Document:

Exhibit 10.9

 

Exhibit 10.9

Western Digital Corporation

Summary of Compensation Arrangements

for

Named Executive Officers and Directors

NAMED EXECUTIVE OFFICERS

     Base Salaries. The current annual base salaries for the current executive officers of Western
Digital Corporation (the “Company”) who were named in the Summary Compensation Table in the
Company’s Proxy Statement that was filed with the Securities and Exchange Commission in connection
with the Company’s 2007 Annual Meeting of Stockholders (the “Named Executive Officers”) are as
follows:

	 	 	 	 	 	 	 	 	 	 	 
	 	Named Executive Officer	 	 	Title	 	 	Current Base Salary	 
	 	John F. Coyne

	 	 	President and Chief
Executive Officer
	 	 	$	800,000	 	 
	 	Timothy M. Leyden

	 	 	Executive Vice
President and Chief
Financial Officer
	 	 	$	450,000	 	 
	 	Raymond M. Bukaty

	 	 	Senior Vice President,
Administration,
General Counsel and
Secretary
	 	 	$	400,000	 	 
	 	Hossein Moghadam

	 	 	Senior Vice President, Chief Technology Officer
	 	 	$	400,000	 	 

     Semi-Annual Bonuses. Under the Company’s Incentive Compensation Plan (the “ICP”), the Named
Executive Officers are also eligible to receive semi-annual cash bonus awards that are determined
based on the Company’s achievement of performance goals pre-established by the Compensation
Committee of the Company’s Board of Directors as well as other discretionary factors. The ICP,
including the performance goals established by the Compensation Committee for the first half of
fiscal 2008, are further described in the Company’s current report on Form 8-K filed with the
Securities and Exchange Commission on June 15, 2007, which is incorporated herein by reference.
The target bonus percentages for the Named Executive Officers under the ICP currently range from
75% to 125% of each Named Executive Officer’s semi-annual base salary.

     Additional Compensation. The Named Executive Officers are also entitled to participate in
various Company plans, and are subject to other written agreements, in each case as set forth in
exhibits to the Company’s filings with the Securities and Exchange Commission. In addition, the
Named Executive Officers may be eligible to receive perquisites and other personal benefits as
disclosed in the Company’s Proxy Statement that was filed with the Securities and Exchange
Commission in connection with the Company’s 2007 Annual Meeting of Stockholders.

DIRECTORS

     Annual Retainer and Committee Retainer Fees.  The following table sets forth the current
annual retainer and committee membership fees payable to each of the Company’s non-

 

 

employee directors:

	 	 	 	 	 
	 	 	Retainer Fees
	 	 	(Effective After
	Type of Fee	 	January 1, 2007)
	Annual Retainer
	 	$	75,000	 
	Lead Independent Director Retainer
	 	$	20,000	 
	Non-Executive Chairman of Board Retainer
	 	$	100,000	 
	Additional Committee Retainers
	 	 	 	 
	•   Audit Committee
	 	$	10,000	 
	•   Compensation Committee
	 	$	5,000	 
	•   Governance Committee
	 	$	2,500	 
	Additional Committee Chairman Retainers
	 	 	 	 
	•   Audit Committee
	 	$	15,000	 
	•   Compensation Committee
	 	$	10,000	 
	•   Governance Committee
	 	$	7,500	 

     The retainer fee to the Company’s lead independent director referred to above is paid only if
the Chairman of the Board is an employee of the Company. The annual retainer fees are generally
paid on January 1 of each year, except that the retainer to the Chairman of the Board or to the
lead independent director is paid in equal installments at the beginning of each calendar quarter.

     The Company also reimburses all non-employee directors for reasonable out-of-pocket expenses
incurred to attend each Board of Directors or committee meeting; however, since November 2005,
non-employee directors no longer receive a separate fee for each Board of Directors or committee
meeting they attend. Mr. Coyne, who is an employee of the Company, does not receive any
compensation for his service on the Board or any Board committee.

     Additional Director Compensation. The Company’s non-employee directors are also entitled to
participate in various other Company plans as set forth in exhibits to the Company’s filings with
the Securities and Exchange Commission.Exhibit 10.32

 

EXHIBIT 10.32

					
	 	 	 	 	 
	 
	     	
	     	 
	 
	 	 	 
	 	 	 	 

Lease between

Sobrato Development Companies #871 and Komag Incorporated

	 	 	 	 	 
	Section	 	Page #	 
	Parties
	 	 	1	 
	Premises
	 	 	1	 
	Use
	 	 	1	 
	Term and Rental
	 	 	2	 
	Adjustment for Variance in Building Square Footage
	 	 	2	 
	Security Deposit
	 	 	2	 
	Late Charges
	 	 	2	 
	Construction and Possession
	 	 	3	 
	Building Shell Construction
	 	 	3	 
	Tenant Improvement Plans
	 	 	3	 
	Preliminary Cost Estimates
	 	 	3	 
	Final Pricing
	 	 	4	 
	Change Orders
	 	 	5	 
	Building Shell Costs
	 	 	5	 
	Tenant Improvement Costs
	 	 	5	 
	Construction
	 	 	6	 
	Documents
	 	 	6	 
	Landlord Overhead & Profit
	 	 	6	 
	Insurance/Indemnity
	 	 	7	 
	Punchlist Items
	 	 	7	 
	Other Work by Tenant
	 	 	7	 
	Parking Lot
	 	 	7	 
	Tank Farm
	 	 	8	 
	Acceptance of Possession and Covenants to Surrender
	 	 	8	 
	Uses Prohibited
	 	 	8	 
	Alterations and Additions
	 	 	8	 
	Maintenance of Premises
	 	 	9	 
	Tenant’s Obligations
	 	 	9	 
	Landlord’s Obligations
	 	 	10	 
	Hazard Insurance
	 	 	10	 
	Tenant’s Use
	 	 	10	 
	Landlord’s Liability Insurance
	 	 	11	 

 

	 	 	 	 	 
	Section	 	Page #	 
	Property Insurance
	 	 	11	 
	Tenant’s Insurance
	 	 	11	 
	Waiver
	 	 	12	 
	Taxes
	 	 	12	 
	Utilities
	 	 	13	 
	Free From Liens
	 	 	14	 
	Compliance With Governmental Regulations
	 	 	14	 
	Toxic Waste and Environmental Damage
	 	 	15	 
	Landlord’s Responsibility
	 	 	15	 
	Tenant’s Responsibility
	 	 	15	 
	Tenant’s Indemnity Regarding Hazardous Materials
	 	 	16	 
	Actual Release by Tenant
	 	 	16	 
	Environmental Monitoring
	 	 	17	 
	Indemnity
	 	 	17	 
	Advertisements and Signs
	 	 	18	 
	Attorney’s Fees
	 	 	18	 
	Tenant’s Default
	 	 	18	 
	Remedies
	 	 	19	 
	Right to Re-enter
	 	 	19	 
	Abandonment
	 	 	20	 
	No Termination
	 	 	20	 
	Surrender of Lease
	 	 	20	 
	Habitual Default
	 	 	21	 
	Landlord’s Default
	 	 	21	 
	Notices
	 	 	21	 
	Entry by Landlord
	 	 	21	 
	Destruction of Premises
	 	 	22	 
	Destruction by an Insured Casualty
	 	 	22	 
	Destruction by an Uninsured Casualty
	 	 	22	 
	Damage or Destruction at End of Term
	 	 	23	 
	Assignment or Sublease
	 	 	23	 
	Consent by Landlord
	 	 	23	 
	Assignment or Subletting Consideration
	 	 	23	 
	No Release
	 	 	24	 
	Effect of Default
	 	 	24	 
	Excluded Transfers
	 	 	25	 
	Condemnation
	 	 	25	 
	Effects of Conveyance
	 	 	25	 
	Subordination
	 	 	26	 
	Waiver
	 	 	26	 
	Holding Over
	 	 	27	 

Page ii

 

	 	 	 	 	 
	Section	 	Page #	 
	Successors and Assigns
	 	 	27	 
	Estoppel Certificates
	 	 	27	 
	Option to Extend the Lease Term
	 	 	27	 
	Grant and Exercise of Option
	 	 	27	 
	Determination of Fair Market Rental
	 	 	28	 
	Resolution of a Disagreement over the Fair Market Rental
	 	 	29	 
	Tenant’s Right of First Refusal
	 	 	29	 
	Grant
	 	 	29	 
	Covenants of Landlord
	 	 	29	 
	Exercise of Tenant’s Right of First Refusal to Purchase
	 	 	30	 
	Terms for Right of First Refusal to Purchase
	 	 	30	 
	Continuing Right
	 	 	30	 
	Exclusive Nature of Option
	 	 	30	 
	Successors and Assigns
	 	 	30	 
	Options
	 	 	31	 
	Quiet Enjoyment
	 	 	31	 
	Brokers
	 	 	31	 
	Landlord’s Liability
	 	 	31	 
	Authority of Parties
	 	 	32	 
	Transportation Demand Management programs
	 	 	32	 
	Dispute Resolution
	 	 	32	 
	Miscellaneous Provisions
	 	 	32	 
	Rent
	 	 	32	 
	Performance by Landlord
	 	 	33	 
	Interest
	 	 	33	 
	Rights and Remedies
	 	 	33	 
	Survival of Indemnities
	 	 	33	 
	Severability
	 	 	33	 
	Choice of Law
	 	 	33	 
	Time
	 	 	33	 
	Entire Agreement
	 	 	33	 
	Representations
	 	 	33	 
	Headings
	 	 	34	 
	Exhibits
	 	 	34	 
	Approvals
	 	 	34	 
	Recordation
	 	 	34	 
	EXHIBIT “A” — Premises
	 	 	35	 
	EXHIBIT “B” — Formula for Determination of Base Monthly Rent
	 	 	36	 
	EXHIBIT “C” — Shell Plans and Specifications
	 	 	37	 
	EXHIBIT “D” — Building Shell Definition
	 	 	38	 
	EXHIBIT “E” — Tenant Improvement Plans and Specifications
	 	 	39	 

