Document:

exv10w38

 

Exhibit 10.38

BUILD-TO-SUIT LEASE

BETWEEN

UTC GREENWICH PARTNERS,

a California limited partnership

and

INTUIT, INC.,

a Delaware corporation

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
								Page	
	 	1.	 	 	Demised Premises 
	 	 	1	 
	 	2.	 	 	Basic Lease Provisions 
	 	 	1	 
	 	3.	 	 	Construction of Improvements 
	 	 	4	 
	 	 	 	 	3.1. Time for Commencement and Completion 
	 	 	4	 
	 	 	 	 	3.1.1. Completion Date 
	 	 	4	 
	 	 	 	 	3.1.2. Substantial Completion 
	 	 	4	 
	 	 	 	 	3.2. Delays 
	 	 	4	 
	 	 	 	 	3.2.1. Finalized Target Completion Date 
	 	 	4	 
	 	 	 	 	3.2.2. Length of Delay; Tenant’s Right to Terminate 
	 	 	5	 
	 	 	 	 	3.2.3. Delay Penalty 
	 	 	5	 
	 	 	 	 	3.2.4. Landlord’s Right to Terminate 
	 	 	5	 
	 	4.	 	 	Lease Term; Additional Improvements; Signage 
	 	 	5	 
	 	 	 	 	4.1. Immediate Effect of Lease 
	 	 	5	 
	 	 	 	 	4.2. Lease Term 
	 	 	6	 
	 	 	 	 	4.3. Option to Extend 
	 	 	6	 
	 	 	 	 	4.3.1. Option Term Rent 
	 	 	6	 
	 	 	 	 	4.3.2. Exercise of Option 
	 	 	6	 
	 	 	 	 	4.3.3. Determination of Fair Market Rental Value 
	 	 	6	 
	 	 	 	 	4.4. Tenant’s Option to Vacate 
	 	 	8	 
	 	 	 	 	4.5. Tenant’s Opportunity to Lease Additional Improvements 
	 	 	9	 
	 	 	 	 	4.6. Identification of “Common Facilities” 
	 	 	10	 
	 	 	 	 	4.6.1. Additional Improvements 
	 	 	10	 
	 	 	 	 	4.6.2. Contraction Space 
	 	 	10	 
	 	 	 	 	4.6.3. Mutual Rights of Ingress and Egress 
	 	 	11	 
	 	 	 	 	4.6.4. Subdivision of Land 
	 	 	11	 
	 	 	 	 	4.7. Signs 
	 	 	11	 
	 	 	 	 	4.7.1.
Tenant as Sole Occupant - Exclusive Rights 
	 	 	11	 
	 	 	 	 	4.7.2. Shared Signage 
	 	 	11	 
	 	 	 	 	4.7.3. Initial Signage 
	 	 	11	 
	 	5.	 	 	Possession and Commencement Date 
	 	 	12	 
	 	6.	 	 	Rent 
	 	 	13	 
	 	 	 	 	6.1. Annual Rent
	 	 	13	 
	 	 	 	 	6.2. Additional Rent 
	 	 	13	 
	 	 	 	 	6.3. No Deduction or Offset 
	 	 	13	 

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	 	 	 	 	6.4. Adjustments in Annual Rent 
	 	 	13	 
	 	 	 	 	6.4.1. Changes in Size of Building; Initial Adjustment in Annual Rent
	 	 	13	 
	 	 	 	 	6.4.2. Changes in Total Project Cost; Final Adjustment of Annual Rent
	 	 	15	 
	 	 	 	 	(a) Increase in Total Project Cost 
	 	 	15	 
	 	 	 	 	(b) Decrease in Total Project Cost 
	 	 	15	 
	 	 	 	 	(c) Timing of Adjustment of Annual Rent 
	 	 	15	 
	 	 	 	 	6.4.3. Excess Tenant Improvements 
	 	 	16	 
	 	 	 	 	6.4.4. Payment for Tenant Changes 
	 	 	16	 
	 	 	 	 	6.5. Total Project Cost 
	 	 	17	 
	 	 	 	 	6.5.1. Components of Total Project Costs 
	 	 	17	 
	 	 	 	 	6.5.2. Exclusions from Total Project Costs 
	 	 	19	 
	 	 	 	 	6.5.3. Landlord’s Maintenance of Records of Total Project Cost
	 	 	19	 
	 	 	 	 	6.5.4. Determination of Total Project Cost; Arbitration of Differences
	 	 	19	 
	 	7.	 	 	Authorized Use 
	 	 	20	 
	 	8.	 	 	Condition of the Premises 
	 	 	22	 
	 	9.	 	 	Repairs and Maintenance 
	 	 	22	 
	 	 	 	 	9.1. Tenant’s Obligations 
	 	 	22	 
	 	 	 	 	9.2. Landlord’s Obligations’ 
	 	 	23	 
	 	10.	 	 	Right of Entry by Landlord 
	 	 	23	 
	 	11.	 	 	Operating Expenses 
	 	 	24	 
	 	 	 	 	11.1. Definition of “Operating Expenses” 
	 	 	24	 
	 	 	 	 	11.2. Exclusions from Operating Expenses 
	 	 	25	 
	 	 	 	 	11.3. Payment of Operating Expenses 
	 	 	26	 
	 	 	 	 	11.4. Audit of Operating Expenses 
	 	 	27	 
	 	 	 	 	11.5. Further Limitations on Operating Expenses 
	 	 	27	 
	 	 	 	 	11.6. Payment of Taxes 
	 	 	28	 
	 	 	 	 	11.7. Taxes on Tenant’s Property 
	 	 	28	 
	 	12.	 	 	Utilities and Services 
	 	 	29	 
	 	13.	 	 	Mortgages and Liens 
	 	 	29	 
	 	 	 	 	13.1. Mortgages 
	 	 	29	 
	 	 	 	 	13.2. Mechanics Liens 
	 	 	30	 
	 	14.	 	 	Assignment and Subletting 
	 	 	31	 
	 	 	 	 	14.1. Landlord’s Consent 
	 	 	31	 
	 	 	 	 	14.2. No Release of Tenant 
	 	 	31	 
	 	 	 	 	14.3. Written Instrument 
	 	 	31	 
	 	 	 	 	14.4. Assignment of Subrents 
	 	 	31	 
	 	 	 	 	14.5. Continuation of Subleases 
	 	 	32	 

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	 	15.	 	 	Alterations, Additions and Repairs 
	 	 	32	 
	 	16.	 	 	Damage or Destruction 
	 	 	33	 
	 	 	 	 	16.1. Definitions 
	 	 	33	 
	 	 	 	 	16.1.1. “Damage” 
	 	 	33	 
	 	 	 	 	16.1.2. “Total Destruction” 
	 	 	33	 
	 	 	 	 	16.1.3. “Insured Loss” 
	 	 	33	 
	 	 	 	 	16.1.4. “Replacement Cost” 
	 	 	33	 
	 	 	 	 	16.1.5. “Hazardous Substance Condition” 
	 	 	33	 
	 	 	 	 	16.1.6. “Tenant Owned Improvements” 
	 	 	33	 
	 	 	 	 	16.2. Damage to the Demised Premises 
	 	 	33	 
	 	 	 	 	16.2.1. Insured Loss 
	 	 	33	 
	 	 	 	 	16.2.2. Uninsured Loss 
	 	 	34	 
	 	 	 	 	16.2.3. Underinsured Loss 
	 	 	34	 
	 	 	 	 	16.2.4. Tenant’s Responsibility 
	 	 	35	 
	 	 	 	 	16.3. Total Destruction of the Demised Premises 
	 	 	35	 
	 	 	 	 	16.4. Damage Near End of Term 
	 	 	35	 
	 	 	 	 	16.5. Abatement of Rent; Tenant’s Remedies 
	 	 	36	 
	 	 	 	 	16.6. Delay in Restoration 
	 	 	37	 
	 	 	 	 	16.7. Limitation on Landlord’s Restoration Obligation 
	 	 	37	 
	 	 	 	 	16.8. Hazardous Substance Conditions 
	 	 	37	 
	 	 	 	 	16.9. Termination-Advance Payment 
	 	 	38	 
	 	 	 	 	16.10. Waiver of Statutes
	 	 	 38	 
	 	17.	 	 	Indemnification, Limitation of Liability 
	 	 	38	 
	 	 	 	 	17.1. Indemnification by Tenant 
	 	 	38	 
	 	 	 	 	17.2. Indemnification by Landlord 
	 	 	39	 
	 	 	 	 	17.3. Limitations on Indemnification 
	 	 	39	 
	 	 	 	 	17.4. Notice 
	 	 	40	 
	 	18.	 	 	Insurance 
	 	 	40	 
	 	 	 	 	18.1. Tenant’s Extended Coverage Policy 
	 	 	40	 
	 	 	 	 	18.2. Property Insurance 
	 	 	40	 
	 	 	 	 	18.3. Insurance on Tenant’s Property 
	 	 	41	 
	 	 	 	 	18.4. Rental Interruption Insurance 
	 	 	41	 
	 	 	 	 	18.5. Landlord’s Extended Coverage Policy 
	 	 	42	 
	 	 	 	 	18.6. Insurance Requirements 
	 	 	42	 
	 	 	 	 	18.7. Waiver of Subrogation 
	 	 	43	 
	 	 	 	 	18.8. Tenant’s Right to Self-Insure 
	 	 	43	 
	 	19.	 	 	Eminent Domain 
	 	 	44	 
	 	 	 	 	19.1. Taking 
	 	 	44	 
	 	 	 	 	19.2. Restoration of Demised Premises 
	 	 	44	 
	 	 	 	 	19.3. Award 
	 	 	44	 
	 	20.	 	 	Defaults and Remedies 
	 	 	44	 

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	 	 	 	 	20.1. Events of Default 
	 	 	44	 
	 	 	 	 	20.2. Landlord’s Remedies 
	 	 	46	 
	 	 	 	 	20.3. Right to Collect Rent as Due 
	 	 	46	 
	 	 	 	 	20.4. New Lease Following Termination 
	 	 	47	 
	 	 	 	 	20.5. Cumulative Rights; No Waiver 
	 	 	47	 
	 	 	 	 	20.6. Tenant Not Released From Liability 
	 	 	47	 
	 	 	 	 	20.7. Landlord Default and Liability 
	 	 	47	 
	 	 	 	 	20.8. Notice to Lender 
	 	 	48	 
	 	 	 	 	20.9. Late Payments 
	 	 	48	 
	 	21.	 	 	Notice 
	 	 	49	 
	 	 	 	 	21.1. Payment of Rent and Delivery of Notice 
	 	 	49	 
	 	 	 	 	21.2. Personal Service 
	 	 	49	 
	 	22.	 	 	Subordination
and Attornment 
	 	 	49	 
	 	23.	 	 	Fixtures 
	 	 	50	 
	 	24.	 	 	Holding Over 
	 	 	51	 
	 	25.	 	 	Quitclaim Deed 
	 	 	51	 
	 	26.	 	 	Quiet Enjoyment 
	 	 	51	 
	 	27.	 	 	Delays 
	 	 	51	 
	 	28.	 	 	Surrender 
	 	 	52	 
	 	29.	 	 	Release of Landlord Upon Conveyance 
	 	 	52	 
	 	30.	 	 	Performance on Behalf of Tenant 
	 	 	52	 
	 	31.	 	 	Estoppel Certificate by Tenant 
	 	 	53	 
	 	32.	 	 	Hazardous Substances 
	 	 	53	 
	 	 	 	 	32.1. Landlord’s Consent 
	 	 	53	 
	 	 	 	 	32.1.1. Duty to Inform Landlord 
	 	 	54	 
	 	 	 	 	32.1.2. Tenant’s Indemnification 
	 	 	54	 
	 	 	 	 	32.2. Tenant’s Compliance with Law 
	 	 	54	 
	 	 	 	 	32.3. Inspection; Compliance 
	 	 	55	 
	 	33.	 	 	Commissions 
	 	 	55	 
	 	34.	 	 	Financial Statements 
	 	 	55	 
	 	35.	 	 	Waiver and Modification 
	 	 	55	 

-iv-

 

	 	 	 	 	 	 	 	 	 
	 	36.	 	 	Waiver of Jury Trial and Counterclaims 
	 	 	55	 
	 	37.	 	 	Miscellaneous 
	 	 	55	 
	 	 	 	 	37.1. Terms and Headings 
	 	 	55	 
	 	 	 	 	37.2. Examination of Lease 
	 	 	56	 
	 	 	 	 	37.3. Time 
	 	 	56	 
	 	 	 	 	37.4. Covenants and Conditions 
	 	 	56	 
	 	 	 	 	37.5. Consents 
	 	 	56	 
	 	 	 	 	37.6. Entire Agreement 
	 	 	56	 
	 	 	 	 	37.7. Severability 
	 	 	56	 
	 	 	 	 	37.8. Recording 
	 	 	56	 
	 	 	 	 	37.9. Impartial Construction 
	 	 	56	 
	 	 	 	 	37.10. Inurement 
	 	 	56	 
	 	 	 	 	37.11. Exhibits 
	 	 	56	 
	 	 	 	 	37.12. Periods of Time 
	 	 	56	 
	 	 	 	 	37.13. Choice of Law 
	 	 	57	 
	 	 	 	 	37.14. Interpretation 
	 	 	57	 
	 	 	 	 	37.15. Right of First Offer 
	 	 	57	 
	 	 	 	 	37.16. Counterparts 
	 	 	58	 

-v-

 

BUILD-TO-SUIT LEASE

     THIS BUILD-TO-SUIT LEASE (“Lease”) dated June 9, 1995, is entered into by
and between UTC GREENWICH PARTNERS, a California limited partnership, or
assignee (“Landlord”), and INTUIT, INC., a Delaware corporation (“Tenant”).

     1. Demised Premises.

          1.1. Upon and subject to the conditions and limitations set
forth below, Landlord undertakes to construct and leases to Tenant, and Tenant
rents from Landlord, certain improvements which are to be constructed by
Landlord on approximately 9.24 acres of land known as Lots 18 & 19 of Governor
Park which are located on Greenwich Drive, San Diego, California, in an area
known as Governor Park (the “Land”). The Land is legally described in Exhibit
“A”, attached hereto and incorporated herein by reference.

          1.2. The improvements are presently expected to consist of a
two-story building approximately 140,000 square feet of Gross Area in size (the
“Building”) and other associated improvements, including, without limitation,
all landscaped areas, parking facilities, open parking areas, open
space, slope
embankment areas, and other improvements and hardscape, driveways, sidewalks,
drainage, irrigation, lighting and appurtenances related thereto, (together with
the Building referred to herein as the “Improvements”). For purposes of this
Lease, the terms “Rentable Area” and “Usable Area” shall have the meanings
ascribed to them in the Standard Method for Measuring Floor Area in Office
Buildings published by the Building Owners and Managers Association
International (“BOMA”) and the term “Gross Area” shall mean the floor areas to
the outside finished surface of permanent outer Building walls, where such walls
intersect each floor, without deduction for columns, projections or vertical
penetrations such as stairs, elevator shafts, flues, pipe shafts, vertical ducts
and the like and their enclosing walls.

          1.3. A preliminary site plan depicting the Land, the Building
and the Improvements (the “Site Plan”) is attached hereto as Exhibit “B,” The
Land, the Building and the Improvements, are hereinafter referred to
collectively as the “Demised Premises.”

     2. Basic Lease Provisions. For the convenience of the parties, certain
basic provisions of this Lease are set forth herein. The provisions set forth
herein are subject to the remaining terms and conditions of this Lease and are
to be interpreted in light of such remaining terms and conditions:

	2.1.	 	Location of the Demised Premises:

Governor Park, Greenwich Drive, 

San Diego, California.
	 
	2.2.	 	Description of the Building: A two (2) - story office
building approximately 140,000 square feet in Gross Area
in size. 

-1-

 

	2.3.	 	Estimated Term Commencement Date: One (1) year after the date
of this Lease.
	 
	2.4.	 	Term: The term of this Lease shall be eight (8) years
commencing on the Term Commencement Date, plus any partial
calendar month following the Term Commencement Date, if the
Term Commencement Date is other than the first day of a
calendar month (the “Initial Term”). (See
Section 4.2)

Extension: In addition, Tenant shall twice have the option of
extending the Term for five (5) years, (See Section 4.3)
	 
	2.5.	 	
Annual Rent: Annual Rent payable by Tenant to Landlord under
this Lease is the following: Monthly

	 	 	 	 	 	Monthly

	Months 01 - 30	 	$	1,420,906	 	 	$	118,408.83
	Months
31 - 60
	 	 	1,527,474	 	 	$	127,289.50
	Months
61 - 90
	 	 	1,642,034	 	 	$	136,836.17
	Months 91 - 96
	 	 	1,765,186	 	 	$	147,098.83

	 	 	Rental Adjustment: The Annual Rent, as scheduled above, has
been calculated based on the assumption that (i) the Building
will be 140,000 square feet in Gross Area, (ii) the Total
Project Cost of the construction of the Demised Premises,
including the Tenant Improvements (but excluding the
Additional Tenant Improvements), will equal Ten Million Eight
Hundred Eight Thousand Dollars ($10,808,000), and (iii) the
Land Cost, for purposes of calculating Annual Rent, will be
set at Two Million Five Hundred Thousand Dollars ($2,500,000).
Once construction of the Demised Premises, including the
Tenant Improvements, has been completed, and the Total Project
Cost has been determined, the Annual Rent shall be adjusted in
accordance with Section 6.4 of this Lease.
	 
	 	 	Option Term Annual Rent: If Tenant exercises its option to
extend the Term of the Lease, the Annual Rent at the
commencement of each Option Term shall be the greater of (i)
ninety-five percent (95 %) of the then Fair Market Rental
Value of the Demised Premises, as then configured, or (ii) the
Annual Rent during the most recent year of the Term. The
Annual Rent shall be increased in the twenty-fifty (25th)
month and the fifty-fifth (55th) month of each Option Term by
seven and one-half percent (7.5%).
	 
	2.6.	 	Right to Vacate: On the sixtieth (60th) month of the Term,
Tenant shall be entitled to vacate all or some (but in no
event less than 10,000 contiguous square feet of Rentable
Area) of the “Contraction Space” as identified on Exhibit
“B-2” to this Lease, subject to the payment to Landlord of a
sum calculated as provided in Section 4.4, below.

-2-

 

	2.7.	 	Address for Rent Payment and Notices to Landlord:

	 	 	 
	

	 	UTC Greenwich Partners,

a California limited partnership

c/o The Allen Group

1029 North Demaree

Visalia, CA 93291-4117
	

	 	or
	

	 	Post Office Box 3028

Visalia, CA 93278-3028

	 	 	Address for Notices to Tenant:

	 	 	 
	

	 	
Intuit, Inc.

6256 Greenwich Drive

San Diego, CA 92122

Attention: Ms. Lynette Bergamini

                 Facilities Manager

	 
	 	 
	

	 	With copies to (which copies shall not constitute notice and

which shall not be required for effective notice to

be given):
	 
	 	 
	

	 	Intuit, Inc.

P.O. Box 3014, MS 246

Menlo Park, CA 94026-3014

Attention: Mr. Jade Dauser

	 
	 	 
	

	 	Intuit, Inc.

MS 184 - Legal Department

P.O. Box 3014

Menlo Park, CA 94026-3014

Attention: Catherine Valentine, Esq.

                General Counsel

	2.8.	 	The following Exhibits are attached hereto and incorporated
herein by this reference, and Landlord and Tenant hereby agree
to the terms of these Exhibits:

	 	 	 	 	 
	 	 	Exhibit
	 	Title

	

	 	“A”
“B”
“C”
“D”
“E”
	 	Legal Description of Land

Site Plan

Work Letter

Multi-Tenant Addendum

Acknowledgment of Term Commencement

Date and Annual Rent Form

-3-

 

	 	 	 	 	 
	 	 	Exhibit
	 	Title

	

	 	“F”

“G”
	 	Form of Subordination,
Non-Disturbance

and Attornment Agreement

Form of Estoppel Certificate

     3. Construction of Improvements. Landlord owns the Land and agrees to
construct the Improvements at its cost and expense and in accordance with the
terms and provisions of this Lease, including the Work Letter Agreement for
Improvements (the “Work Letter”), which is attached to this Lease as Exhibit
“C”. The Improvements shall be constructed in a good, workmanlike manner and
substantially in accordance with the Improvement Plans created in accordance
with the provisions of the Work Letter, Applicable Laws (as defined in Section
7.1 of this Lease) and Instruments of Record (as defined in Section 7.1 of this
Lease).

	3.1.	 	Time for Commencement and Completion.

               3.1.1. Completion Date. Landlord shall use reasonable
diligence to commence construction of the Improvements within three (3) calendar
months after finalization of the Schematic Design Drawings (as defined in
Section I.D.2. of the Work Letter), and to substantially complete such
construction within nine (9) calendar months after Landlord obtains the Building
Permit (as defined in Section I.F. of the Work Letter) (the “Target Completion
Date”).

               3.1.2. Substantial Completion. The Improvements shall be
deemed “substantially complete” on the date when (and the terms “substantial
completion,” “substantially complete,” and “substantially completed” shall mean)
(i) the Project Architect (as defined in Section I.A.1 of the Work Letter) has
certified that construction of the Improvements is substantially complete in
accordance with the Improvement Plans (as defined in Section I.B.4 of the Work
Letter), (ii) Tenant can physically and legally occupy the Demised Premises
(e.g. a temporary or permanent Certificate of Occupancy (“Certificate of
Occupancy”) has been issued for the Demised Premises by the City of San Diego
(“City”)), and (iii) all parking areas and related driveways and sidewalks on
the Demised Premises are substantially available for Tenant’s use, all subject
to minor punch-list items (as described in Section I.G.8 of the Work Letter)
that may still need to be corrected. Landlord shall deliver to Tenant a copy of
any Certificate of Occupancy issued by City for the Demised Premises. The
Project Architect shall determine said “substantial completion” based upon the
generally accepted professional standards of the American Institute of
Architects, and not as an advocate, consultant, or agent for either Tenant or
Landlord.

	3.2.	 	Delays. 

               3.2.1. Finalized Target Completion Date. No later than eight
(8) months prior to the Estimated Term Commencement Date, Landlord shall deliver
to Tenant a written notice setting a definitive Target Completion Date and which
shall, thereafter, remain the Target Completion Date for purposes of this
Section 3.2.

-4-

 

               3.2.2.
Length of Delay; Tenant’s Right to Terminate. In the event
the Term Commencement Date has not occurred (or been deemed to have occurred
pursuant to Section 5.2(iii) of this Lease) on or before the Target Completion
Date, Landlord shall not be liable for any damage caused thereby and this Lease
shall remain in full force and effect, provided, however, that, subject to
Section 27 of this Lease, if the construction of the Improvements is not
substantially completed within fifteen (15) months after Landlord obtains the
Building Permit, then Tenant may, within thirty (30) days following the end of
such fifteen (15) month period (provided that no Event of Default then exists),
give Landlord written notice that it desires to terminate this Lease, in which
case this Lease shall terminate thirty (30) days thereafter; provided, however,
if the Improvements are substantially complete, as defined in Section 3.1.2,
above, by the end of such thirty (30) day period following notice to Landlord,
this Lease shall remain in full force and effect.

               3.2.3. Delay Penalty. In the event the Term Commencement Date has
not occurred (or been deemed to have occurred pursuant to Section 5.2(iii) of
this Lease) on or before the Target Completion Date, plus up to an additional
thirty (30) days for Force Majeure Delays, Landlord shall pay to Tenant, as
liquidated damages, the sum of One Thousand Dollars ($1,000) per day until the
earlier to occur of (i) the date three (3) months thereafter, or (ii) the Term
Commencement Date and, thereafter, if the Term Commencement Date has not yet
occurred, the sum of Five Thousand Dollars ($5,000) per day for each day after
such three (3) month period until the Term Commencement Date or this Lease is
otherwise terminated.

               3.2.4. Landlord’s Right to Terminate. Subject to Section 27 of this
Lease, if the Term Commencement Date has not occurred (or been deemed to have
occurred pursuant to Section 5.2(iii) of this Lease) on or before one (1) year
after the Target Completion Date, and Tenant has not otherwise terminated this
Lease pursuant to Section 3.2.2, above, then Landlord may, at any time
thereafter, give Tenant written notice of Landlord’s intention to terminate this
 Lease, which notice shall specifically include a statement that Tenant has ten
(10) days in which to respond in accordance with this Section 3.2.4. Upon
receipt of such notice, Tenant may, by providing Landlord written notice within
ten (10) days after such notice, elect either to (i) keep the Lease in effect,
in which case the liquidated damages provided for in Section 3.2.3, above, shall
immediately cease being assessed against Landlord, or (ii) terminate this Lease,
in which case this Lease shall immediately terminate and neither Landlord nor
Tenant shall have any further rights hereunder. Failure of Tenant to make an
election between subsections (i) and (ii), above, within such ten (10) day
period shall be deemed an election under subsection (i).

                3.2.5. Notification of
Delays. Following the execution of this Lease, and until substantial completion
of the Improvements, Landlord shall provide Tenant, on a monthly basis, a
written statement of the number of days of Force Majeure Delay or Tenant-Caused
Delay which occurred during the prior month and since the execution of this
Lease. This statement shall be delivered together with the statement required to
be delivered pursuant to Section 5.2.1.

     4. Lease; Term Additional Improvements; Signage.

          4.1. Immediate Effect of Lease. This Lease shall take effect upon
the date of execution hereof by both parties hereto and, except as specifically
provided otherwise herein,

-5-

 

each of the provisions hereof shall be binding upon and inure to the benefit
of Landlord and
Tenant thereafter.

          4.2.
Lease Term. The term of this Lease (the “Term”) shall be eight (8)
years from the Term Commencement Date (as defined in Section 5.2, below), plus
any period extending from the end of the Term until the last day of the calendar
month in which the Term would otherwise expire, subject to extension pursuant to
Section 4.3, below. For example only, if the Term Commencement Date were April
15, 1996, the Term would expire on April 30, 2004.

