneys’ fees and costs) attributable to any failure by
Tenant to timely deliver any such estoppel certificate to Landlord as required
by this Paragraph 26.

 

27.       RULES AND REGULATIONS.  Tenant agrees to faithfully observe and
comply with the “Rules and Regulations,” a copy of which is attached hereto and
incorporated herein by this reference as Exhibit “E”, and all reasonable
and nondiscriminatory modifications thereof and additions thereto from time to
time put into effect by Landlord. 
Landlord shall use its commercially reasonable efforts to enforce such
Rules and Regulations against other tenants and occupants of the Building;
however, Landlord will not be responsible to Tenant for the violation or
non-performance by any other tenant or occupant of the Building of any of the
Rules and Regulations.

 

28.       MODIFICATION AND CURE
RIGHTS OF LANDLORD’S MORTGAGEES AND LESSORS.

 

(a)       Modifications.  If, in connection with Landlord’s obtaining
or entering into any financing or ground lease for any portion of the Building
or the Project, the lender or ground lessor requests modifications to this
Lease, Tenant, within ten (10) business days after request therefor, agrees to 

 

20

 

execute an amendment to
this Lease incorporating such modifications, provided such modifications are
reasonable and do not increase the obligations of Tenant under this Lease or
adversely affect the leasehold estate created by this Lease.

 

(b)       Cure Rights.  In the event of any default on the part of
Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgage covering the Premises or ground
lessor of Landlord whose address has been furnished to Tenant, and Tenant
agrees to offer such beneficiary, mortgagee or ground lessor a reasonable
opportunity to cure the default (including with respect to any such beneficiary
or mortgagee, time to obtain possession of the Premises, subject to this Lease
and Tenant’s rights hereunder, by power of sale or a judicial foreclosure, if
such should prove necessary to effect a cure).

 

29.       DEFINITION OF LANDLORD.  The term “Landlord,” as used in this Lease,
so far as covenants or obligations on the part of Landlord are concerned, means
and includes only the owner or owners, at the time in question, of the fee
title of the Premises or the lessees under any ground lease, if any.  In the event of any transfer, assignment or
other conveyance or transfers of any such title (other than a transfer for
security purposes only), Landlord herein named (and in case of any subsequent
transfers or conveyances, the then grantor) will be automatically relieved from
and after the date of such transfer, assignment or conveyance of all liability
as respects the performance of any covenants or obligations on the part of Landlord
contained in this Lease thereafter to be performed, so long as the transferee
assumes in writing all such covenants and obligations of Landlord arising after
the date of such transfer and the transferee has the financial capabilities to
perform Landlord’s obligations under this Lease.  Landlord and Landlord’s transferees and
assignees have the absolute right to transfer all or any portion of their
respective title and interest in the Project, the Building, the Premises and/or
this Lease without the consent of Tenant, and such transfer or subsequent
transfer will not be deemed a violation on Landlord’s part of any of the terms
and conditions of this Lease.

 

30.       WAIVER.  The waiver by either party of any breach of
any term, covenant or condition herein contained will not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or
condition herein contained, nor will any custom or practice which may develop
between the parties in the administration of the terms hereof be deemed a
waiver of or in any way affect the right of either party to insist upon
performance in strict accordance with said terms.  The subsequent acceptance of rent or any
other payment hereunder by Landlord will not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant or condition of this Lease,
other than the failure of Tenant to pay the particular rent so accepted,
regardless of Landlord’s knowledge of such preceding breach at the time of
acceptance of such rent.  No acceptance
by Landlord of a lesser sum than the basic rent and additional rent or other
sum then due will be deemed to be other than on account of the earliest
installment of such rent or other amount due, nor will any endorsement or
statement on any check or any letter accompanying any check 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
other amount or pursue any other remedy provided in this Lease.  The consent or approval of Landlord to or of
any act by Tenant requiring Landlord’s consent or approval will not be deemed
to waive or render unnecessary Landlord’s consent or approval to or of any
subsequent similar acts by Tenant.

 

31.       PARKING.

 

(a)       Grant of Parking Rights.  So long as this Lease is in effect and
provided Tenant is not in default hereunder after expiration of any applicable
cure or notice period, Landlord grants to Tenant a license to use the number
and type of parking spaces designated in Subparagraph 1(s) subject to the
terms and conditions of this Paragraph 31, and the Rules and Regulations
regarding parking contained in Exhibit ”E” attached hereto.  Tenant agrees to submit to Landlord or, at
Landlord’s election, directly to Landlord’s parking operator with a copy to
Landlord, written notice in a form reasonably specified by Landlord containing
the names, office addresses and telephone numbers of those persons who are
authorized by Tenant to use Tenant’s parking spaces on a monthly basis (“Tenant’s
Authorized Users”) and shall use its best efforts to identify each vehicle of
Tenant’s Authorized Users by make, model and license number.  Tenant agrees to deliver such notice prior to
the beginning of the Term of this Lease and to periodically update such notice
as well as upon specific request by Landlord or Landlord’s parking operator to
reflect changes to Tenant’s Authorized Users or their vehicles.  Tenant will not use or allow any of Tenant’s
Authorized Users to use any parking spaces which have been specifically
assigned by Landlord to other tenants or occupants or for other uses such as
visitor parking or which have been designated by any governmental entity as
being restricted to certain uses.

 

(b)       Parking Rules and
Regulations.  Tenant and
Tenant’s Authorized Users shall comply with all rules and regulations regarding
parking set forth in Exhibit ”E” attached hereto and Tenant agrees
to cause its employees, subtenants, assignees, contractors, suppliers,
customers and invitees to comply with such rules and regulations.  Landlord reserves the right from time to time
to modify and/or adopt 

 

21

 

such other reasonable and
non-discriminatory rules and regulations for the parking facilities as it deems
reasonably necessary for the operation of the parking facilities.

 

32.       FORCE MAJEURE.  If either Landlord or Tenant is delayed,
hindered in or prevented from the performance of any act required under this
Lease by reason of strikes, lock-outs, labor troubles, inability to procure
standard materials, unusual and unforeseeable delay in the course of
construction, failure of power, restrictive governmental laws, regulations or
orders or governmental action or inaction (including failure, refusal or delay
in issuing permits, approvals and/or authorizations which is not the result of
the action or inaction of the party claiming such delay), riots, civil unrest
or insurrection, war, fire, earthquake, flood or other natural disaster,
unusual and unforeseeable delay which results from an interruption of any
public utilities (e.g., electricity, gas, water, telephone) or other
unusual and unforeseeable delay not within the reasonable control of the party
delayed in performing work or doing acts required under the provisions of this
Lease, then performance of such act will be excused for the period of the delay
and the period for the performance of any such act will be extended for a
period equivalent to the period of such delay. 
The provisions of this Paragraph 32 will not operate to excuse
Tenant from prompt payment of rent or any other payments required under the
provisions of this Lease.

 

33.       SIGNS.  At Tenant’s sole cost and expense, Tenant
shall be entitled to have Building standard identity signs installed and
maintained in place throughout the Term (on a non-exclusive basis) (a) at the
Building monument sign and (b) on the exterior of the Building, subject
(i) to Landlord’s reasonable prior approval, (ii) applicable City
ordinances and (iii) the signage rights of all existing tenants.  Tenant agrees to have Landlord maintain
Tenant’s foregoing identification signs in such designated locations in
accordance with this Paragraph 33 at Tenant’s sole cost and expense.  Tenant has no right to install Tenant identification
signs in any other location in, on or about the Premises or the Project, to
change the name upon any such signage and Tenant will not display or erect any
other signs, displays or other advertising materials that are visible from the
exterior of the Building or from within the Building in any interior or
exterior common areas.

 

34.       LIMITATION ON LIABILITY.  In consideration of the benefits accruing
hereunder, Tenant on behalf of itself and all successors and assigns of Tenant
covenants and agrees that, in the event of any actual or alleged failure,
breach or default hereunder by Landlord: 
(a)  Tenant’s recourse against
Landlord for monetary damages will be limited to Landlord’s interest in the
Building including, subject to the prior rights of any Mortgagee, Landlord’s
interest in the rents of the Building and any insurance proceeds payable to
Landlord; (b)  Except as may be necessary
to secure jurisdiction of the partnership or company, no partner or member of
Landlord shall be sued or named as a party in any suit or action and no service
of process shall be made against any partner or member of Landlord; (c)  No partner or member of Landlord shall be
required to answer or otherwise plead to any service of process; (d)  No judgment will be taken against any partner
or member of Landlord and any judgment taken against any partner or member of
Landlord may be vacated and set aside at any time after the fact; (e)  No writ of execution will be levied against the
assets of any partner or member of Landlord; (f)  The obligations under this Lease do not
constitute personal obligations of the individual members, partners, directors,
officers or shareholders of Landlord, and Tenant shall not seek recourse
against the individual members, partners, directors, officers or shareholders
of Landlord or any of their personal assets for satisfaction of any liability
in respect to this Lease; and (g)  These
covenants and agreements are enforceable both by Landlord and also by any
partner or member of Landlord.

 

35.       FINANCIAL STATEMENTS.  Prior to the execution of this Lease by
Landlord and at any time during the Term of this Lease, upon ten (10) days
prior written notice from Landlord, Tenant agrees to provide Landlord with a
current financial statement for Tenant and any guarantors of Tenant and
financial statements for the two (2) years prior to the current financial
statement year for Tenant and any guarantors of Tenant.  Such statements are to be prepared in
accordance with generally accepted accounting principles and, if such is the
normal practice of Tenant, audited by an independent certified public
accountant.

 

36.       QUIET ENJOYMENT.  Landlord covenants and agrees with Tenant
that upon Tenant paying the rent required under this Lease and paying all other
charges and performing all of the covenants and provisions on Tenant’s part to
be observed and performed under this Lease, Tenant may peaceably and quietly
have, hold and enjoy the Premises in accordance with this Lease without
hindrance or molestation by Landlord or its employees or agents.

 

37.       MISCELLANEOUS.

 

(a)       Conflict of Laws.  This Lease shall be governed by and construed
solely pursuant to the laws of the State, without giving effect to choice of
law principles thereunder.

 

22

 

(b)       Successors
and Assigns.  Except as
otherwise provided in this Lease, all of the covenants, conditions and
provisions of this Lease shall be binding upon and shall inure to the benefit
of the parties hereto and their respective heirs, personal representatives,
successors and assigns.

 

(c)       Professional
Fees and Costs.  If either
Landlord or Tenant should bring suit against the other with respect to this
Lease, then all costs and expenses, including without limitation, actual
professional fees and costs such as appraisers’, accountants’ and attorneys’
fees and costs, incurred by the party which prevails in such action, whether by
final judgment or out of court settlement, shall be paid by the other party,
which obligation on the part of the other party shall be deemed to have accrued
on the date of the commencement of such action and shall be enforceable whether
or not the action is prosecuted to judgment. 
As used herein, attorneys’ fees and costs shall include, without
limitation, attorneys’ fees, costs and expenses incurred in connection with any
(i) postjudgment motions; (ii) contempt proceedings; (iii) garnishment, levy,
and debtor and third party examination; (iv) discovery; and (v) bankruptcy
litigation.