Page iii

 

	 	 	 	 	 
	Section	 	Page #	 
	EXHIBIT “F” — Tenant’s Trade Fixtures
	 	 	40	 
	EXHIBIT “G” — Fee Agreement
	 	 	41	 

Page iv

 

					
	 	 	 	 	 
	 
	     	
	     	 
	 
	 	 	 
	 	 	 	 

     1. PARTIES: THIS LEASE, is entered into on this 24th day of May, 1996 (“Execution Date”),
between Sobrato Development Companies #871, a California Limited Partnership, whose address is
10600 North De Anza Boulevard, Suite 200, Cupertino, CA 95014 and Komag Incorporated, a Delaware
corporation, whose address is 275 S. Hillview Drive, Milpitas, CA 95035, hereinafter called
respectively Landlord and Tenant.

     2. PREMISES: Landlord hereby leases to Tenant, and Tenant hires from Landlord those certain
Premises with the appurtenances, situated in the City of San Jose, County of Santa Clara, State of
California, and more particularly described as follows, to-wit:

A 12.6 acre parcel (“Parcel”) on the north side of Automation Parkway, San Jose, California,
including all appurtenances and buildings now or during the Term located thereon. Pursuant to the
terms of this Lease, Landlord is obligated to construct a single story building of approximately
188,303 rentable square feet (“Building”), a parking lot consisting of a minimum of 544 parking
spaces expandable to approximately 656 spaces described as Building 10 on Exhibit “A”
attached hereto. Landlord represents and warrants that Landlord is the fee simple owner of the
Premises. Prior to the Commencement Date, Landlord shall use its best efforts to record a parcel
map to subdivide the Parcel into two parcels, one for the Premises and the balance for a second
building to be constructed for Tenant pursuant to that certain lease between the parties of even
date herewith.

     3. USE: Tenant shall use the Premises only for the following purposes and shall not change the
use of the Premises without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed: Office research, development, testing, manufacturing, ancillary
warehouse, and other legal uses. Landlord makes no representation or warranty that any specific use
of the Premises desired by Tenant is permitted pursuant to any Laws. Landlord represents and
warrants to tenant that, as of the Commencement Date, (i) the premises are in compliance with all
municipal, county, state and federal statutes, laws, ordinances, including zoning ordinances, and
regulations governing and relating to the Building Shell; (ii) there shall exist no patent or, to
the best of Landlord’s knowledge, latent defect in the Premises; and (iii) the Premises shall be in
good condition and repair and fit for Tenant’s particular purposes. Landlord represents and
warrants to Tenant that, as of the Commencement Date, the land is zoned industrial (“I”).

Page 1

 

     4. TERM AND RENTAL: The term (“Lease Term”) shall be for one hundred twenty (120) months,
commencing on the date on which the Building Shell and Tenant Improvements are Substantially
Complete as defined in Article 7.H below (“Commencement Date”), and ending one hundred twenty (120)
months thereafter, (“Expiration Date”). In addition to all other sums payable by Tenant under this
Lease, Tenant shall pay as base monthly rent (“Base Monthly Rent”) below for the Premises in an
amount determined pursuant to Exhibit “B” attached hereto. Base Monthly Rent shall increase
at the end of the forty-second and eighty fourth month of the Lease Term by the product of the Base
Monthly Rent payable for the preceding month and one and 147/1000 (1.147). The parties agree to
enter into an amendment to this Lease setting forth the exact amount of the Base Monthly Rent
payable during the Lease Term within fourteen (14) days following determination by Landlord.

Base Monthly Rent shall be due on or before the first day of each calendar month during Lease Term.
All sums payable by Tenant under this Lease shall be paid in lawful money of the United States of
America, without offset or deduction, and shall be paid to Landlord at the address specified in
Article 1 of this Lease or at such place or places as may be designated from time to time by
Landlord. Base Monthly Rent for any period less than a calendar month shall be a pro rata portion
of the monthly installment.

     A. Adjustment for Variance in Building Square Footage: In the event the square footage of the
Building is other than 188,303 determined by measurement after completion of construction, within
thirty (30) days after the Commencement Date, Landlord and Tenant shall execute an amendment to the
Lease setting forth the actual rentable square feet of the Building, which calculation shall be
consistent with the BOMA standard for Industrial Buildings (i.e. outside of outside wall to outside
of outside wall without deduction).

     5. SECURITY DEPOSIT: None required.

     6. LATE CHARGES: Tenant hereby acknowledges that late payment by Tenant to Landlord of Base
Monthly Rent and other sums due hereunder will cause Landlord to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include,
but are not limited to, administrative, processing, accounting charges, and late charges, which may
be imposed on Landlord by the terms of any contract, revolving credit, mortgage or trust deed
covering the Premises. Accordingly, if any installment of Base Monthly Rent or any other sum due
from Tenant shall not be received by Landlord or Landlord’s designee within ten (10) days after
Tenant’s receipt of written notice from Landlord that such amount is delinquent, Tenant shall pay
to Landlord a late charge equal to five (5%) percent of such overdue amount which late charge shall
be due and payable with the payment then delinquent. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by reason of late
payment

Page 2

 

by Tenant. Acceptance of such late charge by Landlord shall in no event constitute a waiver of
Tenant’s default with respect to such overdue amount, nor prevent Landlord from exercising any of
the other rights and remedies granted hereunder.

IT IS FURTHER MUTUALLY AGREED BETWEEN THE PARTIES AS FOLLOWS:

     7. CONSTRUCTION AND POSSESSION:

          A. Building Shell Construction. Landlord shall cause the shell of the Building (“Building
Shell”) to be constructed by independent contractor to be employed by and under the supervision of
Landlord, in accordance with the building shell plans prepared by Comprehensive Architectural
Services (“Tenant’s Architect”) and approved by Landlord and Tenant and guideline specifications,
which are attached hereto as Exhibit “C” and are incorporated herein by this reference
(“Shell Plans and Specifications”). Landlord shall construct the Building Shell in accordance with all applicable
municipal, local, state and federal laws, statutes, rules, regulations and ordinances. Landlord
shall pay for all costs and expenses associated with the construction of the Building Shell up to a
maximum amount of Six Million Six Hundred Thousand and No/100 Dollars ($6,600,000.00) (“Building
Shell Allowance”). The Building Shell shall include all items customarily included within the
definition of a speculative “building shell,” including without limitation, those items set forth
in the Building Shell Definition, attached hereto as Exhibit “D”, and incorporated herein
by this reference. Landlord shall provide Tenant half-size vellum as-built drawings of the Building
Shell within thirty (30) days following completion of construction thereof.

          B. Tenant Improvement Plans. Tenant, at Tenant’s sole cost and expense, has also hired
Tenant’s Architect, to prepare plans and outline specifications. (“Tenant Improvement Plans and
Specifications”) which are attached hereto as Exhibit “E” with respect to the construction
of improvements to the interior premises (“Tenant Improvements”). The Tenant Improvements shall
consist of all those items not included within in the scope of the Building Shell definition
pursuant to Article 7.A above and Exhibit “D”. The Tenant Improvement Plans and
Specifications shall be prepared in sufficient detail to allow Landlord to construct the Tenant
Improvements. Landlord shall construct the Tenant Improvements in accordance with all Tenant
Improvement Plans and Specifications. Tenant shall pay for all costs and expenses associated with
the construction of the Tenant Improvements.

          C. Preliminary Cost Estimates.

               i. Building Shell. Within fourteen (14) days after Tenant’s delivery of the Shell

Page 3

 

Plans and Specifications as Landlord, Landlord shall deliver to Tenant a preliminary cost estimate
of the cost to construct the Building Shell. The preliminary cost estimate shall contain sufficient
detail for Tenant to understand the cost element of each portion of the proposed Building Shell.

               ii. Tenant Improvements. Within fourteen (14) days after Tenant’s delivery of the Tenant
Improvement Plans and Specifications to Landlord, Landlord shall also deliver to Tenant a
preliminary cost estimate of the cost to construct the Tenant Improvements. The preliminary cost
estimate shall contain sufficient detail for Tenant to understand the cost element of each portion
of the proposed Tenant Improvements.