          4.3. Option to Extend. Tenant shall have two (2) options to extend
(“Extension Option”) the Term for a period of five (5) years each (the foregoing
option terms (or either of them) shall be referred to hereinafter sometimes
individually or collectively as the “Option Term”), in accordance with the
following terms and conditions:

               4.3.1. Option Term Rent. The Annual Rent during each Option Term
(the “Option Term Annual Rent”) shall be determined as follows:

                    (a) At the commencement of each Option Term the Option Term
Annual Rent shall be an amount equal to the greater of (i) ninety-five percent
(95 %) of the then Fair Market Rental Value of the Demised Premises as then
configured (the “Fair Market Rental Value”), as stated on an annual basis and
determined pursuant to Section 4.3.3, below and (ii) the Annual Rent for the
Demised Premises which was in effect immediately prior to the commencement of
the Option Term in question. Tenant shall also continue to pay during any Option
Term all Operating Expenses and Additional Rent as required in this Lease.

                    (b) On the first day of the twenty-fifth (25th) and the
fifty-fifth (55th) month of any Option Term, the Annual Rent shall increase to
an amount equal to the product of (i) the then applicable Annual Rent for the
Demised Premises and (ii) 1.075.

               4.3.2. Exercise of Option. Tenant may exercise the Extension Option
only by delivering a binding written notice of exercise to Landlord (“Tenant’s
Extension Notice”), so that Landlord receives Tenant’s Extension Notice at least
three hundred sixty (360) days prior to the commencement of the Option Term in
question. Tenant may not exercise the Extension Option if an uncured Event of
Default exists at the time for such exercise.

               4.3.3. Determination of Fair Market Rental Value. Upon receipt by
Landlord of Tenant’s Extension Notice under Section 4.3.2, above, Landlord and
Tenant shall meet in an effort to negotiate, in good faith, the Option Term
Annual Rent which will become effective, as of the first day of the Option Term
(the “Option Term Commencement Date”). If Landlord and Tenant have not agreed
upon the Option Term Annual Rent within fifteen (15) days after the delivery of
Tenant’s Extension Notice, the Option Term Annual Rent shall be determined as
follows:

                    (a) Landlord and Tenant shall attempt to agree in good faith
upon a single appraiser not later than one (1) month after delivery of Tenant’s
Extension Notice. If

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Landlord and Tenant are unable to agree upon a single appraiser within such time
period, then Landlord and Tenant shall each appoint one appraiser not later than
fifteen (15) days after the deadline for selecting a single appraiser. Landlord
and Tenant shall each give written notice to the other as to the name of the
appraiser it has selected, as soon as the selection is made. Within ten (10)
days thereafter, the two appointed appraisers shall appoint a third appraiser.
All appraisers shall be independent from, and disinterested in, both Landlord
and Tenant.

                    (b) The only task which the appraisers will perform will be
forming and reporting to Landlord and Tenant an opinion of the Fair Market
Rental Value of the Demised Premises for use in determining the Option Term
Annual Rent.

                    (c) If either Landlord or Tenant fails to appoint its
appraiser within the prescribed time period, the single appraiser appointed
shall determine the Fair Market Rental Value of the Demised Premises. If both
parties fail to appoint appraisers within the prescribed time periods, then the
first appraiser thereafter selected by a party shall determine the Fair Market
Rental Value of the Demised Premises.

                    (d) Each party shall bear the cost of its own appraiser and
the parties shall share equally the cost of any single or third
appraiser, if applicable. All appraisers so designated herein shall
have at least five (5) years’ experience in the appraisal of
commercial office properties in the San Diego area and shall be
members of professional organizations such as MAI or its equivalent.

                    (e) For the purpose of such appraisal and this Section 4.3.3,
the term “Fair Market Rental Value” shall mean the price that a
ready and willing single tenant would pay, as of the Option Term
Commencement Date, as annual rent to a ready and willing landlord of
a comparable property to the Demised Premises on the terms of this
Lease, if such property were exposed for lease on the open market
for a reasonable period of time, and taking into account all of the
purposes for which such property may be legally used. A “comparable
property” shall mean a commercial office facility located in the
Golden Triangle, Sorrento Hills, Sorrento Mesa, Torrey Pines and Del
Mar Heights areas of San Diego (collectively the “North City Area”),
with improvements similar in age and character to the Demised
Premises, which has been improved with the tenant improvements
comparable to those constructed in the Demised Premises; provided,
however, that the appraisal shall disregard the value of the
equipment which Tenant is entitled to remove at the expiration or
termination of the Term of this Lease. The appraiser shall give
appropriate consideration to all relevant factors, including,
without limitation, (i) the fact that this Lease is a “triple net”
lease, (ii) rental concessions and tenant improvement allowances
generally being offered by landlords of comparable properties, (iii)
the age of the Improvements, (iv) the condition of the Demised
Premises on the assumption that Tenant has complied with its
obligations to maintain and repair the Demised Premises, (v) current
rental market conditions and the alternative uses and users for the
Demised Premises, and (vi) whether Landlord will or will not be
required to pay a real estate brokerage commission in connection
with Tenant’s exercise of the Extension Option.

                    (f) If a single appraiser is chosen, then such appraiser shall
determine the Fair Market Rental Value of the Demised Premises. Otherwise, the
Fair Market

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Rental Value of the Demised Premises shall be the arithmetic average of the two
(2) appraisals which are closest in amount, and the third appraisal shall be
disregarded.

                    (g) Landlord and Tenant shall instruct the appraiser(s), in
writing, to complete their written determination of the Fair Market Rental Value
not later than nine (9) months prior to the Option Term Commencement Date. If
the Fair Market Rental Value is not determined prior to the Option Term
Commencement Date, then Tenant shall continue to pay Landlord monthly
installments of Annual Rent in the amount applicable to the Demised Premises
immediately prior to the Option Term Commencement Date until the Fair Market
Rental Value is determined. When the Fair Market Rental Value of the Demised
Premises is determined, Landlord shall deliver notice thereof to Tenant, and
Tenant shall pay to Landlord, or Landlord shall pay to Tenant, as the case may
be, within ten (10) days after receipt of such notice, the difference between
the monthly installments of Annual Rent actually paid by Tenant to Landlord
subsequent to the Option Term Commencement Date and the new monthly installments
of Annual Rent which are determined to have been actually owing during such
period in accordance with Section 4.3.1 (a).

                    (h) On or before the date eight (8) months prior to the Option
Term Commencement Date, or if earlier, ten (10) days after the final
determination of the Option Term Annual Rent, Tenant may elect to rescind its
Tenant’s Extension Notice to Landlord under Section 4.3.2 of this Lease by
delivering a binding written notice of rescission to Landlord. Should Tenant so
elect, Tenant shall immediately reimburse Landlord for any expenses reasonably
incurred by Landlord in accordance with this Section 4.3.3. If Tenant does not
rescind its Tenant’s Extension Notice as provided in this subsection (h),
Tenant’s Extension Notice shall thereafter be irrevocable. Notwithstanding the
foregoing, if the final determination of the Option Term Annual Rent has not
been made by the date eight (8) months prior to the Option Term Commencement
Date due solely to Landlord’s failure to timely follow the procedure described
in this Section 4.3.3, then Tenant shall have until ten (10) days after the
final determination of the Option Term Annual Rent to rescind its Tenant’s
Extension Notice.

          4.4. Tenant’s Option to Vacate. On the first day of the
sixtieth (60th) month of the Term (“Contraction Date”), Tenant shall have the
right to vacate all or some (but in no event less than 10,000 contiguous square
feet of Rentable Area) of the “Contraction Space” as identified in the Site Plan
attached to this Lease as Exhibit “B-2.” In order to exercise the right to
vacate described in this Section 4.4, Tenant shall have delivered written notice
to Landlord (“Contraction Notice”), not less than 360 days prior to the
Contraction Date, advising Landlord of Tenant’s intention to vacate some or all
of the Contraction Space, and identifying with specificity the portion (if less
than all) of the Contraction Space Tenant intends to vacate. The Contraction
Notice shall be accompanied by payment, in cash, of a fee equal to eighty
percent (80%) of the then net present value of the Annual Rent which Tenant
would have owed for the Contraction Space during the balance of the Term
(excluding any Option Term). The net present value shall be calculated using a
ten percent (10%) interest rate. In the event Tenant exercises its rights under
this Section 4.4 and vacates a portion of the Demised Premises, the provisions
of the “Multi-Tenant Addendum”, attached to this Lease as Exhibit “D” shall
apply and shall, to the extent contradictory of other provisions of
this Lease,
govern the matters addressed in such addendum, The provisions of this Section
4.4 shall not apply so long as an uncured Event of

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Default exists. Should Tenant fail or be disabled from exercising its rights
under, and in strict compliance with, this Section 4.4, Tenant shall have no
further rights to vacate the Contraction Space or any other portion of the
Demised Premises.

          4.5. Tenant’s Opportunity to Lease Additional Improvements. During the
first eighteen (18) months of the Term, Landlord shall not be entitled to
construct buildings or other permanent improvements intended for occupancy or
storage (e.g. excluding landscaping, associated hardscape, sidewalks and parking
areas) on the Land, other than the Improvements. Thereafter, Landlord may at any
time during the Term elect to proceed with the construction and leasing of an
additional office building or buildings on the Land (the “Additional
Improvements”) in Landlord’s sole and absolute discretion, subject to the
following limitations:

               4.5.1. The construction of the Additional Improvements shall not
result in the reduction of the parking spaces available for Tenant’s
non-exclusive use to an amount less than the number of parking spaces
contained within the Demised Premises as of the Term Commencement Date.

               4.5.2. Provided that no uncured Event of Default then exists, before
offering the Additional Improvements for lease to another tenant, Landlord
shall offer to Tenant, in writing (“Landlord’s Lease Offer Notice”), the
opportunity to lease some or all (but not less than 10,000 square feet of
Rentable Area) of the Additional Improvements (the “Additional Premises”);

               4.5.3. Landlord’s Lease Offer Notice shall be on the same terms and
conditions under which Tenant is then leasing the Demised Premises, except
that:

                    (a) the Annual Rent for the Additional Premises (the
“Additional Premises Rent”) shall be the greater of (i) the Annual
Rent then applicable to the Demised Premises (as calculated on a
per-square-foot-of-Rentable-Area basis) and (ii) an amount equal to
the sum of (1) the product of (a) the Total Project Costs incurred
by Landlord in the construction of the Additional Improvements, and
(b) .11 (adjusted on a pro rata basis to reflect the square footage
of Rentable Area in the Additional Premises) and (2) any payments
required to be made by Landlord to San Diego Gas & Electric Company
to secure additional parking area on land adjacent to the Land (the
“SDG&E Land”);

                    (b) the Term of the Lease with respect to the Additional
Premises (the “Additional Premises Term”) shall be eight (8) years
from the Term Commencement Date for the Additional Premises, plus
any period extending from the end of the Additional Premises Term
until the last day of the calendar month in which the Additional
Premises Term would otherwise expire, subject to extension pursuant
to Section 4.3, above.

                    (c) the Additional Premises Rent shall increase at the
beginning of the thirty-first (31st), sixty-first (61st) and
ninety-first (91st) months of the Additional Premises Term to an
amount equal to the product of (i) the Additional Premises Rent then
payable and (ii) 1.075.

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               4.5.4. Tenant shall have thirty (30) days following receipt of
Landlord’s Lease Offer Notice to deliver to Landlord unconditional and
irrevocable acceptance of Landlord’s Lease Offer Notice identifying the
size of the Additional Premises.

               4.5.5. Tenant and Landlord shall then have thirty (30) days
thereafter to (i) determine and identify the exact size and location of
the Additional Premises, if they are smaller than the entire Additional
Improvements (which shall be mutually determined in good faith), and (ii)
execute a definitive addendum to this Lease or similar instrument
formalizing the addition of the Additional Premises and the terms under
which they are being leased to Tenant.

               4.5.6. If Tenant either (i) rejects Landlord’s Lease Offer Notice,
(ii) accepts Landlord’s Lease Offer Notice, but subject to conditions or
contingencies, (iii) submits a counter-offer to Landlord’s Lease Offer
Notice (iv) accepts Landlord’s Lease Offer Notice but fails to execute
definitive documents within the thirty (30) day period provided, or (v)
fails to respond to Landlord’s Lease Offer Notice, Tenant shall be deemed
to have rejected Landlord’s Lease Offer Notice, in which case Landlord
shall have no further responsibility under this Section 4.5 and shall be
free to lease the Additional Improvements to a party other than Tenant.

               4.5.7. The foregoing commitments by Landlord shall not constitute a
right of first refusal which Tenant can enforce against Landlord to the
detriment of any lease to a third party which Landlord may elect to make
so long as the provisions of this Section 4.5 have been observed.

          4.6. Identification of “Common Facilities”.

               4.6.1. Additional Improvements. If Additional Improvements are ever
 built and leased to a tenant other than Tenant, some of the parking
areas, driveways, sidewalks, landscaped areas, open space and adjacent
areas may be, as appropriate and as determined by Landlord in its
reasonable discretion, removed from the definition of the Demised
Premises, and instead such areas will become “common facilities” to be
shared by Tenant and the tenant(s) of the Additional Improvements;
provided, however, Tenant shall retain the non-exclusive use of at least 5
parking spaces for each 1,000 square feet of Usable Area contained within
the Demised Premises. If and when the Additional Improvements are so
constructed and the Demised Premises modified, then the provisions of the
“Multi-Tenant Addendum”, attached to this Lease as Exhibit “D,” shall
apply and shall, to the extent contradictory with other provisions of this
Lease, govern the rights and obligations of Landlord and Tenant with
regard to the matters addressed in such addendum.

               4.6.2.
Contraction Space. If Tenant exercises its right pursuant to
Section 4.4 of this Lease to vacate a portion of the Demised Premises,
certain portions of the Demised Premises which are available for use by
all tenants in the Building (i.e. common areas) shall become subject to
the provisions of the “Multi-Tenant Addendum” and the rights and
obligations of Landlord and Tenant shall, to the extent contradictory with
other provisions of this Lease, be thereafter governed by such addendum.

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               4.6.3.
Mutual Rights of Ingress and Egress. In addition to
Landlord’s rights under Section 10 of this Lease, Landlord, and its
officers, agents, employees, contractors, subcontractors, invitees, and
tenants shall be entitled to ingress and egress over and to park on the
exterior portions of the Demised Premises (e.g. sidewalks, roads, ramps
and parking areas) as may be reasonably necessary in connection with the
use, construction, ownership, maintenance or occupancy of the Additional
Improvements and such ingress and egress shall not be or deemed to be an
actual or constructive eviction of Tenant or an interference with Tenant’s
rights under this Lease. Tenant, and its officers, agents, employees,
contractors, subcontractors, and invitees, shall be entitled to ingress
and egress over and to park on the exterior portions of the Additional
Improvements (e.g. sidewalks, roads, ramps and parking areas) as may be
reasonably necessary in connection with the use, maintenance or occupancy
of the Demised Premises.

               
4.6.4. Subdivision of Land; Reciprocal Easements.
Nothing in this Lease shall prohibit Landlord from subdividing the Land
into separate legal parcels or lots, whether in connection with the construction of Additional Improvements, or otherwise. In
such an event, Landlord may, in its sole and absolute discretion, formalize the
rights of reciprocal access and parking of the nature described in Section
4.6.3, above, in a reciprocal easement agreement or similar instrument
reasonably acceptable to Tenant and Tenant shall not unreasonably withhold or
delay its approval and, if necessary, execution and acknowledgment of such an
instrument.

          4.7. Signs.

               4.7.1.
Tenant as Sole Occupant - Exclusive Rights. So long as Tenant
is the sole occupant of the Building and the Additional Improvements, if
any, then Tenant shall have the exclusive right (subject to Landlord’s
rights under Section 10 of this Lease) to affix exterior signs to the
Building or to construct a monument sign identifying Tenant’s occupancy of
the Building or the Additional Improvements, subject, however, to (i)
Landlord’s prior written approval, which shall not be unreasonably
withheld, and (ii) compliance with all Applicable Laws and Instruments of
Record, including permit, design review and approval requirements.

               4.7.2. Shared Signage. If, at any time during the Term of this
Lease, Tenant is not the sole occupant of either the Building or the
Additional Improvements, then the right to affix signs to the exterior of
the Building or the Additional Improvements or to construct or appear on
any monument sign(s) shall be shared among Tenant and any other tenant in
proportion to the Rentable Areas of their respective premises; provided
that Tenant shall not be required to incur any cost in the reconfiguration
of any existing signage; and provided further that Tenant’s consent shall
be obtained before any existing signage is changed, such consent not to be
unreasonably withheld or delayed.

               4.7.3. Initial Signage. Subject to the approval and legal compliance
requirements of Section 4.7.1, above, Tenant may request that Landlord
construct a monument sign on the Demised Premises identifying Tenant’s
occupancy and the cost thereof shall be included as part of Total Project
Cost.

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     5. Possession and Commencement Date.

          5.1. Landlord and Tenant acknowledge that it is very important to
both parties to complete the construction of the Improvements as soon as
reasonably feasible and both parties agree to use diligent and good faith
efforts to cause construction of the Improvements to be completed as soon
as reasonably feasible. Landlord shall use reasonably diligent efforts to
tender possession of the Demised Premises to Tenant, substantially
completed, on the Estimated Term Commencement Date.

          5.2. The term commencement date of the Term of this Lease shall be
the earlier of (i) the date Landlord tenders possession of the Demised
Premises to Tenant with construction of the Improvements substantially
complete; (ii) the date Tenant actually accepts possession of the entire
Demised Premises and commences to conduct business therefrom; or (iii) the
date that construction of the Improvements would have been substantially
completed but for Tenant-Caused Delays, as that term is defined in Section
27.2 (the “Term Commencement Date”).

               5.2.1. Commencing with the notice required to be delivered to
Tenant pursuant to Section 3.2.1, above, and continuing monthly
thereafter, Landlord shall also deliver to Tenant written estimates
of the expected actual Term Commencement Date. Notwithstanding
anything to the contrary in this Lease, Landlord shall provide
Tenant with no less than thirty (30) days’ prior notice, in writing,
that the Demised Premises are, or shortly shall be, available for
occupancy.

               5.2.2. Landlord and Tenant shall each execute and deliver to
the other written acknowledgment of the actual Term Commencement
Date and the date when the Term will expire when such is established
and shall attach it to this Lease as Exhibit “E”; however, failure
to execute and deliver such acknowledgment shall not affect Tenant’s
liability hereunder.

               5.2.3. Tenant may elect, by delivering written notice to
Landlord within ten (10) business days prior to the Target
Commencement Date (as established in accordance with Section 3.2.1,
above), to occupy the Demised Premises for a period of fifteen (15)
days following the Term Commencement Date for the purpose of
installation of fixtures and other equipment or improvements which
are not part of the Improvements, without the immediate obligation
to pay Annual Rent for such fifteen (15) day period; provided,
however, that the Annual Rent which would have been applicable to
and payable for such fifteen (15) day period shall be added to the
Annual Rent payable during the remainder of the Initial Term and
equally amortized over the remainder of the Initial Term and the
Annual Rent payable by Tenant during the remainder of the Initial
Term shall be increased accordingly.

           5.3. Landlord shall allow
Tenant to enter upon the Demised Premises prior to the Term
Commencement Date for the purpose of installation of fixtures and
other equipment or improvements which are not part of the
Improvements, provided such entry shall be coordinated in advance
with Landlord and Landlord’s Contractor (as defined in the Work
Letter) so as to not interfere with the construction by Landlord or
Landlord’s Contractor of the Improvements. Such entry shall be
subject to all the terms and conditions of this Lease, and the

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Work Letter, other than for the payment of Annual Rent or Additional Rent. Such
entry shall not constitute possession for purposes of establishing the Term
Commencement Date.

          5.4. Prior to Tenant’s initial entry onto the Demised Premises for
the purpose of (i) installing improvements that are not a part of the
Improvements, or (ii) placing Tenant’s personal property within the
Demised Premises, Tenant and Landlord shall furnish each other evidence
satisfactory to the other that insurance coverages required under the
provisions of Section 18 herein are in effect.

     6. Rent.

          6.1. Annual Rent. Tenant agrees to pay Landlord as annual rent (the
“Annual Rent”) for the Demised Premises the sums set forth in Section 2.5
of this Lease, subject to adjustment as provided in Section 5.2.3, above,
and Section 6.4, below. Annual Rent shall be paid in equal monthly
installments, with each payment made in advance on the first day of each
and every calendar month during the Term of this Lease, except that the
first full month’s installment of Annual Rent (plus the monthly
installment of Annual Rent pro rated for any partial month at the
beginning of the Term hereof) shall be paid by Tenant to Landlord on the
Term Commencement Date (i.e. if the Term Commencement Date is April 15,
1996, Tenant will pay its monthly installment of Annual Rent for May,
together with a prorated portion of the Annual Rent for April, on April
15, 1996; the next monthly installment of Annual Rent will be due on June
1, 1996).

          6.2.
Additional Rent. In addition to Annual Rent, Tenant agrees to
pay, as additional rent (“Additional Rent”), at times hereinafter
specified in this Lease (i) all Operating Expenses which, pursuant to
Section 11 of this Lease, are paid by Landlord, (ii) all Operating
Expenses which, pursuant to Section 11 of this Lease, Tenant is obligated
to pay directly, and (iii) any other amounts that Tenant assumes or agrees
to pay under this Lease that are owed to Landlord, including, without
limitation, any and all other sums that may become due by reason of an
Event of Default by Tenant or by reason of Tenant’s failure to comply with
the agreements, terms, covenants and conditions of this Lease to be
performed by Tenant.

          6.3. No Deduction or Offset. Annual Rent and Additional Rent are
together denominated in this Lease as “Rent”. Rent shall be paid to
Landlord, without abatement, deduction or offset, in lawful money of the
United States of America, at the office of Landlord as set forth in
Section 2.7, herein or to such other person or at such other place as
Landlord may from time to time designate in writing with not less than
three (3) business days advance notice to Tenant. In the event 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 fraction of a month shall be
prorated for such period on the basis of a thirty (30) day month and shall
be paid at the then current rate for such fractional month.

          6.4. Adjustments in Annual Rent.

               6.4.1.
Changes in Size of Building; Initial Adjustment in
Annual Rent. Landlord and Tenant acknowledge that the final design,
configuration, and square footage of the

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Demised Premises, including Tenant Improvements, has not been finalized as of
the execution of this Lease. The schedule of Annual Rent which appears in
Section 2.5 was based on the following projections: (a) the Building will
contain 140,000 square feet of Gross Area (as defined in Section 1.2 of this
Lease) (the “Projected Gross Area”), (b) the Total Project Cost, including the
Tenant Improvements will be Ten Million Eight Hundred Eight Thousand Dollars
($10,808,000) (the “Projected Total Project Cost”), (c) the Land Cost (as
defined in Section 6.4.1(b), below) will be Two Million Five Hundred Thousand
Dollars ($2,500,000), and, (d) the Annual Rent during the first thirty (30)
months of the Term will be One Million Four Hundred Twenty Thousand Nine Hundred
Six Dollars ($1,420,906) (the “Projected Initial Annual Rent”). Upon the
completion of the Improvement Plans and a final determination of the Gross Area
of the Building to be constructed by Landlord (“Actual Gross Area”):

                    (a) the Projected Total Project Cost shall be adjusted
by applying to it a fraction, the numerator of which is the
Actual Gross Area and the denominator of which is the
Projected Gross Area;

                    (b) the “Land Cost” of the Demised Premises shall equal
the total cost to Landlord of acquiring and holding the
Land until commencement of construction of the Demised
Premises, and will include, (x) the purchase price paid to the
seller of the Land ($2,350,000), (y) any costs, fees or other
expenses incurred to third parties in connection with the
acquisition of the Land (e.g. title insurance premiums, the
costs of surveyors, environmental consultants and soils
engineers, loan fees and points, demolition costs, etc.), and
(z) expenses incurred in connection with the ownership of the
Land from and after such acquisition until the commencement of
construction, including real property taxes, property owners’
association fees and dues, and debt service on
mortgage-secured financing used to acquire the Land, including
any interest paid thereon.

                    (c) the Projected Initial Annual Rent (and the projected
Annual Rent for each succeeding period described in Section
2.5) shall be adjusted by applying to it a fraction, the
numerator of which is the sum of (i) the Projected Total
Project Cost, as adjusted pursuant to subsection (a), above,
and (ii) the Land Cost, and the denominator of which is the
sum of (y) the Projected Total Project Cost (without
adjustment), and (z) the Land Cost.

 By way of example only, if
the Actual Gross Area of the Building is 130,000 square feet,
then the Projected Total Project Cost will be decreased to Ten
Million Thirty Six Thousand Dollars ($10,036,000) ($10,808,000
x [130,000 ÷ 140,000]). The Projected Initial Annual Rent
will be decreased to One Million Three Hundred Thirty Eight
Thousand Four Hundred Seventy Nine Dollars ($1,338,479)
($1,420,906 x [($10,036,000 + 2,500,000) ÷ (10,808,000 +
2,500,000)]). For purposes of this Lease, and this Section 6.4
in particular, the terms “Projected Total Project Cost” and
“Projected Initial Annual Rent” shall mean the amounts as
adjusted in accordance with this Section 6.4.1.

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               6.4.2.
Changes in Total Project Cost; Final Adjustment of
Annual Rent.

                    (a) Increase
in Total Project Cost. If the Total Project
Cost (as determined in accordance with Section 6.5, below)
exceeds the Projected Total Project Cost (the “Total Project
Cost Excess”), the Annual Rent, effective as of the Term
Commencement Date, shall equal and be established as the sum
of (i) the Projected Initial Annual Rent, and (ii) an amount
equal to the product of (x) the Total Project Cost Excess and
(y) eleven percent (.11), and the Annual Rent for the balance
of the Term, as scheduled in Section 2.5 of this Lease, shall
be adjusted accordingly. Notwithstanding the foregoing,
provided the Improvement Plans have been prepared in
substantial conformance with Schedule 1 to the Work Letter,
only one-half (1⁄2) of any Total Project Cost Excess greater
than Four Hundred Thousand Dollars ($400,000) shall be
included in the calculation of the increase in Annual Rent.