 

(d)       Terms and
Headings.  The words “Landlord”
and “Tenant” as used herein shall include the plural as well as the
singular.  Words used in any gender
include other genders.  The paragraph
headings of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.

 

(e)       Time.  Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor.

 

(f)        Prior
Agreement; Amendments.  This
Lease constitutes and is intended by the parties to be a final, complete and
exclusive statement of their entire agreement with respect to the subject
matter of this Lease.  This Lease
supersedes any and all prior and contemporaneous agreements and understandings
of any kind relating to the subject matter of this Lease.  There are no other agreements,
understandings, representations, warranties, or statements, either oral or in
written form, concerning the subject matter of this Lease.  No alteration, modification, amendment or
interpretation of this Lease shall be binding on the parties unless contained
in a writing which is signed by both parties.

 

(g)       Separability.  The provisions of this Lease shall be
considered separable such that if any provision or part of this Lease is ever
held to be invalid, void or illegal under any law or ruling, all remaining
provisions of this Lease shall remain in full force and effect to the maximum
extent permitted by law unless the provision invalidated is required for Tenant’s
practical realization of the benefits of this Lease.

 

(h)       Recording.  Neither Landlord nor Tenant shall record this
Lease nor any memorandum thereof without the prior written consent of the
other; provided, however, that if and only if Landlord fails to obtain and
record a subordination, nondisturbance and attornment agreement from its
existing lender on or before the Commencement Date, than and solely in such
event the parties shall (i) execute, acknowledge and record a memorandum of
lease (“Memorandum”) in the form attached hereto as Exhibit F in the
Official Records of the County of Santa Clara (“Official Records”) and (ii)
Tenant shall execute, acknowledge and deliver to Landlord a quitclaim of the
Memorandum (“Quitclaim”) in the form attached hereto as Exhibit G.  Tenant hereby irrevocably authorizes and
directs Landlord to record the Quitclaim in the Official Records upon the
earlier to occur of the expiration of the term of the Lease or earlier
termination of the Lease pursuant to the terms of this Lease.

 

(i)        Counterparts.  This Lease may be executed in one or more
counterparts, each of which shall constitute an original and all of which shall
be one and the same agreement.

 

(j)        Nondisclosure
of Lease Terms.  Tenant
acknowledges and agrees that the terms of this Lease are confidential and
constitute proprietary information of Landlord. 
Disclosure of the terms could adversely affect the ability of Landlord
to negotiate other leases and impair Landlord’s relationship with other
tenants.  Accordingly, Tenant agrees that
it, and its partners, officers, directors, employees, agents and attorneys,
shall not intentionally and voluntarily disclose the terms and conditions of
this Lease to any newspaper or other publication or any other tenant or
apparent prospective tenant of the Building or other portion of the Project, or
real estate agent, either directly or indirectly, without the prior written
consent of Landlord, provided, however, that Tenant may disclose the terms to
prospective subtenants or assignees under this Lease, lenders and investors and
prospective lenders and investors, and to the extent required by law.

 

(k)       Non-Discrimination.  Tenant acknowledges and agrees that there
shall be no discrimination against, or segregation of, any person, group of
persons, or entity on the basis of race, color, creed, religion, age, sex,
marital status, national origin, or ancestry in the leasing, subleasing,
transferring, assignment, occupancy, tenure, use, or enjoyment of the Premises,
or any portion thereof.

 

23

 

38.       EXECUTION OF LEASE.

 

(a)       Joint and
Several Obligations.  If more
than one person executes this Lease as Tenant, their execution of this Lease
will constitute their covenant and agreement that (i) each of them is jointly
and severally liable for the keeping, observing and performing of all of the
terms, covenants, conditions, provisions and agreements of this Lease to be
kept, observed and performed by Tenant, and (ii) the term “Tenant” as used in
this Lease means and includes each of them jointly and severally.  The act of or notice from, or notice or
refund to, or the signature of any one or more of them, with respect to the
tenancy of this Lease, including, but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, will be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted or so given or received such
notice or refund or so signed.

 

(b)       Tenant as
Corporation or Partnership. 
If Tenant executes this Lease as a corporation or partnership, then
Tenant and the persons executing this Lease on behalf of Tenant represent and
warrant that such entity is duly qualified and in good standing to do business
in California and that the individuals executing this Lease on Tenant’s behalf
are duly authorized to execute and deliver this Lease on its behalf, and in the
case of a corporation, in accordance with a duly adopted resolution of the
board of directors of Tenant, a copy of which is to be delivered to Landlord on
execution hereof, if requested by Landlord, and in accordance with the by-laws
of Tenant, and, in the case of a partnership, in accordance with the
partnership agreement and the most current amendments thereto, if any, copies
of which are to be delivered to Landlord on execution hereof, if requested by
Landlord, and that this Lease is binding upon Tenant in accordance with its
terms.

 

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

 

39.       EARLY
OCCUPANCY.    Landlord shall permit Tenant to have
early occupancy of the Premises following execution of this Lease and payment
of the sums required upon Lease execution, for the purposes of preparing the
Premises for use by Tenant, subject to the rights and use of the current tenant
in occupancy.

 

40.       OPTION TO EXTEND.  Landlord hereby grants to Tenant
two options (the “Option” or “Options”) to extend the term of the Lease, for an
additional period of five (5) years each (each, an “Option Term”).  The Option must be exercised, if at all, by
written notice (an “Option Notice”) delivered by Tenant to Landlord not later
than nine (9) months prior to the end of the term then in effect.  Further, the Option shall not be deemed to be
properly exercised if, as of the date of the Option Notice or at the end of the
term then in effect, Tenant (i) is in default under the Lease, which default
has not been cured as of the date in question, (ii) has assigned all or any
portion of this Lease or its interest therein or (iii) has sublet sixty percent
(60%) or more of the Premises.  Provided
Tenant has properly and timely exercised the Option, the term of the Lease
shall be extended by the Option Term, and all terms, covenants and conditions
of the Lease shall remain unmodified and in full force and effect, except that
(y) Tenant shall pay initial base rent determined as set forth below in this
paragraph, and (z) after the exercise of the second Option, Tenant shall have
no further options remaining.  Landlord
shall have no obligation whatsoever in connection with any extension of the
term of this Lease to remodel, alter or improve the Premises for use by Tenant,
to provide any improvement or construction allowance to Tenant, or to pay or
reimburse Tenant for any remodeling, alterations or improvements to the
Premises.  The initial base rent during
each Option Term shall be ninety-five percent (95%) of the fair market rental
value of the Premises as of the commencement of such Option Term, determined as
provided below. As used herein, “fair market rental value” shall mean the
projected prevailing rental rate as of the first day of the Option Term for
similar commercial space improved or presumed to be improved with tenant
improvements of substantially similar age, quality and layout as then existing
in the Premises and situated in similar office buildings in the Sunnyvale
market area including without limitation annual increases in the base
rent.  Promptly after delivery of an
Option Notice, Landlord and Tenant shall meet and confer and attempt to agree
upon the fair market rental value of the Premises.  If they are not able to agree, either party
may give written notice to the other that the fair market rental value is to be
determined by appraisal as provided herein. 
Within twenty (20) days following such notice, each party shall by
written notice to the other appoint an independent and qualified
appraiser.  Each of such appraisers
shall, within thirty (30) days following appointment, give written notice to
both parties of the appraiser’s determination of fair market rental value.  If the determinations of such appraisers are
in agreement, the initial base rent for the Option Term shall be ninety-five
percent (95%) of the fair market rental value so determined.  If the difference between such determinations
is five percent (5%) of the higher appraisal or less, the average of the two
determinations shall be the fair market rental value.  If the difference is more than such
percentage, then during the ten-day period following the appraisers’
determinations, Landlord and Tenant shall again meet and confer and attempt to
agree upon the fair market rental value of the Premises.  If they are unable to agree, the two
appraisers shall appoint an independent M.A.I. appraiser with not less than
five (5) years experience with office leases in the area 

 

24

 

in which the building is located.  Within thirty (30) days following
appointment, the third appraiser shall on written notice to the parties
determine the fair market rental value, which determination shall be binding
upon the parties.  Each party shall pay
the fees and expenses of the appraiser appointed by it and one-half of the fees
and expenses of the third appraiser.  If
base rent has not been determined as of the commencement of the Option Term,
Tenant shall pay the Base Rent in the amount specified by Landlord until base
rent is finally determined.  Upon such
determination.

 

41.       CONDITIONS PRECEDENT.  This Lease is subject to the
following condition precedent which must be satisfied or waived by Landlord on
or before April 30, 2005:  Landlord shall
have obtained the consent of its first mortgage lender to this Lease.

IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed by their duly authorized representatives as of the date first above
written.

 

 

	
  TENANT: 

  	
  LANDLORD: 

  
	
   

  	
   

  
	
  MONOLITHIC SYSTEM TECHNOLOGY, INC.

  	
  SUNNYVALE MATHILDA INVESTORS, LLC 

  
	
  a Delaware corporation 

  	
  a California limited liability company 

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Matteson Real Estate Equities, Inc. 

  
	
  By:

  	
  /s/ Mark Voll

  	
   

  	
   

  	
  Manager 

  
	
   

  	
  Print Name:

  	
  Mark Voll

  	
   

  	
   

  
	
   

  	
  Print Title:

  	
  Chief Financial Officer

  	
   

  	
   

  	
  By:

  	
  James A. Blake

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Executive Vice President

  
									

 

25

 

OUTLINE OF FLOOR

PLAN OF PREMISES

 

[To be supplied]

 

 

TENANT IMPROVEMENTS

 

1.         TENANT
IMPROVEMENTS.  As used in
the Lease and this Exhibit B, the term “Tenant Improvements” or “Tenant
Improvement Work” or “Tenant’s Work” means those items of general tenant
improvement construction shown on the Final Plans (described in Section 4
below), more particularly described in Section 5 below.

 

2.         WORK
SCHEDULE.  Prior to
commencing construction, Tenant will deliver to Landlord, for Landlord’s review
and approval, a schedule (“Work Schedule”) which will set forth the timetable for
the planning and completion of the installation of the Tenant
Improvements.  Subject to receipt of an
acceptable Work Schedule, Tenant shall be granted access to the Premises prior
to the Commencement Date for the sole purpose of beginning construction of its
Tenant Improvement Work subject to all of the terms and provisions of this
Lease except for the payment of Rent and Operating Expenses.

 

3.         CONSTRUCTION
REPRESENTATIVES.  Landlord
hereby appoints the following person(s) as Landlord’s representative (“Landlord’s
Representative”) to act for Landlord in all matters covered by this Exhibit
B: Anne Risberg. Tenant hereby appoints the following person(s) as Tenant’s
representative (“Tenant’s Representative”) to act for Tenant in all matters
covered by this Exhibit B:

 

                                                                                                                                                                                 .

 

All communications with respect to the matters covered by this Work
Letter Agreement are to be made to Landlord’s Representative or Tenant’s
Representative, as the case may be, in writing in compliance with the notice
provisions of the Lease.  Either party
may change its representative under this Exhibit B at any time by written
notice to the other party in compliance with the notice provisions of the
Lease.