          D. Final Pricing.

               i. Building Shell. Within ten (10) days after Tenant’s approval of the preliminary cost
estimate for the Building Shell, Landlord shall submit to Tenant competitive bids from a minimum of
three (3) subcontractors for each aspect of the work which is to be performed. Landlord must
utilize the low bid in each case, unless Tenant approves Landlord’s use of another subcontractor,
and the cost of the Building Shell shall be based upon construction expenses equal to the sum of
the bid amounts as approved by Tenant. Upon Tenant’s written approval of the contract bids,
Landlord and Tenant shall each be deemed to have given their approval of the final Shell Plans and
Specifications on which the cost estimate was made, and Landlord shall proceed with the
construction of the Building Shell in accordance with the terms of Article 7.H below. If Tenant
does not specifically approve or disapprove the bids within seven (7) days, Tenant shall be deemed
to have approved the bids.

               ii. Tenant Improvements. Within ten (10) days after Tenant’s approval of the preliminary cost
estimate for the Tenant Improvements, Landlord shall submit to Tenant competitive bids from a
minimum of three (3) subcontractors for each aspect of the work which is to be performed. Landlord
must utilize the low bid in each case, unless Tenant approves Landlord’s use of another
subcontractor, and the cost of the Tenant Improvements shall be based upon construction expenses
equal to the sum of the bid amounts as approved by Tenant. Upon Tenant’s written approval of the
contract bids, Landlord and Tenant shall each be deemed to have given their approval of the final
Tenant Improvement Plans and Specifications on which the cost estimate was made, and Landlord shall
proceed with the construction of the Tenant Improvements in accordance with the terms of Article
7.H below. If Tenant does not specifically approve or disapprove the bids within seven (7) days,
Tenant shall be deemed to have approved the bids.

Page 4

 

          E. Change Orders. Tenant shall have the right to order changes in the manner and type of
construction of the Building Shell or the Tenant Improvements. Any change orders which are
submitted by Tenant after the date which is ten (10) days after the issuance by the City of San
Jose of a building permit for the construction of the Building Shell, which cause Landlord’s
construction schedule to be delayed shall cause the Commencement Date to occur one (1) day in
advance of the date the Building Shell is Substantially Complete, as defined in Article 7.H, for
each day of delay. Upon request and prior to Tenant’s submitting any binding change order, Landlord shall promptly provide Tenant with written statements of the cost to
implement and the time delay and increased construction costs associated with any proposed change
order, which statements shall be binding on Landlord. If no time delay or increased construction
cost amount is noted on the written statement, the parties agree that there shall be no adjustment
to the construction cost or the Commencement Date associated with such change order. If ordered by
Tenant, Landlord shall implement such change order, and the cost of constructing the Tenant
Improvements shall be increased in accordance with the cost statement previously delivered by
Landlord to Tenant for any such change order.

          F. Building Shell Costs. Landlord shall pay all costs associated with the Building Shell. The
costs of the Building Shell shall consist of only the following costs to the extent actually
incurred by Landlord in connection with the construction of the Building Shell: costs of
construction, costs of permits, and the general contractor overhead described in Article 7.J below.
During the course of construction of the Building Shell, Landlord may deliver to Tenant not more
than once each calendar month a written request for payment which shall include and be accompanied
by: (i) Landlord’s certified statements setting forth the amount requested certifying the
percentage of completion of each item for which reimbursement is requested and certifying that the
progress payment requested is due to a subcontractor of Landlord pursuant to a contract between
Landlord and Landlord’s subcontractor. Tenant shall pay to Landlord, within fifteen (15) days after
Tenant’s receipt of the above items, any costs incurred by Landlord in excess of the Building Shell
Allowance in connection with the Building Shell in accordance with the Shell Plans and
Specifications minus the retainage set forth below. Tenant shall be entitled to retain ten percent
(10%) of the amount invoiced by Landlord until the Building Shell is “Substantially Complete”
(defined in Article 7.H below). Tenant shall pay the retained balance owing to Landlord within
fifteen (15) days following the date that the Building Shell is Substantially Complete. All costs
for Building Shell shall be fully documented to and verified by Tenant. The amounts charged to
Tenant shall be limited as provided in Article 7.D.i above.

          G. Tenant Improvement Costs. The costs of the Tenant Improvements shall consist of only the
following costs to the extent actually incurred by Landlord in connection with the construction of
the Tenant Improvements: costs of construction, costs of permits, and the Landlord overhead
described in Article 7.J below. During the course of construction of the Tenant Improvements,
Landlord may deliver to Tenant not more than once each calendar month a written

Page 5

 

request for payment which shall include and be accompanied by: (i) Landlord’s certified statements
setting forth the amount requested certifying the percentage of completion of each item for which
reimbursement is requested and certifying that the progress payment requested is due to a
subcontractor of Landlord pursuant to a contract between Landlord and Landlord’s subcontractor.
Tenant shall pay to Landlord, within fifteen (15) days after Tenant’s receipt of the above items,
the costs incurred by Landlord in connection with the Tenant Improvements installed in the Building
in accordance with the Tenant Improvement Plans and Specifications minus the retainage set forth
below. Tenant shall be entitled to retain ten percent (10%) of the amount invoiced by Landlord
until the Tenant Improvements are “Substantially Complete” (defined in Article 7.H below). Tenant
shall pay the retained balance owing to Landlord within fifteen (15) days following the date that
the Tenant Improvements are Substantially Complete. All costs for Tenant Improvements shall be
fully documented to and verified by Tenant. The amounts charged to Tenant shall be limited as
provided in Article 7.D.ii above.

          H. Construction. Landlord shall use its best efforts to obtain a building permit from the City
of San Jose as soon as possible after Tenant’s approval of the Shell Plans and Specifications. The
Building Shell and Tenant Improvements shall be deemed substantially complete (“Substantially
Complete”) when the Building Shell and Tenant Improvements have been substantially completed in
accordance with the Shell Plans and Specifications and Tenant Improvement Plans and Specifications,
as evidenced by the issuance of a certificate of occupancy or its equivalent by the appropriate
governmental authority for the Building Shell and Tenant Improvements, and the issuance of a
certificate by Tenant’s Architect certifying that the Building Shell and Tenant Improvements have
been completed in accordance with the plans.

          I. Documents. Landlord shall at all times keep one (1) complete set of all contract documents
(i.e., approved drawings, shop and setting drawings, specifications, samples, addenda and change
orders) current and in good order on the job site. Such documents shall be available for review by
representatives of Tenant, its consultants and any public officials at any time. Record drawings
marked with all changes made during the job shall be kept on the job site by Landlord. Upon
acceptance of the work, the record document print set shall be immediately forwarded to Tenant’s
Architect for changes to the originals. The changes shall be noted on the original and one (1)
mylar reproducible set of the originals shall be forwarded to Tenant. Tenant shall be provided with
two (2) copies of these specifications.

          J. Landlord Overhead & Profit. As compensation to Landlord for its services as general
contractor for the Building Shell and Tenant Improvements, Landlord shall be entitled to a fee as
specified in the Fee Agreement attached as Exhibit “G”. Except as provided therein, Landlord

Page 6

 

shall not be entitled to any other fee or payment from Tenant in connection with Landlord’s
services as general contractor.

          K. Insurance/Indemnity. Landlord shall indemnify, protect, defend and hold Tenant harmless
from and against all liability, cost, expense, or damage (including, without limitation, attorneys
fees) arising from: (i) the construction of the Building Shell or the Tenant Improvements; or (ii)
any construction defects, or (iii) any failure to properly construct the Building Shell or Tenant
Improvements in accordance with the approved Shell Plans and Specifications or Tenant Improvement
Plan and Specifications. Tenant’s review and approval of any plans, specifications, or any other
documents shall not relieve Landlord from Landlord’s obligations under the foregoing
indemnification. Landlord shall procure (as a cost of the Building Shell) and keep in effect from
the execution date of this Lease until the termination of this Lease a “Broad Form” liability
insurance policy in the amount of Three Million Dollars ($3,000,000.00), insuring all of Landlord’s
activities with respect to the Building and Premises, including Landlord’s indemnity obligations
under this Article 7.K. In addition, Landlord shall procure (as a cost of the Building Shell)
builder’s risk insurance, insuring the Building Shell and Tenant Improvements for their full
replacement cost while the Building and Tenant Improvements are under construction, and until the
date that the fire insurance policy described in Article 12 of the Lease is in full force and
effect.

          L. Punchlist Items. After the Building Shell and Tenant Improvements are Substantially
Complete, Landlord shall immediately correct any construction defect or other “punchlist” item
which Tenant brings to Landlord’s attention. All such work shall be performed in a manner designed
to cause the least possible interruption to Tenant and Tenant’s activities on the Premises.

          M. Other Work by Tenant. All work not within the scope of work normally constructed by the
construction trades employed on the Building and not described in the Shell Plans and
Specifications or Tenant Improvement Plans and Specifications, such as furniture, telephone
equipment, telephone wiring and office equipment work, shall be furnished and installed by
Tenant.