 By
way of example only, if the Projected Total Project Cost and
Projected Initial Annual Rent, were the amounts used in the
example in Section 6.4.1, above, and a Total Project Cost
Excess of Five Hundred Thousand Dollars ($500,000) were
experienced, then the Annual Rent, effective as of the Term
Commencement Date, would be One Million Four Hundred Seventy
Thousand Four Hundred Six Dollars ($1,470,406) ($1,420,906 +
[$400,000 x .11] + [$100,000 x .11 x. 50]) and the Annual Rent
for each succeeding period would be increased by a like
amount.

                    (b) Decrease in Total Project Cost. If the Total Project
Cost (as determined in accordance with Section 6.5, below) is
less than the Projected Total Project Cost (the “Total Project
Cost Savings”), the Annual Rent, effective as of the Term
Commencement Date, shall equal and be established as the sum
of (i) the Projected Initial Annual Rent, less (ii) an amount
equal to fifty percent (.50) of the product of (x) the Total
Project Cost Savings and (y) eleven percent (.11), and the
Annual Rent for the balance of the Term, as scheduled in
Section 2.5 of this Lease, shall be adjusted accordingly.

 By
way of example only, if the Projected Total Project Cost and
Projected Initial Annual Rent, were the amounts used in the
example in Section 6.4.1, above, and a Total Project Cost
Savings of Five Hundred Thousand Dollars ($500,000) were
experienced, then the Annual Rent, effective as of the Term
Commencement Date, would be One Million Three Hundred Ninety
Three Thousand Four Hundred Six Dollars ($1,393,406)
($1,420,906 - [.50 x [$500,000 x .11]]) and the Annual Rent
for each succeeding period would be decreased by a like
amount.

                    (c) Timing of Adjustment of Annual Rent. As soon as
practicable following the Term Commencement Date, the actual
Total Project Cost will be determined in accordance with the
terms of Section 6.5, below, and the Annual Rent, throughout
the Term as scheduled in Section 2.5 of this Lease, shall be
determined. Since the Total Project Cost, and resulting
adjustments in Annual Rent, if any, will not be finally
determined until after the Term Commencement Date and,
accordingly, the Annual Rent, as scheduled in Section 2.5 of
this Lease, will not have been finally determined prior to the
Term Commencement Date, the Annual Rent as of the Term
Commencement Date shall be the Projected Initial Annual Rent,
as adjusted pursuant to Section 6.4.1, above. When any final
adjustment in the Annual Rent is finally determined in
accordance with this Section 6.4.2, Landlord and Tenant shall
each execute

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and deliver to the other an addendum to this Lease formalizing the actual Annual
Rent, as adjusted, in the form of Exhibit “E” to this lease. If, as a result of
any such adjustment, there has been an underpayment of Annual Rent since the
Term Commencement Date, Tenant shall, with the next scheduled monthly payment of
Annual Rent, pay to Landlord any such underpayment. If, as a result of any such
adjustment, there has been an overpayment of Annual Rent since the Term
Commencement Date, Tenant shall, with the next scheduled monthly payment of
Annual Rent, receive a credit against such monthly payment (and to the extent
necessary succeeding monthly payments) in the amount of any such overpayment.

               6.4.3. Excess Tenant Improvements. Landlord and Tenant
acknowledge that the Projected Total Project Cost has been
determined based on an expectation that twenty percent (20%) of the
Building would be improved with “fixed wall” Tenant Improvements.
Landlord and Tenant expect that, in fact, the Tenant Improvements
will be substantially all “fixed wall.” Furthermore, the Projected
Total Cost was not expected to include the cost of “side lights”
installed in office demising walls located next to the doors it
offices in the Building, although it is now expected that “side
lights” will be installed next to each office door in the Building.
The construction of these excess Tenant Improvements involves
expenses to Landlord which have not been included in the Projected
Total Project Cost and will, therefore, be treated separately from
the calculation of Annual Rent. Landlord and Tenant have agreed that
Landlord will incur Eight Hundred Sixty Thousand Dollars ($860,000)
in expense in the construction of the additional “fixed walls” and
that Landlord will incur One Hundred Twelve Thousand Dollars
($112,000) in expense in the installation of the “side lights.” The
additional expenses associated with these specific excess Tenant
Improvements shall be repaid to Landlord through the payment by
Tenant of Additional Rent payable, on a monthly basis throughout the
Initial Term, in an amount equal to Fourteen Thousand Ninety Two
Dollars ($14,092). Such amount shall not be (i) subject to increases
pursuant to Section 2.5 of this Lease, nor (ii) included in the
determination of Option Term Annual Rent, nor (iii) considered a
Tenant Change hereunder. In lieu of paying the Additional Rent
described above, Tenant may elect, in a writing delivered to
Landlord on or before June 30, 1995, to pay to Landlord the Nine
Hundred Seventy Two Thousand Dollars ($972,000) cost of the excess
Tenant Improvements, in a lump sum cash payment, which, if Tenant
makes such election, shall be due and payable from Tenant, as
Additional Rent, to Landlord within five (5) days after Landlord’s
written demand therefor. It is Landlord’s expectation that these
funds will be required at the time of the recordation of the
construction loan for the Building.

               6.4.4. Payment for Tenant Changes. Landlord and Tenant
acknowledge that the Projected Total Project Cost reflected in
Section 6.4.1, above, has been determined based on an expectation
that the Improvement Plans will be prepared in substantial
conformance with Schedule 1 to the Work Letter. The provisions of
Section 6.4.2, above, which address the results of increases in
Total Project Cost, use the Projected Total Project Costs as a
baseline from which increases are measured. Increases in Total
Project Costs which are the result of Tenant Changes (as such term
is defined in Exhibit C, Section I.H.1) shall, therefore, be treated
separately from the increases described in Section 6.4.2, as
follows:

               (a) With respect to a Tenant Change which is of a
permanent nature and related to (1) the Building shell (i.e.
the Building excluding Tenant Improvements),

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(2) the size, configuration and location on the Land of the Building or
improvements to the Building site, or (3) Building systems (e.g. HVAC), the
Annual Rent shall be increased by an amount equal to the product of (i) the
Total Project Cost associated with that Tenant Change and (ii) eleven percent
(11%). Such amount shall not be (i) subject to increases pursuant to Section 2.5
of this Lease, or (ii) included in the determination of Option Term Annual Rent;

                    (b) With respect to a Tenant Change which involves items
similar to Tenant Improvements (e.g. wall coverings, floor
coverings, millwork, lighting) the cost of such Tenant
Improvements shall be repaid to Landlord through the payment
by Tenant of Additional Rent payable, on a monthly basis
throughout the Initial Term, of an amount sufficient to fully
amortize the Total Project Cost associated with that Tenant
Change over the Initial Term while applying an interest rate
of nine percent (9%) per annum. Such amount shall not be (i)
subject to increases pursuant to Section 2.5 of this Lease,
nor (ii) included in the determination of Option Term Annual
Rent; and

                    (c) With respect to a Tenant Change which involves items
of furniture, trade fixtures and non-permanent equipment (e.g.
special data and telephone cabling (Landlord shall provide and
install the conduit), security systems, kitchen improvements
(including, without limitation, equipment, fixtures,
furnishings and mechanical system alterations), fitness
equipment, and signage in addition to that described elsewhere
in this Lease), these shall either (A) be paid by Tenant, in
full and in advance of installation, or, (B) if purchased by
Landlord, Tenant shall pay Landlord for such items (at
Landlord’s cost) in advance of Landlord’s commitment to
purchase.

                    (d) In lieu of paying the additional Annual Rent
described in subsection (a), above, and/or the additional
payments described in subsection (b), above, Tenant may elect
(which election shall be made at the time Landlord provides
the written response to Tenant’s request for the Tenant
Change described in Section I.H.2 of the Work Letter), to pay
directly to Landlord the cost of such Tenant Change, in cash,
within five (5) days after written demand therefor delivered
to Tenant by Landlord at the time of Landlord’s approval of
the requested Tenant Change or any time thereafter.

          6.5. Total Project Cost. The term “Total Project Cost” shall mean
costs reasonably and necessarily incurred by Landlord in the proper
performance of its obligation to construct the Improvements, as determined
in accordance with this Section 6.5 and the Work Letter.

               6.5.1. Components of Total Project Costs. Subject to the
foregoing general definition, Total Project Costs shall include all
costs and expenses of the type and character described below and
which are paid to third parties (with the exception of the
development fee described in subsection (m) below), including,
without limitation for:

                    (a) Architectural and engineering services.

                    (b) Space planning and design services.

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                    (c) Consulting and professional services, including
legal and accounting.

                    (d) Governmental permits, plan check inspections and
approvals and other government imposed fees and charges.

                    (e) Utility company hook-ups, installation charges,
sewer and water capacity fees, meter(s) and associated piping
and other related charges.

                    (f) Insurance, bonds, assessments, and property taxes
during course of construction.

                    (g) Sales and property taxes during course of
construction.

                    (h) Grading, paving and landscaping of the Land.

                    (i) All payments and charges owed under any construction
contract or subcontract entered into by Landlord in connection
with the construction of the Improvements, including the
Building and the Tenant Improvements.

                    (j) To the extent not included in (i), above, labor and
material costs incurred in the construction of the
Improvements.

                    (k) Contract bidding and cost budgeting services.

                    (l) Interest on construction and permanent financing and
related costs and expenses, including points, loan charges and
fees.

                    (m) A development fee payable to Landlord in the amount
of Three Dollars ($3.00) per square foot of the Gross Area of
the Building.

                    (n) Leasing commissions paid by Landlord to The Staubach
Company and Colliers Illif Thorn.

                    (o) All other costs and services directly related to the
construction or installation of the Improvements, including
payments to San Diego Gas & Electric incurred during
construction of Additional Improvements for use of the SDG&E
Land.

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               6.5.2. Exclusions from Total Project Costs. Total Project Cost
shall not include the following:

                    (a) Salaries and other compensation paid to Landlord’s
personnel located at Landlord’s principal office or offices
other than on the Demised Premises.

                    (b) Expenses of Landlord’s principal office or offices
other than on the Demised Premises, including overhead and
general expenses.

                    (c) Costs incurred due to the active negligence of
Landlord or any person directly or indirectly employed by
Landlord and for whose acts Landlord is liable, and which
result in costs for the correction of damaged, defective or
nonconforming work, disposal and replacement of materials and
equipment incorrectly ordered or supplied.

                    (d) Costs related to Landlord’s acquisition of the Land,
which shall be included in Land Cost for purposes of
determining Annual Rent pursuant to Section 6.4.1, above.

               6.5.3. Landlord’s Maintenance of Records of Total Project
Cost. Landlord shall keep and maintain full and detailed records and
accounts of Total Project Costs incurred in the construction of the
Improvements and exercise such controls as may be necessary for
proper financial management and reporting under this Lease to the
extent related to the construction of the Improvements. Tenant shall
be afforded access to Landlord’s records and accounts, books,
correspondence, instructions, drawings, receipts, contracts and
subcontracts, purchase orders, vouchers, memoranda and other data
relating to Total Project Costs, and shall preserve them for a
period of one (1) year after substantial completion of construction
of the Improvements.

               6.5.4.
Determination of Total Project Cost; Arbitration of
Differences.

                    (a) Within ninety (90) days following substantial
completion of construction of the Improvements, Landlord shall
calculate (i) the final Total Project Cost in accordance with
this Section 6.5 and the Work Letter, (ii) any further
adjustment of the Annual Rent resulting from the application
of Section 6.4, above, in light of the final Total Project
Cost (i.e. determine an increase or decrease in Annual Rent)
and (iii) the initial Annual Rent and the Annual Rent for the
balance of the Term as reflected in Section 2.5, and shall
deliver the results of those calculations (together with
reasonably detailed supporting explanations) to Tenant, in
writing (“Final Rent Notice”).

                    (b) Within thirty (30) days after Tenant’s receipt of
the Final Rent Notice, Tenant shall deliver to Landlord,
either (i) a written acceptance of the Final Rent Notice, in
which case the initial Annual Rent shall be the Annual Rent as
reflected in the Final Rent

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Notice, or (ii) a written rejection of the Final Rent Notice, identifying the
specific basis upon which Tenant is challenging the Final Rent Notice (“Final
Rent Response”), during which thirty (30) day period Landlord shall be
reasonably available to meet with Tenant and explain and further substantiate
the basis for the Final Rent Notice. Tenant’s failure to deliver to Landlord a
Final Rent Response within such thirty (30) day period shall be deemed Tenant’s
acceptance of the Final Rent Notice and the Annual Rent and Section 2.5 of this
Lease shall be deemed modified accordingly.

                    (c) If Tenant rejects the contents of the Final Rent
Notice, Landlord and Tenant shall meet and endeavor, in good
faith, to resolve their differences. If, after fifteen (15)
days following delivery to Landlord of the Final Rent
Response, Landlord and Tenant have not resolved their
differences, they shall immediately submit their differences
to binding arbitration in accordance with the Construction
Industry Arbitration Rules of the American Arbitration
Association, and judgment upon the determination of the
arbitrator may be entered in any court having jurisdiction
thereof. Notice of demand for arbitration shall be filed by
Landlord in writing with Tenant; provided, however, that if
Landlord has not filed such demand for arbitration within ten
(10) days after the end of such fifteen (15) day period,
Tenant may file the demand for arbitration. At the
commencement of such an arbitration, Landlord and Tenant shall
each submit to the arbitrator a written statement of what they
contend is the proper Total Project Cost and Annual Rent. The
arbitrator’s sole responsibility shall be to determine which
of the two calculations of Total Project Cost and Annual Rent
is most accurate and may select only Landlord’s calculation or
Tenant’s calculation. Whichever party’s calculation is
accepted shall be considered the prevailing party and the
losing party shall bear all costs associated with such
arbitration, including the other party’s reasonable legal
expenses and reasonable expenses of other appropriate third
party professional advisors not affiliated with either party
(e.g. accountants, auditors).

     7. Authorized Use. The Demised Premises are leased to Tenant for general
office, production and distribution of Tenant’s products; and shall be used for
no other purpose without first securing the prior written consent of Landlord,
which consent shall not be unreasonably withheld.

          7.1. Tenant shall conduct its business operations and use the
Demised Premises in compliance with all Applicable Laws and Instruments of
Record. “Applicable Law(s)” is used in this Lease to mean all laws, rules,
regulations, zoning requirements, ordinances, directives, covenants,
easements and restrictions of record, permits, certificates of occupancy
(temporary and permanent), the requirements of any applicable fire
insurance underwriter or rating bureau relating in any manner to the
Demised Premises (including but not limited to matters pertaining to (i)
the Americans with Disabilities Act (“ADA”) (ii) industrial hygiene, (iii)
environmental conditions on, in, under or about the Demised Premises,
including soil and groundwater conditions, and (iv) the use, generation,
manufacture, production, installation, maintenance, removal,
transportation, storage, sale or release of any Hazardous Substance or
storage tank), now in effect or which may hereafter come into effect, and
whether or not reflecting a change in policy from any previously existing
policy. The term “Instruments of Record” is used in this lease to mean all
matters affecting title to the Demised Premises or the use thereof,
including, without limitation, the Declaration of Restrictions (Summers’
Governor Park) dated as of June

-20-

 

30, 1982, and the Summers Governor Park Design Guide promulgated thereunder.
Tenant shall, upon five (5) days’ written notice from Landlord, discontinue any
use of the Demised Premises which is declared by any governmental authority
having jurisdiction to be a violation of any Applicable Law or by any person or
entity with competent jurisdiction to be a violation of an Instrument of Record.
Throughout the Term of this Lease and/or Tenant’s occupancy of the Demised
Premises, Tenant shall, at its expense, comply with any direction of any
governmental authority having jurisdiction which shall, by reason of the nature
of Tenant’s use or occupancy of the Demised Premises, impose any duty upon
Tenant or Landlord with respect to the Demised Premises or with respect to the
use or occupancy thereof.

          7.2. Tenant shall not allow the Demised Premises to be used for
unlawful purposes, nor shall Tenant cause, maintain or permit any nuisance
or waste in or on the Demised Premises.

          7.3. Landlord shall deliver the Demised Premises to Tenant in
substantial compliance with the Improvement Plans, all Instruments of
Record and all Applicable Laws. Tenant agrees, at its own cost, to comply
with all Applicable Laws and Instruments of Record, whether or not
compliance therewith shall require changes in the Improvements, except to
the extent such changes are the result of Landlord’s failure to deliver
the Demised Premises in compliance with those Applicable Laws and
Instruments of Record, and except to the extent of any required changes
related to the public areas on (e.g. common areas, lobbies, public
restrooms), or means of public access to (e.g. walkways, elevators), the
Demised Premises, in which case Landlord shall be responsible for those
changes at its sole cost and expense. Items considered “public” for
purposes of this Section 7.3 shall be those which, by their nature or use,
are not intended exclusively for use by Tenant or its employees and
invitees.

          7.4. The insurance required to be maintained by Landlord and Tenant
pursuant to the provisions of Section 18.2 of this Lease shall be based
on Tenant’s actual use of the Demised Premises. If, after the Term
Commencement Date, the use of the Demised Premises changes to another
permitted use, such insurance shall, to the extent available, be changed
to the extent necessary to provide the required coverages in a manner
consistent with the changed use. Tenant shall not do or permit to be done
anything which will invalidate any fire, extended coverage or any other
insurance policy covering the Building or the Demised Premises. Tenant
shall comply with all reasonable rules, orders, regulations and
requirements of the insurers of the Demised Premises. Tenant shall pay for
any additional premium charged for any policy by reason of Tenant’s
failure to comply with the provisions of this Lease, or by reason of
Tenant’s particular use of the Demised Premises.

          7.5. Tenant shall keep the exterior appearance of the Demised
Premises in a neat and attractive condition, comparable to the appearance
as of the Term Commencement Date, subject to normal wear and tear, and at
all times in accordance with all Applicable Laws and Instruments of
Record, subject to Landlord’s obligation to have delivered the Demised
Premises in accordance therewith. In this regard, Tenant shall not place
any unsightly items on the Demised Premises which are visible from the
surrounding areas.

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          7.6. No equipment weighing in excess of the load per square foot
which such floor was designed to carry, or which is allowed by law, shall
be placed upon the Demised Premises. The Improvement Plans shall specify
the load bearing capacities of all floors in the Building.

          7.7. Tenant shall pay all costs, expenses, claims, fines, penalties
and damages that may, in any manner, arise out of or be imposed as a
result of the failure of Tenant to comply with the provisions of this
Section 7.

     8. Condition
of the Premises.

          8.1. Tenant acknowledges that the development of the Demised
Premises has been undertaken on a “build-to-suit” basis and that neither
Landlord nor any agent of Landlord has made any representations or
warranties (i) with respect to the condition of the Demised Premises or
the Building, as designed, except as set forth herein or in the Work
Letter, or (ii) with respect to the suitability of the Demised Premises,
as designed, for the conduct of Tenant’s business.

          8.2. Landlord makes no warranties or representations with regard to
any portion of the Demised Premises, and Tenant shall accept the Demised
Premises in the condition they are in on the Term Commencement Date
(subject to the completion of minor “punch-list” items (as described in
and in accordance with Section I.G.8 of the Work Letter) that may still
need to be corrected), except that (i) the Demised Premises shall be
constructed in substantial compliance with the Improvement Plans,
Applicable Laws and the Instruments of Record, and (ii) for the Term of
this Lease, the Improvements shall be free of latent defects in
construction, workmanship and materials, and Landlord shall be
responsible, at Landlord’s sole cost and expense, for the prompt and
diligent repair of any such latent defects which manifest themselves
during the Term.

          8.3. Except to the extent related to a latent defect which is the
subject of Landlord’s warranty in Section 8.2, above, and subject to
Landlord’s obligations regarding the condition of the Demised Premises
when delivered to Tenant under Section 7.3 of this Lease, Tenant shall be
entitled to pursue any available remedies and claims against the
construction contractors, equipment suppliers, manufacturers and other
responsible third parties for any defects that may be discovered in the
Demised Premises. Landlord shall assign, on a non-exclusive basis, to
Tenant any such claims if such an assignment is appropriate to enable
Tenant to pursue said claims and remedies. Landlord shall also be entitled
to pursue available remedies against said third parties. Any warranty made
by any person in connection with the construction of the Demised Premises
as to any materials, equipment or other items contained and incorporated
herein shall inure to the benefit of and be deemed to have been made to
Landlord, copies of all of which shall be delivered to Tenant.

     9. Repairs and Maintenance.

          9.1. Tenant’s Obligations. Except to the extent specifically
identified as Landlord’s responsibility in Section 9.2, below, Tenant
shall, at its own expense, keep the

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Demised Premises, and every part thereof, including, but not by way of
limitation, the grounds, landscaped areas, truck parking and loading and dock
areas, the roof and roof membrane, drainage swales, gutters, downspouts, glass,
interior and exterior portions of the Building, and the plumbing, heating,
air-conditioning, wiring, elevators and other mechanical systems therein, the
facilities thereof and all sidewalks, parking areas, driveways, passageways and
alleys adjacent thereto and other appurtenances thereunto belonging, in good
order, appearance, condition and repair (reasonable wear and tear excepted),
free of obstructions, dirt, and rubbish, and so as to comply fully and at all
times with all Applicable Laws consistent with other first-class business and
industrial parks in the North City Area. Tenant agrees to make all replacements
and repairs to the Demised Premises necessary to maintain the Demised Premises
in the condition described in the preceding sentence. Tenant, at its own
expense, shall also seal (paint) the exterior of the Building periodically
during the Term (including the Option Term) of this Lease in accordance with the
recommendations of the manufacturer of the material used for the exterior of
said Building. All repairs, replacements and renewals shall be at least equal in
quality and class to the original work. Any and all warranties to which Landlord
is entitled in connection with the development and construction of the Demised
Premises, including, without limitation, those referred to in Section 8 of this
Lease, shall be assigned to Tenant when and where appropriate, on a
non-exclusive basis, for the Term of this Lease. Because Tenant is undertaking
the responsibility for most aspects of the ongoing maintenance of the Demised
Premises, Tenant waives the provisions of California Civil Code
Sections 1941 and
1942 with respect to Landlord’s obligations for tenantability of the Demised
Premises and Tenant’s right to make repairs and deduct the expenses of such
repairs from Rent.

          9.2. Landlord’s Obligations. In addition to Landlord’s obligations
under Sections 7.3 and 8.2 of this Lease, and as a limitation on Tenant’s
obligations under Section 9.1, above, Landlord shall, at its own expense,
keep the structural elements of all exterior walls (except for painting of
the exterior walls, which shall be Tenant’s responsibility), the Building
foundation and all underground utilities, in good order, condition and
repair, and so as to comply fully and at all times with all Applicable
Laws and all Instruments of Record consistent with other first-class
business and industrial parks in the North City Area.

     10. Right of Entry by Landlord. Landlord or Landlord’s agents and
representatives shall be permitted during the Term of this Lease to inspect the
Demised Premises during reasonable business hours for the purposes inspecting
the Demised Premises and ascertaining their condition and making such
replacements and repairs and performing any other act as may be required of
Landlord or Tenant under the terms of this Lease upon twenty-four (24) hours
prior verbal notice to Tenant, except in the case of emergency, in which case
no notice shall be required. Landlord shall also be permitted access to the
Demised Premises during reasonable business hours, upon twenty-four (24) hours
prior verbal notice to Tenant, for the purpose of showing the Demised Premises
to prospective purchasers or mortgagees, Tenant shall have the right to
accompany Landlord on any such inspection. Additionally, Tenant agrees to
maintain keys for all locked doors in the Demised Premises in a fire department
controlled lock box located on the Demised Premises. During the twelve (12)
months prior to the expiration of the Term, Landlord shall be permitted access
to the Demised Premises during reasonable business hours, upon twenty-four (24)
hours prior verbal notice to Tenant, for the purpose of showing the Demised
Premises to prospective Tenants. During the nine (9) months prior to the
expiration

-23-

 

of the Term, Landlord shall be entitled to post suitable notice on the Demised
Premises that the same are “for sale” or “for lease”. Landlord’s access shall be
subject to such reasonable controls as are necessary to preserve Tenant’s trade
secrets and to maintain Landlord’s safety.

     11. Operating Expenses.

          11.1. Definition of “Operating Expenses”. As used herein, the term
“Operating Expenses” shall include, but not be limited to:

               11.1.1. Government impositions including, without limitation,
property tax costs consisting of real and personal property taxes
(except as specified in Section 11.2 below), assessments, including
amounts due under any improvement bond upon the Building and/or
Demised Premises or assessments levied in lieu thereof imposed by
any governmental authority or agency, any tax on or measured by
gross rentals received from the rental of space in the Building, or
tax based on the square footage of the Demised Premises or Building
(if such tax is enacted in lieu of presently existing real property
taxes).

               11.1.2. Any parking charges, utilities, surcharges or any
other costs levied, assessed or imposed by, or at the direction of,
or resulting from statutes or regulations, or interpretations
thereof, promulgated by any federal, state, regional, municipal or
local government authority in connection with the use or occupancy
of the Building or the parking facilities serving the Building.

               11.1.3. Any tax on any document to which Tenant is a party
creating or transferring an interest in the Demised Premises
(excluding any transfer tax upon a sale by Landlord of the Demised
Premises).

               11.1.4. Any fee for a business license to operate the Demised
Premises.

               11.1.5. Any expenses, including the cost of attorneys or
experts, reasonably incurred in seeking reduction by the taxing
authority of the applicable taxes, less tax refunds obtained as a
result of an application for review thereof.