 

4.         TENANT
IMPROVEMENT PLANS.

 

(a)       Preparation
of Space Plans.  In
accordance with the Work Schedule, Landlord agrees to meet with Tenant’s
architect and/or space planner for the purpose of promptly preparing
preliminary space plans for the layout of Premises (“Space Plans”).  The Space Plans are to be sufficient to
convey the architectural design of the Premises and layout of the Tenant
Improvements therein and are to be submitted to Landlord in accordance with the
Work Schedule for Landlord’s approval. 
If Landlord reasonably disapproves any aspect of the Space Plans,
Landlord will advise Tenant in writing of such disapproval and the reasons
therefor in accordance with the Work Schedule. 
Tenant will then submit to Landlord for Landlord’s approval, in
accordance with the Work Schedule, a redesign of the Space Plans incorporating
the revisions reasonably required by Landlord. Landlord’s failure to deliver
written notice of disapproval within the time frame set forth in the Work
Schedule shall be deemed approval.

 

(b)       Preparation
of Final Plans.  Based on
the approved Space Plans, and in accordance with the Work Schedule, Tenant’s
architect will prepare complete architectural plans, drawings and
specifications and complete engineered mechanical, structural and electrical
working drawings for all of the Tenant Improvements for the Premises
(collectively, the “Final Plans”).  The
Final Plans will show (a) the subdivision (including partitions and
walls), layout, lighting, finish and decoration work (including carpeting and
other floor coverings) for the Premises; (b) all internal and external
communications and utility facilities which will require conduiting or other
improvements from the base Building shell work and/or within common areas; and
(c) all other specifications for the Tenant Improvements.  The Final Plans will be submitted to Landlord
for signature to confirm that they are consistent with the Space Plans.  At the time Landlord approves the Final
Plans, Landlord shall inform Tenant in writing of any tenant improvements which
Landlord will require Tenant to remove upon the expiration or earlier
termination of this Lease.  If Landlord
reasonably disapproves any aspect of the Final Plans based on any inconsistency
with the Space Plans, Landlord agrees to advise Tenant in writing of such
disapproval and the reasons therefor within the time frame set forth in the
Work Schedule.  Landlord’s failure to
deliver written notice of disapproval within the time frame set forth in the
Work Schedule shall be deemed approval. 
In accordance with the Work Schedule, Tenant will then cause Tenant’s
architect to redesign the Final Plans incorporating the revisions reasonably
requested by Landlord so as to make the Final Plans consistent with the Space
Plans.

 

(c)       Requirements
of Tenant’s Final Plans. 
Tenant’s Final Plans will include locations and complete dimensions, and
the Tenant Improvements, as shown on the Final Plans, will:  (i) be compatible with the Building
shell and with the design, construction and equipment of the Building;
(ii) if not comprised of the Building standards set forth in the written
description thereof (the “Standards”), then compatible with and of at least equal
quality as the Standards and approved by 

 

EXHIBIT “B”

 

1

 

Landlord; (iii) comply with all applicable laws, ordinances, rules
and regulations of all governmental authorities having jurisdiction, and all
applicable insurance regulations; (iv) not require Building service beyond
the level normally provided to other tenants in the Building and will not
overload the Building floors; and (v) be of a nature and quality
consistent with the overall objectives of Landlord for the Building, as
determined by Landlord in its reasonable but subjective discretion.

 

(d)       Submittal
of Final Plans.  Once
approved by Landlord and Tenant, Tenant’s architect will submit the Final Plans
to the appropriate governmental agencies for plan checking and the issuance of
a building permit.  Tenant’s architect,
with Landlord’s cooperation, will make any changes to the Final Plans which are
requested by the applicable governmental authorities to obtain the building
permit.  After approval of the Final
Plans no further changes may be made without the prior written approval of both
Landlord and Tenant, and then only after agreement by Tenant to pay any excess
costs resulting from the design and/or construction of such changes.

 

(e)       Changes
to Shell of Building.  If
the Final Plans or any amendment thereof or supplement thereto shall require
changes in the Building shell, the increased cost of the Building shell work
caused by such changes will be paid for by Tenant or charged against the “Allowance”
described in Section 5 below.

 

(f)        Work Cost
Estimate and Statement. 
Prior to the commencement of construction of any of the Tenant
Improvements shown on the Final Plans, Tenant will submit to Landlord a written
estimate of the cost to complete the Tenant Improvement Work, which written
estimate will be based on the Final Plans taking into account any modifications
which may be required to reflect changes in the Final Plans required by the
City or County in which the Premises are located (the “Work Cost Estimate”).  Landlord will either approve the Work Cost
Estimate or disapprove specific items and submit to Tenant revisions to the
Final Plans to reflect deletions of and/or substitutions for such disapproved
items; provided that Landlord’s approval shall not be unreasonably withheld or
conditioned.  Submission and approval of
the Work Cost Estimate will proceed in accordance with the Work Schedule.  Landlord’s failure to disapprove the Work
Cost Estimate within the time frame required by the Work Schedule shall be
deemed approval.  Upon Landlord’s
approval or deemed approval of the Work Cost Estimate (such approved Work Cost
Estimate to be hereinafter known as the “Work Cost Statement”), Tenant will
have the right to purchase materials and to commence the construction of the
items included in the Work Cost Statement pursuant to Section 6
hereof.  If the total costs reflected in
the Work Cost Statement exceed the Allowance described in Section 5 below,
Tenant agrees to pay such excess.

 

5.         PAYMENT FOR THE TENANT
IMPROVEMENTS.

 

(a)       Allowance.  Landlord hereby grants to Tenant a tenant
improvement allowance of Twelve Dollars ($12.00) per Rentable Square Foot of
the Premises, i.e., Three Hundred Fifteen Thousand Dollars ($315,000) (the “Allowance”).  The Allowance is to be used only for:

 

(i)        Payment of the cost of preparing the
Space Plans and the Final Plans, including mechanical, electrical, plumbing and
structural drawings and of all other aspects necessary to complete the Final
Plans.

 

(ii)       The payment of plan check, permit and
license fees relating to construction of the Tenant Improvements.

 

(iii)      Construction of the Tenant Improvements,
including, without limitation, the following:

 

(aa)             Installation within the Premises of
all partitioning, doors, floor coverings, ceilings, wall coverings and
painting, millwork and similar items;

 

(bb)             All electrical wiring, lighting
fixtures, outlets and switches, and other electrical work necessary for the
Premises;

 

(cc)             The furnishing and installation of
all duct work, terminal boxes, diffusers and accessories necessary for the
heating, ventilation and air conditioning systems within the Premises,
including the cost of meter and key control for after-hour air conditioning;

 

(dd)             Any additional improvements to the
Premises required for Tenant’s use of the Premises including, but not limited
to, odor control, special heating, ventilation and air conditioning, noise or
vibration control or other special systems or improvements;

 

(ee)             All fire and life safety control
systems such as fire walls, sprinklers, halon, fire alarms, including piping,
wiring and accessories, necessary for the Premises;

 

2

 

(ff)               All plumbing, fixtures, pipes and
accessories necessary for the Premises; and

 

(gg)             Testing and inspection costs.

 

(iv)          All costs incurred by Landlord for
construction or planning of the Tenant Improvements in the Premises.

 

In the event that Tenant
does not use or apply the entire Allowance for the items set forth in clauses
(i) through (iv) above, then Tenant shall be entitled to apply such unused
portion of the Allowance, not to exceed One Hundred Twenty-Five Thousand
Dollars ($125,000), for reimbursement of Tenant’s reasonable and properly
documented moving expenses and cabling, fixtures, furnishings, telephone and
security systems and equipment installed by Tenant in the Premises.

 

(b)       Excess
Costs.  The cost of each
item referenced in Section 5(a) above shall be charged against the
Allowance.  If the work cost exceeds the
Allowance, Tenant shall be solely responsible for payment of all excess costs,
which shall be paid to Landlord within five (5) business days after invoice
therefor.  Except to the extent provided
in the last paragraph of Section 5(a) above, in no event will the Allowance be
used to pay for Tenant’s furniture, artifacts, equipment, telephone systems or
any other item of personal property which is not affixed to the Premises.

 

(c)       Changes.  Any changes to the Final Plans will be
approved by Landlord and Tenant in the manner set forth in Section 4
above.  Tenant shall be solely
responsible for any additional costs associated with such changes Landlord will
have the right to decline Tenant’s request for a change to the Final Plans if
such changes are inconsistent with the provisions of Section 4 above.

 

(d)       Governmental
Cost Increases.  If
increases in the cost of the Tenant Improvements as set forth in the Work Cost
Statement are due to requirements of any governmental agency, Tenant shall be
solely responsible for such additional costs; provided, however, that Landlord
will first apply toward any such increase any remaining balance of the
Allowance.

 

(e)       Disbursement
of the Allowance. 
Provided Tenant is not in default following the giving of notice and passage
of any applicable cure period under the Lease or this Work Letter Agreement,
Landlord shall disburse the Allowance to Tenant to reimburse Tenant for the
actual construction costs which Tenant incurs in connection with the
construction of the Tenant Improvements in accordance with the following:

 

(i)            Twenty-five
percent (25%) of the Allowance shall be disbursed to Tenant when Landlord shall
have received “Evidence of Completion and Payment” as to fifty percent (50%) of
Tenant’s Work having been completed and paid for by Tenant as described
hereinbelow;

 

(ii)           An
additional Fifty percent (50%) of the Allowance shall be disbursed to Tenant
when Landlord shall have received “Evidence of Completion and Payment” as to
seventy-five percent (75%) of Tenant’s Work having been completed and paid for
by Tenant as described hereinbelow;

 

(iii)          Fifteen
percent (15%) of the Allowance shall be disbursed to Tenant when Landlord shall
have received “Evidence of Completion and Payment” as to ninety percent (90%)
of Tenant’s Work having been completed and paid for by Tenant as described
hereinbelow; and

 

(iv)          The
final ten percent (10%) of the Allowance shall be disbursed to Tenant when
Landlord shall have received “Evidence of Completion and Payment” as to one
hundred percent (100%) of Tenant’s Work having been completed and paid for by
Tenant as described hereinbelow and satisfaction of the items described in
subparagraph (vi) below.

 

(v)           As
to each phase of completion of Tenant’s Work described in
subparagraphs (i) through (iii) above, the appropriate portion of the
Allowance shall be disbursed to Tenant only when Landlord has received the
following “Evidence of Completion and Payment”:

 

(A)          Tenant has delivered to Landlord a
draw request (“Draw Request”) in a form satisfactory to Landlord with respect
to the Improvements specifying that the requisite portion of Tenant’s Work has
been completed, together with invoices, receipts and bills evidencing the costs
and expenses set forth in such Draw Request and evidence of payment by Tenant
for all costs which are payable in connection with such Tenant’s Work covered
by the Draw Request.  The Draw Request
shall constitute a representation by Tenant that the Tenant’s Work identified
therein has been completed in a good and workmanlike manner and in accordance
with the Final Plans and the Work Schedule and has been paid for;

 

3

 

(B)           The architect for the Tenant
Improvements has certified to Landlord that the Tenant Improvements have been
completed to the level indicated in the Draw Request in accordance with the
Final Plans;

 

(C)           Tenant has delivered to Landlord such
other evidence of Tenant’s payment of the general contractor and subcontractors
for the portions of Tenant’s Work covered by the Draw Request and the absence
of any liens generated by such portions of the Tenant’s Work as may be required
by Landlord (i.e., either unconditional lien releases in accordance with
California Civil Code Section 3262 or release bond(s) in accordance with
California Civil Code Sections 3143 and 3171);

 

(D)          Landlord or Landlord’s architect or
construction representative has inspected the Tenant Improvements and
determined that the portion of Tenant’s Work covered by the Draw Request has
been completed in a good and workmanlike manner;

 

(vi)          The
final disbursement of the balance of the Allowance under subparagraph (iv)
above shall be disbursed to Tenant only when Landlord has received Evidence of
Completion and Payment as to all of Tenant’s Work as provided hereinabove and
the following conditions have been satisfied:

 

(A)          Thirty-five (35) days shall have
elapsed following the filing of a valid notice of completion by Tenant for the
Tenant Improvements;

 

(B)           A certificate of occupancy for the
Tenant Improvements and the Premises has been issued by the appropriate
governmental body; and

 

(C)         The satisfaction of any other
requirements or conditions which may be required or imposed by Landlord’s
lender with respect to the construction of the Tenant Improvements.