          O. Parking Lot. Landlord, at Landlord’s sole cost and expense, shall construct a parking lot,
with a minimum of approximately 544 parking spaces, on the Premises in the location set forth in
Exhibit “C”. Landlord shall cause the parking lot to comply in all respects with all
applicable governmental rules, regulations, and orders, and shall create a sufficient number of
parking spaces to comply with all governmental requirements in connection with the Building.

Page 7

 

          P. Tank Farm. Landlord shall not develop any portion of the “tank farm pad” as set forth in
Exhibit “C”, without the prior written consent of Tenant. Tenant shall have the right at
any time to construct a tank farm, designed by Tenant, on the tank farm pad.

     8. ACCEPTANCE OF POSSESSION AND COVENANTS TO SURRENDER: Tenant agrees on Expiration Date, or
on the sooner termination of this Lease, to surrender the Premises to Landlord in good condition
and repair, reasonable wear and tear, actions of Landlord or Landlord’s Parties, or damage due to
casualty excepted. “Good Condition” shall mean that the interior walls of all office and warehouse
areas, the floors of all office and warehouse areas, all suspended ceilings and carpeting will be
cleaned and free of any major defacements. Tenant on or before the Expiration Date or sooner
termination of this Lease, shall remove all its personal property and trade fixtures from the
Premises, and all property and fixtures not so removed shall be deemed to be abandoned by Tenant.
Tenant shall ascertain from Landlord at the time Tenant desires to make any Alteration (including
Permitted Alterations), whether Landlord desires to have such Alteration removed at the Expiration
Date or to cause Tenant to surrender the Alteration to Landlord. If Landlord so notifies Tenant in
writing within fifteen (15) days after Tenant’s notice to Landlord that Tenant intends to alter the
Building, then Tenant shall remove such Alteration, as Landlord may require in such written
notice, and shall repair and restore said Building or such part or parts thereof before the
Expiration Date at Tenant’s sole cost and expense. If Landlord has not provided Tenant with such
written notice within said fifteen (15) days period, then Tenant shall have no obligation to remove
such Alteration from the Premises upon the Expiration Date or earlier termination of this Lease.
Notwithstanding the terms of this Article 8, Tenant shall not have an obligation to remove any
Tenant Improvements installed prior to the first anniversary of the Commencement Date from the
Premises at any time.

     9. USES PROHIBITED: Tenant shall not commit, or suffer to be committed, any waste upon the
said Premises, or any nuisance, or allow any sale by auction upon the Premises, or allow the
Premises to be used for any unlawful purpose, or place any loads upon the floor, walls, or ceiling
which endanger the structure, or use any machinery or apparatus which will in any manner vibrate or
shake the Premises. Except for materials which may be stored in the enclosed tank farm area outside
the Building, no materials, supplies, equipment, finished products or semi-finished products, raw
materials or articles of any nature or any waste materials, refuse, scrap or debris shall be stored
upon or permitted to remain on any portion of the Premises outside of the Building proper without
Landlord’s prior approval, which approval shall not be unreasonably withheld.

     10. ALTERATIONS AND ADDITIONS: Except for those improvements installed prior to the first
anniversary of the Commencement Date and Permitted Alterations (as defined below), Tenant shall not
make, or suffer to be made, any alteration or addition to the said Premises (“Alterations”), or
any part thereof, without (i) the written consent of Landlord first had and

Page 8

 

obtained, which consent shall not be unreasonably withheld or delayed, and (ii) delivering to
Landlord the proposed architectural and structural plans, if any, for all such Alterations. After
having obtained Landlord’s consent, Tenant agrees that it shall not proceed to make such
Alterations until Tenant has obtained all required governmental approvals and permits. Tenant
further agrees to provide Landlord (i) written notice of the anticipated start date and actual
start date of the work, and (ii) a complete set of half-size (15” X 21”) vellum as-built drawings.
All Alterations shall be constructed in compliance with applicable buildings codes and laws.
Alterations which are not to be deemed as trade fixtures shall include heating, lighting, electrical systems, air conditioning, partitioning, carpeting, or
any other installation which has become affixed to the Premises. All Alterations shall be
maintained, replaced or repaired by Tenant at Tenant’s sole cost and expense, except as provided
in Section 11 below. Notwithstanding the above, Tenant shall have the right to remove any trade
fixtures, furniture, or process equipment paid for by Tenant from the Premises at the expiration
of the Lease, which items shall include, without limitation, the items set forth in Exhibit
“F” attached hereto and incorporated herein by this reference.

          Notwithstanding the foregoing, Tenant shall have the right, without the prior written consent
of Landlord, to make certain alterations, additions or improvements (the “Permitted Alterations”)
which (i) do not affect the Building systems or structural components of the Building and (ii)
which cost less, on an individual basis, than One Hundred Fifty Thousand Dollars ($150,000),
provided that each such Permitted Alteration is otherwise performed in accordance with the terms
of this Section 10. Ownership of any Alterations, Permitted Alterations or Tenant Improvements
paid for by Tenant shall remain in Tenant throughout the Term of this Lease, and Tenant shall be
entitled to the benefit of any depreciation or other tax benefits arising therefrom, provided that
Landlord shall, upon the Expiration Date or earlier termination of the Term hereof, become the
owner of any Alterations or Tenant Improvements made to the Premises which, pursuant to the terms
of this Lease, are left on the Premises by Tenant. Tenant shall give Landlord at least ten (10)
days’ prior written notice of any Alteration or Permitted Alteration so that Landlord can post a
notice of non-responsibility with respect thereto.

     11. MAINTENANCE OF PREMISES:

          A. Tenant’s Obligations: Tenant shall, at its sole cost, keep and maintain and repair and said
Premises and appurtenances and every part hereof, including but not limited to, roof membrane,
glazing, sidewalks, parking areas, telephone, plumbing, electrical and HVAC systems, and all the
Tenant Improvements in good and sanitary order, condition, and repair. Tenant shall enter into a
service contract with a licensed air-conditioning and heating contractor which contract shall
provide for maintenance of all air conditioning and heating equipment at the Premises in accordance
with general industry practices. Tenant shall pay the cost of all air-conditioning heating, and
elevator equipment repairs which are either excluded from such service contract or any existing
equipment warranties. All wall surfaces and floor tile are to be maintained in an as good a
condition

Page 9

 

as when Tenant took possession free of holes, gouges, or defacements, except for damage resulting
from normal wear and tear, casualty or other acts of God, Landlord, Landlord’s agents, employees,
contractors or invitees (“Landlord Parties”) In no event, however, shall Tenant’s obligation to
repair under this subsection extend to (i) damage and repairs covered under any insurance policy
carried by Landlord in connection with the Building; (ii) damage caused in whole or in part by the
negligence or willful misconduct of Landlord or Landlord’s agents, employees, invitees or
licensees, (iii) reasonable wear and tear; (iv) conditions covered under any warranties of
contractors; or (v) damage by fire and other casualties, or acts of governmental authorities, or
acts of God and the elements.

Tenant shall also be responsible, at its sole cost and expense for the preventive maintenance
of the membrane of the roof, which responsibility shall be deemed properly discharged if (i) Tenant
contracts with a licensed roof contractor who is reasonably satisfactory to both Tenant and
Landlord, at Tenant’s sole cost, to inspect the roof membrane at least every six (6) months, with
the first inspection due the sixth (6th) month after the Commencement Date, and (ii) Tenant
performs, at Tenant’s sole cost, all preventive maintenance recommendations made by such contractor
within a reasonable tune after such recommendations are made. Such preventive maintenance might
include acts such as clearing storm gutters and drains, removing debris from the roof membrane,
trimming trees overhanging the roof membrane, applying coating materials to seal roof penetrations,
repairing blisters, and other routine measures. Tenant make available for Landlord’s inspection
such preventive maintenance contracts and paid invoices for the recommended work. Tenant agrees, at
its expense, to water, maintain and replace, when necessary, any shrubbery and landscaping. Nothing
herein shall require either Landlord or Tenant to replace any Tenant Improvements.

          B. Landlord’s Obligations: Landlord at its sole cost and expense, and without reimbursement of
all or any such costs from Tenant, shall (i) maintain in good condition, order, and repair, and
replace as and when necessary the structural portions of the building including: the foundation,
exterior walls, structure and structural members, and roof structure of the Building; and (ii)
repair and damage caused by the acts or omissions of Landlord or Landlord’s Parties. Subject to the
obligations of Tenant to provide periodic inspections and perform maintenance of the membrane of
the roof in accordance with the provisions set forth in Article 11.A above, Landlord shall also
replace as and when necessary, the membrane of the roof. Tenant may give Landlord notice of any
repairs or replacements that are required of Landlord under the terms of this Lease and Landlord
shall proceed forthwith to effect the same with reasonable diligence. In the event of an emergency
Tenant shall be empowered to undertake immediate repairs of such nature as would be Landlord’s
responsibility and notify Landlord promptly after such repairs have been undertaken.