               11.1.6. Costs paid or incurred directly related to the
operation, maintenance and management of the Building and the
Demised Premises including, by way of example, and not as a
limitation upon the generality of the foregoing, costs of repairs
and replacements to improvements within the Demised Premises as
appropriate to maintain the Demised Premises in first-class
condition, costs to comply with applicable governmental requirements
for the Demised Premises, assessments, fees or dues paid to the
Summers’ Governor Park Property Owners Association, special utility
assessments, including sewer fees, trash collection, cleaning,
maintenance of heating, ventilation and air conditioning systems,
maintenance of landscape and grounds, maintenance of drives and
parking areas, insurance premiums, portions of insured losses paid
as part of the deductible portion of loss by reason of insurance
policy terms, service contracts (including, by the way of example
only, HVAC,

-24-

 

elevator and roof maintenance, landscaping services, security and trash
collection and removal) and costs of services of independent contractors
retained to do work of the nature referenced above.

               11.1.7. Ground Lease payments attributable to the SDG&E Land.

          11.2. Exclusions from Operating Expenses. Operating Expenses shall
not include:

               11.2.1. Any net income, franchise, capital stock, estate or
inheritance taxes.

               11.2.2. Any increase in ad valorem real property taxes assessed against
the Demised Premises which are the result of a reassessment of the value of the
Demised Premises in connection with a sale of the Demised Premises during the
Term, but only to the extent of those taxes which are assessed based on the
value of the Demised Premises which exceed the sum of Total Project Costs and
Land Cost.

               11.2.3. All costs associated with the operation of the business of the
Landlord, as distinguished from the costs of operations of the Demised
Premises, including, but not limited to, costs of partnership accounting and
legal matters, costs of defending any lawsuits with any Lender (except as the
actions of Tenant may be in issue), costs of selling, syndicating, financing,
mortgaging or hypothecating any of Landlord’ s interest in the Demised Premises
(other than in connection with the construction and initial financing of the
Demised Premises), costs of any disputes between Landlord and its employees,
costs of disputes of Landlord with its own agents, employees and contractors,
or costs paid in connection with disputes with Tenant or any other tenants.

               11.2.4. Advertising and promotional costs.

               11.2.5. Expenses resulting from Landlord’s failure to have
constructed and delivered the Demised Premises in substantial conformance
with the Improvement Plans, Applicable Laws and Instruments of Record,
including costs incurred by Landlord ‘in connection with the construction of
the Demised Premises, the correction of defects in construction, or to the
extent related to Landlord’s active negligence or willful misconduct.

               11.2.6. Expenses which, under generally acceptable accounting principles
and sound management practices consistently applied would not be considered
normal maintenance or operating expenses.

               11.2.7. Expenses related to the creation or maintenance of reserves for
equipment or capital replacement.

               11.2.8. Depreciation and amortization of the Demised
Premises.

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               11.2.9. Costs incurred due to violation by Landlord of the terms and
conditions of this Lease.

               11.2.10. Payments in respect to overhead or profit to subsidiaries or
affiliates of Landlord (including any property management fees paid to Landlord
or its affiliates), or to any party as a result of a non-competitive selection
process, for services to the Demised Premises, or for supplies or other
materials, all to the extent that such costs exceed the costs that would have
been paid had the services, supplies or materials been provided by parties
unaffiliated with Landlord on a competitive basis.

               11.2.11. Interest on debt or amortization payments on any mortgages or
deeds of trust or any other debt instrument encumbering the Demised Premises or
any payments on ground leases, other than the lease, license or permit for the
SDG&E Land.

          11.3. Payment of Operating Expenses. Tenant shall pay all of the
Operating Expenses directly to the third party to whom the expense is payable,
as such Operating Expenses become due and payable. Within ten (10) business
days following Landlord’s written request to Tenant, Tenant shall furnish to
Landlord appropriate evidence of the Operating Expenses which have been paid
by Tenant directly to a third party.

               11.3.1. Notwithstanding the foregoing, Landlord may elect to pay any or
all of the Operating Expenses directly without relieving Tenant of financial
responsibility for such expenses. In the event of such an election, Landlord
shall give Tenant at least thirty (30) days prior written notice of Landlord’s
election and commitment to pay said Operating Expense(s), which notice shall
identify which Operating Expenses Landlord is undertaking to pay directly and
the date when such Operating Expenses become due. Any Operating Expenses
which Landlord undertakes to pay directly shall be paid by Tenant to Landlord
at least twenty (20) days prior to the scheduled due date (“Advance Expense
Payment”). Any Operating Expenses which Landlord undertakes to pay directly
and owed by Tenant to Landlord shall be deemed Additional Rent as defined in
Section 6.2 of this Lease.

               11.3.2. If Landlord makes the election described in Section 11.3.1 and
Tenant fails to make an Advance Expense Payment when due, in addition to any
other remedies available to Landlord under this Lease, Landlord may,
thereafter, institute a procedure whereby Tenant shall pay to Landlord monthly
installments of such Operating Expenses based upon Landlord’s reasonable
estimate of the annual amount of the Operating Expenses which Landlord has
undertaken to pay directly. If such a monthly installment arrangement is
instituted by Landlord, then Landlord shall provide Tenant, in writing, a
statement containing an estimate of the amount of Operating Expenses which will
be paid by Landlord for the current year and calculating the monthly
installment due from Tenant to enable Landlord to pay those expenses when due
(the “Monthly Installment”); and Tenant shall pay to Landlord, on the first day
of each calendar month of the Term of this Lease thereafter, as Additional
Rent, the Monthly Installment.

               11.3.3.
Within ninety (90) days after the conclusion of each calendar year
during the Term, Landlord shall furnish to Tenant a statement showing, in
reasonable detail,

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the actual Operating Expenses which Landlord paid during the previous calendar
year. If the amounts paid by Tenant for said Operating Expenses (whether
pursuant to Section 11.3.1 or 11.3.2, above) are less than the actual amount
of said Operating Expenses for the previous year, that additional sum shall be
due and payable by Tenant to Landlord within thirty (30) days after receipt by
Tenant of said statement. If the amounts paid by Tenant to Landlord exceed the
actual Operating Expenses paid by Landlord for the previous calendar year, the
difference shall be credited by Landlord against the Rent next due and owing
from Tenant; provided that, if the Term has expired, Landlord shall accompany
said statement with a payment to Tenant for the amount of such difference.

          11.4. Audit of Operating Expenses. Tenant shall have the right, at its own
cost and expense, to audit or inspect Landlord’s detailed records each year
with respect to Operating Expenses, as well as all other additional rent
payable by Tenant pursuant to this Lease for any year of the Term. Landlord
shall maintain at its principal place of business for a period of at least
twelve (12) months after the expiration of each calendar year during the Term,
full and accurate books, records and supporting documents in connection with
Landlord’s annual statement of Operating Expenses. If Tenant’s audit reveals
an overpayment by Tenant, such overpayment shall be credited by Landlord
against the Rent next due and owing from Tenant, and if such overpayment
equals five percent (5%) or more, Landlord shall pay the costs and expenses of
such audit and such overpayment shall be credited by Landlord against the Rent
next due and owing from Tenant. In the event the Term has expired, any such
overpayment and any such audit expense owed by Landlord to Tenant shall be paid
to Tenant within ten (10) business days after determination thereof.

          11.5. Further Limitations on Operating Expenses.

               11.5.1. Tenant shall not be responsible for Operating Expenses
attributable to the time period prior to the Term Commencement Date (other
than as specified in the Work Letter); provided, however, if Tenant takes
possession or occupancy of some or all of the Demised Premises prior to the
Term Commencement Date (expressly excluding entry under Section 5.3, above),
Tenant shall be responsible for Operating Expenses for the Demised Premises so
occupied from such earlier date of possession or occupancy. The responsibility
of Tenant for Operating Expenses attributable to the Demised Premises shall
continue to the later of (i) the date of termination of this Lease, or (ii) the
date Tenant has fully vacated the Demised Premises; but if termination of the
Lease is due to an Event of Default by Tenant, Tenant shall be responsible for
Operating Expenses even after Tenant has vacated the Demised Premises, as part
of the damages to which Landlord is entitled, to the extent of Tenant’s
liabilities for an Event of Default.

               11.5.2. Operating Expenses for the calendar year in which Tenant’s
obligation to reimburse Landlord commences, and for the calendar year in which
such obligation ceases shall be prorated. Expenses such as taxes, assessments
and insurance premiums which are incurred for an extended time period shall be
prorated based upon time periods to which such items are applicable, so that
the amounts attributed to the Demised Premises relate in a reasonable manner to
the time period in which Tenant has an obligation to pay for Operating
Expenses.

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               11.5.3. Any amount due for Operating Expenses attributable to any period
which is less than a full month shall be prorated (based on a 30-day month)
for such fractional month.

               11.5.4. Landlord and Tenant shall share those Operating Expenses incurred
which, although considered normal maintenance or operating expenses would,
under generally acceptable accounting principles consistently applied, be
considered related to capital improvements, the reasonable useful (i.e.
depreciable) life of which would extend beyond the end of the Term (“Long-Term
Item”), as follows:

                    (a) Tenant shall pay Operating Expenses related to Long-Term Items,
subject to Sections 9.2, 11.2, 11.3.1 and 11.3.2, above.

                    (b) At any time Tenant intends to incur an Operating
Expense
related to a Long-Term Item, Tenant shall notify Landlord, in writing, and
Landlord shall approve such expenditure, which approval shall not be
unreasonably withheld or delayed. Landlord shall not be required to approve
any expenditure which is not required under this Section 11 for the
maintenance and operation of the Demised Premises.

                    (c) At that time, Landlord and Tenant shall also agree
on the
“useful” (i.e. depreciable) life of the Long-Term Item and shall determine a
per-year useful life allocation (the “Useful Life Allocation”) of financial
responsibility for that Long-Term Item. By way of example only, financial
responsibility for a Long-Term Item which requires the expenditure of $50,000
and which has a five-year “useful” life would be assigned a $10,000 per year
Useful Life Allocation.

                    (d) The Useful Life Allocation will be applied to the
Operating
Expense related to the Long-Term Item, until the full amount of the Operating
Expense has been amortized.

                    (e) If, at the end of the Term, there remains any
unamortized
Useful Life Allocation(s), Landlord shall, within thirty (30) days after the
end of the Term, refund to Tenant, such unamortized Useful Life Allocations,
in cash.

               11.5.5. Operating Expenses shall be only the actual and reasonable
expenses incurred, subject to proration as specified in Sections 11.5.2 and
11.5.3, above.

          11.6. Payment of Taxes. Tenant shall pay not less than ten (10) days
before delinquency, all taxes levied against any personal property or trade
fixtures in or about the Demised Premises.

          11.7. Taxes on Tenant’s Property. If any taxes on Tenant’s personal
property or trade fixtures are levied against Landlord or Landlord’s property
or, if the assessed valuation of the Building is increased by the inclusion
therein of a value attributable to Tenant’s personal property or trade
fixtures, and if Landlord, after written notice to Tenant, elects to pay the
taxes

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based upon such increase in assessed value, then Tenant shall, within thirty
(30) days after receipt of Landlord’s written demand, repay to Landlord the
taxes so levied against Landlord.

     12. Utilities and Services.

          12.1. Tenant shall pay separately for all water, gas, electricity,
telephone, trash removal and all other utilities and services supplied to the
Demised Premises, whether arranged by Tenant or Landlord, together with any
taxes thereon.

          12.2. Landlord shall not be liable for, nor shall any eviction of Tenant
result from, the interruption in delivery of any such utility or service to the
Demised Premises when such failure is caused by accident, breakage, repairs,
strikes, lockouts or other labor disturbances or labor disputes of any
character, governmental regulation, moratorium or other governmental action,
the inability to furnish such utility or service despite the exercise of
reasonable diligence by Landlord or by any other cause beyond Landlord’s
reasonable control, excluding only interruptions of service caused solely by
Landlord’s active negligence or willful misconduct. In the event of an
interruption which is solely the result of the Landlord’s active negligence or
willful misconduct, and which prevents Tenant from conducting regular business
on the Demised Premises, Rent shall be abated to the extent Tenant’s regular
business operations are interrupted, commencing upon the date of interruption
until the delivery of such utilities or services are restored to the Demised
Premises and Landlord shall be responsible for Tenant’s damages directly caused
by such active negligence or willful misconduct. The abatement of rent and
Landlord’s liability for Tenant’s damages are conditioned upon Landlord’ s
receipt of the proceeds of the rental interruption insurance which Tenant is
required to maintain pursuant to Section 18.4 of this Lease, unless such rental
insurance and proceeds are not available due solely to the fact that the
interruption was caused by Landlord’s sole active negligence or willful
misconduct. If an interruption in utilities or services which prevents Tenant
from conducting regular business on the Demised Premises continues for more
than thirty (30) consecutive days, then Tenant shall be entitled at any time
thereafter (prior to the restoration of such utilities or services) to
terminate this lease upon written notice to Landlord together with payment, in
advance, of one (1) year’s worth of Annual Rent at the rate then in effect,
less the amount of Annual Rent, if any, paid during the period of interruption
whether directly by Tenant or from the proceeds of rental interruption
insurance.

          12.3. If Tenant shall require any utilities or services in excess of that
initially provided in the Improvement Plans, such as by reason of equipment to
be operated by Tenant, then Tenant shall make all necessary arrangements, at
Tenant’s expense, for such excess services and utilities.

     13. Mortgages and Liens.

          13.1. Mortgages. Tenant may not mortgage, encumber or assign as
collateral for any Tenant obligation, Tenant’s interests under this Lease or
in the Demised Premises. In the event Tenant shall lease or finance the
acquisition of equipment, furnishings or other personal property of a
removable nature utilized by Tenant in the operation of Tenant’s business,
Tenant

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warrants that any Uniform Commercial Code Financing Statement executed by
Tenant will, upon its face or by exhibit thereto, indicate that such Financing
Statement is applicable only to such removable personal property of Tenant
located within the Demised Premises, the acquisition of which was financed by
Tenant pursuant to said Financing Statement. In no event shall the address of
the Building be furnished on the statement without qualifying language as to
applicability of the lien only to removable personal property therein. Should
any holder of a Financing Statement executed by Tenant record or place of
record a Financing Statement which appears to constitute a lien against any
interest of Landlord or against equipment which may be located other than
within the Demised Premises, Tenant shall, within ten (10) days after filing
such Financing Statement, cause (i) copies of the Security Agreement or other
documents to which the Financing Statement pertains to be furnished to Landlord
to show that such lien is not applicable to Landlord’s interest, and (ii) its
lender to amend documents of record so as to clarify that such lien is not
applicable to any interest of Landlord in the Demised Premises. Landlord will,
upon Tenant’s written request, and without incurring any liability, execute
such lien waiver documents as may be reasonably necessary for Tenant to finance
its fixtures, furnishings and equipment located on the Demised Premises.

          13.2. Mechanics Liens.

               13.2.1.
Tenant shall keep the Demised Premises free from any liens
arising out of work performed, materials furnished and obligations incurred by
Tenant. Tenant covenants and agrees that any mechanic’s lien filed against the
Demised Premises for work claimed to have been done for, or materials claimed
to have been furnished to, Tenant will be discharged by Tenant, by bond or
otherwise, within thirty (30) days after the filing thereof, at the sole cost
and expense of Tenant. This provision does not apply to any claim or lien
arising out of the original construction of the Demised Premises by Landlord
pursuant to this Lease.

               13.2.2. Tenant shall have the right to contest with due diligence the
validity or amount of any lien or claimed lien created by Tenant if Tenant
shall give to Landlord such security as Landlord may reasonably require to
insure payment thereof and prevent any sale, foreclosure or forfeiture of the
Demised Premises or any portion thereof by reason of such nonpayment. On final
determination of the lien or claim for lien, Tenant shall immediately pay any
judgment rendered with all proper costs and charges and shall have the lien
released or judgment satisfied at Tenant’s own expense, and if Tenant shall
fail to do so, Landlord may at its option pay any such final judgment and
clear the Demised Premises therefrom. If Tenant shall fail to contest with due
diligence the validity or amount of any such lien or claimed lien created by
Tenant, or to give Landlord security as hereinabove provided, Landlord may,
but shall not be required to, contest the validity or amount of any such lien
or claimed lien or settle or compromise the same without inquiring into the
validity of the claim or the reasonableness of the amount thereof. Should any
lien be filed against the Demised Premises or should any action of any
character affecting the title thereto be commenced, Tenant shall give to
Landlord written notice thereof as soon as notice of such lien or action comes
to the knowledge of Tenant.

               13.2.3. Should Tenant fail to discharge any such lien, Landlord may, at
Landlord’s election, pay such claim or post a bond or otherwise provide
security to eliminate the

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lien as a claim against title, and the cost thereof shall be immediately due
from Tenant as Additional Rent.

     14. Assignment and Subletting.

          14.1. Landlord’s Consent. Neither this Lease, nor any interest herein,
may be assigned by Tenant voluntarily or involuntarily by operation of law and
neither all nor any part of the Demised Premises shall be sublet by Tenant
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld; provided, however, that, if Tenant is a corporation,
Tenant may assign this Lease or sublet all or a portion of the Demised
Premises to (i) a wholly-owned subsidiary corporation of Tenant, (ii) Tenant’s
sole parent corporation, or (iii) a wholly-owned subsidiary corporation of
Tenant’s sole parent corporation.

          14.2. No Release of Tenant. Landlord may withhold approval of any
proposed assignee or sublessee which, in the reasonable judgment of Landlord,
does not have the financial capacity to promptly perform all of the terms and
conditions of this Lease, including but not limited to the payment of all
sums of money to be paid hereunder. No assignment of this Lease or subletting
of the Demised Premises at any time shall relieve Tenant of any obligations
required to be performed by Tenant. No extension of time or other indulgence
granted by Landlord to any subsequent assignee whether or not notice thereof
is given to any predecessor shall relieve Tenant or any future tenant
hereunder of its obligations under this Lease.

          14.3. Written Instrument. No assignment or sublease shall be valid or
effective until there is delivered to Landlord and any Lender (as defined in
Section 16.5.2), a duplicate original of the written instrument of assignment,
in recordable form, containing the name or address of the assignee or
sublessee, and an assumption by the assignee or sublessee of the
Lease and of
all obligations under this Lease to be performed by Tenant. Such assumption
need relate only to the obligations thereafter to be performed by Tenant.

          14.4. Assignment of Subrents. Tenant hereby irrevocably assigns to
Landlord all rents due or to become due from any assignee of Tenant’s
interest hereunder and any sublessee or any tenant or occupant of the Demised
Premises or any part thereof, together with the right to collect and receive
such rents. Upon any Default by Tenant under this Lease, Landlord shall have
absolute title to such rents and the absolute right to collect the same.
Tenant shall not demand or accept from any sublessee, tenant or occupant of
the Demised Premises, or any part thereof, any payment, prepayment or advance
payment in respect of more than one rental period under the applicable
sublease and in no event shall Tenant demand or accept any payment,
prepayment or advance payment for a period exceeding one month. So long as
Tenant is not in Default under the terms of this Lease, Landlord shall apply
as a credit against Tenant’s next month’s installment(s) of Rent (or refund
to Tenant if the Term has expired) fifty percent (50%) of the amount by which
the subrents collected from any sublessee exceed the Rent owed by Tenant with
respect to the portion of the Demised Premises which are the subject of such
sublease (i.e. 50% of the “bonus” sublease rent).

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          14.5. Continuation of Subleases. Whether or not Landlord elects to
terminate this Lease on account of any Default by Tenant, as set forth in
Section 20, below, Landlord shall have the right, following such Default, to
terminate any and all subleases, licenses, concessions or other consensual
arrangements for possession entered into by Tenant and affecting the Demised
Premises or may, in Landlord’s sole discretion, succeed to Tenant’s interest
in such subleases, licenses, concessions or arrangements. In the event of
Landlord’s election to succeed to Tenant’s interest in any such subleases,
licenses, concessions or arrangements, Tenant shall, as of the date of notice
by Landlord of such election, have no further right or interest in the rent or
other consideration receivable thereunder.

     15. Alterations, Additions and Repairs. Tenant shall have the right to
make changes, alterations or additions to the improvements on the Demised
Premises (“Alterations”), subject to the following conditions:

          15.1. No change, alteration or addition shall at any time be made which
shall involve any structural component of the Building, or make any
structural changes and alterations, or other changes that materially diminish
the value of any improvement on the Demised Premises, or change the usage
thereof.

          15.2. No change, alteration or addition shall be made involving an
expenditure in excess of Fifty Thousand Dollars ($50,000) without the prior
written consent of the Landlord, which shall not be unreasonably withheld.
Landlord will endeavor with reasonable diligence to obtain agreement from any
Lender that its consent, when required, to a proposed change, alteration or
addition, will not be unreasonably withheld.

          15.3. No change, alteration or addition shall be undertaken until Tenant
shall have procured and paid for all required municipal and other governmental
permits and authorizations of the various municipal departments and
governmental subdivisions having jurisdiction.

          15.4. All work done in connection with any change, alteration or addition
shall be done only by licensed and qualified contractors or mechanics in a
good and workmanlike manner and in compliance with all Applicable Laws and in
accord with all Instruments of Record, and Tenant shall procure certificates
of occupancy and other licenses and certificates if required by law.

          15.5. At all times when any change, alteration, or addition is in
progress, there shall be maintained, at no expense to Landlord, workmen’s
compensation insurance in accordance with the law covering all persons
employed in connection with the change or alteration and general liability
insurance for the mutual benefit of Tenant and Landlord expressly covering
the additional hazards, if any, due to the change, alteration or addition.

          15.6. All alterations, additions or improvements made to the Demised
Premises by Tenant after the initial build-out shall be removed at the
expense of Tenant at the end of the Term of this Lease. When Tenant requests
Landlord’s consent for making a specific alteration, addition or improvement,
or if Landlord’s consent is not required, prior to commencing such
alteration, addition or improvement, Tenant may request in writing that
Landlord waive Tenant’s

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obligation to remove said specific alteration, addition or improvement; and
Landlord may deny said request for a waiver in Landlord’s (good faith
discretion, only if Landlord determines that such alteration, addition or
improvement would likely result in a material diminution of the sale or lease
value of the Demised Premises. Said denial shall be by written notice to Tenant
stating Landlord’s reasons and delivered within fifteen (15) days after
Landlord’s receipt of Tenant’s written request.

          15.7. Subject to the preceding section 15.6, any permanent alteration or
improvement to the Demised Premises or any part thereof, and any replacement
of fixtures forming an integral part of the improvements or any portion
thereof, during the Term of this Lease shall at once become the absolute
property of Landlord without payment of any kind therefor (“Permanent
Alterations”).

     16. Damage or Destruction.

          16.1. Definitions.

               16.1.1. “Damage” shall mean damage or destruction to the improvements on
the Demised Premises, by fire or other perils, other than the Tenant Owned
Improvements.

               16.1.2. “Total Destruction” shall mean Damage to the Demised Premises,
the repair cost of which is fifty percent (50%) or more of the then
Replacement Cost of the Demised Premises immediately prior to such Damage,
excluding from such calculation the value of the Land and Tenant Owned
Improvements.

               16.1.3. “Insured Loss” shall mean Damage which was caused by an event
required to be covered by the insurance described in Section 18 of this Lease,
irrespective of any deductible amounts or coverage limits involved.

               16.1.4. “Replacement Cost” shall mean the cost to repair or rebuild the
Improvements owned by Landlord at the time of the occurrence of the Damage to
their condition existing immediately prior thereto, including demolition,
debris removal and upgrading required by the operation of applicable building
codes, ordinances or laws, and without deduction for depreciation.

               16.1.5. “Hazardous Substance Condition” shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Section 32, in, on, or under the Demised
Premises.

               16.1.6. “Tenant Owned Improvements” shall mean Alterations made by Tenant
that are not Permanent Alterations.

          16.2. Damage to the Demised Premises.

               16.2.1. Insured Loss. If Damage occurs to the Demised Premises, then
Landlord shall, subject to the provisions of this Section 16, commence the
repair of such Damage

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(but not Tenant Owned Improvements or Tenant’s fixtures or
personal property, the repair of which shall be Tenant’s sole
duty and financial responsibility), as soon as reasonably
practicable, but in any event once (i) Landlord has, with the
exercise of reasonable diligence, obtained all necessary
building permits and approvals to repair the Demised Premises,
(ii) received the proceeds, if any, of the insurance required to
be maintained under Section 18 of this Lease, and (iii) received
the proceeds, if any, of the amounts Tenant is obligated to
contribute toward such restoration in accordance with Section
16.2.3, below (the “Restoration Commencement Date”), and shall
complete such repair as soon as reasonably practicable, but in
any event within one (1) year after the Restoration Commencement
Date (the “Restoration Completion Date”), and this Lease shall
continue in full force and effect; provided, however, that
Tenant shall undertake, at Landlord’s election, the repair of
any damage or destruction the total cost of which is One Hundred
Thousand Dollars ($100,000) or less, and, in such event,
Landlord shall make any insurance proceeds available to Tenant
on a reasonable basis for that purpose.

               16.2.2. Uninsured Loss. If, because such Damage resulted from
an event which was not an Insured Loss, (a) the proceeds of the
casualty insurance required to be maintained pursuant to Section 18
of this Lease, and (b) the amounts to be paid by Tenant pursuant to
Section 16.2.3, below; if any, are not in the aggregate sufficient
to pay the cost of repair of Damage to the Demised Premises,
Landlord may at Landlord’s option either: (i) repair such damage at
Landlord’s expense, as soon as reasonably practicable, but in any
event by the Restoration Completion Date, in which event this Lease
shall continue in full force and effect, or (ii), if the cost to
Landlord to repair such Damage exceeds the then applicable Annual
Rent for the Demised Premises, give written notice to Tenant within
thirty (30) days after receipt by Landlord of knowledge of the
occurrence of such damage of Landlord’s desire to terminate this
Lease as of the date sixty (60) days following the giving of such
notice. In the event Landlord elects to terminate this Lease, Tenant
shall have the right within ten (10) days after the receipt of such
notice to give written notice to Landlord of Tenant’s commitment to
pay for the cost of repair of such Damage in excess of the sum of
the then applicable Annual Rent, without reimbursement from
Landlord, and Tenant shall provide Landlord with the required funds
or satisfactory assurance thereof within thirty (30) days following
Tenant’s said commitment; provided, however, that Tenant shall be
entitled to the use of insurance proceeds which may be available for
such repair. In such event this Lease shall continue in full force
and effect, and Landlord shall proceed to make such repairs as soon
as reasonably practicable, to be completed in no event later than
the Restoration Completion Date. If Tenant does not give such notice
and provide the funds or assurance thereof within the times
specified above, this Lease shall terminate as of the date specified
in Landlord’s notice of termination.