 

(vii)         All
construction costs in excess of the Allowance shall have been paid by Tenant.

 

(g)       Books and
Records.  At its option,
Landlord, at any time within twelve (12) months after final disbursement of the
Allowance to Tenant, and upon at least ten (10) days prior written notice to
Tenant, may cause an audit to be made of Tenant’s books and records relating to
Tenant’s expenditures in connection with the construction of the Tenant
Improvements.  Tenant shall maintain
complete and accurate books and records in accordance with generally accepted
accounting principles of these expenditures for at least twelve (12).  Tenant shall make available to Landlord’s
auditor at the Premises within ten (10) business days following Landlord’s
notice requiring the audit, all books and records maintained by Tenant
pertaining to the construction and completion of the Tenant Improvements.  In addition to all other remedies which
Landlord may have pursuant to the Lease, Landlord may recover from Tenant the
reasonable cost of its audit if the audit discloses that Tenant falsely
reported to Landlord expenditures which were not in fact made or falsely
reported a material amount of any expenditure or the aggregate expenditures.

 

6.         CONSTRUCTION
OF TENANT IMPROVEMENTS. 
Following Landlord’s approval of the Final Plans and the Work Cost
Statement described in Section 4(f) above, Tenant’s contractor (selected
as provided in Paragraph 9(n)) will commence and diligently proceed with
the construction of the Tenant Improvements. 
Tenant shall use diligent efforts to cause its contractor to complete
the Tenant Improvements in a good and workmanlike manner in accordance with the
Final Plans and the Work Schedule. 
Tenant agrees to use diligent efforts to cause construction of the
Tenant Improvements to commence promptly following the issuance of a building
permit for the Tenant Improvements. 
Landlord shall have the right to enter upon the Premises to inspect
Tenant’s construction activities following reasonable advance notice to Tenant.

 

7.         MISCELLANEOUS
CONSTRUCTION COVENANTS.

 

(a)       No Liens.  Tenant shall not allow the Tenant
Improvements or the Building or any portion thereof to be subjected to any
mechanic’s, materialmen’s or other liens or encumbrances arising out of the
construction of the Tenant Improvements.

 

(b)       Diligent
Construction.  Tenant will
promptly, diligently and continuously pursue construction of the Tenant
Improvements to successful completion in full compliance with the Final Plans,
the Work Schedule and this Work Letter Agreement.  Landlord and Tenant shall cooperate with one
another during the performance of Tenant’s Work to effectuate such work in a
timely and compatible manner.

 

(c)       Compliance
with Laws.  Tenant will
construct the Tenant Improvements in a safe and lawful manner.  Tenant shall, at its sole cost and expense,
comply with all applicable laws and all regulations and requirements of, and
all licenses and permits issued by, all municipal or other 

 

4

 

governmental bodies with jurisdiction which pertain to the installation
of the Tenant Improvements.  Copies of
all filed documents and all permits and licenses shall be provided to
Landlord.  Any portion of the Tenant
Improvements which is not acceptable to any applicable governmental body,
agency or department, or not reasonably satisfactory to Landlord, shall be
promptly repaired or replaced by Tenant at Tenant’s expense.  Notwithstanding any failure by Landlord to
object to any such Tenant Improvements, Landlord shall have no responsibility
therefor.

 

(d)       Indemnification.  Subject to the terms of the Lease regarding
insurance and waiver of subrogation by the parties, Tenant hereby indemnifies
and agrees to defend and hold Landlord, the Premises and the Building harmless
from and against any and all suits, claims, actions, losses, costs or expenses
(including, without limitation, claims for workers’ compensation) of any nature
whatsoever, together with reasonable attorneys’ fees for counsel of Landlord’s
choice, arising out of or in connection with the Tenant Improvements or the
performance of Tenant’s Work (including, but not limited to, claims for breach
of warranty, personal injury or property damage).

 

(e)       Insurance.  Construction of the Tenant Improvements shall
not proceed without Tenant first acquiring workers’ compensation and
comprehensive general public liability insurance and property damage insurance
as well as “All Risks” builders’ risk insurance, with minimum coverage of
$2,000,000 or such other amount as may be approved by Landlord in writing and
issued by an insurance company reasonably satisfactory to Landlord.  Not less than thirty (30) days before
commencing the construction of the Tenant Improvements, certificates of such
insurance shall be furnished to Landlord or, if requested, the original
policies thereof shall be submitted for Landlord’s approval.  All such policies shall provide that thirty
(30) days prior notice must be given to Landlord before modification,
termination or cancellation.  All insurance
policies maintained by Tenant pursuant to this Exhibit B shall name Landlord
and any lender with an interest in the Premises as additional insureds and
comply with all of the applicable terms and provisions of the Lease relating to
insurance.  Tenant’s contractor shall be
required to maintain the same insurance policies as Tenant, and such policies
shall name Tenant, Landlord and any lender with an interest in the Premises as
additional insureds.

 

(f)        Construction
Defects.  Landlord shall
have no responsibility for the Tenant Improvements and Tenant will remedy, at
Tenant’s own expense, and be responsible for any and all defects in the Tenant
Improvements that may appear during or after the completion thereof whether the
same shall affect the Tenant Improvements in particular or any parts of the
Premises in general.

 

(g)       Additional
Services.  If the
construction of the Tenant Improvements shall require that additional services
or facilities (including, but not limited to, hoisting, cleanup or other cleaning
services, trash removal, field supervision, or ordering of materials) be
provided by Landlord, then Tenant shall pay Landlord for such items at Landlord’s
cost or at a reasonable charge if the item involves time of Landlord’s
personnel only.  Electrical power and
heating, ventilation and air conditioning shall be available to Tenant during
normal business hours for construction purposes at no charge to Tenant.

 

(h)       Coordination
of Labor.  All of Tenant’s
contractors, subcontractors, employees, servants and agents must work in
harmony with and shall not interfere with any labor employed by Landlord, or
Landlord’s contractors or by any other tenant or its contractors with respect
to the any portion of the Project. 
Nothing in this Work Letter shall, however, require Tenant to use union
labor.

 

(i)        Work in
Adjacent Areas.  Any work
to be performed in areas adjacent to the Premises shall be performed only after
obtaining Landlord’s express written permission, which shall not be
unreasonably withheld, conditioned or delayed, and shall be done only if an
agent or employee of Landlord is present; Tenant will reimburse Landlord for
the expense of any such employee or agent.

 

(j)        HVAC
Systems.  Tenant agrees to
be entirely responsible for the maintenance or the balancing of any heating,
ventilating or air conditioning system installed by Tenant and/or maintenance
of the electrical or plumbing work installed by Tenant and/or for maintenance
of lighting fixtures, partitions, doors, hardware or any other installations
made by Tenant.

 

(k)       Coordination
with Lease.  Nothing
herein contained shall be construed as (i) constituting Tenant as Landlord’s
agent for any purpose whatsoever, or (ii) a waiver by Landlord or Tenant
of any of the terms or provisions of the Lease. 
Any default by Tenant following the giving of notice and the passage of
any applicable cure period with respect to any portion of this Exhibit B shall
be deemed a breach of the Lease for which Landlord shall have all the rights
and remedies as in the case of a breach of said Lease.

 

(l)        Approval
of Plans.  Landlord will
not check Tenant drawings for building code compliance.  Approval of the Final Plans by Landlord is
not a representation that the drawings are in compliance with the requirements
of governing authorities, and it shall be Tenant’s responsibility to meet and 

 

5

 

comply with all federal, state, and local code requirements.  Approval of the Final Plans does not
constitute assumption of responsibility by Landlord or its architect for their
accuracy, sufficiency or efficiency, and Tenant shall be solely responsible for
such matters.

 

(m)      Tenant’s
Deliveries.  Tenant shall
deliver to Landlord, at least five (5) days prior to the commencement of construction
of Tenant’s Work, the following information:

 

(i)        The names, addresses, telephone numbers,
and primary contacts for the general, mechanical and electrical contractors
Tenant intends to engage in the performance of Tenant’s Work; and

 

(ii)       The date on which Tenant’s Work will
commence, together with the estimated dates of completion of Tenant’s
construction and fixturing work.

 

(n)       Qualification
of Contractors.  Once the
Final Plans have been proposed and approved, Tenant shall select and retain a
contractor and subcontractors from a list of contractors and subcontractors
approved by Landlord for the construction of the Tenant Improvement Work in
accordance with the Final Plans.  All
contractors engaged by Tenant shall be bondable, licensed contractors,
possessing good labor relations, capable of performing quality workmanship and
working in harmony with Landlord’s general contractor and other contractors on
the job, if any, all as reasonably determined by Landlord. All work shall be
coordinated with general construction work on the Site, if any.

 

(o)       Warranties.  Tenant shall cause its contractor to provide
warranties for not less than one (1) year (or such shorter time as may be
customary and available without additional expense to Tenant) against defects
in workmanship, materials and equipment, which warranties shall run to the
benefit of Landlord or shall be assignable to Landlord to the extent that
Landlord is obligated to maintain any of the improvements covered by such
warranties.

 

(p)       Landlord’s
Performance of Work. 
Within ten (10) working days after receipt of Landlord’s written notice
of Tenant’s failure to perform its obligations under this Exhibit B, if Tenant
shall fail to commence to cure such failure, Landlord shall have the right, but
not the obligation, to perform, on behalf of and for the account of Tenant,
subject to reimbursement of the cost thereof by Tenant, any and all of Tenant’s
Work which Landlord determines, in its reasonable discretion, should be
performed immediately and on an emergency basis for the best interest of the
Premises including, without limitation, work which pertains to structural
components, mechanical, sprinkler and general utility systems, roofing and
removal of unduly accumulated construction material and debris; provided,
however, Landlord shall use reasonable efforts to give Tenant at least ten (10)
days prior written notice to the performance of any of Tenant’s Work.

 

(q)       As-Built
Drawings.  Tenant shall
cause “As-Built Drawings” (excluding furniture, fixtures and equipment) to be
delivered to Landlord and/or Landlord’s representative no later than sixty (60)
days after the completion of Tenant’s Work. 
In the event these drawings are not received by such date, Landlord may,
at its election, cause said drawings to be obtained and Tenant shall pay to
Landlord, as additional rent, the cost of producing these drawings.