     12. HAZARD INSURANCE:

          A. Tenant’s Use: Tenant shall not use, or permit said Premises, or any part thereof, to

Page 10

 

be used, for any purpose other than that for which the said Premises are hereby leased; and no use
shall be made or permitted to be made of the said Premises, nor acts done, which will cause a
cancellation of any insurance policy covering said Building, or any part thereof, nor shall Tenant
sell or permit to be kept, used or sold, in or about said Premises, any article which may be
prohibited by the standard form of fire insurance policies. Tenant shall (subject to the
provisions of Article 17 as to Alterations required which are not a result of Tenant’s specific
use), at its sole cost and expense, comply with any and all reasonable requirements, pertaining to
said Premises, of any insurance organization or company, necessary for the maintenance of
reasonable fire and public liability insurance, covering said Premises and appurtenances.

          B. Landlord’s Liability Insurance: Landlord shall procure and maintain during the Term of
this Lease a policy of (i) commercial general liability insurance having a combined single limit
for bodily injury and property damage of not less than One Million Dollars ($1,000,000.00) per
occurrence; and (ii) a general aggregate insurance in an amount of not less than Five Million
Dollars ($5,000,000.00). The policy shall provide coverage for blanket contractual liability
(except for the negligence or willful misconduct of the non-insured party) premises and personal
injury coverage. Landlord shall furnish to Tenant prior to the Commencement Date, and thereafter
within thirty (30) days prior to the expiration of each such policy, a certificate of insurance
issued by the insurance carrier of each policy of insurance carried hereunder.

          C. Property Insurance: Landlord agrees to purchase and keep in force fire, and extended
coverage (“All Risk” excluding earthquake) insurance covering the Premises pursuant to the
provisions of Article 10) in amounts not less than the replacement cost of said Premises as
mutually determined by Landlord and Tenant. Tenant agrees to pay to the Landlord as additional
rent, on demand, the full cost of said insurance as evidenced by insurance billings to the
Landlord, and in the event of damage covered by said insurance which does not result in a
termination of this Lease, the amount of any deductible under such policy, provided such
deductible is not greater than $20,000.00. Payment shall be due to Landlord within ten (10) days
after written invoice to Tenant. It is understood and agreed that Tenant’s obligation under this
Article will be prorated to reflect the commencement and termination dates of this Lease.

          Notwithstanding the forgoing, Tenant shall have the right to provide the hazard insurance for
the Premises provided (i) Tenant can obtain such insurance at a more favorable rate than Landlord;
(ii) the form of coverage and insurer are satisfactory to Landlord and its lender; (iii) Landlord
and its lender are named as additional insured; (iv) such insurance provides that it may not be
subject to cancellation or change except after at least thirty (30) days written notice to
Landlord; and (v) Tenant has delivered to Landlord a certificate of insurance and additional
insured endorsement evidencing such policy is in effect.

          E. Tenant’s Insurance: In addition, Tenant agrees to insure its personal property, the

Page 11

 

Tenant Improvements, any Alterations not owned by Landlord pursuant to the terms of Article 10 and
to obtain worker’s compensation and public liability and property damage insurance for occurrences
within the Premises with combined limits for bodily injury and property damage of not less than
$1,000,000.00 per occurrence and a general aggregate limit of not less than $5,000,000.00. Tenant
shall name Landlord and Landlord’s lender as an additional insured, shall deliver a copy of the
policies and renewal certificates to Landlord. All such policies shall provide for thirty (30)
days’ prior written notice to Landlord of any cancellation, termination, or reduction in coverage.

          D. Waiver: Landlord and Tenant hereby waive any and all rights each may have against the other
on account of any loss or damage occasioned to the Landlord or the Tenant as the case may be, or to
the Premises or its contents, and which may arise from any risk covered by their respective
insurance policies (or which would have been covered had such insurance policies been maintained in
accordance with this Lease), as set forth above. The parties shall obtain from their respective
insurance companies a waiver of any right of subrogation which said insurance company may have
against the Landlord or the Tenant, as the case may be.

          E. General: Insurance required hereunder shall be written by companies licensed to do business
in the state in which the Premises are located and have a General Policyholder’s rating of at least
A8 (or such higher rating as may be required by a lender having lien on the Property) as set forth
in the most current issue of Best’s Insurance Guide. All insurance shall expressly provide that
such policies shall not be cancelable or subject to reduction of coverage or otherwise be subject
to modification except after thirty (30) days prior written notice to any other party named as
additional insureds.

     13. TAXES: Tenant shall be liable for, and shall pay prior to delinquency, all taxes and
assessments levied against personal property and trade or business fixtures, and agrees to pay, as
additional rental, all real estate taxes and assessment installments (special or general) or other
impositions or charges which may be levied on the Premises, upon the occupancy of the Premises and
including any substitute or additional charges which may be imposed during, or applicable to the
Lease Term including real estate tax increases due to a sale or other transfer of the Premises, as
they appear on the City and County tax bills during the Lease Term, and as they become due. It is
understood and agreed that Tenant’s obligation under this Article will be prorated to reflect the
Commencement and Expiration Dates. If, at any time during the Lease Term a tax, excise on rents,
business license tax, or any other tax, however described, is levied or assessed against Landlord,
as a substitute or addition in whole or in part for taxes assessed or imposed on land or Buildings,
Tenant shall pay and discharge his pro rata share of such tax or excise on rents or other tax
before it becomes delinquent. In the event that a tax is placed, levied, or assessed against
Landlord and the taxing authority takes the position that the Tenant cannot pay and discharge his
pro rata share of such tax on behalf of the Landlord, then at the sole election of the Landlord,
the Landlord may increase the rental charged hereunder by the exact amount of such tax and Tenant
shall pay such increase as

Page 12

 

additional rent hereunder. Landlord hereby grants to Tenant the right to contest, on behalf and in
the name of Landlord, all taxes and assessments which are imposed upon the Premises; Landlord
agrees to cooperate fully with Tenant and to execute all documents requested by Tenant, in
connection with any such contest. If by virtue of any application or proceeding brought by Landlord
results a reduction in the assessed value of the Building during the Lease Term, Tenant agrees to
reimburse Landlord its reasonable, actual third party out of pocket costs incurred by Landlord in
connection with such application or proceeding.

          Notwithstanding the foregoing, the following shall not constitute real estate taxes for the
purposes of this Lease, and nothing contained herein shall be deemed to require Tenant to pay any
of the following: (i) any state, local, federal, personal or corporate income tax measured by the
income of Landlord; (ii) any estate or inheritance taxes; (iii) any franchise, succession or
transfer taxes; (iv) interest on taxes or penalties resulting from Landlord’s failure to pay taxes,
except to the extent such failure is due to Tenant’s failure to pay such taxes to Landlord when
provided under this Lease; (v) any assessments for public improvements or any taxes initiated by
Landlord which are essentially payments to a governmental agency for the right to make improvements
to the Building or surrounding area, to the extent such assessments are not in effect as of the
Execution Date and have not received the prior written consent of Tenant; and (vi) any
environmental tax, surcharge or other fee affecting the Premises due to Landlord’s activities with
respect to Hazardous Materials, as opposed to general, areawide taxes or surcharges with respect to
the remediation or testing for Hazardous Materials. If any assessments affecting the Premises are
payable in installments and Landlord should prepay such assessments in advance of the date such
installments would become due, Tenant shall be solely responsible for the portion of such
assessments that would have normally come due as an installments, unless consented to by tenant in
writing.

          Notwithstanding anything to the contrary contained in this Lease, Landlord shall pay, and
Tenant shall have no responsibility for, any real property taxes resulting from any changes in
ownership, sale, or other transfer of the Premises or Building during the initial Term of the Lease
to the extent that such amount reflects an assessed valuation of the Premises in excess of one
hundred fifty percent (150%) of the “Commencement Date Valuation.” The “Commencement Date
Valuation” shall mean the assessed valuation of the Premises (as improved with the Building) as
determined by the Santa Clara County Assessor, as of the first date after the Commencement Date
that the Santa Clara County Assessor reassesses the Premises based on the completion of
construction of the Building and Tenant Improvements.

     14. UTILITIES: Tenant shall pay directly to the providing utility all water, gas, heat, light,
power, telephone and other utilities supplied to the Premises. Except for any damages resulting
from the negligence, willful misconduct, or breach of contract by Landlord, or its agents, or
contractors Landlord shall not be liable for a loss of or injury to property, however occurring,
through or in connection with or incidental to furnishing or failure to furnish any utilities to
the

Page 13

 

Premises and Tenant shall not be entitled to abatement or reduction of any portion of the Base
Monthly Rent so long as any failure to provide and furnish the utilities to the Premises is due to
a cause beyond the Landlord’s reasonable control, and is not the result of the negligence, willful
misconduct, or breach of contract by Landlord, or its agents, or contractors.

          In the event of any interruption in utilities or services to be provided to the Premises,
Tenant’s rights and remedies shall be as follows: (i) if such interruption is due to a failure of
Tenant to pay the providing utility when due, Base Rent due hereunder shall not be abated and
Landlord shall have no liability to Tenant whatsoever as a result of such interruption; (ii) if
such interruption is due to the actions of Landlord or Landlord’s Parties, the Base Rent hereunder
shall be equitably abated as of the time such interruption commenced and Landlord shall be liable
to Tenant for loss or injury to property and Tenant’s business as a result thereof; (iii) if such
interruption is due to the failure of the providing utility to provide such utility or service to
the Premises and such interruption continues for more than ninety (90) continuous days, then Tenant
shall be entitled to terminate this Lease by delivery of written notice to Landlord within five (5)
days following the expiration of such ninety (90) day period; and (iv) if such interruption is due
to an event of damage or destruction, the rights of the parties hereunder shall be as described in
Section 28 below.