               16.2.3. Underinsured Loss. If the proceeds of the casualty
insurance required to be maintained pursuant to Section 18 of this
Lease are not sufficient to pay the cost of repair of Damage to the
Demised Premises for any reason other than because the Damage was
not an Insured Loss (e.g. the application of deductibles or
co-insurance requirements, and/or the inadequacy of coverage amount)
or Tenant’s failure to maintain the insurance required to be
maintained pursuant to Section 18 of this Lease, then Tenant shall
be responsible for, and shall pay to Landlord as Additional Rent,
the amount by which the cost to repair the Damage exceeds the
available insurance proceeds and this Lease shall continue in full
force and effect; provided, however, that Tenant’s responsibility
under this Section 16.2.3 shall not exceed an amount equal

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to the then applicable Annual Rent, although such payment shall not be in lieu
thereof. In such event this Lease shall continue in full force and effect,
conditioned upon Tenant paying the amount required under this Section 16.2.3,
and, subject to Section 16.2.1, above, Landlord shall proceed to make such
repairs as soon as reasonably practicable, but in no event later than the
Restoration Completion Date.

               16.2.4. Tenant’s Responsibility. Notwithstanding the provisions of this
Section 16.2, if insurance-proceeds are not available or are insufficient to
pay the cost to repair any Damage to the Demised Premises as the result of
either (i) Tenant’s failure to maintain the insurance required pursuant to
Section 18 of this Lease, or (ii) the fact that the Damage is not an Insured
Loss solely because it resulted from Tenant’s active negligence or willful
act, then Tenant shall be responsible for, and shall pay to Landlord as
Additional Rent, the amount by which the cost to repair the Damage exceeds the
available insurance proceeds and this Lease shall continue in full force and
effect, but subject to Landlord’s rights under Section 20.

          16.3. Total Destruction of the Demised Premises. Notwithstanding any
other provision hereof, if a Total Destruction occurs (including any
destruction required by any authorized public authority), and the loss is an
Insured Loss, this Lease shall terminate effective as of the date of the Total
Destruction, provided Landlord receives or is entitled to receive the full
amount of the casualty and rental interruption insurance required to be
maintained by Tenant under Section 18 of this Lease. In the event, however,
that (i) the damage or destruction was caused by Tenant’s active negligence or
willful act, and the loss was not an Insured Loss, or (ii) the full proceeds of
the rental interruption insurance are not available to Landlord, this Lease
shall not terminate and such occurrence shall be an Event of Default and
Landlord shall have the right to recover Landlord’s damages from Tenant. In
the event of the inadequacy of rental interruption insurance, Tenant’s
liability therefor shall be limited to the difference between the amount
Landlord receives from such insurance, if any, and the amount of the rental
interruption insurance Tenant is required to maintain.

          16.4. Damage Near End of Term. If at any time during the last six (6)
months of the Term of this Lease there is Damage for which the cost of repair
exceeds one (1) month’s worth of Annual Rent, whether or not an Insured Loss,
Landlord or Tenant may, at either’s option, terminate this Lease effective
sixty (60) days following the date of occurrence of such Damage by giving
written notice to the other of that party’s election to do so within thirty
(30) days after the date of occurrence of such Damage. Provided, however, if
Tenant has an exercisable option to extend this Lease at that time, then
Tenant may preserve this Lease by, within twenty (20) days following the
occurrence of the Damage, or before the expiration of the time provided in
such option for its exercise, whichever is earlier (“Exercise Period”), (i)
exercising such option and (ii) providing Landlord with any shortage in
insurance proceeds (or adequate assurance thereof) needed to make the repairs
to the extent required of Tenant under Section 16.2. If Tenant duly exercises
such option during said Exercise Period and provides Landlord with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds to the
extent required of Tenant under Section 16.2, and subject to the provisions of
Sections 16.2 and 16.3 of this Lease, Landlord shall commence repair of such
Damage as soon as practicable, but no later than the Restoration Commencement
Date and complete repair of such Damage as soon as practicable but no later
than the Restoration Completion Date, and this Lease

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shall continue in full force and effect. If Tenant fails to exercise such
option and provide such funds or assurance during said Exercise Period, then
Landlord may at Landlord’s option terminate this Lease as of the expiration of
said sixty (60) day period following the occurrence of such Damage by giving
written notice to Tenant of Landlord’s election to do so within ten (10) days
after the expiration of the Exercise Period, notwithstanding any term or
provision in the grant of option to the contrary.

          16.5.
Abatement of Rent; Tenant’s Remedies.

               16.5.1. In the event of Damage described in Section 16.2, whether or not
Landlord or Tenant repairs or restores the Premises, the Rent payable by
Tenant hereunder for the period during which such damage, its repair or the
restoration continues, or prior to a determination about whether it will be
repaired or restored, shall be abated in proportion to the degree to which
Tenant’s use of the Demised Premises is impaired, conditioned, however, upon
Landlord’s receipt of the proceeds of the rental interruption insurance
required to be maintained by Tenant under Section 18 of this Lease during the
pendency of any such abatement. Except for abatement of Rent as aforesaid, all
other obligations of Tenant hereunder shall be performed by Tenant to the
extent practicable, and Tenant shall have no claim against Landlord for any
damage suffered by reason of any such repair or restoration.

               16.5.2. If Landlord shall be obligated to repair or restore the Premises
under the provisions of this Section 16 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Demised
Premises as soon as reasonably practicable, but in any event on or before the
Restoration Commencement Date, Tenant may, at any time after the Restoration
Commencement Date but prior to the commencement of such repair, give written
notice to Landlord and to any holders of any mortgages, deeds of trust or
ground leases on the Demised Premises (“Lenders”) of which Tenant has actual
or constructive notice of Tenant’s election to terminate this Lease on a date
not less than sixty (60) days following the giving of such notice. If Tenant
gives such notice to Landlord and such Lenders and such repair or restoration
is not commenced in a substantial and meaningful way within sixty (60) days
after receipt of such notice, this Lease shall terminate as of the end of such
sixty (60) day period. If Landlord or a Lender commences the repair of the
Premises in a substantial and meaningful way within sixty (60) days after
receipt of such notice, the Lease shall continue in full force and effect.

               16.5.3. In the event of Damage described in Section 16.2 or 16.3 which is
solely the result of Landlord’s active negligence or willful misconduct, and
which prevents Tenant from conducting regular business on the Demised
Premises, Rent shall be abated as set forth in Section 16.5.1, above, and
Landlord shall be responsible for Tenant’s damages directly caused by such
active negligence or willful misconduct. The abatement of Rent and Landlord’s
liability for Tenant’s damages are conditioned upon Landlord’s receipt of the
proceeds of the rental interruption insurance which Tenant is required to
maintain pursuant to Section 18.4 of this Lease, unless such rental
interruption insurance and proceeds are not-available due solely to the fact
that the Damage was caused by Landlord’s sole active negligence or willful
misconduct.

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          16.6. Delay in Restoration. Notwithstanding anything to the contrary
contained in this Section 16, if Landlord cannot substantially complete the
restoration of the Demised Premises following Damage by the Restoration
Completion Date, this Lease may, at the election of Landlord or Tenant,
terminate upon the delivery of written notice delivered by Landlord or Tenant
to the other.

          16.7.
Limitation on Landlord’s Restoration Obligation. If Landlord is
obligated to or elects to repair Damage to the Demised Premises as herein
provided, Landlord shall be obligated to repair or restore only those portions
of the Building and the Demised Premises which were originally provided at
Landlord’s expense, plus such other portions for which insurance proceeds are
available to pay the costs to repair or restore. The repair and restoration of
Tenant Owned Improvements for which no insurance proceeds are available shall
be the obligation of Tenant. Landlord’s repairs shall be limited to those
repairs which are payable from the available insurance proceeds; and if any
additional repairs or improvements are desired by Tenant, Tenant shall pay for
the same.

          16.8. Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs (other than a Hazardous Substance Condition which existed at or prior to
the Term Commencement Date which shall be Landlord’s sole responsibility),
unless Tenant is legally responsible therefor (in which case Tenant shall make
the investigation and remediation thereof required by Applicable Law and this
Lease shall continue in full force and effect, but subject to Landlord’s rights
under Section 20), Landlord may at Landlord’s option either (i) investigate and
remediate such Hazardous Substance Condition, if required, as soon as
reasonably possible at Landlord’s expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds one year’s worth of Annual Rent, give
written notice to Tenant within thirty (30) days after receipt by Landlord of
knowledge of the occurrence of such Hazardous Substance Condition of Landlord’s
desire to terminate this Lease as of the date sixty (60) days following the
giving of such notice. In the event Landlord elects to give such notice of
Landlord’s intention to terminate this Lease, Tenant shall have the right
within ten (10) days after the receipt of such notice to give written notice to
Landlord of Tenant’s commitment to pay for the investigation and remediation of
such Hazardous Substance Condition totally at Tenant’s expense and without
reimbursement from Landlord except to the extent of an amount equal to the
Annual Rent, which shall be paid by Landlord. Tenant shall provide Landlord
with the funds required of Tenant or satisfactory assurance thereof within
thirty (30) days following Tenant’s said commitment. In such event this Lease
shall continue in full force and effect, and Landlord shall proceed to make
such investigation and remediation as soon as reasonably possible and the
required funds are available. If Tenant does not give such notice and provide
the required funds or assurance thereof within the times specified above, this
Lease shall terminate as of the date specified in Landlord’s notice of
termination. If a Hazardous Substance Condition occurs for which Tenant is not
legally responsible, there shall be abatement of Tenant’s obligations under
this Lease to the same extent as provided in Section 16.5.1, conditioned upon
Landlord’s receipt of the proceeds of the rental interruption insurance
required to be maintained by Tenant pursuant to Section 18 of this Lease. If
a Hazardous Substance Condition occurs which is solely the result of Landlord’s
active negligence or willful misconduct, and which prevents Tenant from
conducting regular business on the Demised Premises, Landlord shall be
responsible for Tenant’s damages directly caused by such active negligence or
willful

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misconduct. Landlord’s liability for Tenant’s damages are conditioned upon
Landlord’s receipt of the proceeds of the rental interruption insurance which
Tenant is required to maintain pursuant to Section 18.4 of this Lease, unless
such rental interruption insurance and proceeds are not available due solely to
the fact that the Hazardous Substance Condition was caused by Landlord’s sole
active negligence or willful misconduct. Notwithstanding the foregoing, should
a Hazardous Substance Condition exist, unless Tenant is legally responsible
therefor, which creates a present danger to the health or safety of Tenant’s
employees or invitees, if Landlord fails to take immediate steps to ameliorate
or remediate such conditions as soon as practicable under the circumstances,
and fails to prosecute those efforts with appropriate diligence and dispatch,
Tenant may give written notice to Landlord and to any Lenders of which Tenant
has actual or constructive notice of Tenant’s election to terminate this Lease
on a date not less than sixty (60) days following the giving of such notice. If
Tenant gives such notice to Landlord and such Lenders and such repair or
restoration is not commenced within sixty (60) days after receipt of such
notice, this Lease shall terminate as of the end of such sixty (60) day period.

          16.9.
Termination — Advance Payment. Upon termination of this Lease pursuant
to this Section 16, an equitable adjustment shall be made concerning advance
Rent and any other advance payments made by Tenant to Landlord.

          16.10. Waiver of Statutes. Landlord and Tenant agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Demised Premises with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent inconsistent
herewith.

     17. Indemnification, Limitation of Liability.

          17.1. Indemnification by Tenant. Tenant shall protect, indemnify, defend
and save harmless Landlord from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including,
without limitation, attorneys’ fees and expenses), imposed upon or incurred by
or asserted against Landlord or the Demised Premises by reason of any death
of, or injury to, any person or damage to property (i) occurring in, upon or
about the Demised Premises (other than to the extent arising as a result of
Landlord’s active negligence or willful misconduct), (ii) arising from -or out
of any act or omission of Tenant, its agents, contractors, employees,
servants, tenants and invitees (“Tenant’s Agents”), (iii) arising from or out
of any use, nonuse or condition of the Demised Premises or any part thereof or
the adjoining sidewalks, curbs, vault space, if any, streets or ways (except
to the extent caused by Landlord’s failure to maintain any such areas which
are, under this Lease, Landlord’s obligation to maintain), or (iv) arising out
of any failure on the part of Tenant to perform or comply with any of the
terms of this Lease, except to the extent arising from Landlord’s active
negligence or willful misconduct or from the acts or omissions of any other
tenant(s) in the Building or the Additional Improvements or their respective
agents, contractors, employees, servants or invitees. In case any action, suit
or proceeding is brought against Landlord by reason of any such occurrence,
Tenant, upon Landlord’s request, shall at Tenant’s expense
resist and defend
such action, suit or proceeding, or cause the same to be resisted and defended
by counsel designated

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by Landlord, subject to Tenant’s reasonable approval. The obligation of
Tenant under this section shall survive any termination of this Lease.

          17.2.
Indemnification by Landlord.

               17.2.1. Landlord shall protect, indemnify, defend and save harmless Tenant
from and against all liabilities, obligations, claims, damages, penalties,
causes of action, costs and expenses (including, without limitation, attorneys’
fees and expenses), imposed upon or incurred by or asserted against Tenant by
reason of any death of, or injury to, any person or damage to property arising
from or out of any active negligence or willful misconduct of Landlord, its
agents, contractors, employees, servants, tenants or invitees or arising out of
any failure on the part of Landlord to perform or comply with any of the terms
of this Lease. In case any action, suit or proceeding is brought against
Tenant by reason of any such occurrence, Landlord, upon Tenant’s request, shall
at Landlord’s expense resist and defend such action, suit or proceeding, or
cause the same to be resisted and defended by counsel designated by Landlord,
subject to Tenant’s reasonable approval. The obligation of Landlord under
this section shall survive any termination of this Lease.

               17.2.2.
Notwithstanding the provisions of Section 16.8 of this Lease to
the contrary, Landlord shall protect, indemnify, defend and save harmless
Tenant from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses (including, without
limitation, attorneys’ fees and expenses), imposed upon or incurred by or
asserted against Tenant by reason of any Hazardous Substance Condition which
existed prior to the Term Commencement Date. In case any action, suit or
proceeding is brought against Tenant by reason of any such pre-existing
Hazardous Substance Condition, Landlord, upon Tenant’s request, shall at
Landlord’s expense resist and defend such action, suit or proceeding, or cause
the same to be resisted and defended by counsel designated by Landlord,
subject to Tenant’s reasonable approval. The obligation of Landlord under this
section shall survive any termination of this Lease.

          17.3. Limitations on Indemnification.

               17.3.1. Notwithstanding any provision of Sections 17.1 and 17.2, above,
to the contrary, Landlord shall not be liable to Tenant or any other party,
and Tenant assumes all risk of damage to personal property, including loss of
records kept within the Demised Premises, if the cause of such damage is of a
nature which, if Tenant had elected to maintain fire and theft insurance with
extended coverage and business records endorsement, would be a loss subject to
settlement by the insurance carrier, including but not limited to damage or
losses caused by fire, electrical malfunctions, gas explosion and water damage
of any type, including but not limited to broken water lines, malfunction of
sprinkler systems, roof leakage or stoppages of lines, unless and to the
extent such loss is due to Landlord’s active negligence or willful misconduct.
Tenant further waives any claim, for injury to Tenant’s business or loss of
income relating to any such damage or destruction of personal property,
including any loss of records. The foregoing waivers are limited to the extent
of the insurance coverage described above that could have been obtained.

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               17.3.2. Neither Landlord nor its agents shall be liable for any damage to
property entrusted to employees, agents or representatives of Tenant, nor for
loss of or damage to persons or property resulting from fire, explosion,
falling plaster, steam, gas, electricity, water or rain which may leak from
any part of the Improvements on the Demised Premises or from the pipes,
appliances or plumbing therein or from the roof, street or subsurface or from
any other place or resulting from dampness or any other cause whatsoever, it
being the intent and agreement of the parties hereto that all property placed
by Tenant on the Demised Premises, together with the maintenance and repair of
any and all Improvements constructed on the Demised Premises, shall be at the
sole risk and expense of Tenant, except to the extent related to or arising
from Landlord’s active negligence or willful misconduct.

               17.3.3. Nothing in this Section 17.3 shall limit Landlord’s liabilities
under its warranties set forth in this Lease.

          17.4. Notice. Each party shall promptly notify the other of any claim
asserted against that party on account of any occurrence to which the
foregoing indemnities relate, but failure to do so shall not affect the
obligation of either party under this section.

     18. Insurance.

          18.1. Tenant’s Extended Coverage Policy. Tenant shall obtain and keep in
force from the Term Commencement Date or the date Tenant occupies the Demised
Premises, whichever first occurs, throughout the Term of this Lease and until
Tenant has surrendered control and possession of the Demised Premises to
Landlord, a commercial general liability policy of insurance protecting Tenant
and Landlord (as an additional insured) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
tenancy, use, occupancy or maintenance of the Demised Premises. Such insurance
shall be on an occurrence basis providing single limit coverage in an amount
not less than $3,000,000 per occurrence with an “Additional Insured-Managers or
Lessors of Premises” endorsement and contain the “Amendment of the Pollution
Exclusion” for damage caused by heat, smoke or fumes from a hostile fire. The
policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall, to the extent commercially available in
the marketplace, include coverage for liability assumed under this Lease as an
“insured contract” for the performance of Tenant’s indemnity obligations under
this Lease. The limits of said insurance required by this Lease or as carried
by Tenant shall not, however, limit the liability of Tenant nor relieve Tenant
of any obligation hereunder. All insurance to be carried by Tenant shall be
primary to and not contributory with any similar insurance carried by Landlord,
whose insurance shall be considered excess insurance only.

          18.2. Property Insurance. Tenant shall, during the Term of this Lease,
obtain and keep in force insurance upon the Demised Premises in an amount
equal to the full Replacement Cost (exclusive of the costs of excavation,
foundations and footings, and without reference to depreciation taken by
Landlord upon its books or tax returns), or the amount of such insurance as
the Lenders may require be maintained, with loss payable to Landlord and to
any Lenders insuring loss or damage to the Demised Premises. Such insurance
shall provide

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protection against any peril generally included within the “All-Risk, Broad
Form 1020” form of property insurance policy, which includes insurance against
sprinkler damage, vandalism and malicious mischief. Subject to availability
thereof, Tenant shall further insure, as the Lenders may require, against flood
and/or earthquake, loss or failure of building equipment, rental loss during
the period to repair or rebuild, and worker’s compensation insurance. If Tenant
is required to maintain earthquake insurance, Tenant shall pay one-half (1/2)
toward the costs of such insurance, but shall not be required to expend more
than Twenty Thousand Dollars ($20,000) during any one (1) year for premiums for
such insurance and Landlord shall be responsible for paying any premiums in
excess thereof. If the coverage is available and commercially appropriate, such
policy or policies shall insure against all risks of direct physical loss or
damage, including coverage for any additional costs resulting from debris
removal and reasonable amounts of coverage for the enforcement of any ordinance
or law regulating the reconstruction or replacement of any undamaged sections
of the Demised Premises required to be demolished or removed by reason of the
enforcement of any building, zoning, safety or land use laws as the result of a
covered cause of loss. Said policy or policies shall also contain (i) an agreed
valuation provision in lieu of any coinsurance clause and (ii) a waiver of
subrogation. The cost of all said insurance shall be an Operating Expense which
shall be paid directly by Tenant as Additional Rent. Tenant shall furnish to
Landlord evidence reasonably satisfactory to Landlord of said property
insurance policy. Landlord shall be named as an additional insured on Tenant’s
property insurance policy; and all of the specifications and provisions
applicable to the extent appropriate to Tenant’s liability insurance policy
shall also be applicable to Tenant’s property insurance policy, on a reciprocal
basis for the benefit of Landlord. The amount of insurance coverage maintained
by Tenant under this Section 18.2 shall be reviewed every two (2) years during
the Term to determine whether the amount is adequate to assure coverage of the
Replacement Cost and shall be increased to the extent reasonably determined by
Landlord to be inadequate.

          18.3. Insurance on Tenant’s Property. Tenant assumes the risk of damage
to any fixtures, goods, inventory, merchandise, equipment, personal property
of any kind located on the Demised Premises. Landlord shall not be liable for
injury to Tenant’s business or any loss of income therefore relative to damage
to such items. Tenant, at its sole cost and expense shall, either by separate
policy or at Tenant’s option, by endorsement to a policy already carried,
maintain insurance coverage on all of Tenant’s personal property or fixtures
to the Demised Premises installed by Tenant, in, on, or about the Demised
Premises similar in coverage to that required to be maintained by Tenant under
Section 18.2, above. Such insurance shall be full replacement cost coverage.
The proceeds from any such insurance shall be used by Tenant for the
replacement of personal property or the restoration of fixtures installed by
Tenant in the Demised Premises. Tenant shall provide Landlord with written
evidence that such insurance is in force on the Term Commencement Date or the
date Tenant occupies the Demised Premises, whichever occurs first, and,
thereafter, upon each anniversary of the Term Commencement Date, or upon the
request of the Lenders. Tenant, at Tenant’s cost, shall carry such other
insurance as Tenant desires for Tenant’s protection with respect to business
interruption or loss of income.

          18.4. Rental Interruption Insurance. Tenant shall obtain and keep in
force from the Term Commencement Date or the date Tenant occupies the Demised
Premises, whichever first occurs, throughout the Term of this Lease and until
Tenant has surrendered control and

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possession of the Demised Premises to Landlord, a policy of insurance, either
as a separate policy or an endorsement to another policy of insurance
maintained by Tenant, whether denominated as business interruption insurance
or rent interruption insurance, which insures the loss of the full Rent and
other charges payable by Tenant to Landlord under this Lease for one (1) year
(including all real estate taxes, insurance costs, and any scheduled rental
increases). Said insurance shall provide that in the event this Lease is
terminated or Tenant’s obligation to pay Rent is abated by reason of an
Insured Loss or an interruption in the delivery of utilities, the period of
indemnity for such coverage shall be extended beyond the date of the
completion of repairs or replacement of the Demised Premises, to provide for
one (1) full year’s loss of rental revenues from the date of any such loss.
Said insurance shall contain an agreed valuation provision in lieu of any
coinsurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental income, property taxes, insurance premium costs
and other expenses, if any, otherwise payable by Tenant, for the next twelve
(12) month period. Tenant shall be liable for any deductible amount in the
event of such loss.

          18.5. Landlord’s Extended Coverage Policy. Landlord shall obtain and keep
in force from the Term Commencement Date or the date Tenant occupies the
Demised Premises, whichever first occurs, throughout the Term of this Lease and
until Tenant has surrendered control and possession of the Demised Premises to
Landlord, a commercial general liability policy of insurance protecting
Landlord and Tenant (as an additional named insured) against claims for bodily
injury, personal injury and property damage based upon, involving or arising
out of the ownership, use, occupancy or maintenance of the Demised Premises and
the Additional Improvements, if any. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $3,000,000 per
occurrence with an “Additional Insured- Managers or Lessors of Premises”
endorsement and contain the “Amendment of the Pollution Exclusion” for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not
contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this
Lease as an “insured contract” for the performance of Landlord’s indemnity
obligations under this Lease. The limits of said insurance required by this
Lease or as carried by Landlord shall not, however, limit the liability of
Landlord nor relieve Landlord of any obligation hereunder. All insurance to
be carried by Landlord shall be primary to and not contributory with any
similar insurance carried by Tenant, whose insurance shall be considered excess
insurance only.

          18.6. Insurance Requirements.

               18.6.1. Insurance required hereunder shall be in companies duly licensed
to transact business in the state of California, and maintaining during the
policy term a “General Policyholders Rating” of at least A- and financial
category rating of Class VII in “Best’s Insurance Guide,” unless otherwise
mutually approved in writing by Landlord, Lender and Tenant.

               18.6.2. Any of Tenant’s or Landlord’s policies may be in the nature of a
“blanket policy” which specifically provides that the amount of insurance
shall not be prejudiced by other losses covered by the policy.

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               18.6.3. Neither Tenant nor Landlord shall not do or permit to be done
anything which shall invalidate the insurance policies referred to in this
Section 18. All such
policies shall be written as primary policies, not contributing with and
not in excess of the
coverage which Landlord or Tenant, respectively, may carry.

               18.6.4. Tenant and Landlord shall cause to be delivered to the other
certified copies of policies of such insurance or certificates evidencing
the existence or amounts
of such insurance with the insured and loss payable clauses as required by
this Lease.

               18.6.5. No such policy shall be cancelable or subject to material
modification except after thirty (30) days prior written notice to
Landlord or Tenant or any
Lender, as the case may be. Tenant and Landlord shall, at least thirty
(30) days prior to the
expiration of such policies, furnish the other with evidence of renewals
or “insurance binders”
evidencing renewal thereof.

               18.6.6. If Tenant or Landlord shall fail to procure and maintain the
insurance required to be carried by it this Section 18, Landlord or Tenant
may, but shall not be
required to, procure and maintain the same, but, in the case of Tenant’s
failure to maintain its
required insurance, as an Operating Expense. In the case of Landlord’s
failure to carry its
required insurance, Tenant shall be entitled to a credit against Rent next
coming due for any
premiums actually paid by Tenant.