 

8. LANDLORD’S FURNITURE.  Tenant is hereby given the
right to use all of Landlord’s office furniture, cubicles, cabling, telephones
and related furnishings located in the Premises as of the date of this Lease,
without additional charge, including any such furniture or furnishings located
elsewhere in the Building and not currently being used by any other
tenant.  Tenant shall be responsible for
insuring all such furniture and furnishings under its “All Risks” policy
required under Section 19(a)(i) of the Lease. 
Landlord and Tenant shall jointly prepare and sign an inventory of all
such furnishings to be located within the Premises and used by Tenant during
the term of this Lease on or before Tenant’s occupancy of the Premises.  In the event Tenant leases the Premises
throughout the initial term and option terms of this Lease, Tenant shall be
allowed, but not required, to assume ownership of such furnishings at the end
of the final option term, and Landlord shall convey such furnishings to Tenant
by bill of sale at the end of the final option term without representation or
warranty by Landlord of any nature whatsoever. 
If Tenant does not lease the Premises for such period, the furnishings
as set forth on the inventory shall remain the property of Landlord and shall
be surrendered to Landlord by Tenant upon Lease expiration in the same
condition as received, reasonable wear and tear excepted.

 

6

 

DEFINITION OF OPERATING EXPENSES

 

1.         Items
Included in Operating Expenses. 
The term “Operating Expenses” as used in the Lease to which this Exhibit ”C”
is attached means:  all costs and
expenses of operation and maintenance of the Building and the Common Areas (as
such terms are defined in the Lease), as determined by standard accounting
practices, including the following costs by way of illustration but not
limitation, but excluding those items specifically set forth in Paragraph 3
below:

 

(a)       Real Property Taxes and
Assessments (as defined in Paragraph 2 below) and any taxes or assessments
imposed in lieu thereof;

 

(b)       any and all assessments
imposed with respect to the Building pursuant to any covenants, conditions and
restrictions affecting the Project, the Common Areas or the Building;

 

(c)       water and sewer charges
and the costs of electricity, heating, ventilating, air conditioning and other
utilities;

 

(d)       utilities surcharges and
any other costs, levies or assessments resulting from statutes or regulations
promulgated by any government or quasi-government authority in connection with
the use, occupancy or alteration of the Building or the Premises or the parking
facilities serving the Building or the Premises;

 

(e)       costs of insurance
obtained by Landlord;

 

(f)        waste disposal and
janitorial services;

 

(g)       labor;

 

(h)       costs incurred in the
management of the Building, including, without limitation:  (i) supplies, (ii) wages and salaries
(and payroll taxes and similar governmental charges related thereto) of
employees used in the management, operation and maintenance of the Building
(with wages and salaries of any employees employed at the Building only on a
part-time basis being equitably allocated by Landlord), (iii) Building
management office rental, supplies, equipment and related operating expenses,
and (iv) a management/administrative fee in an amount not to exceed three
percent (3%) of the monthly base rent.

 

(i)        supplies, materials,
equipment and tools including rental of personal property used for maintenance;

 

(j)        repair and maintenance
of the elevators and the structural portions of the Building, including the
plumbing, heating, ventilating, air-conditioning and electrical systems
installed or furnished by Landlord;

 

(k)       maintenance, costs and
upkeep of all parking and Project Common Areas;

 

(l)        depreciation on a
straight line basis and rental of personal property used in maintenance;

 

(m)      amortization on a
straight line basis over the useful life [together with interest at the
Interest Rate on the unamortized balance] of all capitalized expenditures which
are: (i) reasonably intended to produce a reduction in operating charges
or energy consumption; or (ii) required under any governmental law or regulation
that was not applicable to the Building at the time it was originally
constructed; or (iii) for replacement of any Building equipment needed to
operate the Building at the same quality levels as prior to the replacement;

 

(n)       costs and expenses of
gardening and landscaping;

 

(o)       maintenance of signs
(other than signs of tenants of the Building);

 

(p)       personal property taxes
levied on or attributable to personal property used in connection with the
Building or the Common Areas;

 

(q)       reasonable accounting,
audit, verification, legal and other consulting fees; and

 

(r)        costs and expenses of
repairs, resurfacing, repairing, maintenance, painting, lighting, cleaning,
refuse removal, security and similar items, including appropriate reserves.

 

2.         Real
Property Taxes and Assessments. 
The term “Real Property Taxes and Assessments”, as used in this Exhibit
“C”, means:  any form of assessment,
license fee, license tax, business license 

 

EXHIBIT “C”

 

1

 

fee, commercial rental tax, levy, charge, improvement bond, tax or
similar imposition imposed by any authority having the direct power to tax,
including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement or special assessment
district thereof, as against any legal or equitable interest of Landlord in the
Premises, Building, Common Areas or the Project (as such terms are defined in
the Lease), including the following by way of illustration but not limitation:

 

(a)       any tax on Landlord’s “right”
to rent or “right” to other income from the Premises or as against Landlord’s
business of leasing the Premises;

 

(b)       any assessment, tax,
fee, levy or charge in substitution, partially or totally, of any assessment,
tax, fee, levy or charge previously included within the definition of real
property tax, it being acknowledged by Tenant and Landlord that Proposition 13
was adopted by the voters of the State of California in the June, 1978 election
and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk
and road maintenance, refuse removal and for other governmental services
formerly provided without charge to property owners or occupants.  It is the intention of Tenant and Landlord
that all such new and increased assessments, taxes, fees, levies and charges be
included within the definition of “real property taxes” for the purposes of
this Lease;

 

(c)       any assessment, tax,
fee, levy or charge allocable to or measured by the area of the Premises or
other premises in the Building or the rent payable by Tenant hereunder or other
tenants of the Building, including, without limitation, any gross receipts tax
or excise tax levied by state, city or federal government, or any political
subdivision thereof, with respect to the receipt of such rent, or upon or with
respect to the possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises, or any portion
thereof but not on Landlord’s other operations;

 

(d)       any assessment, tax,
fee, levy or charge upon this transaction or any document to which Tenant is a
party, creating or transferring an interest or an estate in the Premises;
and/or

 

(e)       any assessment, tax,
fee, levy or charge by any governmental agency related to any transportation
plan, fund or system (including assessment districts) instituted within the
geographic area of which the Building is a part.

 

3.         Items
Excluded From Operating Expenses.  Notwithstanding the provisions of Paragraphs
1 and 2 above to the contrary, “Operating Expenses” will not include:

 

(a)       Landlord’s federal or
state or local income, franchise, inheritance or estate taxes and transfer
taxes;

 

(b)       any ground lease rental;

 

(c)       costs incurred by
Landlord for the repair of damage to the Building to the extent that Landlord
is reimbursed by insurance or condemnation proceeds or by tenants, warrantors
or other third persons;

 

(d)       depreciation,
amortization and interest payments, except as specifically provided herein, and
except on materials, tools, supplies and vendor-type equipment purchased by
Landlord to enable Landlord to supply services Landlord might otherwise
contract for with a third party, where such depreciation, amortization and
interest payments would otherwise have been included in the charge for such
third party’s services, all as determined in accordance with standard
accounting practices;

 

(e)       brokerage commissions,
finders’ fees, attorneys’ fees, space planning costs, marketing costs and other
costs incurred by Landlord in leasing or attempting to lease space in the
Building;

 

(f)        costs of a capital
nature, including, without limitation, capital improvements, capital
replacements, capital repairs, capital equipment and capital tools, all as
determined in accordance with standard accounting practices; except for the
capital expenditures set forth in Subparagraph 1(m) above;

 

(g)       interest, principal,
points and fees on debt or amortization on any mortgage, deed of trust or other
debt encumbering the Building or the Project;

 

(h)       costs, including permit,
license and inspection costs, incurred with respect to the installation of
tenant improvements for tenants in the Building (including the original Tenant
Improvements for the Premises), or incurred in renovating or otherwise
improving, decorating, painting or redecorating space for tenants or other
occupants of the Building, including space planning and interior design costs
and fees;

 

2

 

(i)        attorneys’ fees and
other costs and expenses incurred in connection with negotiations or disputes
with present or prospective tenants or other occupants of the Building;
provided, however, that Operating Expenses will include those attorneys’ fees
and other costs and expenses incurred in connection with negotiations, disputes
or claims relating to items of Operating Expenses, enforcement of rules and
regulations of the Building, and such other matters relating to the maintenance
of standards required of Landlord under the Lease;

 

(j)        except for the
administrative/management fees described in Subparagraph 1(h) above, costs
of Landlord’s general corporate overhead;

 

(k)       all items and services
for which Tenant or any other tenant in the Building reimburses Landlord (other
than through operating expense pass-through provisions);

 

(l)        electric power costs
for which any tenant directly contracts with the local public service company;

 

(m)      costs arising from
Landlord’s charitable or political contributions;

 

(n)       costs incurred in
connection with the original construction of the Building;

 

(o)       expenses directly
resulting from the gross negligence and/or intentional misconduct of Landlord,
its agents, contractors or employees;

 

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

 

(q)       the wages of any
employee who does not devote substantially all of his or her time to the
Building shall be equitably allocated to the Building;

 

(r)        fines, penalties and
interest;

 

(s)       costs incurred by
Landlord with respect to goods and services (including utilities sold and
supplied to tenants and occupants of the Building) to the extent that Landlord
is reimbursed such costs other than through operating expense payments; and

 

(t)        rentals and other
related expenses incurred in leasing air conditioning systems, elevators or
other equipment ordinarily considered to be of a capital nature, except
equipment not affixed to the Building which is used while repairs are being
undertaken or in providing janitorial or similar services.

 

3

 

STANDARDS FOR UTILITIES AND SERVICES

 

The following standards for utilities and services are in effect.  Landlord reserves the right to adopt
nondiscriminatory modifications and additions hereto.

 

Subject to the terms and conditions of the Lease and provided Tenant
remains in occupancy of the Premises, Landlord will provide or make available
the following utilities and services:

 

1.         Provide non-attended
automatic elevator available for Tenant’s nonexclusive use at all times.

 

2.         On Monday through
Friday, except holidays, from 8 a.m. to 6 p.m. (and other times for a
reasonable additional charge to be fixed by Landlord), ventilate the Premises
and furnish air conditioning or heating on such days and hours, when in the
reasonable judgment of Landlord it may be required for the comfortable
occupancy of the Premises.  “Holidays”
shall mean New Year’s Day, President’s Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, the day after Thanksgiving and Christmas Day and
such other national holidays as are adopted by Landlord as holidays for the
Building.  The air conditioning system
achieves maximum cooling when the window coverings are extended to the full
length of the window opening and adjusted to a 45° angle upwards.  Landlord will not be responsible for room
temperatures if Tenant does not keep all window coverings in the Premises
extended to the full length of the window opening and adjusted to a 45° angle
upwards whenever the system is in operation. 
Tenant agrees to cooperate fully at all times with Landlord, and to
abide by all reasonable regulations and requirements which Landlord may
prescribe for the proper function and protection of said air conditioning
system.  Tenant agrees not to connect any
apparatus, device, conduit or pipe to the chilled and hot water air
conditioning supply lines of the Building. 
Tenant further agrees that neither Tenant nor its servants, employees,
agents, visitors, licensees or contractors shall at any time enter the
mechanical installations or facilities of the Building or the Project or
adjust, tamper with, touch or otherwise in any manner affect said installations
or facilities.  The cost of maintenance
and service calls to adjust and regulate the air conditioning system will be
charged to Tenant if the need for maintenance work results from either Tenant’s
adjustment of room thermostats or Tenant’s failure to comply with its
obligations under this Exhibit, including keeping window coverings extended to
the full length of the window opening and adjusted to a 45° angle upwards.  Initially, Tenant shall pay for after-hours
HVAC services at the rate of Thirty-Five Dollars ($35.00) per hour.