     15. This paragraph intentionally left blank.

     16. FREE FROM LIENS: Except for obligations arising from the construction of the Building
Shell, Tenant Improvements, and parking lot, Tenant shall keep the Premises free from any liens
arising out of any work performed, materials furnished, or obligations incurred by Tenant. Landlord
shall keep the Premises free from any liens arising out of any work performed, materials furnished,
or obligations incurred in connection with the Building Shell, Tenant Improvements, or parking lot.
In the event Tenant fails to discharge or bond over any such lien within thirty (30) days after
receiving notice of the filing, Landlord shall be entitled to discharge such lien at Tenant’s
expense and all resulting costs incurred by Landlord, including reasonable attorney’s fees shall be
due from Tenant as additional rent.

     17. COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Tenant shall, at its sole cost and expense,
comply with all of the requirements of all Municipal, State and Federal authorities now in force,
or which may hereafter be in force, which are imposed as a result of Tenant’s particular and
specific use of the Premises, and shall faithfully observe in the use of the Premises all Municipal
ordinances and State and Federal statutes now in force or which may hereafter be in force. The
judgment of any court of competent jurisdiction, or the admission of Tenant in any action or
proceeding against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any
such ordinance or statute in the use of the Premises, shall be conclusive of that fact as between
Landlord and Tenant. In the event an Alteration is required to the Building Shell by any law, rule,

Page 14

 

ordinance or decision not in effect as of the Commencement Date of this Lease which is not imposed
as a result of Tenant’s particular and specific use of the Premises (whether pursuant to Article 12
or this Article 17), Tenant shall only be required to pay that portion of the cost equal to the
product of such total cost multiplied by a fraction, the numerator of which is the number of months
remaining in the Lease Term, the denominator of which is the useful life (in months) of the
Alteration.

     18. TOXIC WASTE AND ENVIRONMENTAL DAMAGE:

          A. Landlord’s Responsibility: Landlord represents and warrants to Tenant that, except as
disclosed in the attached environmental studies dated June 18, 1990, July 2, 1990, July 25, 1994,
and the Burrowing Owl study from H.T. Harvey & Associates, to the best of Landlord’s knowledge, the
Premises and the Building, as of the Commencement Date, do not contain any chemicals, toxic or
hazardous gaseous, liquid or solid materials or waste, including without limitation, material or
substance having characteristics of ignitability, corrosivity, reactivity, or extraction procedure
toxicity or substances or materials which are listed on any of the Environmental Protection
Agency’s list of hazardous wastes or which are identified in Section 66680 through 66685 of Title
22 of the California Administrative Code, 42 U.S.C. Section 9601, et seq., 49 U.S.C. Sections 1801,
et seq., 42 U.S.C. Section 6901, et seq., or California Health and Safety Code Section 25117, as
the same may be amended from time to time (“Hazardous Materials”). Landlord shall indemnify,
protect, defend and hold Tenant harmless from and against all liability, cost, damage and expense
(including, without limitation attorneys’ fees) arising from either: (i) the failure of the
representation and warranty contained in the immediately preceding sentence; (ii) the presence of
any Hazardous Materials or Burrowing Owls on or about the Premises on or prior to the Commencement
Date; or (iii) the presence, release storage or use of Hazardous Materials on the Premises during
the Term by any party other than Tenant, Tenant’s agents, employees, contractors or invitees
(“Tenant’s Parties”).

          B. Tenant’s Responsibility: Landlord hereby approves Tenant’s use on or about the Premises of
Hazardous Materials used by Tenant in connection with Tenant’s business. Tenant represents and
warrants that Tenant will (i) adhere to all reporting and inspection requirements imposed by
Federal, State, County or Municipal laws, ordinances or regulations and will make available for
inspection by Landlord a copy of any such reports or agency inspections, (ii) obtain and make
available for inspection by Landlord copies of all necessary permits required for the use and
handling Hazardous Materials on the Premises, (iii) enforce Hazardous Materials handling and
disposal practices consistent with industry standards, (iv) surrender the Premises free from any
Hazardous Materials arising from Tenant’s bringing, using, permitting, generating, emitting or
disposing of Hazardous Materials, and (v) properly close the facility with regard to Hazardous
Materials including the removal or decontamination of any process piping, mechanical ducting,
storage tanks, containers, or trenches which have come become contaminated with Hazardous Materials
and obtain a closure certificate from the local administering agency prior to the Expiration

Page 15

 

Date to the extent required by Law.

          C. Tenant’s Indemnity Regarding Hazardous Materials: Tenant shall comply, at its sole cost,
with all laws pertaining to, and shall indemnify and hold Landlord harmless from any claims,
liabilities, costs or expenses incurred or suffered by Landlord arising from such bringing, using,
permitting, generating, emitting or disposing of Hazardous Materials on the Premises by Tenant or
Tenant’s Parties. Tenant’s indemnification and hold harmless obligations include, without
limitation, (i) claims, liability, costs or expenses resulting from or based upon administrative,
judicial (civil or criminal) or other action, legal or equitable, brought by any private or public
person under common law or under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (“CERCLA”), the Resource Conservation and Recovery Act of 1980 (“RCRA”) or
any other Federal, State, County or Municipal law, ordinance or regulation, (ii) claims,
liabilities, costs or expenses pertaining to the identification, monitoring, cleanup, containment,
or removal of Hazardous Materials from soils, riverbeds or aquifers including the provision of an
alternative public drinking water source, and (iii) all reasonable costs of defending such claims.

          D. Actual Release by Tenant: Tenant agrees to notify Landlord upon learning of any lawsuits
which relate to, or orders which relate to the remedying of, the actual release by Tenant or
Tenant’s Parties of Hazardous Materials on or into the soils or groundwater at or under the
Premises. Tenant shall also provide to Landlord all notices required by Section 25359.7(b) of the
Health and Safety Code and all other notices required by law to be given to Landlord in connection
with Hazardous Materials. Without limiting the foregoing, Tenant shall also deliver to Landlord,
within twenty (20) days after receipt thereof, any written notices from any governmental agency
alleging a material violation of, or material failure to comply with, any federal, state or local
laws, regulations, ordinances or orders, the violation of which of failure to comply with, poses a
foreseeable and material risk of contamination of the groundwater or injury to humans (other than
injury solely to Tenant, its agents and employees within the Improvements on the Property).

          In the event of any release on or into the Premises or into the soil or groundwater under the
Premises of any Hazardous Materials used, treated, stored or disposed of by Tenant, Tenant agrees
to comply, at its sole cost and expense, with all laws, regulations, ordinances and orders of any
federal, state or local agency relating to the monitoring or remediation of such Hazardous
Materials. In the event of any such release of Hazardous Materials, Tenant agrees to meet and
confer with Landlord and its Lender to attempt to eliminate and mitigate any financial exposure to
such Lender and resultant exposure to Landlord under California Code of Civil Procedure section
736(b) as a result of such release and promptly to take reasonable monitoring, cleanup and remedial
steps given, inter alia, the historical uses to which the Property has and continues to be used,
the risks to public health posed by the release, the then available technology and the costs of
remediation, cleanup and monitoring, consistent with acceptable customary practices for the type
and severity of such contamination and all applicable laws. Nothing in the preceding sentence shall
eliminate,

Page 16

 

modify or reduce the obligation of Tenant under Article 18.B of this Lease to indemnify and hold
Landlord harmless from any claims liabilities, costs or expenses incurred or suffered by Landlord
as provided in Article 18.B of this Lease. Tenant shall provide Landlord prompt written notice of
Tenant’s monitoring, cleanup and remedial steps. Tenant shall have the right, at Tenant’s expense
and in Tenant’s name, to contest or object in good faith to any alleged violation by Tenant of any
applicable law relating to the use of Hazardous Materials by appropriate legal proceedings which
are not prejudicial to Landlord’s rights if (i) Tenant shall have demonstrated by Landlord’s
satisfaction that such legal proceedings shall conclusively operate to prevent enforcement prior to
final determination of any such proceedings. In the event that, by non-performance of any such
items, the Premises is subject to imminent loss or forfeiture, Tenant shall perform any such act required by the relevant
governmental authority.

          In the absence of an order of any federal, state or local governmental or quasi-governmental
agency relating to the cleanup, remediation or other response action required by applicable law,
any dispute arising between Landlord and Tenant concerning Tenant’s obligation to Landlord under
this Article 18.D concerning the Level, method, and manner of cleanup, remediation or response
action required in connection with such a release of Hazardous Materials shall be resolved by
mediation and/or arbitration pursuant to the provisions of Article 45 of this Lease.