          18.7. Waiver of Subrogation. Without affecting any other rights or
remedies,
Tenant and Landlord (“Waiving Party”) each hereby release and relieve the
other, and waive
their entire right to recover damages (whether in contract or in tort)
against the other, for loss
of or damage to the Waiving Party’s property arising out of or incident to
the perils required to
be insured against under Section 18. The effect of such releases and
waivers of the right to recover damages shall not be limited by the amount of insurance carried or
required, or by any
deductibles applicable thereto.

          18.8. Tenant’s Right to Self-Insure. Notwithstanding the provisions of
Sections
18.1, 18.2, 18.3, 18.4 and 18.6 above, Tenant may elect to self-insure against
the types of losses
which are required to be insured against thereunder; provided that, during
any period of such
self-insurance Tenant shall, at all times, maintain a book value net worth
of no less than One
Hundred Million Dollars ($100,000,000) and a debt-to-equity ratio of not
less than fifty percent
(50%). Tenant shall provide Landlord, as well as any Lender, with written
notice of Tenant’s
election to self-insure no less than sixty (60) days prior to terminating
Tenant’s third-party
insurance and commencing self-insurance, together with sufficient
documentation, as determined
by Landlord and Lender, in their reasonable discretion, that Tenant
satisfies the financial
thresholds set forth in the preceding sentence. In such an event, those
provisions of this Lease
which address the rights and responsibilities of Landlord and Tenant in
relation to insurance,
including, without limitation, their obligations to maintain insurance,
the availability of insurance
and the lack of sufficient insurance proceeds, shall be interpreted as if
Tenant was maintaining
the required insurance. Nevertheless, Tenant and Landlord agree to make
such modifications
to or enter into such amendments of this Lease as may be reasonably
necessary to address any

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ambiguities or anomalies in their respective rights and obligations hereunder,
including, without limitation, under Section 16, caused by Tenant’s election
to self-insure.

     19. Eminent Domain.

          19.1. Taking. In the event the whole of the Demised Premises, or such
critical
and essential parts thereof as shall substantially deprive Tenant of the
usefulness to Tenant of the
Demised Premises (as mutually and reasonably determined by Landlord and
Tenant) be 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 Tenant
or Landlord may terminate this Lease effective as of the date possession
is required to be
surrendered to said authority by delivering written notice to the other of
such termination.

          19.2. Restoration of Demised Premises. Upon any taking, if this Lease is
not
terminated pursuant to Section 19.1 above, then Landlord shall promptly
and diligently proceed
to restore the Demised Premises to substantially their same condition, to
the extent reasonably
possible, prior to such partial taking (exclusive of Tenant’s fixtures,
furnishings, equipment,
supplies and other personal property and contents), but Landlord’s
financial obligation under this
Section 19.2 shall be limited in amount to the amount of the award in
condemnation. Tenant,
at Tenant’s expense, shall make all necessary repairs and alterations to
Tenant’s fixtures,
furnishings, equipment, supplies and other personal property and contents;
provided, however,
that Landlord shall make available to Tenant for” the restoration of any
Tenant Owned
Improvements any portion of the award in condemnation which remains
unspent and available
after completion of the restoration of the Demised Premises as required
above. Until such
restoration has been completed, Rent shall be abated proportionately based
on the percentage of
the rental value of the Demised Premises after such taking as compared to
the rental value of the
Demised Premises prior to such taking, conditioned, however, on Landlord’s
receipt during such
period of restoration of the proceeds of the rental interruption insurance
required to be
maintained by Tenant for Landlord’s benefit pursuant to Section 18 of this
Lease.

          19.3. Award. Landlord shall receive the total amount awarded in any
proceeding
resulting in the total or partial taking of the Demised Premises,
Notwithstanding the provisions
of this Section 19.3, if Lender shall refuse to allow such award to be
used to restore the Demised
Premises; and Landlord does not arrange alternate financing for such
purpose, then either party
hereto may terminate this Lease upon ninety (90) days notice in writing to
the other. To the
extent it does not result in a reduction in the award which would
otherwise be payable to
Landlord, Tenant shall be entitled to any award which is specifically
awarded as compensation
(i) for the taking of Tenant’s personal property and fixtures, including
excess tenant improvements and Alterations which were installed at Tenant’s expense, and (ii)
for costs of Tenant
moving to a new location, and (iii) for Tenant’s loss of business.

     20. Defaults and Remedies

          20.1. Events of Default. Any one or more of the following events shall
be an event of default by Tenant (“Event of Default”) under this Lease (and
while an Event of Default exists, Tenant shall be considered “in Default” as
that term is used in this Lease):

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               20.1.1. Tenant fails to pay any Rent within five (5) business days
after the same becomes due and payable, provided, however, that on no more
than two (2)
occasions during any twelve (12) month period and no more than five (5)
occasions during the
Term, Tenant shall not be considered in Default under this Section 20.1.1
until five (5) business
days have elapsed following written notice from Landlord to Tenant that
Rent has not been paid
when due; or

               20.1.2. Tenant fails to pay any other sum required by this Lease
when and as the same becomes due and payable and such failure shall
continue for more than
ten (10) days, provided, however, that on no more than two (2) occasions
during any twelve (12)
month period and no more than five (5) occasions during the Term
(including any such notices
delivered under Section 20.1.1, above), Tenant shall not be considered in
Default under this
Section 20.1.2 until ten (10) business days have elapsed following written
notice from Landlord
that the amount due hereunder has not been paid when due; or

               20.1.3. Tenant fails to perform or comply with any other term
hereof, and such failure shall continue for more than thirty (30) days
after notice thereof from
Landlord, and Tenant shall not within such period commence with due
diligence and dispatch the
curing of such default, or, having so commenced, shall thereafter fail or
neglect to prosecute or
complete with due diligence and dispatch the curing of such default; or

               20.1.4. Tenant makes a general assignment for the benefit of
creditors or shall admit in writing its inability to pay its debts, as
they become due or shall file
a petition in bankruptcy, or shall be adjudicated a bankrupt or insolvent,
or shall file a petition
seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or
similar relief under any present or future statute, law, or regulation, or
shall file an answer
admitting or shall fail reasonably to contest the material allegations of
a petition filed against it
in any such proceeding, or shall seek or consent to or acquiesce in the
appointment of any
trustee, receiver or liquidator of Tenant or any material part of its
properties; or

               20.1.5. Within ninety (90) days after the commencement of any
proceeding against Tenant seeking any reorganization, arrangement,
composition, readjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation,
such proceeding shall not have been dismissed, or if, within ninety (90)
days after the
appointment without the consent or acquiescence of Tenant, of any trustee,
receiver or liquidator
of Tenant or of any material part of its properties, such appointment
shall not have been vacated;
or

               20.1.6. A final judgment for the payment of money shall be rendered
against Tenant and, within sixty (60) days after the entry thereof, such
judgment shall not have
been discharged or execution thereof stayed pending appeal, or if, within
sixty (60) days after
the expiration of any such stay, such judgment shall not have been
discharged; or

               20.1.7. Tenant shall permit the abandonment or nonoccupancy of
the Demised Premises except for temporary vacancies or portions thereof,
or to the extent caused

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by damage, destruction or condemnation, although Landlord’s sole remedy for
such Event of Default shall be termination of the Lease and possession of the
Demised Premises.

          20.2. Landlord’s Remedies. Upon the occurrence of an Event of Default,
Landlord, at its option, without further notice or demand to Tenant, shall
have, in addition to all other rights and remedies provided in this Lease, at
law or in equity, the option to pursue any one or more of the following
remedies, each and all of which shall be cumulative and nonexclusive, without
any notice or demand whatsoever:

               20.2.1. Terminate this Lease, in which event Tenant shall immediately
surrender the Demised Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in Rent, enter upon and take possession of the
Demised Premises and expel or remove Tenant and any other person who may be
occupying the Demised Premises or any part thereof, without being liable for
prosecution or any claim or damages therefor; and Landlord may recover from
Tenant the following:

                    (i) The worth at the time of award of any unpaid Rent which has 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 rental 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 Lease Term after the time of award exceeds
the amount of such rental loss that Tenant proves could have been 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 would
be likely to result therefrom; and

                    (v) Such other amounts in addition to or in lieu of the foregoing as
may be permitted from time to time by applicable law.

The term “Rent” as used in this Section 20 shall be deemed to be and to mean
all sums of every nature required to be paid by Tenant pursuant to the terms
of this Lease, whether to Landlord or to others. As used in Section 20.2.1
(i) and (ii) , above, the “worth at the time of award” shall be computed by
allowing interest at the rate set forth in Section 20.9, below, but in no
case greater than the maximum amount of such interest permitted by law. As
used in Section 20.2.1 (iii) above, the “worth at the time of award” shall be
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1 %).

          20.3. Right to Collect Rent as Due. Landlord shall have the remedy
described in California Civil Code Section 1951.4 (Landlord may continue
lease in effect after Tenant’s

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breach and abandonment and recover Rent as it becomes due, if Tenant has the
right to sublet or assign, subject only to reasonable limitations).
Accordingly, if Landlord does not elect to terminate this Lease on account of
any default by Tenant, Landlord may, from time to time, without terminating
this Lease, enforce all of its rights and remedies under this Lease, including
the right to recover all Rent as it becomes due.

          20.4. New Lease Following Termination. In the event Landlord elects to
terminate this Lease and relet the Premises, it may execute any new lease
in its own name.
Tenant hereunder shall have no right or authority whatsoever to collect
any Rent or other sums
from such tenant. The proceeds of any such reletting shall be applied as
follows:

               20.4.1. First, to the payment of any indebtedness other than Rent due
hereunder from Tenant to Landlord, including but not limited to storage
charges or brokerage
commissions owing from Tenant to Landlord as the result of such reletting;

               20.4.2. Second, to the payment of the costs and expenses of reletting the
Premises, including alterations and repairs which Landlord deems
reasonably necessary and
advisable, and reasonable attorneys’ fees incurred by Landlord in
connection with the retaking
of the Demised Premises and such reletting;

               20.4.3. Third, to the payment of Rent and other charges due and unpaid
hereunder; and

               20.4.4. Fourth, to the payment of future Rent and other damages payable
by Tenant under this Lease.

          20.5.
Cumulative Rights; No Waiver. All rights, options and remedies of
Landlord contained in this Lease shall be construed and held to be
non-exclusive and cumulative.
Landlord shall have the right to pursue any or all of such remedies or any
other remedy or relief
which may be provided by law, whether or not stated in this Lease. No
waiver of any Default
of Tenant hereunder shall be implied from the acceptance by Landlord of
any Rent or other
payments due hereunder (except with respect to the amount so collected) or
any omission by
Landlord to take any action on account of such Default if such Default
persists or is repeated,
and no express waiver shall affect Defaults other than as specified in
said waiver.

          20.6. Tenant Not Released From Liability. No expiration or termination of
the
Term pursuant to this Section 20 or by operation of law, or otherwise
(except as expressly
provided herein), and no repossession of the Demised Premises or any part
thereof pursuant to
this Section 20, or otherwise, shall relieve Tenant of its liabilities and
obligations hereunder, all
of which shall survive such expiration, termination or repossession.

          20.7. Landlord Default and Liability.

               20.7.1. Landlord shall be in default under this Lease (a “Landlord
Default”) if Landlord fails to perform an obligation required of Landlord
under this Lease within a reasonable time, but in no event until the lapse of
thirty (30) days after written notice to

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Landlord by Tenant specifically identifying the obligation Landlord has failed
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 shall not be in default if Landlord commences performance within such
thirty (30) day period and thereafter diligently prosecutes the same to
completion. Except in the case of Landlord’s active negligence or willful
misconduct, Landlord’s liability for a Landlord Default shall be only for
damages arising from and after Landlord’s receipt of Tenant’s written notice
claiming a Landlord Default. Any claims for a Landlord Default concerning the
construction of the Improvements shall be asserted in writing, if at all, not
later than 360 days following the substantial completion of construction of
the Improvements, except with regard to matters related to Landlord’s warranty
against latent defects contained in Section 8.2 of this Lease, in which case
such claim shall be made within sixty (60) days after such defect is
discovered. In the event that there is any insurance coverage for the damages
claimed to be caused by a Landlord Default, said insurance proceeds shall be
exhausted and Landlord shall be obligated to pay only the remainder of said
damages.

               20.7.2. If Landlord is a limited partnership, limited liability company or
joint venture, the limited partners of such partnership or members of such
limited liability company shall not be personally liable and no limited partner
or member of Landlord shall be sued individually or named individually as a
party in any suit or action or service of process be made against any limited
partner or member of Landlord. If Landlord is a corporation, the shareholders,
directors, officers, employees and/or agents of such corporation shall not be
personally liable and no shareholder, director, officer, employee or agent of
Landlord shall be sued or named as a party in any suit or action or service of
process be made against any shareholder, director, officer, employee or agent
of Landlord (excluding however the corporation’s statutory agent for service of
process). No limited partner, member, shareholder, director, employee or agent
of Landlord shall be required to answer or otherwise plead to any service of
process and no judgment will be taken or writ of execution levied against any
limited partner, member, shareholder, director, employee or agent of Landlord.

          20.8. Notice to Lender. In the event of any Landlord Default, Tenant shall
give
notice, by registered or certified mail, at any address provided to
Tenant, to any Lender whose
address shall have been furnished to Tenant and Tenant shall offer such
Lender a reasonable
opportunity to cure the default. The period of time for Lender to cure a
Landlord Default shall
begin on the receipt of notice by Lender from Tenant of the Landlord
Default and shall continue
until thirty (30) days thereafter (which thirty (30) day period shall run
concurrently with the
thirty (30) day period provided in Section 20.7.1, above).

          20.9. Late Payments. If Tenant is in Default in its obligation to pay any
Rent
to Landlord, in addition to any other remedies to which Landlord may be
entitled under this
Lease, Tenant shall pay to Landlord the following as Additional Rent:

               (a) A late charge equal to the late charge Landlord is required to pay to
Landlord’s mortgagee, provided such late charge is assessed to Landlord and
Landlord provides Tenant with written evidence of such late charge; and

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               (b) Interest on the overdue amount Tenant has not paid accruing from and
as of the day it was due, at the rate of interest equal to the rate of
interest charged by Lender on the mortgage financing secured by the Demised
Premises (as evidenced by Landlord in writing to Tenant).

Late charges and interest owing pursuant to this Section 20.9 shall be due and
payable within two (2) business days after proper written demand from
Landlord. Tenant acknowledges that Landlord’s sole source of funds to cover
debt service under the fee mortgage relating to the Real Property is Tenant’s
Rent payments hereunder and that Tenant’s late payment of Rent will result in
Landlord’s late payment of debt service and will, therefore, cause Landlord to
incur the late payment charges to the fee mortgagee and related costs and
expenses.

     21. Notice and Payment of Rent to Landlord.

          21.1. Payment of Rent and Delivery of Notice. Rent and all other sums due
Landlord under the terms and conditions of this Lease, and any notice,
consent, demand, bill,
statement or other communication required or permitted to be given
hereunder to either Landlord
or Tenant shall be in writing and shall be deemed duly delivered upon
personal delivery, or as
of the second business day after mailing by United States mail, postage
prepaid, return receipt
requested, or upon the next business day if delivered by overnight courier
or similar overnight
delivery system, addressed to Tenant at the Demised Premises or to Tenant
or Landlord at the
address(es) shown and to the person(s) identified in Section 2.7 herein.
Either party may, by
notice to the other given pursuant to this Section, specify additional or
different addresses for
notice purposes, of may change the identity of the person to whom the
notices are to be
addressed.

          21.2. Personal Service. Notwithstanding the foregoing, a notice from one
party
to the other shall be deemed sufficient if personally served by the agent
of the serving party upon
the President or any Vice-President, or the Secretary or Treasurer or any
General Partner of the
other party, and, in the event of a judicial proceeding with respect to
this Lease, a notice, service
of process or other communication shall be deemed properly given if served
or otherwise
delivered in accordance with the laws and rules of civil procedure of the
jurisdiction in which
such judicial proceeding is pending.

     22. Subordination and Attornment.

          22.1. This Lease shall be subject and subordinate to the lien of any
mortgage, deed of trust or lease in which Landlord is tenant, now or
hereafter in force against the Demised Premises, and to all advances made or
hereafter to be made upon the security thereof without the necessity of the
execution and delivery of any further instruments on the part of Tenant to
effectuate such subordination; provided, however, that Tenant shall execute
and deliver, within ten (10) days after request therefor, such further
instrument or instruments evidencing such subordination of this Lease to the
lien of any such mortgages, deeds of trust or leases in which Landlord is
tenant as may be reasonably required for that purposes; provided, further,
that the holder of any such mortgage, deed of trust or lease delivers to
Tenant a non-disturbance agreement in a form reasonably similar to the form
of Subordination, Nondisturbance and

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Attornment Agreement which is attached to this Lease as Exhibit “F,” providing
that so long as Tenant performs all of its obligations under the Lease,
Tenant’s quiet enjoyment and use of the Demised Premises shall not be
disturbed.

          22.2. If any mortgagee, beneficiary or landlord under a lease wherein
Landlord
is tenant so elects, this Lease shall be deemed prior in lien to any such
lease, mortgage or deed
of trust upon or including the Demised Premises, regardless of date, and
Tenant shall execute
a statement in writing to such effect within ten (10) days after receipt
of Landlord’s request
therefor.

          22.3. Subject to Section 22.1, above, Tenant agrees to attorn to any
successor in
interest to Landlord whether by purchase, foreclosure, sale in lieu of
foreclosure, power of sale,
termination of any lease of land only or land and buildings in a
sale-leaseback transaction or
otherwise, if so requested or required by such successor in interest, and
Tenant agrees, within
ten (10) days after receipt of demand therefor, to execute such agreement
or agreements in
confirmation of such attornment. If any person shall succeed to all or
part of Landlord’s interest
in the Demised Premises upon the exercise of any remedy provided for in
any mortgage of the
Demised Premises now or hereafter recorded to which this Lease is prior,
Tenant shall attorn and
recognize such person as Tenant’s landlord as above provided and this
Lease shall continue in
full force and effect as a direct Lease between such person and Tenant as
fully and with the same
force and effect as if this Lease had originally been entered into by such
person and Tenant,
except that such person shall not be liable for any act or omission of
Landlord prior to such
person’s succession to title, nor be subject to any offset, defense or
counterclaim occurring prior
to such person’s succession to title, nor be bound by any material
modification of this Lease or
any waiver, compromise, release or discharge of any obligation of Tenant
hereunder unless such
modification, waiver, compromise, release or discharge shall have been
specifically consented
to in writing by the mortgagee under said mortgage; provided that nothing
in this Section 22.3
shall be deemed to alter or diminish such successor’s liability and
responsibilities under this
Lease.

          22.4. If Landlord obtains a loan commitment from a lender for the
financing or
refinancing of the Demised Premises, and said loan commitment requires
some amendment(s)
to this Lease, then Tenant shall cooperate with Landlord in executing said
amendment(s), so long
as the amendment(s) do not adversely affect any of the material rights,
obligations or privileges
of Tenant under this Lease.

     23. Fixtures. All fixtures, furniture and equipment installed in the
Demised Premises by Tenant shall at all times be and remain the sole and
exclusive property of Tenant, and at its option, the same, or any portion
thereof, may be removed by Tenant at the expiration or termination of this
Lease. The term “Trade Fixtures” as used in this Lease shall mean Tenant’s
machinery, personal property and equipment that can be removed without doing
material damage to the Demised Premises, or which can be removed by Tenant and
any damage caused by such removal can be repaired by Tenant. Any damage caused
by such removal by Tenant shall be repaired at the expense of Tenant. Anything
hereinbefore to the contrary notwithstanding, if Tenant shall be in Default
under this Lease, Landlord shall, to the extent permitted by law, have (in
addition to all other rights) a right of distress for rent as security for all
rent and other sums

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payable under this Lease. In addition, if any of Tenant’s furniture,
equipment or fixtures are not removed by Tenant at its expense within
twenty (20) days after any repossession of the Demised Premises (whether or
not this Lease has been terminated) such furniture, equipment and fixtures
shall be considered abandoned by Tenant and may be appropriated, sold,
destroyed, or otherwise disposed of by Landlord without notice to Tenant
and without obligation to account therefor, except as may be required by
applicable law; and Tenant shall pay Landlord, upon demand, all costs and
expenses incurred by Landlord in removing, storing or disposing of any of
Tenant’s furniture, equipment and fixtures. Landlord may exercise its right
to remove Tenant’s furniture, equipment and fixtures sooner than twenty
(20) days if necessary to make the Demised Premises suitable for another
tenant and such furniture, equipment and fixtures shall be deemed abandoned
by Tenant if Tenant fails to recover them from Landlord within twenty (20)
days. Landlord shall not be responsible for any replacement and loss of, or
damages to Tenant’s furniture, equipment or fixtures unless caused solely
by Landlord’s active negligence or willful misconduct.

     24. Holding Over. At the expiration of this Lease, should Tenant hold over
without
Landlord’s consent, such holding over shall create only a tenancy from
month to month,
terminable on thirty (30) days notice from either party to the other,
provided that the amount of
rent due and payable during any such period shall be one hundred and ten
percent (110%) of the
then applicable Rent, provided, however, that if such holding over extends
for more than three
(3) months after the expiration of this Lease, then the amount of rent due
and payable during a
further period of hold over shall be one hundred twenty-five percent
(125%) of the then
applicable Rent.

     25. Quitclaim Deed. Tenant shall execute and deliver to Landlord on the
expiration
or termination of this Lease, immediately upon Landlord’s request, a
quitclaim deed to the
Demised Premises or other document in recordable form suitable to evidence
of record the
termination of this Lease.

     26. Quiet Enjoyment. If and so long as Tenant pays the Rent reserved by
this Lease
and performs and observes all the covenants and provisions hereof, Tenant
shall quietly enjoy
the Demised Premises, subject, however, to the terms of this Lease, and
Landlord shall warrant
and defend Tenant in the enjoyment and peaceful possession of the Demised
Premises throughout
the Term of this Lease.

     27. Delays. In any case, where either party hereto is required to do any
act, except
the payment of Rent or other money, the term for the performance thereof
shall be extended by
a period equal to any delay caused by any delay in commencement or
completion resulting from
a Tenant Caused Delay or a Force Majeure Delay, whether such time be
designated by a fixed
date, a fixed time or a “reasonable time”. Both parties shall use their
respective reasonable
efforts to minimize any such delay.

          27.1. A “Force Majeure Delay” shall mean any delay in completing or
performing any required act under this Lease, other than Tenant’s
obligation to pay Rent on a timely basis, which is the result of acts of
God, war, governmental restrictions, inability to procure the necessary
labor or materials, strikes or other causes beyond the control of the
party from whom the performance is required.

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          27.2. A “Tenant-Caused Delay” shall mean (i) any delay, caused by the
failure of Tenant, its officers, directors, partners, agents, employees, or
contractors or any other representative of Tenant to act within the time limits
set forth in the Lease or the Work Letter; and (ii) any delay resulting from
Tenant Changes (as defined in the Section I.H.1. of the Work Letter).

     28. Surrender.

          28.1. Subject to Section 4.4 of this Lease, no surrender of possession of
any part
of the Demised Premises shall release Tenant from any of its obligations
hereunder unless
accepted by Landlord.

          28.2. The voluntary or other surrender of this Lease by Tenant shall not
work
a merger, unless Landlord consents, and shall, at the option of Landlord,
operate as an
assignment to it of any or all subleases or subtenancies.

          28.3. The voluntary or other surrender of any ground or underlying lease
that
may hereafter be executed affecting the Building or the Demised Premises,
or a mutual
cancellation thereof or of Landlord’s interest therein, shall not work a
merger and shall, at the
option of the successor of Landlord’s interest in the Building or the
Demised Premises, operate
as an assignment of this Lease.

          28.4.
Tenant shall, on the last day of the Initial Term or Option Term,
or on the
last day of any holdover, surrender the Demised Premises in as good
condition as when Tenant
took possession, except for ordinary wear and tear, loss by fire or
casualty, loss by any cause
beyond Tenant’s control, and alterations, additions and improvements
herein permitted.

     29. Release of Landlord Upon Conveyance. In case the original or any
successor
Landlord shall convey, transfer or otherwise dispose of Landlord’s
interest in the Demised
Premises, it shall thereupon be released from all liabilities and
obligations of Landlord under this
Lease (except those occurring prior to such conveyance or other
disposition) and such liabilities
and obligations shall be binding solely on the then owner of the Demised
Premises.

     30. Performance on Behalf of Tenant. In the event that Tenant shall fail
to make any
payment or perform any act required hereunder to be made or performed by
Tenant, then
Landlord may, but shall be under no obligation to, after such notice to
Tenant, if any, as may
be reasonable under the circumstances, or as may otherwise be required by
the terms of this
Lease, make such payment or perform such act with the same effect as if
made or performed by
Tenant. Entry by Landlord upon the Demised Premises for such purpose
shall not waive or
release Tenant from any obligation or Default hereunder. Tenant shall
reimburse Landlord,
within three (3) business days after demand therefor, for all sums so paid
by Landlord and all

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costs and expenses incurred by Landlord, together with interest thereon as
provided in Section 20 hereof, in connection with the performance of any such
act.

     31. Estoppel Certificate by Tenant.

          31.1. Tenant agrees at any time and from time to time, upon not less than
ten (10) days prior request by Landlord, to execute, acknowledge and deliver
to Landlord a statement in writing, substantially in the form attached to this
Lease as Exhibit “G” with the blanks filled in, or on any other form
reasonably requested by a proposed lender or purchaser, certifying that this
Lease is unmodified and in full force and effect (or if there have been
modifications that the same is in full force and effect as modified and
stating those modifications), and the dates to which the Rent and other
charges, if any, have been paid in advance, that Landlord is not in default on
and has complied with all the terms and conditions of this Lease, it being
intended that any such statement delivered pursuant to this section may be
relied upon by any prospective purchaser of the fee or mortgagee or assignee
of any mortgage upon the fee of the Demised Premises. Nothing in any such
estoppel certificate shall change the rights or obligations of Landlord and
Tenant as between themselves.