 

3.         Landlord will make
available to the Premises, 24 hours per day, seven days a week, electric
current as required by the Building standard office lighting and fractional
horsepower office business machines including copiers, personal computers and
word processing equipment in an amount not to exceed five (5) watts per square
foot per normal business day. Tenant agrees,
should its electrical installation or electrical consumption be in excess of
the aforesaid quantity or extend beyond normal business hours, to reimburse
Landlord monthly for the measured consumption at the average cost per kilowatt
hour charged to the Building during the period. 
If a separate meter is not installed at Tenant’s cost, such excess cost
will be established by an estimate agreed upon by Landlord and Tenant, and if
the parties fail to agree, such cost will be established by an independent
licensed engineer selected in Landlord’s reasonable discretion, whose fee shall
be shared equally by Landlord and Tenant. 
Tenant agrees not to use any apparatus or device in, upon or about the
Premises (other than standard office business machines, personal computers and
word processing equipment) which may in any way increase the amount of such
services usually furnished or supplied to said Premises, and Tenant further
agrees not to connect any apparatus or device with wires, conduits or pipes, or
other means by which such services are supplied, for the purpose of using
additional or unusual amounts of such services without the written consent of
Landlord.  Should Tenant use the same to
excess, the refusal on the part of Tenant to pay upon demand of Landlord the
amount established by Landlord for such excess charge will constitute a breach
of the obligation to pay rent under this Lease and will entitle Landlord to the
rights therein granted for such breach. 
Tenant’s use of electric current will never exceed the capacity of the
feeders to the Building, or the risers or wiring installation and Tenants will
not install or use or permit the installation or use of any computer or
electronic data processing equipment in the Premises (except standard office
business machines, personal computers and word processing equipment) without
the prior written consent of Landlord.

 

4.         Water will be available
in public areas for drinking and lavatory purposes only, but if Tenant
requires, uses or consumes water for any purpose in addition to ordinary
drinking and lavatory purposes, of which fact Tenant constitutes Landlord to be
the sole judge so long as Landlord is reasonable, Landlord may install a water
meter and thereby measure Tenant’s water consumption for all purposes.  Tenant agrees to pay Landlord for the cost of
the meter and the cost of the installation thereof and throughout the duration
of Tenant’s occupancy Tenant will keep said meter and installation equipment in
good working order and repair at Tenant’s own cost and expense, in default of
which Landlord may cause such meter and equipment to be replaced or repaired
and collect the cost thereof from Tenant. 
Tenant agrees to pay for water consumed, as shown on such meter, as 

 

EXHIBIT "D"

 

1

 

and when bills are rendered, and on default in making such payment,
Landlord may pay such charges and collect the same from Tenant.  Any such costs or expenses incurred, or
payments made by Landlord for any of the reasons or purposes hereinabove stated
will be deemed to be additional rent payable by Tenant and collectible by
Landlord as such.

 

5.         Landlord will provide
janitorial service to the Premises at least five (5) days per week on each
business day, provided the same are used exclusively as permitted in this
Lease, and are kept reasonably in order by Tenant, and unless otherwise agreed
to by Landlord and Tenant no one other than persons approved by Landlord shall
be permitted to enter the Premises for such purposes.  If the Premises are not used exclusively as
permitted in this Lease, they will be kept clean and in order by Tenant, at
Tenant’s expense, and to the satisfaction of Landlord, and by persons approved
by Landlord.  Tenant agrees to pay to
Landlord the cost of removal of any of Tenant’s refuse and rubbish to the
extent that the same exceeds the refuse and rubbish usually attendant upon the
use of the Premises as offices.

 

6.         Landlord reserves the
right to stop service of the elevator, plumbing, ventilation, air conditioning
and electrical systems, when necessary, by reason of accident or emergency or
for repairs, alterations or improvements, when in the judgment of Landlord such
actions are desirable or necessary to be made, until said repairs, alterations
or improvements shall have been completed, and Landlord will have no
responsibility or liability for failure to supply elevator facilities,
plumbing, ventilating, air conditioning or electric service, when prevented
from so doing by strike or accident or by any cause beyond Landlord’s
reasonable control, or by laws, rules, orders, ordinances, directions,
regulations or by reason of the requirements of any federal, state, county or
municipal authority or failure of gas, oil or other suitable fuel supply or
inability by exercise of reasonable diligence to obtain gas, oil or other
suitable fuel supply.  It is expressly
understood and agreed that any covenants on Landlord’s part to furnish any
services pursuant to any of the terms, covenants, conditions, provisions or
agreements of this Lease, or to perform any act or thing for the benefit of
Tenant, will not be deemed breached if Landlord is unable to furnish or perform
the same by virtue of a strike or labor trouble or any other cause whatsoever
beyond Landlord’s control.

 

7.         As part of Operating
Expenses, Landlord shall provide security services for the Building and the
Project, including, without limitation, equipment, personnel, systems and
procedures as reasonably determined by Landlord in its sole discretion.

 

2

 

RULES AND REGULATIONS

 

A.        General
Rules and Regulations. 
The following rules and regulations govern the use of the Building and
the Project Common Areas.  Tenant will be
bound by such rules and regulations and agrees to cause Tenant’s Authorized
Users, its employees, subtenants, assignees, contractors, suppliers, customers
and invitees to observe the same.

 

1.         Except as specifically
provided in the Lease to which these Rules and Regulations are attached, no
sign, placard, picture, advertisement, name or notice may be installed or
displayed on any part of the outside or inside of the Building or the Project
(but not including decorations placed within the Premises) without the prior
written consent of Landlord.  Landlord
will have the right to remove, at Tenant’s expense and without notice, any sign
installed or displayed in violation of this rule.  All approved signs or lettering on doors and
walls are to be printed, painted, affixed or inscribed at the expense of Tenant
and under the direction of Landlord by a person or company designated or
approved by Landlord.

 

2.         If Landlord objects in
writing to any curtains, blinds, shades, screens or hanging plants or other
similar objects attached to or used in connection with any window or door of
the Premises, or placed on any windowsill, which is visible from the exterior
of the Premises, Tenant will immediately discontinue such use.  Tenant agrees not to place anything against
or near glass partitions or doors or windows which may appear unsightly from
outside the Premises including from within any interior common areas.

 

3.         Tenant will not
obstruct any sidewalks, halls, passages, exits, entrances, elevators,
escalators, or stairways of the Project. The halls, passages, exits, entrances,
elevators and stairways are not open to the general public, but are open,
subject to reasonable regulations, to Tenant’s business invitees. Landlord will
in all cases retain the right to control and prevent access thereto of all
persons whose presence in the reasonable judgment of Landlord would be
prejudicial to the safety, character, reputation and interest of the Project
and its tenants, provided that nothing herein contained will be construed to
prevent such access to persons with whom any tenant normally deals in the
ordinary course of its business, unless such persons are engaged in illegal or
unlawful activities.  No tenant and no
employee or invitee of any tenant will go upon the roof of the Building.

 

4.         Tenant will not obtain
for use on the Premises ice, food vendors, towel or other similar services or
accept barbering or bootblacking service upon the Premises, except at such
reasonable hours and under such reasonable regulations as may be fixed by
Landlord. Tenant shall have the right to obtain food and beverage service to
serve its employees, agents, contractors, clients and invitees. Landlord
expressly reserves the right to absolutely prohibit solicitation, canvassing,
distribution of handbills or any other written material, peddling, sales and
displays of products, goods and wares in all portions of the Project except as
may be expressly permitted under the Lease. 
Landlord reserves the right to restrict and regulate the use of the
common areas of the Project and Building by invitees of tenants providing
services to tenants on a periodic or daily basis including food and beverage
vendors.  Such restrictions may include
limitations on time, place, manner and duration of access to a tenant’s
premises for such purposes.  Without
limiting the foregoing, Landlord may require that such parties use service
elevators, halls, passageways and stairways for such purposes to preserve
access within the Building for tenants and the general public.

 

5.         Landlord reserves the
right to require tenants to periodically provide Landlord with a written list
of any and all business invitees which periodically or regularly provide goods
and services to such tenants at the premises. 
Landlord reserves the right to preclude all vendors from entering or
conducting business within the Building and the Project if such vendors are not
listed on a tenant’s list of requested vendors.

 

6.         Landlord reserves the
right to exclude from the Building between the hours of 6 p.m. and 8 a.m. the
following business day, or such other hours as may be established from time to
time by Landlord, and on Sundays and legal holidays, any person unless that
person is known to the person or employee in charge of the Building or has a
pass or is properly identified.  Tenant
will be responsible for all persons for whom it requests passes and will be
liable to Landlord for all acts of such persons.  Landlord will not be liable for damages for
any error with regard to the admission to or exclusion from the Building of any
person.  Landlord reserves the right to
prevent access to the Building in case of invasion, mob, riot, public
excitement or other commotion by closing the doors or by other appropriate
action.

 

EXHIBIT
"E"

 

1

 

7.         The directory of the
Building or the Project will be provided exclusively for the display of the
name and location of tenants only and Landlord reserves the right to exclude
any other names therefrom.

 

8.         All cleaning and
janitorial services for the Project and the Premises will be provided
exclusively through Landlord, and except with the written consent of Landlord,
no person or persons other than those approved by Landlord will be employed by
Tenant or permitted to enter the Project for the purpose of cleaning the
same.  Tenant will not cause any
unnecessary labor by carelessness or indifference to the good order and
cleanliness of the Premises.

 

9.         Landlord will furnish
Tenant, free of charge, with two keys to each entry door lock in the
Premises.  Landlord may make a reasonable
charge for any additional keys.  Tenant
shall not make or have made additional keys, and Tenant shall not alter any
lock or install any new additional lock or bolt on any door of the
Premises.  Tenant, upon the termination
of its tenancy, will deliver to Landlord the keys to all doors which have been
furnished to Tenant, and in the event of loss of any keys so furnished, will pay
Landlord therefor.

 

10.       If Tenant requires
telegraphic, burglar alarm, satellite dishes, antennae or similar services, it
will first obtain Landlord’s approval, which approval shall not be unreasonably
withheld, conditioned or delayed, and comply with, Landlord’s reasonable rules
and requirements applicable to such services, which may include separate
licensing by, Landlord.

 

11.       The elevator will be
available for use by all tenants in the Building, subject to such reasonable
scheduling as Landlord, in its discretion, deems appropriate.  No equipment, materials, furniture, packages,
supplies, merchandise or other property will be received in the Building or
carried in the elevators except between such hours and in such elevators as may
be reasonably designated by Landlord. 
Tenant’s initial move in and subsequent deliveries of bulky items, such
as furniture, safes and similar items will, unless otherwise agreed in writing
by Landlord, be made during the hours of 6:00 p.m. to 6:00 a.m. or on Saturday
or Sunday.  Deliveries during normal
office hours shall be limited to normal office supplies and other small items,
unless Tenant gives prior notice to Landlord of other deliveries.  No deliveries will be made which unreasonably
impede or interfere with other tenants or the operation of the Building.