          E. Environmental Monitoring: Landlord and its agents shall have the right, at Landlord’s sole
cost and expense, (unless Tenant is in violation of this Article 18 in which event such monitoring
shall be at Tenant’s expense) to inspect, investigate, sample and/or monitor the Premises,
including any air, soil, water, groundwater or other sampling or any other testing, digging,
drilling or analysis to determine whether Tenant is complying with the terms of this Article 18. If
Landlord discovers that Tenant is not in compliance with the terms of this Article 18, any such
reasonable costs incurred by Landlord, including attorneys’ and consultants’ fees shall be due and
payable by Tenant to Landlord within thirty (30) days following Landlord’s written demand
therefore.

     19. INDEMNITY: As a material part of the consideration to be rendered to Landlord, Tenant
hereby waives all claims against Landlord for damages to goods, wares and merchandise, and all
other personal property in, upon or about said Premises and for injuries to persons in or about
said Premises, from any cause except to the extent due to the negligence or willful misconduct of
Landlord or Landlord’s Parties to the fullest extent permitted by law, and Tenant shall indemnify
and hold Landlord exempt and harmless from any damage or injury to any person, or to the goods,
wares and merchandise and all other personal property of any person, arising from the use of the
Premises, Building, and/or Project by Tenant, its employees, contractors, agents and invitees or
from the failure of Tenant to keep the Premises in good condition and repair, as herein provided,
except to the extent due to the negligence or willful misconduct of Landlord or Landlord’s Parties.
Further, in the event Landlord is made party to any litigation due to the acts or omission of
Tenant, its

Page 17

 

employees, contractors, agents and invitees, Tenant will indemnify and hold Landlord harmless from
any such claim or liability including Landlord’s costs and expenses and reasonable attorney’s fees
incurred in defending such claims.

          Landlord shall defend, indemnify by counsel acceptable to Tenant, protect Tenant, its
officers, employees and agents harmless from and against any liabilities, loss, cost, damage,
injury or expense (including reasonable attorneys’ fees and court costs) arising out of or related
to the willful misconduct or negligence of Landlord or Landlord’s Parties.

     20. ADVERTISEMENTS AND SIGNS: Tenant will not place or permit to be placed, in, upon or about
the exterior of the Building any signs which are prohibited by the city or other governing
authority. The Tenant will not place, or permit to be placed upon the exterior of the Building, any
signs, advertisements or notices without the written consent of the Landlord as to type, size,
design, lettering, coloring and location, and such consent will not be unreasonably withheld. Any
sign so placed on the exterior of the Building shall be so placed upon the understanding and
agreement that Tenant will remove same at the termination of the tenancy herein created and repair
any damage or injury to the exterior of the Building caused thereby, and if not so removed by
Tenant then Landlord may have same so removed at Tenant’s expense.

     21. ATTORNEY’S FEES: In case a suit or alternative form of dispute resolution should be
brought for the possession of the Premises, for the recovery of any sum due hereunder, or because
of the breach of any other covenant herein, the losing party shall pay to the prevailing party a
reasonable attorney’s fee including the expense of expert witnesses, depositions and court
testimony as part of its cost which shall be deemed to have accrued on the commencement of such
action. In addition, the prevailing party shall be entitled to recover all costs and expenses
including reasonable attorney’s fees incurred by the prevailing party in enforcing any judgment or
award against the other party. The foregoing provision relating to post-judgment costs is intended
to be severable from all other provisions of this Lease.

     22. TENANT’S DEFAULT: The occurrence of any of the following shall constitute a material
default and breach of this Lease by Tenant a) Any failure by Tenant to pay the rental or to make
any other payment required to be made by Tenant hereunder, where such failure continues for ten
(10) days after Tenant’s receipt of written notice thereof by Landlord to Tenant; b) A failure by
Tenant to observe and perform any other provision of the Lease to the observed or performed by
Tenant, where such failure continues for thirty (30) days after Tenant’s receipt of written notice
thereof by Landlord; provided, however, that if the nature of such default is such that the same
cannot reasonably be cured within such thirty (30) day period Tenant shall not be deemed to be in
default if Tenant shall within such period commence such cure and thereafter diligently prosecute
the same to completion; c) The making by Tenant of any general assignment for the benefit of
creditors; the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or of a

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petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the
case of a petition filed against Tenant, the same is dismissed after the filing); the appointment
of a trustee or receiver to take possession of substantially all of Tenant’s assets located at the
Premises or of Tenant’s interest in this Lease, where possession is not restored to Tenant within
ninety (90) days; or the attachment, execution or other judicial seizure of substantially all of
Tenant’s assets located at the Premises or of Tenant’s interest in this Lease, where such seizure
is not discharged within ninety (90) days. The notice requirements set forth herein are in lieu of
and not in addition to the notices required by California Code of Civil Procedure Section 1161. Any
notice given by Landlord to Tenant pursuant to California Civil Code 1161 with respect to any
failure by tenant to pay rent under this Lease on or before the date the rent is due shall provide Tenant with
a period of no less than ten (10) days to pay such rent or quit.

          A. Remedies: In the event of any such default by Tenant, then in addition to any other
remedies available to Landlord at law or in equity, Landlord shall have the immediate option to
terminate this Lease and all rights of Tenant hereunder by giving written notice of such intention
to terminate. In the event that Landlord shall elect to so terminate this Lease then Landlord may
recover from Tenant: a) the worth at the time of award of any unpaid rent which had been earned at
the time of such termination; plus b) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of award exceeds the
amount of such rental loss for the same period that Tenant proves could have been reasonably
avoided; plus c) the worth at the time of award of the amount by which the unpaid rent for the
balance of the Lease Term after the time of award exceeds the amount of such rental loss that
Tenant proves could be reasonably avoided; plus d) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations
under this Lease or which in the ordinary course of things would be likely to result therefrom, and
e) at Landlord’s election, such other amounts in addition to or in lieu of the foregoing as may be
permitted from time to time by applicable California law. The term “rent”, as used herein, shall be
deemed to be and to mean the minimum monthly installments of Base Monthly Rent and all other sums
required to be paid by Tenant Pursuant to the terms of this Lease, all other such sums being deemed
to be additional rent due hereunder. As used in (a) and (b) above, the “worth at the time of award”
is to be computed by allowing interest at the rate of the discount rate of the Federal Reserve
Bank of San Francisco plus five (5%) percent per annum. As used in (c) above, the “worth at the
time of award” is to 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 (1%) percent.

          B. Right to Re-enter: In the event of any such default by Tenant, Landlord shall also have the
right, with or without terminating this Lease, to re-enter the Premises and remove all persons and
property from the Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant and disposed of by Landlord in any manner
permitted by law.

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          C. Abandonment: In the event of the vacation or abandonment of the Premises by Tenant or in
the event that Landlord shall elect to re-enter as provided in Article 22.B above or shall take
possession of the Premises pursuant to legal proceeding or pursuant to any notice provided by law,
then if Landlord does not elect to terminate this Lease as provided in Article 22.A above, then the
provisions of California Civil Code Section 1951.4, (Landlord may continue the lease in effect
after Tenant’s breach and abandonment and recover rent as it becomes due, if Tenant has a right to
sublet and assign, subject only to reasonable limitations) as amended from time to time, shall
apply and Landlord may from time to time, without terminating this Lease, either recover all rental
as it becomes due or relet the Premises or any part thereof for such term or terms and at such
rental or rentals and upon such other terms and conditions as Landlord in its sole discretion may
deem advisable with the right to make alterations and repairs to the Premises. In the event that
Landlord shall elect to so relet, then rentals received by Landlord from such reletting shall be
applied: first, to the payment of any indebtedness other than Base Monthly Rent due hereunder from
Tenant to Landlord; second, to the payment of any cost of such reletting; third, to the payment of
the cost of any alterations and repairs to the Premises; fourth, to the payment of Base Monthly
Rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in
payment of future Base Monthly Rent as the same may become due and payable hereunder. Landlord
shall have no obligation to relet the Premises following a default if Landlord has other available
space within the Building or Project. Should that portion of such rentals received from such
reletting during any month, which is applied by the payment of rent hereunder, be less than the
rent payable during that month by Tenant hereunder, then Tenant shall pay such deficiency to
Landlord immediately upon demand therefor by Landlord. Such deficiency shall be calculated and paid
monthly. Tenant shall also pay to Landlord, as soon as ascertained, any costs and expenses incurred
by Landlord in such reletting or in making such alterations and repairs not covered by the rentals
received from such reletting.

          D. No Termination: No re-entry or taking possession of the Premises by Landlord pursuant to
22.B or 22.C of this Article 22 shall be construed as an election to terminate this Lease unless a
written notice of such intention be given to Tenant or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any reletting without termination by Landlord
because of any default by Tenant, Landlord may at any time after such reletting elect to terminate
this Lease for any such default.

     23. SURRENDER OF LEASE: The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not automatically effect a merger of the Lease with Landlord’s
ownership of the Premises. Instead, at the option of Landlord, Tenant’s surrender may terminate all
or any existing sublease or subtenancies, or may operate as an assignment to Landlord of any or all
such subleases or subtenancies, thereby creating a direct Landlord-Tenant relationship between
Landlord and any subtenants.