          31.2. Landlord agrees at any time and from time to time, upon not less
than ten (10) days prior request by Tenant, to execute, acknowledge and
deliver to Tenant a statement in writing, certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications
that the same is in full force and effect as modified and stating those
modifications), and the dates to which the Rent and other charges, if any,
have been paid in advance, that Tenant is not, to Landlord’s knowledge, in
default on and has complied with all the terms and conditions of this Lease.
Any such statement may be relied upon by the party to whom it is issued.
Nothing in any such estoppel certificate shall change the rights or
obligations of Landlord and Tenant as between themselves.

     32. Hazardous Substances.

          32.1. Landlord’s Consent. The term “Hazardous Substance” as used in this
Lease shall mean any product, substance, chemical, material or waste whose
presence, nature, quantity and/or intensity of existence, use, manufacture,
disposal, transportation, spill, release or effect, either by itself or in
combination with other materials expected to be on the Demised Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the Demised Premises, (ii) regulated or monitored by any
governmental authority or (iii) a basis for liability of Landlord to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products, by-products or
fractions thereof. Tenant may without Landlord’s prior consent, but in
compliance with all Applicable Law, use any ordinary and customary materials
reasonably required to be used by Tenant in the normal course of Tenant’s
business permitted on the Demised Premises, so long as such use does not
expose the Demised Premises or neighboring properties to any meaningful risk
of contamination or damage or expose Landlord to any liability therefor.
Tenant shall not cause or permit any Hazardous Substance to be spilled or
released in, on, under or about the Demised Premises (including through the
plumbing or sanitary sewer system) and shall promptly, at

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Tenant’s expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or
required, for the cleanup of any contamination of, and for the
maintenance, security and/or monitoring of the Demised Premises,
the elements surrounding same, or neighboring properties, that was
caused or materially contributed to by Tenant, or pertaining to or
involving any Hazardous Substance and/or storage tank brought onto
the Demised Premises by or for Tenant or under its control.

               32.1.1. Duty to Inform Landlord. If Tenant knows, or has
reasonable cause to believe, that a Hazardous Substance, or a
condition involving or resulting
from same, has come to be located in, on, under or about the
Demised Premises, other than as
expressly allowed by this Lease or otherwise previously
consented to by Landlord, Tenant shall
immediately give written notice of such fact to Landlord.
Tenant shall also immediately give
Landlord a copy of any statement, report, notice,
registration, application, permit, business plan,
license, claim, action or proceeding given to, or received
from, any governmental authority or
private party, or persons entering or occupying the Demised
Premises, concerning the presence,
spill, release, discharge of, or exposure to, any Hazardous
Substance or contamination in, on,
or about the Demised Premises.

               32.1.2. Tenant’s Indemnification. Tenant shall indemnify,
protect,
defend and hold Landlord, its agents, employees, Lenders and
ground lessor, if any, and the
Demised Premises, harmless from and against any and all loss
of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses,
penalties, permits and attorney’s and
consultant’s fees arising out of or involving any Hazardous
Substance or storage tank brought
onto the Demised Premises by or for Tenant or under Tenant’s
control. Tenant’s obligations
under this Section 32.1.2 shall include, but not be limited
to, the effects of any contamination
or injury to person, property or the environment created or
suffered by Tenant, and the cost of
investigation (including consultant’s and attorney’s fees and
testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination
therein involved, and shall survive
the expiration or earlier termination of this Lease. No
termination, cancellation or release
agreement entered into by Landlord and Tenant shall release
Tenant from its obligations under
this Lease with respect to Hazardous Substances or storage
tanks brought onto the Demised
Premises by or for Tenant or under Tenant’s control, unless
specifically so agreed by Landlord
in writing at the time of such agreement.

          32.2. Tenant’s Compliance with Law. Except as otherwise
provided in this Lease, and further subject to Landlord’s
warranties and obligations set forth in Sections 7.3, 8.2 and 9.2
of this Lease, Tenant, shall, from and after the Term
Commencement Date at Tenant’s sole cost and expense, fully,
diligently and in a timely manner, comply with all Applicable
Laws. Tenant shall, within ten (10) days after receipt of
Landlord’s written request, provide Landlord with copies of all
documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and
certificates, evidencing Tenant’s compliance with any Applicable
Law specified by Landlord, and shall immediately upon receipt,
notify Landlord in writing (with copies of any documents
involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure
by Tenant or the Demised Premises to comply with any Applicable
Law.

-54-

 

          32.3.
Inspection; Compliance. Landlord and any Lenders (as defined
in Section 16.5.2 of this Lease) shall have the right to employ experts and/or
consultants in connection therewith and/or to advise Landlord with respect to
Tenant’s activities, including but not limited to the installation, operation,
use, monitoring, maintenance, or removal of any Hazardous Substance or storage
tank on or from the Demised Premises. The costs and expenses of any such
inspections, to the extent related to Hazardous Materials, shall be paid by
the party requesting same, unless a Default of this Lease related to Hazardous
Materials, violation of Applicable Law related to Hazardous Materials, or a
contamination, caused or materially contributed to by Tenant is found to exist
or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent
violation or contamination.

     33. Commissions. Tenant represents and warrants that there are no
commissions, fees and sums which are now or in the future may be due and payable
with regard to leasing, acquisition or other such matters related to the Demised
Premises, other than those owed to Colliers Illif Thorn and The Staubach
Company, for which Landlord shall be solely responsible. Landlord and Tenant
agree to indemnify and hold each other harmless from any and all liability for
the payment of commissions, fees and other sums other than those specifically
enumerated above.

     34. Financial Statements. Tenant, from time to time, at Landlord’s
request, shall provide Landlord with Tenant’s most recent financial statements
which, so long as Tenant is an entity which files periodic financial
disclosures to securities regulatory authorities, shall be those which are
periodically filed with those authorities. Unless Tenant is in Default of the
Lease, in no event shall Tenant be obligated to provide financial statements
more frequently than two (2) times in a fiscal year.

     35. Waiver and Modification. No provision of this Lease may be modified,
amended or added to except by an agreement in writing executed by Landlord and
Tenant. The waiver by Landlord or Tenant of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant or condition herein contained.

     36. Waiver of Jury Trial and Counterclaims. The parties hereto shall and
do hereby waive trial by jury in any action, proceeding or counterclaim brought
by either of the parties hereto against the other on any matters whatsoever
arising out of or in any way connected with this Lease, the relationship of
Landlord and Tenant, Tenant’s use or occupancy of the Demised Premises and/or
any claim of injury or damage.

     37. Miscellaneous.

          37.1. Terms and Headings. Where applicable in this Lease, the singular
includes the plural and the masculine or neuter includes the masculine,
feminine and neuter. The headings used in this Lease are not a part hereof and
shall have no effect upon the construction or interpretation of any part
hereof.

-55-

 

          37.2. Examination of Lease. Submission of this Lease for examination or
signature by Tenant does not constitute a reservation of, or option for, lease,
nor is it effective as a lease or otherwise until execution by, and delivery
to, both Landlord and Tenant.

          37.3. 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.

          37.4. Covenants and Conditions. Each provision of this Lease performable
by Landlord or Tenant shall be deemed both a covenant and a condition.

          37.5.
Consents. Whenever consent or approval of either party is required,
that party shall not unreasonably withhold such consent or approval, except as
may be expressly set forth herein to the contrary.

          37.6. Entire Agreement. This Lease (together with its Exhibits) is
intended by the parties as a final expression of their agreement with respect
to the terms as are included herein, and all prior agreements, understandings,
representations and statements, oral or written, are merged herein, excepting
only for written agreements signed contemporaneously with or after the signing
of this Lease.

          37.7. Severability. Any provision of this Lease which shall be deemed or
proven to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provision hereof, and all such other provisions shall
remain in full force and effect.

          37.8. Recording. Landlord and Tenant shall execute, acknowledge and record
a short form memorandum of this Lease.

          37.9. Impartial Construction. The language in all parts of this Lease
shall be in all cases construed as a whole according to its fair meaning, and
not strictly for or against either Landlord or Tenant. As both parties
participated in the drafting and review of this Lease, any ambiguity in the
language will not be constructed against either party as the drafter of that
language.

          37.10. Inurement. Each of the covenants, conditions and agreements herein
contained shall inure to the benefit of and shall apply to and be binding upon
the parties hereto and their respective heirs, legatees, devisees, executors,
administrators, successors, assigns, sublessees or any person who may come
into possession of the Demised Premises or any part thereof in any manner
whatsoever. Nothing contained in this Section shall in any way alter the
provisions against assignment or subletting provided in this Lease.

          37.11. Exhibits. All exhibits and schedules referred to herein and
attached hereto are a part hereof, and incorporated herein by this reference.

          37.12. Periods of Time. All periods of time referred to in this Lease
shall include all Saturdays, Sundays and state or United States holidays,
unless the period of time specifies business days, provided that if the date or
last date to perform any act or give any notice with

-56-

 

respect to this Lease shall fall on a Saturday, Sunday or state or national
holiday, such act or notice may be timely performed or given on the next
succeeding day which is not a Saturday, Sunday or state or national holiday.

          37.13. Choice of Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California, and venue for any legal
action under this Lease shall be San Diego County, California.

          37.14. Interpretation. In the event any conflict exists between the
provisions of this Lease, the order of priority in the interpretation hereof
shall be as follows: (a) any supplemental agreement, memorandum of
understanding or addendum signed simultaneously with, or after, the signing of
this Lease, (b) Work Letter Exhibit B, (c) Exhibits (except Work Letter Exhibit
B), (d) basic Lease provisions, and (e) general provisions.

          37.15. Right of First Offer. In the event Landlord decides to market the
Demised Premises for sale, Landlord shall notify Tenant of that intention, in
writing (“Landlord’s Offer Notice”), which Landlord’s Offer Notice shall
specify the terms and conditions under which Landlord is willing to sell the
Demised Premises and under which it intends to offer the Demised Premises for
sale to third parties (the “Terms and Conditions”). Landlord’s Offer Notice
shall be deemed an offer to sell the Demised Premises which is available for
acceptance or rejection by Tenant on the terms expressed in this Section 37.15.
If Tenant wishes to accept the offer to purchase the Demised Premises on the
Terms and Conditions, Tenant shall, within twenty (20) days following receipt
of Landlord’s Offer Notice, deliver to Landlord written and unconditional
acceptance of the Terms and Conditions (“Tenant’s Acceptance Notice”), together
with a non- refundable deposit in the amount of five percent (5%) of the
purchase price. Tenant shall then have ninety (90) days to complete the
purchase of the Demised Premises. If Tenant either (i) rejects Landlord’s
Offer Notice, (ii) accepts Landlord’s Offer Notice, but
subject to conditions or contingencies, (iii) submits a counter-offer to Landlord’s Offer Notice,
(iv) accepts Landlord’s Offer Notice but fails to complete the purchase with
the ninety (90) day period provided, or (v) fails to respond to Landlord’s
Offer Notice, Tenant shall be deemed to have rejected Landlord’s Offer Notice,
in which case Landlord will have no further responsibility under this Section
37.15 and will be free to sell the Demised Premises to a party other than
Tenant on substantially the same terms as were offered to Tenant. If Landlord
subsequently decides to market the Demised Premises on terms substantially more
favorable to a prospective purchaser than those originally presented to Tenant,
then Landlord shall again deliver Landlord’s Offer Notice to Tenant and the
procedure described in this Section 37.15 shall be repeated. If any Lender or
successor to a Lender acquires title to the Demised Premises by “deed-in-lieu
of foreclosure” or by foreclosure, the procedures’ of this Section 37.15 shall
not be applicable to such a sale or any sale by the Lender; provided, however,
it shall continue to be applicable to any sale by any person or entity other
than Lender, other than the foreclosure sale itself. The foregoing
commitments by Landlord shall not constitute a right of first refusal which
Tenant can enforce against Landlord to the detriment of any sale to a third
party which Landlord may elect to make so long as the provisions of this
Section 37.15 have been observed.

-57-

 

          37.16. Counterparts. This Lease may be signed in counterparts, each of
which shall be deemed an original, and all of which together shall be deemed
one and the same Lease when both parties have signed a counterpart.

     IN WITNESS WHEREOF, the parties have caused these presents to be executed
as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	LANDLORD:
	 
	 	 	 	 	 	 
	 	 	UTC GREENWICH PARTNERS, a California limited
	 	 	partnership
	 
	 	 	 	 	 	 
	 	 	By:	 	Allen Development, Inc.,
	 	 	 	 	a California corporation,
	 	 	 	 	General Partner
	 
	 	 	 	 	 	 
	

	 	 	 	By:
	 	/s/ MARTIN V.
	

	 	 	 	 	 	
 
	

	 	 	 	Title:
	 	CHIEF FINANCIAL OFFICER
	 
	 	 	 	 	 	 
	 	 	TENANT:
	 
	 	 	 	 	 	 
	 	 	INTUIT, INC.,
	 	 	a Delaware corporation
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ WILLIAM H. LANE
	 	 	 	 	
 
	 	 	Title:	 	VP/CFO

-58-

 

EXHIBIT “D”

to

BUILD-TO-SUIT LEASE

MULTI-TENANT ADDENDUM

This Multi-Tenant Addendum (“Addendum”) is a part of the Build-to-Suit Lease,
dated as of May
        , 1995, by and between Intuit, Inc., a Delaware corporation, and UTC
Greenwich Partners,
a California limited partnership (the “Lease”) with regard to the lease of
certain land and improvements, including a two-story commercial office
building, of approximately 140,000 square feet of Gross Area in size (the
“Building”) (collectively the “Demised Premises”). The defined terms used in
this Addendum have the same meanings as ascribed to them in the Lease,
including, without limitation, the terms “Rentable Area” and “Usable Area.”

          1. Purpose of the Addendum. Under certain circumstances described in the
Lease, it is possible that (i) one or more tenant(s) other than Tenant will
occupy the Building or, (ii) more than one tenant other than Tenant will occupy
the Additional Improvements, or (iii) Additional improvements will be
constructed on the Land and no portion occupied by Tenant. The provisions of
the Lease addressing Operating Expenses, payment and reimbursement of Operating
Expenses and the responsibility for the actual maintenance of the Demised
Premises are primarily designed for the circumstance wherein Tenant is the sole
tenant of the Land, Building and Additional Improvements. This Addendum is
intended to address those same issues in the context where (i) either or both
of the Building or the Additional Improvements (“Building Multi-Tenancy’) are
occupied by Tenant together with another tenant(s), and (ii) the Demised
Premises are occupied solely by Tenant and the Additional Improvements are
occupied by a tenant(s) other than Tenant (“Land Multi-Tenancy”).

          2. Establishment
of “Common Facilities”.

               a. Building Multi-Tenancy. If either or both of the Building or the
Additional Improvements are ever leased to a tenant other than Tenant while
Tenant continues to occupy a portion of the Building or the Additional
Improvements, whichever is applicable, then the areas or facilities of the
Building or the Additional Improvements which are not reserved for use by a
tenant to the exclusion of all other tenants shall be, as appropriate and as
determined by Landlord in its reasonable discretion, removed from the
definition of the Demised Premises, and instead such facilities and areas will
become “Building Common Facilities” to be shared by Tenant and the other
tenant(s) in the Building. Building Common Facilities shall include common
lobbies, hallways, public restrooms, stairwells and stairways, all parking
areas, driveways, passageways, sidewalks, landscaped, areas, truck parking
areas, loading and dock areas, the roof and roof membrane, drainage swales,
gutters, downspouts, exterior glass, and exterior Building walls. Landlord
shall promptly notify Tenant of any such determination with an explanation
thereof as appropriate.

Page 1 of Exhibit “D”

 

 

               b. Land Multi-Tenancy. If Additional Improvements are ever leased to a
tenant other than Tenant and Tenant does not occupy any portion thereof, then
the parking areas, driveways, passageways, sidewalks, landscaped areas, truck
parking areas, and loading and dock areas, shall be, as appropriate and as
determined by Landlord in its reasonable discretion, removed from the
definition of the Demised Premises, and instead such facilities and areas will
become “Land Common Facilities” to be shared by Tenant and the tenant(s) of the
Additional Improvements. Landlord shall promptly notify Tenant of any such
determination with an explanation thereof as appropriate.

          3. Maintenance
of “Common Facilities”. In addition to
Tenant’s responsibilities under Section 9.1 of the Lease, and except to the
extent specifically identified as Landlord’s responsibility in Section 9.2 of
the Lease (including Landlord’s responsibilities under Sections 7.3 and 8.2 of
the Lease), Tenant shall keep the Building Common Facilities and/or the Land
Common Facilities, as appropriate, and every part thereof, in good order,
appearance, condition and repair, free of obstructions, dirt and rubbish, and
so as to comply fully and at all times with all Applicable Laws consistent with
other first-class business and industrial parks in the North City Area. Tenant
shall make all replacements and repairs to the Building Common Facilities
and/or the Land Common Facilities in the condition described in the preceding
sentence, reasonable wear and tear excepted. All repairs, replacements and
renewals shall be at least equal in quality and class to the original work. Any
and all warranties to which Landlord is entitled in connection with the
development and construction of the Demised Premises or the Additional
Improvements related to the Building Common Facilities or the Land Common
Facilities, including, without limitation, those referred to in Section 8 of
the Lease, shall be assigned to Tenant when and where appropriate, on a
non-exclusive basis, for the Term of this Lease for the purpose of fulfilling
Tenant’s responsibilities under this section.

          4. Payment of Operating Expenses. Tenant shall pay all of the Operating
Expenses related to its maintenance obligations regarding the Building Common
Facilities and the Land Common Facilities directly to the third party to whom
the expense is payable, as such Operating Expenses become due and payable.
Within ten (10) days following Landlord’s written request to Tenant, Tenant
shall furnish to Landlord appropriate evidence of payment of the Operating
Expenses which have been paid by Tenant directly to a (third party.

               a. Notwithstanding the foregoing, Landlord may elect to pay any or all of
the Operating Expenses related to the Building Common Facilities or the Land
Common Facilities directly without relieving Tenant of financial
responsibility for such expenses. In the event Landlord so elects, Landlord
shall give Tenant at least thirty (30) days prior written notice of Landlord’s
election and commitment to pay said Operating Expense(s), which notice shall
identify which Operating Expenses Landlord is undertaking to pay directly and
the date when such Operating Expenses become due. Tenant’s Share of Common
Operating Expenses (as defined below) which Landlord undertakes to pay
directly shall be paid by Tenant to Landlord at least twenty (20) days prior
to the scheduled due date (“Advance Expense Payment”). Tenant’s Share of
Common Operating Expenses which Landlord undertakes to pay directly and owed
by Tenant to Landlord shall be deemed Additional Rent as defined in Section
6.2 of the Lease.

Page 2 of Exhibit “D”

 

 

               b. If Landlord makes the election described in subsection a, above, and
Tenant fails to make an Advance Expense Payment when due, in addition to any
other remedies available to Landlord under the Lease, Landlord may, thereafter,
institute a procedure whereby Tenant shall pay to Landlord monthly installments
of Tenant’s Share of Common Operating Expenses based upon Landlord’s reasonable
estimate of the annual amount of Tenant’s Share of Common Operating Expenses
which Landlord has undertaken to pay directly. If such a monthly installment
arrangement is instituted by Landlord, then Landlord shall provide Tenant, in
writing, a statement containing an estimate of the amount of Tenant’s Share of
Common Operating Expenses which will be paid by Landlord for the current year
and calculating the monthly installment due from Tenant to enable Landlord to
pay those expenses when due (the “Monthly Installment”);
and Tenant shall pay
to Landlord, on the first day of each calendar month of the Term of this Lease
thereafter, as Additional Rent, the Monthly Installment.

               c. Within ninety (90) days after the conclusion of each calendar year
during the Term, Landlord shall furnish to Tenant a statement showing, in
reasonable detail, the actual Common Operating Expenses which Landlord paid
during the previous calendar year. If the amounts paid by Tenant for Tenant’s
Share of Common Operating Expenses are less than the actual amount of Tenant’s
Share of Common Operating Expenses for the previous year, that additional sum
shall be due and payable by Tenant to Landlord within thirty (30) days after
receipt by Tenant of said statement. If the amounts paid by Tenant to Landlord
exceed the actual Tenant’s Share of Common Operating Expenses paid by Landlord
for the previous calendar year, the difference shall be credited by Landlord
against the Rent next due and owing from Tenant; provided that, if the Term has
expired, Landlord shall accompany said statement with a payment to Tenant for
the amount of such difference.

               d. Notwithstanding the foregoing, if Tenant is not occupying any portion
of the Additional Improvements, Tenant may elect to have Landlord undertake
responsibility for and pay any or all of the Operating Expenses related to the
Building Common Facilities related to the Additional Improvements or the Land
Common Facilities without relieving Tenant of financial responsibility for
Tenant’s Share of Common Operating Expenses. In the event of such an election,
Tenant shall notify Landlord, in writing, of such election within thirty (30)
days after Landlord completes construction of the Additional Improvements and
notifies Tenant of its determination of the Building Common Facilities, if any,
and Land Common Facilities pursuant to Sections 2.a. and 2.b., above.

          5. Tenant’s Share of Common Operating Expenses. Although Tenant will be
responsible for paying all Operating Expenses related to operation and
maintenance of the Building Common Facilities and/or the Land Common
Facilities, Tenant’s share of those Operating Expenses (“Tenant’s Share of
Common Operating Expenses”) shall be limited as follows:

               a. The percentage of Tenant’s Share of Common Operating Expenses related
to operation and maintenance of the Building Common Areas shall be a fraction, the numerator of which is in the total square footage of Usable Area
contained in the Demised Premises which is reserved exclusively for use by
Tenant (i.e. excluding Building Common

Page 3 of Exhibit “D”

 

 

Facilities and areas reserved for rental to others) and the denominator of
which is the total square footage of Usable Area contained in the Demised
Premises.

               b. The percentage of Tenant’s Share of Common Operating Expenses related
to operation and maintenance of the Land Common Areas shall be a fraction, the
numerator of which is in the total square footage of the Land comprising the
Demised Premises (excluding the SDG&E Land) and the denominator of which is the
sum total square footage of (i) the Land comprising the Demised Premises and
(ii) the Land comprising the Excess Land.

               c. Tenant’s Share of Common Operating Expenses related to operation and
maintenance of the Building Common Areas and the Land Common Areas shall be
determined by applying the appropriate percentage calculated pursuant to
subsections a. and b., above, to the amount of Common Operating Expenses
incurred related to the Building Common Areas and the Land Common Areas,
respectively.

               d. In addition to the exclusions from Operating Expenses contained in
Section 11.2 of the Lease, during a period of Building Multi-Tenancy or Land
Multi-Tenancy, Operating Expenses shall not include:

                    i. costs (including permit, license and inspection fees) incurred
in renovating or otherwise improving or decorating, painting or redecorating
space for tenants or other occupants of the Building or Additional
Improvements or in renovating or redecorating vacant space, including the cost
of alterations or improvements to the premises of any other tenant or occupant
of the Building, the Additional Improvements or the Building Common Facilities
or the Land Common Facilities;

                    ii. cash or other consideration paid by Landlord on account of,
with respect to, or in lieu of, the tenant improvements work or alterations
described in clause (i) above;

                    iii. costs of any services sold or provided to Tenant, or tenants
or other occupants of the Building or the Additional Improvements other than
Tenant, for which Landlord is entitled to be reimbursed by such tenants or
other occupants as an additional charge or rental over and above the basic
rent charged to such tenants or other occupants (and escalations thereof);

                    iv. costs of any services which are provided to another tenant or
occupant of the Building or the Additional Improvements which are not provided
to Tenant;

                    v. costs incurred due to violation by Landlord or any tenant of the
terms and conditions of any lease;

                    vi. real
estate taxes actually paid by Tenant or any other tenant in
the Building or Additional Improvements pursuant to the terms of their
respective leases; and

Page 4 of Exhibit “D”

 

 

                    vii. real estate taxes allocable to the tenant improvements of other
tenants or occupants in the Building or the Additional Improvements which are
over and above the tenant improvement allowance Landlord generally offers to
tenants.

          6. Tenant’s Recovery of Operating Expenses. Tenant shall be entitled to
recover from Landlord the amount of Common Operating Expenses paid by Tenant
which exceeds Tenant’s Share of Common Operating Expenses as determined
pursuant to Section 5, above. Within thirty (30) days
following the end of
each calendar month during the Term, Tenant shall furnish to Landlord
appropriate evidence of the Common Operating Expenses which have been paid by
Tenant directly to a third party. Within thirty (30) days thereafter, Landlord
shall pay to Tenant the amount by which the Common Operating Expenses paid by
Tenant exceeds Tenant’s Share of Common Operating Expenses paid by Tenant.

          7. Audit of Common Operating Expenses. Landlord and Tenant shall each have
the right, at their own cost and expense, to audit or inspect the other’s
detailed records each year with respect to Common Operating Expenses. Landlord
shall maintain at its principal place of business and Tenant shall maintain on
the Demised Premises, each for a period of at least twelve (12) months after
the expiration of each calendar year during the Term, full and accurate books,
records and supporting documents in connection with their payments of Common
Operating Expenses. If an audit by either reveals an overpayment or an
underrefund by or to the other, such overpayment or underrefund shall be
settled directly between Landlord and Tenant by payment within thirty (30) days
thereafter. If such audit reveals an overpayment or underrefund which is five
percent (5%) or more, then the party who owes such overpayment or underrefund
shall pay the costs and expenses of such audit. In the event the Term has
expired, any such overpayment or underrefund and any such audit expense owed by
Landlord to Tenant shall be paid to Tenant within ten (10) business days after
determination thereof.