 

12.       Tenant will not place a
load upon any floor of the Premises which exceeds the load per square foot
which such floor was designed to carry and which is allowed by law.  Landlord will have the right to reasonably
prescribe the weight, size and position of all safes, heavy equipment, files,
materials, furniture or other property brought into the Building.  Heavy objects will, if considered necessary
by Landlord, stand on such platforms as determined by Landlord to be necessary
to properly distribute the weight, which platforms will be provided at Tenant’s
expense.  Business machines and
mechanical equipment belonging to Tenant, which cause noise or vibration that
may be transmitted to the structure of the Building or to any space therein to
such a degree as to be objectionable to any tenants in the Building or
Landlord, are to be placed and maintained by Tenant, at Tenant’s expense, on
vibration eliminators or other devises sufficient to eliminate noise or
vibration.  Tenant will be responsible
for all structural engineering required to determine structural load, as well
as the expense thereof.  The persons
employed to move such equipment in or out of the Building must be reasonably
acceptable to Landlord.  Landlord will
not be responsible for loss of, or damage to, any such equipment or other
property from any cause, and all damage done to the Building by maintaining or
moving such equipment or other property will be repaired at the expense of
Tenant.

 

13.       Tenant will not use or
keep in the Premises any kerosene, gasoline or inflammable or combustible fluid
or material other than those limited quantities necessary for the operation or
maintenance of office equipment.  Tenant
will not use or permit to be used in the Premises any foul or noxious gas or
substance, or permit or allow the Premises to be occupied or used in a manner
offensive or objectionable to Landlord or other occupants of the Building by
reason of noise, odors or vibrations, nor will Tenant bring into or keep in or
about the Premises any birds or animals.

 

14.       Tenant will not use any
method of heating or air conditioning other than that supplied by Landlord
without Landlord’s prior written consent.

 

15.       Tenant will not waste
electricity, water or air conditioning and agrees to cooperate fully with
Landlord to assure the most effective operation of the Building’s heating and
air conditioning and to comply with any governmental energy-saving rules, laws
or regulations of which Tenant has actual notice, and will refrain from
attempting to adjust controls.  Tenant
will keep corridor doors closed, and shall keep all window coverings pulled
down.

 

2

 

16.       Landlord reserves the
right, exercisable without notice and without liability to Tenant, to change the
name and street address of the Building. 
Without the prior written consent of Landlord, which Landlord will not
unreasonably withhold or delay, Tenant will not use the name, photograph or
likeness of the Building or the Project except in connection with or in
promoting or advertising the business of Tenant.

 

17.       Tenant will close and
lock the doors of its Premises and entirely shut off all water faucets or other
water apparatus, and lighting or gas before Tenant and its employees leave the
Premises.  Tenant will be responsible for
any damage or injuries sustained by other tenants or occupants of the Building
or by Landlord for noncompliance with this rule.

 

18.       The toilet rooms,
toilets, urinals, wash bowls and other apparatus will not be used for any purpose
other than that for which they were constructed and no foreign substance of any
kind whatsoever shall be thrown therein. 
The expense of any breakage, stoppage or damage resulting from any
violation of this rule will be borne by the tenant who, or whose employees or
invitees, break this rule.  Cleaning of
equipment of any type is prohibited. 
Shaving is prohibited.

 

19.       Tenant will not sell, or
permit the sale at retail of newspapers, magazines, periodicals, theater
tickets or any other goods or merchandise to the general public in or on the
Premises.  Tenant will not use the
Premises for any business or activity other than that specifically provided for
in this Lease.  Tenant will not conduct,
nor permit to be conducted, either voluntarily or involuntarily, any auction
upon the Premises without first having obtained Landlord’s prior written
consent, which consent Landlord may withhold in its sole and absolute
discretion.

 

20.       Tenant will not install
any radio or television antenna, loudspeaker, satellite dishes or other devices
on the roof(s) or exterior walls of the Building or the Project.  Tenant will not interfere with satellite
dish, radio or television broadcasting or transmission or reception from or in the
Project or elsewhere.

 

21.       Except for the ordinary
hanging of pictures and wall decorations, Tenant will not mark, drive nails,
screw or drill into the partitions, woodwork or plaster or in any way deface
the Premises or any part thereof, except in accordance with the provisions of
the Lease pertaining to alterations. 
Landlord reserves the right to direct electricians as to where and how
telephone and telegraph wires are to be introduced to the Premises.  Tenant will not cut or bore holes for
wires.  Tenant will not affix any floor
covering to the floor of the Premises in any manner except as approved by
Landlord.  Tenant shall repair any damage
resulting from noncompliance with this rule.

 

22.       Tenant will not install,
maintain or operate upon the Premises any vending machines without the written
consent of Landlord, except for food and beverage vending machines intended to
serve Tenant’s employees.

 

23.       Landlord reserves the
right to exclude or expel from the Project any person who, in Landlord’s
judgment, is intoxicated or under the influence of liquor or drugs or who is in
violation of any of the Rules and Regulations of the Building.

 

24.       Tenant will store all
its trash and garbage within its Premises or in other facilities provided by
Landlord.  Tenant will not place in any
trash box or receptacle any material which cannot be disposed of in the
ordinary and customary manner of trash and garbage disposal.  All garbage and refuse disposal is to be made
in accordance with directions issued from time to time by Landlord.

 

25.       The Premises will not be
used for lodging or for the storage of merchandise held for sale to the general
public, or for lodging or for manufacturing of any kind, nor shall the Premises
be used for any improper, immoral or objectionable purpose.  No cooking will be done or permitted on the
Premises without Landlord’s consent, except the use by Tenant of Underwriters’
Laboratory approved equipment for brewing coffee, tea, hot chocolate and
similar beverages shall be permitted, and the use of a microwave oven for
employees use will be permitted, provided that such equipment and use is in
accordance with all applicable federal, state, county and city laws, codes,
ordinances, rules and regulations.

 

26.       Neither Tenant nor any
of its employees, agents, customers and invitees may use in any space or in the
public halls of the Building or the Project any hand truck except those
equipped with rubber tires and side guards or such other material-handling
equipment as Landlord may approve. 
Tenant will not bring any other vehicles of any kind into the Building.

 

3

 

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

 

28.       Tenant assumes any and
all responsibility for protecting its Premises from theft, robbery and
pilferage, which includes keeping doors locked and other means of entry to the
Premises closed.

 

29.       To the extent Landlord
reasonably deems it necessary to exercise exclusive control over any portions
of the Common Areas for the mutual benefit of the tenants in the Building or
the Project, Landlord may do so subject to reasonable, non-discriminatory
additional rules and regulations which do not deprive Tenant of its quiet
enjoyment of the Premises or parking.

 

30.       Landlord may prohibit
smoking in the Building and may require Tenant and any of its employees,
agents, clients, customers, invitees and guests who desire to smoke, to smoke
within designated smoking areas within the Project.

 

31.       Tenant’s requirements
will be attended to only upon appropriate application to Landlord’s asset
management office for the Project by an authorized individual of Tenant.  Employees of Landlord will not perform any
work or do anything outside of their regular duties unless under special
instructions from Landlord, and no employee of Landlord will admit any person
(Tenant or otherwise) to any office without specific instructions from
Landlord.

 

32.       These Rules and
Regulations are in addition to, and will not be construed to in any way modify
or amend, in whole or in part, the terms, covenants, agreements and conditions
of the Lease.  Landlord may waive any one
or more of these Rules and Regulations for the benefit of Tenant or any other
tenant, but no such waiver by Landlord will be construed as a waiver of such
Rules and Regulations in favor of Tenant or any other tenant, nor prevent
Landlord from thereafter enforcing any such Rules and Regulations against any
or all of the tenants of the Project.

 

33.       Landlord reserves the
right to make such other reasonable and non-discriminatory Rules and
Regulations as, in its judgment, may from time to time be needed for safety and
security, for care and cleanliness of the Project and for the preservation of
good order therein.  Tenant agrees to
abide by all such Rules and Regulations herein above stated and any additional
reasonable and non-discriminatory rules and regulations which are adopted.  Tenant is responsible for the observance of
all of the foregoing rules by Tenant’s employees, agents, clients, customers,
invitees and guests.

 

B.        Parking
Rules and Regulations. 
The following rules and regulations govern the use of the parking
facilities which serve the Building. 
Tenant will be bound by such rules and regulations and agrees to cause
its employees, subtenants, assignees, contractors, suppliers, customers and
invitees to observe the same:

 

1.         Tenant will not permit
or allow any vehicles that belong to or are controlled by Tenant or Tenant’s
employees, subtenants, customers or invitees to be loaded, unloaded or parked
in areas other than those designated by Landlord for such activities.  No vehicles are to be left in the parking
areas overnight and no vehicles are to be parked in the parking areas other
than passenger automobiles, vans, sport utility vehicles, motorcycles and
pick-up trucks.  No extended term storage
of vehicles is permitted.

 

2.         Vehicles must be parked
entirely within painted stall lines of a single parking stall.

 

3.         All directional signs
and arrows must be observed.

 

4.         The speed limit within
all parking areas shall be five (5) miles per hour.

 

5.         Parking is
prohibited:  (a) in areas not striped for
parking; (b) in aisles or on ramps; (c) where “no parking” signs are posted;
(d) in cross-hatched areas; and (e) in such other areas as may be designated
from time to time by Landlord.

 

6.         Landlord reserves the
right, without cost or liability to Landlord, to tow any vehicle if such
vehicle’s audio theft alarm system remains engaged for an unreasonable period
of time.

 

7.         Washing, waxing,
cleaning or servicing of any vehicle in any area not specifically reserved for
such purpose is prohibited.

 

8.         Landlord may refuse to
permit any person to park in the parking facilities who violates these rules
with unreasonable frequency, and any violation of these rules shall subject the

 

4

 

violator’s car to removal, at such car owner’s expense.  Tenant agrees to use its best efforts to
acquaint its employees, subtenants, assignees, contractors, suppliers,
customers and invitees with these parking provisions, rules and regulations.

 

9.         Parking stickers,
access cards, or any other device or form of identification supplied by
Landlord as a condition of use of the parking facilities shall remain the
property of Landlord.  Parking
identification devices, if utilized by Landlord, must be displayed as requested
and may not be mutilated in any manner. 
The serial number of the parking identification device may not be
obliterated.  Parking identification
devices, if any, are not transferable and any device in the possession of an
unauthorized holder will be void. 
Landlord reserves the right to refuse the sale of monthly stickers or
other parking identification devices to Tenant or any of its agents, employees
or representatives who willfully refuse to comply with these rules and
regulations and all unposted city, state or federal ordinances, laws or
agreements.

 

10.       Loss or theft of parking
identification devices or access cards must be reported to the management
office in the Project immediately, and a lost or stolen report must be filed by
the Tenant or user of such parking identification device or access card at the
time.  Landlord has the right to exclude
any vehicle from the parking facilities that does not have a parking
identification device or valid access card. 
Any parking identification device or access card which is reported lost
or stolen and which is subsequently found in the possession of an unauthorized
person will be confiscated and the illegal holder will be subject to
prosecution.