          8. Further Limitations on Common Operating Expenses.

               a. Common Operating Expenses shall be prorated for any partial calendar
year during which this Addendum applies. Expenses such as taxes, assessments
and insurance premiums which are incurred for an extended time period shall be
prorated based upon time periods to which such items are applicable, so that
the amounts attributed to the Demised Premises relate in a reasonable manner to
the time period in which Tenant has an obligation to pay for Common Operating
Expenses.

               b. Any amount due for Operating Expenses attributable to any period which
is less than a full month shall be prorated (based on a 30-day month) for such
fractional month.

               c. The provisions of the Lease governing the sharing of Long-Term Items
shall also apply to Long-Term Items related to Building Common Facilities or
Land Common Facilities.

Page 5 of Exhibit “D”

 

 

EXHIBIT “E”

ACKNOWLEDGMENT OF TERM COMMENCEMENT DATE AND ANNUAL RENT

This
Acknowledgment of Term Commencement Date and Annual Rent is entered into
by and between KILROY REALTY, L.P., a Delaware limited partnership, or assignee
(“Landlord”), and INTUIT, INC., a Delaware corporation (“Tenant”), dated as of
April 20, 1999, with reference to that certain Amendment to Lease dated April
14, 1998 (“Lease Amendment”) by and between Landlord and Tenant, for the
purpose of definitely establishing the Term Commencement Date and the Annual
Rent, as those terms are defined in the Lease Amendment.

	1.	 	The New Term Commencement Date of the Initial Term of the Lease is the
16th day of April, 1999, and the Expiration Date is the 15th day of April,
2007, subject however to the. terms and conditions of the Lease
Amendment.
	 
	2.	 	Upon the New Term Commencement Date, the term of the entire Lease,
including the existing Demised Premises and the Additional Premises
(together the “Combined Demised Premises”) shall continue until the
Expiration Date. Tenant shall be entitled to the Extension Options granted
in accordance to Section 4.3 of that certain Build-To-Suit Lease dated
June 9, 1995 (“Lease”), by and between Landlord (as successor to UTC
Greenwich Partners, L.P.) and Tenant.
	 
	3.	 	The Annual Rent for the Combined Demised Premises, as of the New Term
Commencement Date, including the Additional Rent for the Excess Tenant
Improvement Allowance, payable by the Tenant to Landlord under this Lease
Amendment is as follows:

Combined Rent for Initial Term:

	 	 	 	 	 	 	 	 	 
	MONTHS
	 	ANNUAL RENT
	 	MONTHLY RENT

	01-30
	 	$	3,161,561	 	 	$	263,463.42	 
	31-60
	 	$	3,381,827	 	 	$	281,818.92	 
	61-90
	 	$	3,618,614	 	 	$	301,551.17	 
	91-96
	 	$	3,873,159	 	 	$	322,763.25	 

	 	 	All rental payments shall be made payable to Kilroy Realty, L.P., a
Delaware limited partnership, at the office of the Landlord at:

        
                                Kilroy
Realty Corporation 
                                        2250 East Imperial
Highway, Suite 1200

                                        El Segundo,
California 90245

                                        Attention: Chief
Financial Officer

 

 

	4.	 	The Combined Premises consists of the existing Demised
Premises of 141,214 rentable square feet and the Additional Premises of 71,000 rentable square
feet of floor area.
	 
	5.	 	Other than as set forth above, all of the terms and conditions of the
Lease Amendment are hereby ratified and confirmed, and shall continue in
full force and effect.

     IN WITNESS WHEREOF, the instrument has been duly executed by the parties
as of the date first written above.

	 	 	 	 	 	 	 
	 	 	LANDLORD:	 	 
	 
	 	 	 	 	 	 
	 	 	KILROY REALTY, L.P., a Delaware limited partnership	 	 
	

	 	By:
	 	Kilroy Realty Corporation., a Maryland corporation,	 	 
	

	 	 	 	General Partner	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	-s- Steven L. Black	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	Steven L. Black	 	 
	

	 	Title:
	 	Executive Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	TENANT:	 	 
	 
	 	 	 	 	 	 
	 	 	INTUIT INC., a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	

	 	By:
	 	-s- L. WOLFE	 	 
	

	 	 	 	
 	 	 
	 	 	Name:	 	 
	 	 	Title:	 	 

 

 

EXHIBIT “F”

to

BUILD-TO-SUIT LEASE

RECORDING REQUESTED BY AND
 WHEN
RECORDED RETURN TO:

SUBORDINATION,

NON-DISTURBANCE AND ATTORNMENT AGREEMENT

	 	 	 
	NOTICE:

	 	THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT RESULTS IN
YOUR LEASEHOLD ESTATE IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER
PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT.

          THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT is
made by and among Intuit, Inc., a Delaware corporation (“Tenant”), UTC
Greenwich Partners, a California limited partnership
(“Landlord”), and
                            
(“Beneficiary”), and affects that certain real
property described in Exhibit “A” attached hereto (the “Property”). This
Agreement is entered into with reference to the following facts:

          A. Landlord and Tenant have entered into that certain Build-to-Suit Lease
(the “Lease”) by and between Landlord and Tenant dated May
         , 1995, covering
the portion of the Property described therein (the “Demised Premises”).

          B. Beneficiary has issued that certain commitment letter executed by
Beneficiary, as
Lender, and Landlord, as Borrower, dated
                      (the “Commitment Letter”),
setting forth the terms and conditions of its agreement to make a loan in the
amount of
                       Dollars ($
                      )to Landlord
(the “Loan”) to be evidenced by that certain Secured Promissory Note executed
by Landlord in
favor of Beneficiary, dated as of
                      , in the amount of the Loan (the “Note”).
The Note is to be secured by, among other things, that certain [Construction]
Deed of Trust and Security Agreement with Assignment of Rents and
Fixture Filing dated as of
        , encumbering the Property, executed by Landlord, as trustor, in favor
of Beneficiary, securing repayment of the Loan evidenced by the Note, to be
recorded in the

Page 1 of Exhibit “F”

 

 

records of the county recorder of the county in which the Property is located
(the “Deed of Trust”).

     C. For the purpose of completing the Loan, the parties hereto desire
expressly to subordinate the Lease to the Deed of Trust, it being a condition
precedent to Beneficiary’s making of the Loan to Landlord that the Deed of
Trust shall be unconditionally and at all times a lien or charge prior and
superior to the Lease and the leasehold estate created thereby.

     D. It is to the mutual benefit of all of the parties hereto that the Loan
be consummated.

          NOW, THEREFORE, in order to induce Beneficiary to enter into and/or
accept the Note, the Deed of Trust, and the other documents evidencing and/or
securing the Loan and to make the Loan, and in consideration of the mutual
covenants contained herein and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

          1. Subordination. Notwithstanding anything to the contrary set forth in
the Lease, the Lease and the leasehold estate created thereby and all of
Tenant’s rights, powers, privileges and benefits thereunder shall be and the
same hereby are unconditionally made, and shall at all times remain, subject,
subordinate and inferior to the Deed of Trust and the agreements, lien and
charge thereof, and all rights, powers, privileges and benefits of Beneficiary
thereunder and to any and all renewals, modifications, consolidations,
replacements and extensions thereof, and Tenant hereby intentionally and
unconditionally waives, relinquishes and subordinates the priority and
superiority of the Lease and the leasehold estate created thereby and the
rights, powers, privileges and benefits of Tenant thereunder in favor of the
agreements contained in the Deed of Trust and the other documents evidencing
and/or securing the Loan, and the lien and charge upon the Property of, the
Deed of Trust. The parties hereto acknowledge and agree that Beneficiary would
not make the Loan except in reliance on this Agreement and the execution,
acknowledgment, delivery and recordation hereof, and in connection therewith,
specific monetary and other obligations are being entered into which would not
be made or entered into but for Beneficiary’s reliance upon this subordination
and upon all of the other terms, covenants, conditions and provisions of this
Agreement.

          2. Acknowledgment
and Agreement by Tenant. Tenant acknowledges and
agrees that:

               a. In making or causing to be made any disbursements of the Loan to
Landlord or otherwise, Beneficiary is under no obligation or duty to, nor has
Beneficiary represented or agreed that it will, oversee, direct or see to the
application of the proceeds of such disbursements. Tenant acknowledges that
proceeds of the Loan may not be applied to the construction of improvements on
the Property or for the refinancing of a loan with respect thereto.

               b. Any application of all or any portion of the proceeds of the Loan other
than as provided for in the Note, the Deed of Trust, or in any other documents,
agreements

Page 2 of Exhibit “F”

 

 

and instruments between Landlord and Beneficiary with respect to the Loan, and
among Landlord, Beneficiary and any other person with respect to the
disbursement of the funds of Beneficiary for the Loan, and any of them, shall
not defeat in whole or in part the subordination hereby effected of the Lease
and the leasehold estate created thereby.

               c. Beneficiary may, without affecting the subordination of the Lease (i)
release or compromise any obligation of any nature with respect to the Note,
the Deed of Trust or the other documents evidencing and/or securing the Loan,
(ii) release its security interest in, or surrender, release or permit any
substitution or exchange of all or any part of any property securing payment of
the Note and/or any other sums secured by the Deed of Trust, (iii) retain or
obtain a security interest in any property to secure payment of the Note and/or
any other sums secured by the Deed of Trust, or (iv) modify, amend, defer,
extend, consolidate or supplement any original or subsequent promissory note,
deed of trust, assignment of leases (including the Note and the Deed of Trust)
and any other documents or instruments now or hereafter executed by Landlord
with respect to the Loan.

               d. From and after the date hereof, in the event of any act or omission by
Landlord or any other circumstance or occurrence (each such act, omission,
circumstance and occurrence, being referred to as a “default or condition”)
which would give Tenant the right, either immediately or after a lapse of time,
or both, to terminate the Lease, to claim a partial or total eviction, or to
declare a breach or default, then Tenant immediately shall give written notice
of such default or condition to Beneficiary, and notwithstanding anything in
the Lease to the contrary, Tenant shall not exercise any one or more of such
rights unless and until the period of time described below available to
Beneficiary to cure such default or condition has elapsed and no cure has
occurred. Such period of time shall begin on the receipt of notice by
Beneficiary from Tenant of the default or condition, and shall continue until
thirty (30) days thereafter and shall run concurrently with the thirty (30) day
period provided in the Lease for Landlord to cure a default or such longer
period as is already provided in the Lease. If the nature of the default or
condition is such that Beneficiary reasonably requires more than such period of
time for its cure, then such period of time shall be extended until such cure
is complete if Beneficiary commences such cure within such period and
thereafter diligently pursues the same to completion.

               e. Tenant has notice that the Lease and the rent and all other sums due
and to be due thereunder and the performance of all other obligations of Tenant
thereunder are to be assigned to Beneficiary as security for the Loan by the
Deed of Trust and by an assignment of leases. In the event that Beneficiary
notifies Tenant of a default under the Deed of Trust or the other documents
evidencing the Loan and demands that Tenant pay its rent and all other sums due
under the Lease to Beneficiary, Tenant shall honor such demand and shall pay
its rent and all other sums due under the Lease directly to Beneficiary or as
otherwise required by Beneficiary pursuant to such notice. Beneficiary and
Landlord acknowledge and agree that notwithstanding any provision, right or
remedy to the contrary provided in the Lease or by law, complete payments (to
the extent required under the Lease) by Tenant to Beneficiary of rent or any
other sum pursuant to such notice and demand by Beneficiary shall constitute
payment of rent and/or other sums pursuant to and in accordance with the Lease.
Further, without in any way limiting the foregoing, Landlord hereby consents to
such payments to Beneficiary in such

Page 3 of Exhibit “F”

 

 

circumstances, and waives any right to declare any such payment to Beneficiary
an Event of Default, or to pursue any rights or remedies against Tenant
provided in the Lease or by law.

               f. Tenant shall send a copy to Beneficiary of any notice or other written
communication which, under the terms of the Lease, Tenant is required to
deliver to Landlord (e.g. notices of Default, notices of election to
terminate) at the same time such notice or communication is sent to Landlord.

               g. Tenant has no right or option of any nature whatsoever, whether
pursuant to the Lease, or otherwise, to purchase the Property, or any portion
thereof or any interest therein, and to the extent that Tenant has had, or
hereafter acquires, any such right or option, the same is hereby acknowledged,
declared and agreed to be subject and subordinate to the Deed of Trust and is
hereby waived, relinquished and released as against Beneficiary, any purchaser
at a foreclosure of the Deed of Trust or any sale by power of sale under the
Deed of Trust, and any transferee of the Property in lieu of such foreclosure
or sale under power of sale (hereinafter, collectively, “Successor Owner of
the Property”), their successors and assigns. Notwithstanding the foregoing,
Tenant is entitled to a right of first offer in connection with a sale of the
Property pursuant to Section 37.15 of the Lease, provided that such rights are
not applicable to the foreclosure of the Deed of Trust or to any sale by
Beneficiary.

          3. Non-Disturbance. In the event of any enforcement action under any of
the documents evidencing and/or securing the Loan, including but not limited
to foreclosure of the Deed of Trust, or upon a sale of the Property pursuant
to the trustee’s power of sale contained therein, or upon a transfer of the
Property by conveyance in lieu thereof, then:

               a. So long as Tenant complies with this Agreement and an Event of
Default under the terms, covenants, or conditions of the Lease is not then
occurring, the Lease shall continue in full force and effect as a direct lease
between Beneficiary or other Successor Owner of the Property and Tenant, upon
and subject to all of the terms, covenants and conditions of the Lease, for
the balance of the term of the Lease. Tenant hereby agrees to attorn to and
accept Beneficiary and any such other Successor Owner of the Property, as
applicable, as landlord under the Lease, and to be bound by and perform all of
the obligations to be performed by Tenant under the Lease and under this
Agreement (such attornment to be effective and self-operative without the
execution of any further instruments on the part of any of the parties to this
Agreement immediately upon Beneficiary or such other Successor Owner of the
Property succeeding to the interest of the prior landlord (including Landlord)
under the Lease), and in such event, Beneficiary, or any such other Successor
Owner of the Property, so long as there is not an Event of Default under the
Lease, and pursuant to the terms of the Lease, will not disturb the
possession of Tenant, will be bound by all of the obligations imposed on the
Landlord by the Lease, and will cure continuing defaults by Landlord.
Notwithstanding the foregoing, in the event of such foreclosure or sale under
power of sale or transfer in lieu thereof, Beneficiary, and any other
Successor Owner of the Property, their successors and assigns, shall not be:

                    (1) liable for any act or omission of a prior landlord (including
Landlord), obligated to cure any defaults of any prior landlord (including
Landlord), or subject to any offsets, credits, defenses or deductions which
Tenant might have against any prior

Page 4 of Exhibit “F”

 

 

landlord (including Landlord), provided, however this subsection (1) does not
apply to continuing defaults;

                    (2) bound by any rent or other charge which Tenant might have paid in
advance to any prior landlord (including Landlord) for a period in excess of
one month;

                    (3) obligated to pay any improvement allowance or
other sum
owed by any prior landlord (including Landlord) to Tenant or any other person
or entity, except for Operating Expenses incurred by Tenant and which the Lease
permits Tenant to recover;

                    (4) bound by any amendment, modification or other
agreement
with respect to the Lease made without the prior written consent of
Beneficiary, which consent may be granted or denied in Beneficiary’s reasonable
discretion;

                    (5) liable for any security deposit not actually received by Beneficiary;
or

                    (6) bound by any notice given by Tenant to any prior
landlord
(including Landlord), whether or not such notice is given pursuant to the terms
of the Lease, unless a copy thereof was also given to Beneficiary.

               b. Upon the written request of Beneficiary given at the time of or at any
time after any such foreclosure, trustee’s sale or other transfer, Tenant shall
execute an amended and restated lease of the Premises with Beneficiary or a
Successor Owner upon the same terms, covenants, conditions and provisions as
the Lease between Landlord and Tenant, as modified by this Agreement for the
duration of the Term of the Lease.

               c. Beneficiary and any other Successor Owner of the Property shall be
liable for the performance of the obligations of the landlord under the Lease
only with respect to those obligations which arise and accrue during
Beneficiary’s or such other Successor Owner of the Property’s ownership of the
Property, as applicable; and from and after the transfer by Beneficiary or such
other Successor Owner of the Property of its ownership of the Property,
Beneficiary and such other Successor Owner of the Property shall be relieved of
all liability with respect to the landlord’s obligations under the Lease
thereafter to be performed.. Any liability of Beneficiary or any such other
Successor Owner of the Property to Tenant for damages as a result of the
default of Beneficiary or such other Successor Owner of the Property in the
performance of the landlord’s obligations under the Lease to be performed by it
as provided in this Agreement shall be satisfied only out of Beneficiary’s or
such other Successor Owner of the Property’s interest in the Premises.

          4. No Obligation of Beneficiary. Beneficiary and any other Successor
Owner of the Property shall have no obligation or liability with respect to
the erection or completion of the improvements in which the Premises are
located or for completion of the Premises, or any improvements for Tenant’s
use or occupancy, or any other improvements with respect to the Property;
provided, however, that Tenant shall have no obligation or liability to
Beneficiary or

Page 5 of Exhibit “F”

 

 

any other Successor Owner if the Improvements are not delivered to Tenant as
provided pursuant to the Lease.

          5. Notices. All notices here under shall be deemed to have been duly
received on the earlier, of actual receipt or two (2) calendar days after
deposit in the United States registered or certified mail or Express Mail,
postage prepaid, return receipt requested, or upon the next business day if
delivered by overnight courier or similar overnight delivery system, addressed
to the address(es) set forth on the signature pages hereof, or at such other
address(es) as shall have been given in writing by Landlord, Tenant or
Beneficiary in accordance with this Paragraph 5, which change of address
shall be effective as to a party hereto only upon actual receipt thereof.

          6. Warranties. Beneficiary shall have no obligation and shall incur no
liability to Tenant with respect to any express or implied representations or
warranties of any nature whatsoever, whether pursuant to the Lease or
otherwise, including, without limitation, any representations or warranties
respecting use, compliance with zoning, Landlord’s (or any successor
landlord’s) title, Landlord’s (or any successor landlord’s) authority,
habitability, fitness for purpose or possession, with the exception of
Landlord’s warranty against latent defects in construction, workmanship and
materials contained in Section 8.2 of the Lease.

          7. Additional
Agreements.

               Notwithstanding any provision of the Lease, and without in any way
limiting any other provision of this Agreement, during such period of time as
the Loan or any portion thereof is outstanding, or in the event that
Beneficiary or any Successor Owner of the Property acquires title to the
Property, Tenant and Landlord agree that the non-exclusive assignment to
Tenant of all warranties and other guaranties under the Lease (as set forth in
Paragraph 8.3 thereof or elsewhere) shall be subject and subordinate to all
rights of Beneficiary to the same pursuant to the Deed of Trust and the other
documents securing or evidencing the Loan.

          8. Miscellaneous.

               a. This Agreement supersedes any term, covenant, condition or provision
of the Lease which is inconsistent herewith.

               b. Nothing contained in this Agreement shall be construed to derogate
from or in any way impair or affect the agreements, lien, charge and other
terms, covenants, conditions and provisions of the Deed of Trust or the terms,
covenants, conditions or provisions of any of the other documents evidencing
or securing the Loan.

               c. The agreements contained in this Agreement shall run with the land and
shall be binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns and shall inure to the benefit of the
parties hereto and their respective heirs, personal representatives,
successors and permitted assigns; provided however, that in the event of the
assignment or other transfer of the interest of Beneficiary, all obligations
and liabilities of Beneficiary under this Agreement shall terminate, and
thereupon all such obligations

Page 6 of Exhibit “F”

 

 

and liabilities shall be the responsibility of the party to whom Beneficiary’s
interest is assigned or transferred.

               d. The parties hereto each agree to execute, acknowledge and deliver, in
recordable form if requested, any and all further documents and instruments
reasonably requested by Beneficiary or any title insurance company to give
further effect to the terms, covenants, conditions and provisions of this
Agreement.

               e. If any party hereto commences an action, suit or other proceeding
(hereinafter, “litigation”) against another party hereto to enforce any of the
terms, covenants, conditions or provisions of this Agreement or because of the
breach by a party of, or any dispute concerning, any of the terms, covenants,
conditions or provisions hereof, the losing party/parties shall pay to the
prevailing party/parties (as determined by the court, agency or other authority
before which such litigation is heard) reasonable attorneys’ fees, expenses
and costs of investigation as actually incurred including, without limitation,
in all appellate proceedings, in any action or participation in, or in
connection with, any case or proceeding under Chapter 7, 11, or 13 of the
Bankruptcy Code, 11 U.S.C. §101 et seq., and any successor statutes, and in any
litigation with respect to the protection, enhancement, or maintenance of the
security interest and other rights of Beneficiary under the Deed of Trust
and/or the rights of Beneficiary under any assignment of leases and/or the
priority of such security interest or rights.

               f. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, except to the extent that federal law may
be applicable.

               g. Each of the parties hereto hereby irrevocably submits to the exclusive
jurisdiction of any California state or Federal court sitting in the County of
San Diego, California in any litigation arising out of or relating to this
Agreement, and each of the parties hereto hereby agrees that all claims in
respect of such litigation may be heard and determined in such courts. Each of
the parties hereto hereby waives the defense of an inconvenient forum to the
maintenance of such litigation in such courts. Each of the parties hereto
hereby agrees that if any litigation is brought between or among any parties
hereto, whether or not any person not a party hereto is joined in such
litigation, the parties hereto expressly waive the right, if any, to trial by
jury in order to avoid, inter alia, the time delays inherent in such process.
Each of the parties hereto agrees that a final judgment in any such litigation
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other, manner provided by law.

               h. This Agreement may be executed in counterparts, each of which so
executed, irrespective of the date of execution and delivery, shall be deemed
to be an original, and all such counterparts together shall constitute one and
the same instrument as if each party had executed the same signature pages.
The signature pages of one or more of the counterpart copies of this Agreement
may be removed from such counterpart copies and attached to the same copy of
this Agreement which,
with attached signature pages of all parties hereto, shall be deemed to be an
original, executed Agreement.

Page 7 of Exhibit “F”

 

 

          IN WITNESS WHEREOF, the parties have executed this Subordination,
Non-Disturbance, and Attornment Agreement as of
                     .

	 	 	 
	NOTICE:

	 	THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT CONTAINS
PROVISIONS WHICH ALLOW THE PERSON OBLIGATED ON THE LEASE TO OBTAIN A LOAN,
ALL OR A PORTION OF WHICH MAY BE EXPENDED FOR PURPOSES OTHER THAN
IMPROVEMENT OF THE PROPERTY.
	 
	 	 
	

	 	IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT, THE
PARTIES CONSULT WITH THEIR ATTORNEYS WITH RESPECT THERETO.

	 	 	 	 	 
	 	 	“TENANT”
	 
	 	 	 	 
	 	 	INTUIT, INC., a Delaware corporation
	 
	 	 	 	 
	 

	 	By:
	 	

	 
	

	 	By:
	 	

	 
	 	 	 	 
	

	 	Address:	 	 
	Signatures continued on next page
	 	 	 	 

Page 8 of Exhibit “F”

 

 

	 	 	 	 	 
	 	 	“LANDLORD”
	 
	 	 	 	 
	 	 	UTC GREENWICH PARTNERS, a California limited
	 	 	partnership
	 
	 	 	 	 
	

	 	By:
	 	

	 
	 	 	 	 
	

	 	By:
	 	

	 
	 	 	 	 
	 	 	Address:
	 
	 	 	 	 
	 	 	“BENEFICIARY”
	 
	 	 	 	 
	

	 	By:
	 	

	 
	 	 	 	 
	

	 	Address:
	 	 

Page 9 of Exhibit “F”September 22, 2004

XL Capital Ltd
XL House
One Bermudiana Road
Hamilton HM 11
Bermuda

Re:      Primus Guaranty, Ltd. - New York Stock Exchange Listing
         -------------------------------------------------------

Ladies and Gentlemen:

Primus Guaranty, Ltd. is filing with the New York Stock Exchange an application
for the initial listing of its common shares upon the completion of its initial
public offering. As part of that listing application, the Exchange has requested
XL Capital Ltd, as the largest beneficial owner of Primus's common shares, to
deliver to it a letter confirming, among other things, XL's compliance with the
Exchange's continued listing standards and the extent of its anticipated
ownership of Primus's common shares after the completion of Primus's initial
public offering.

Primus hereby agrees to indemnify and hold harmless XL, its directors, officers
and employees (in their capacities as such), and each person, if any, who
controls XL within the meaning of the Securities Act of 1933 and each affiliate
of XL within the meaning of Rule 405 under such Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof
(including from and against any legal and any other expenses reasonably incurred
in connection with investigating or defending such loss, claim, damage,
liability or action), to which XL, or any such director, officer, employee or
controlling person may become subject, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, Primus's application for
listing of its common shares on the Exchange including, without limitation, the
aforesaid letter which XL has agreed to deliver to the Exchange; provided,
however, that the foregoing indemnity does not cover any loss, claim, damage,
liability or action (i) which is governed by Section 10 of the form of
Underwriting Agreement to be executed by Primus, certain shareholders of Primus
(including XL) and the Underwriters for which Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated, Credit Suisse First Boston LLC, UBS Securities LLC,
William Blair & Company, L.L.C. and Keefe, Bruyette & Woods, Inc. are acting as
Representatives; or (ii) which arises out of, or is based upon, any information
or representations about XL which XL provides to the Exchange in the
aforementioned letter.

If the foregoing sets forth our agreement on the matters set forth herein,
please indicate by signing in the space provided below.

                                            Very truly yours,

                                            PRIMUS GUARANTY, LTD.

                                            By: /s/ Zachary Snow
                                                ------------------------------
                                                  Name:  Zachary Snow
                                                  Title: General Counsel

ACCEPTED AND AGREED:

XL CAPITAL LTD

/s/ Paul S. Giordano
--------------------------
Name:  Paul S. Giordano
Title: Executive Vice President and
       General Counsel

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