 

11.       Landlord reserves the
right, without cost or liability to Landlord, to tow any vehicles which are
used or parked in violation of these rules and regulations.

 

12.       Landlord reserves the
right from time to time to modify and/or adopt such other reasonable and
non-discriminatory rules and regulations for the parking facilities as it deems
reasonably necessary for the operation of the parking facilities.

 

5

 

EXHIBIT F

 

	
  RECORDING REQUESTED BY AND

  	
  )

  	
   

  
	
  WHEN RECORDED MAIL TO:

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  Sunnyvale Mathilda Investors, LLC

  	
  )

  	
   

  
	
  c/o Matteson Real Estate Equities, Inc.

  	
  )

  	
   

  
	
  1991 Broadway, Suite 300

  	
  )

  	
   

  
	
  Redwood City, CA 94063-1994

  	
  )

  	
   

  
	
  Attn:   James A. Blake

  	
  )

  	
   

  

 

MEMORANDUM OF LEASE

 

THIS MEMORANDUM OF LEASE
(“Memorandum”) is made and entered into this      day of                      
2005, by and between SUNNYVALE MATHILDA INVESTORS, LLC, a California limited
liability company (“Landlord”) and MONOLITHIC SYSTEM TECHNOLOGY, INC., dba
MOSYS,  a Delaware corporation (“Tenant”).

 

1.             Terms and Premises.            By that certain Office Building Lease dated April     ,
2005 (“Lease”) between Landlord and Tenant, Landlord hereby leases to Tenant,
and Tenant hereby hires from Landlord, the premises commonly known as 755 No.
Mathilda Avenue, Suite 100, Sunnyvale, California 94086, forming a part of that
certain real property located in the City of Sunnyvale, County of Santa Clara,
State of California, as shown and described on Exhibit A attached hereto
and incorporated herein by this reference (the “Premises”).  The term of the Lease is five (5) years with
two (2) five (5) year options commencing on [insert actual Commencement Date
prior to recording] and ending on [insert actual Expiration Date prior to
recording], unless sooner terminated in accordance with the terms of the Lease.

 

2.             Other Terms. 
All terms and conditions of the Lease are set forth fully in the Lease.

 

IN WITNESS WHEREOF,
Landlord and Tenant have executed this Memorandum as of the date and year first
above written.

 

	
  TENANT:

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
  MONOLITHIC SYSTEM TECHNOLOGY, INC., a Delaware corporation

  	
   

  	
  SUNNYVALE MATHILDA INVESTORS, LLC a California limited liability
  company

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
  Matteson Real Estate Equities, Inc.

  
	
   

  	
  Print Name:

  	
   

  	
   

  	
   

  	
  Manager

  
	
   

  	
  Print Title:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
   

  
									

 

EXHIBIT "F"

 

 

EXHIBIT A

DESCRIPTION OF PREMISES

 

The ground floor of that
certain real property situated in the City of Sunnyvale, County of Santa Clara,
State of California, described as follows:

 

 

	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY OF

  	
  )

  	
   

  

 

On this                      
day of                  2005,
before me, the undersigned, a Notary Public in and for the State of California,
personally appeared                                 ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument, and
acknowledged to me that he executed the same in his authorized capacity; and
that by his signature on the instrument the person, or the entity upon behalf
of which the person acted, executed the instrument.

 

WITNESS my hand and
official seal.

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature of Notary

  	
   

  

 

[SEAL]

 

 

	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY OF

  	
  )

  	
   

  

 

On this                       
day of                 
2005, before me, the undersigned, a Notary Public in and for the State of
California, personally appeared                                               ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument, and
acknowledged to me that he executed the same in his authorized capacity; and
that by his signature on the instrument the person, or the entity upon behalf
of which the person acted, executed the instrument.

 

WITNESS my hand and
official seal.

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature of Notary

  

 

[SEAL] 

 

 

EXHIBIT G

 

	
  RECORDING REQUESTED BY AND

  	
  )

  	
   

  
	
  WHEN RECORDED MAIL TO:

  	
  )

  	
   

  
	
   

  	
  )

  	
   

  
	
  Sunnyvale Mathilda Investors, LLC

  	
  )

  	
   

  
	
  c/o Matteson Real Estate Equities, Inc.

  	
  )

  	
   

  
	
  1991 Broadway, Suite 300

  	
  )

  	
   

  
	
  Redwood City, CA 94063-1994

  	
  )

  	
   

  
	
  Attn:   James A. Blake

  	
  )

  	
   

  

 

QUITCLAIM

 

The undersigned,
MONOLITHIC SYSTEM TECHNOLOGY, INC., dba MOSYS, a Delaware corporation, hereby
irrevocably quitclaims, releases and relinquishes to SUNNYVALE MATHILDA
INVESTORS, LLC, a California limited liability company, all of the undersigned’s
right, title and interest, if any, in, to and under (i) that certain Memorandum
of Lease recorded on [insert date of recording] as Instrument No. [insert exact
recording information] in the Official Records of Santa Clara County,
California (the “Memorandum”), (ii) the Lease (as defined in the Memorandum)
and (iii) the Premises (as defined in the Memorandum).

 

IN WITNESS WHEREOF, this
Quitclaim has been executed as of                             ,
2005.

 

	
  MONOLITHIC SYSTEM TECHNOLOGY, INC., a 

  Delaware corporation

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Print Name:

  	
   

  	
   

  
	
   

  	
  Print Title:

  	
   

  	
   

  
						

 

EXHIBIT "G"

 

 

	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY OF

  	
  )

  	
   

  

 

On this                        
day of                   
2005, before me, the undersigned, a Notary Public in and for the State of
California, personally appeared                                  ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument, and
acknowledged to me that he executed the same in his authorized capacity; and
that by his signature on the instrument the person, or the entity upon behalf
of which the person acted, executed the instrument.

 

WITNESS my hand and
official seal.

 

	
   

  	
   

  	
   

  
	
   

  	
  Signature of Notary

  

 

 

[SEAL]Exhibit 10.17

 

October 3, 2005

 

Mr. Dhaval Ajmera

713 Solstice Court

Fremont, CA 94539

 

Dear Dhaval:

 

I am pleased to offer you
a position with Monolithic System Technology, Inc. (“MoSys” or the “Company”)
as Vice President of Worldwide Sales and Business Development, an exempt
position in which you will report directly to me.  Your semimonthly compensation will be
$7,916.66 dollars, which is equal to $190,000.00 on an annualized basis.  You will also be eligible to receive an
incentive bonus based on the following guidelines:

 

•  for the fiscal quarter ending December 31,
2005, you will be eligible to receive a $30,000 non-recoverable, incentive
bonus.

 

•  for fiscal year 2006, your targeted incentive
bonus will be $30,000 quarterly based on mutually agreed bookings goals with a
$30,000 incentive bonus guaranteed in 2006 paid at the end of Q1 as a credit
against earned bonuses for the year.

 

The bookings target and
incentive bonus payment will be subject to the Company’s sole and absolute
discretion.  Further, nothing in this
offer letter shall alter the “at-will” nature of your employment relationship
with the Company, or constitute any promise, express or implied, regarding the
duration of your employment with the Company, payment of any specific amount of
incentive bonus, or a requirement of any reason or “cause” for termination of
your employment with the Company, which shall be terminable at-will, by you or
the Company, without any reason or cause or advance notice required.

 

Upon approval of the
Company’s Board of Directors, you will be granted an option to purchase 300,000
shares of the Company’s common stock. 
The terms of such option shall be in accordance with the terms of the
Company’s stock option plan. 
Accordingly, the options will vest 25% at the end of one year of
employment and 2.0833% per month thereafter. 
The per share exercise price of the option shall be the fair market
value of the Company’s common stock on the date of grant as determined by the
Company’s Board of Directors.

 

If, there is an event of “change
of control” of more than 50% of the voting power of the Company resulting from
a merger, reorganization, sale of all or substantially all assets or other
similar acquisition transaction, and you are terminated involuntarily “without
cause,” or if you resign for “good reason” in connection with such change in
control event, then 50% of the unvested stock options granted to you above
shall be immediately accelerated and exercisable.

 

 

Should your employment be
terminated “without cause,” you will receive one quarter (1/4) of the annual
salary (three months) in effect at the time of termination as severance pay,
and your health benefits will also continue for three months from the
Company.  In addition, you will receive
your earned incentive bonus based on bookings for the quarter in which you are
terminated and the subsequent quarter.

 

In addition, you will be
eligible to participate in Monolithic System Technology, Inc. (“MoSys” or the “Company”)
employee benefit plans including our standard major medical, dental, life,
short and long term disability, vision, flexible benefit plan, paid holidays,
ESPP (Employee Stock Purchase Plan), personal time off (PTO) and the Company’s
401(k) plan.

 

You also will be eligible
for a five hundred dollar ($500.00) monthly car allowance.  You will be reimbursed for all reasonable
travel and entertainment expenses necessarily and reasonably incurred in
conducting the Company’s business.  You
shall submit for reimbursement all direct expenses incurred, including any car
allowance on a monthly basis.

 

The Company will
reimburse you the cost of a cellular phone to be primarily used in conducting
the Company’s business.  The Company will
also reimburse all reasonable month calling charges billed directly to you and
submitted to the Company for payment.

 

You should be aware that
your employment with the Company is for no specified period and constitutes “at
will” employment.  As a result, you are
free to resign at any time, for any reason or for no reason.  Similarly, the Company is free to conclude
its employment relationship with you at any time, with or without cause.

 

For purposes of federal
immigration law, you will be required to provide to the Company documentary
evidence of your identity and eligibility for employment in the United
States.  Such documentation must be
provided to us within three (3) business days of your date of hire, or our
employment relationship with you may be terminated.

 

In the event of any
dispute or claim relating to or arising out of our employment relationship, you
and the Company agree that all such disputes shall be fully and finally
resolved by binding arbitration conducted in Santa Clara County, California
under the then-existing rules for resolution of employment disputes adopted by
the American Arbitration Association (“AAA”) or Judicial Arbitration and
Mediation Services (“JAMS”).  However, we
agree that this mandatory arbitration provision shall not apply to any disputes
or claims relating to or arising out of the misuse or misappropriation of the
Company’s trade secrets or proprietary information.

 

To indicate your
acceptance of the Company’s offer, please sign and date this letter in the
space provided below and return it to Human Resources.  This offer will expire on Tuesday , October
4, 2005 at 5:00 p.m.  Please indicate
your planned start date.  This letter,
along with the agreement relating to proprietary rights between you and the
Company, set forth the terms of your employment with the Company and supersede
any prior representations or agreements, whether written or oral.  This letter may not be modified or amended
except by a written agreement, signed by the Company and by you.

 

 

Dhaval, we believe that
you can make a great contribution to MoSys and we all look forward to working
with you.

 

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Chet Silvestri

  
	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACCEPTED AND AGREED TO

  	
  Start date 10/3/05

  
	
  This 3rdday
  of October, 2005.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Dhaval Ajmera

  	
   

  
	
   

  	
  Dhaval Ajmera

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