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     24. HABITUAL DEFAULT: Deleted.

     25. LANDLORD’S DEFAULT: In the event of Landlord’s failure to perform any of its covenants or
agreements under this Lease, Tenants shall give Landlord written notice of such failure and shall
give Landlord thirty (30) days to cure such failure; provided, however, that if the nature of such
default is such that the same cannot reasonably be cured within such thirty (30) day period.
Landlord shall not be deemed to be in default if Landlord shall within such period commence such
cure and thereafter diligently prosecute the same to completion. In addition, upon any such failure
by Landlord, Tenant shall give notice by registered or certified mail or national overnight courier
service to any person or entity with a security interest in the Premises (“Mortgage”) that has
provided Tenant with written notice (including such Mortgagee’s address) of its interest in the
Premises, and shall provide such Mortgage a period of thirty (30) days beyond the cure period
provided Landlord hereunder to cure such failure. Tenant shall not make any prepayment of rent
more than one (1) month in advance without the prior written consent of such Mortgagee. Tenant
waives any right under California Civil Code Section 1950.7 or any other present or future law to
the collection of any payment or deposit from such Mortgagee or any purchaser at a foreclosure sale
of such Mortgagee’s interest unless such Mortgagee or such purchaser shall have actually received
(or have credited to it) and not refunded the application payment or deposit.

     26. NOTICES: All notices, demands, requests, or consents required to be given under this Lease
shall be sent in writing by U.S. certified mail, return receipt requested, national overnight
courier service or by personal delivery addressed to the party to be notified at the address for
such party specified in Article 1 of this Lease, or to such other place as the party to be notified
may from time to time designate by at least five (5) days prior notice to the notifying party.

     27. ENTRY BY LANDLORD: Upon 24 hours prior notice, Tenant shall permit Landlord and his agents
to enter into and upon said Premises at all reasonable times subject to any security regulations of
Tenant for the purposes of (i) inspecting the same, (ii) maintaining the Premises, (iii) making
repairs, alterations or additions to the Premises, (iv) erecting additional building(s) and
improvements on the land where the Premises are situated, or on adjacent land owned by Landlord, or
(v) performing any obligations of the Landlord under the Lease including remediation of hazardous
materials if determined to be the responsibility of Landlord, without any abatement or reduction of
rent without any liability to Tenant for any loss of occupation or quiet enjoyment of the Premises
thereby occasioned. Tenant shall permit Landlord and Landlord’s Parties, at any time within one
hundred eighty (180) days prior to the Expiration Date, unless Tenant has exercised its option to
extend the term pursuant to Section 37.A (or at any time during the Lease if Tenant is in default
hereunder beyond the applicable cure period), to place upon the Premises “For Lease” signs and
exhibit the Premises to real estate brokers and prospective tenants at reasonable hours. Landlord
agrees that Landlord and Landlord’s Parties shall conduct all of their activities under this

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Section 27 in a manner which minimizes the interruption to Tenant or Tenant’s activities on the
Premises.

     28. DESTRUCTION OF PREMISES:

          A. Destruction by an Insured Casualty: In the event of a partial destruction of the Premises
by a casualty for which Landlord has received insurance proceeds sufficient to repair the damage or
destruction during the Lease Term from any cause, Landlord shall forthwith repair the same to the
extent of such proceeds, provided such repairs can be made within twelve (12) months from the date
of destruction as reasonably determined by the architect responsible for the reconstruction such
determination to be made within sixty (60) days of the date of destruction, and such partial
destruction shall in no way annul or void this Lease, except that Tenant shall be entitled to a
proportionate reduction of Base Monthly Rent while such repairs are being made, such proportionate
reduction to be based upon the extent to which the making of such repairs shall interfere with the
business carried on by Tenant in the Premises. For purpose of this Article “partial destruction”
shall mean destruction of no greater than one-third (1/3) of the replacement cost of the Premises,
including the replacement cost of the Tenant Improvements paid for by Landlord. In the event the
Premises (i) are more than partially destroyed, or (ii) the repairs cannot be made within twelve
(12) months from the date of destruction as reasonably determined by the architect responsible for
the reconstruction such determination to be made within sixty (60) days of the date of destruction.
Landlord shall not be required to restore Alterations or replace Tenant’s fixtures or personal
property. In respect to any partial destruction which Landlord is obligated to repair or may elect
to repair under the terms of this Article, the provision of Section 1932, Subdivision 2, and of
Section 1933, Subdivision 4, of the Civil Code of the State of California and any other similarly
enacted statute are waived by Tenant and the provisions of this Article 28 shall govern in the case
of such destruction. Any disputes between Landlord and Tenant with respect to the degree of damage
or destruction of the Premises or the time necessary to rebuild shall be resolved by arbitration
pursuant to Section 47 of this Lease.

          B. Destruction by an Uninsured Casualty: In the event of a total or partial destruction of the
Premises by a casualty for which Landlord has not received insurance proceeds sufficient to repair
the damage or destruction during the Lease Term and which would cost in excess of Two Hundred Fifty
Thousand and No/100 Dollars ($250,000.00) to repair, Landlord shall have the option to terminate
this Lease, unless Tenant agrees to contribute the amount of such uninsured loss beyond the initial
$250,000 to repair, which amount shall be the sole obligation of Landlord. Further if the uninsured
damage can not be repaired within twelve (12) months from the date of destruction as reasonably
determined by the architect responsible for the reconstruction such determination to be made within
sixty (60) days of the date of destruction, either Landlord or Tenant shall have the option to
terminate this lease.

Page 22

 

          C. Damage or Destruction at End of Term: If the Building or Premises is damaged or destroyed
during the last twenty-four (24) months of the Term of the Lease, and the Premises or Building
cannot be fully repaired or restored by Landlord within ninety (90) days after the date of the
damage or destruction, either Landlord or Tenant may terminate this Lease upon notice to the other,
provided, that Tenant may prevent Landlord’s termination of this Lease under this Section 28.C by
exercising Tenant’s right to extend the Lease Term as described in Section 37.

     29. ASSIGNMENT OR SUBLEASE:

          A. Consent by Landlord: In the event Tenant desires to assign this Lease or any interest
therein including, without limitation, a pledge, mortgage or other hypothecation, or sublet the
Premises or any part thereof, Tenant shall deliver to Landlord executed counterparts of any such
agreement and of all ancillary agreements with the proposed assignee or subtenant, such assignee or
subtenant’s most recent financial statements, and any additional information as reasonably required
by Landlord to determine whether it will consent to the proposed assignment or sublease. The notice
shall give the name and current address of the proposed assignee/ subtenant, proposed use of the
Premises, rental rate and current financial statement, and upon request to Tenant, Landlord shall
be given additional information
as reasonably required by Landlord to determine whether it will consent to the proposed
assignment or sublease. Landlord shall then have a period of ten (10) days following receipt of the
foregoing agreement, statements and additional information within which to notify Tenant in writing
that Landlord elects (i) to permit Tenant to assign or sublet such space to the named
assignee/subtenant on the terms and conditions set forth in the notice, or (ii) to refuse consent,
which consent shall not be unreasonably withheld or delayed. If Landlord should fail to notify
Tenant in writing of such election within said ten (10) day period, Landlord shall be deemed to
have elected option (i) above. Landlord’s consent (which must be in writing and in form reasonably
satisfactory to Landlord) to the proposed assignment or sublease shall not be unreasonably withheld
or delayed. Tenant shall not advertise or publicize the availability of the Premises without prior
notice to Landlord.

          B. Assignment or Subletting Consideration: If Tenant shall assign, sublease or otherwise
transfer all or any portion of the Premises to a party other than Tenant Affiliate (as defined in
29.E below), Landlord and Tenant shall evenly divide any rent or other consideration paid to Tenant
in connection with such assignment, sublease or other transfer which is in excess of the base rent
due under this Lease, after first deducting out for the Tenant’s account the cost of (i) broker’s
commissions paid by Tenant with regard to the transfer; (ii) legal fees; (iii) the cost of
improvements made to the Premises at Tenant’s expense to the extent such improvements increase the
rent paid under the sublease over that which would have been paid without such improvements; (iv)
any tenant improvements made by Tenant at Tenant’s expense for the purpose of transfer; (v) all
rent paid by Tenant to Landlord while the Premises were vacant prior to such transfer; and (vi) any
other expenses incurred by Tenant in effectuating the transfer. The terms of this section shall
survive the

Page 23

 

expiration or earlier termination of the Lease. The above provision relating to the allocation of
bonus rent are independently negotiated terms of the Lease, constitute a material inducement for
the Landlord to enter into the Lease, and are agreed as between the parties to be commercially
reasonable. No assignment or subletting by Tenant shall relieve of any obligation under this Lease.
Any assignment or subletting which conflicts with the provisions hereof shall be void.

          C. No Release: Any assignment or sublease shall be made only if and shall not be effective
until the assignee or subtenant shall execute, acknowledge and deliver to Landlord an agreement, in
form and substance satisfactory to Landlord, whereby the assignee or subtenant shall assume all of
the obligations of this Lease on the part of Tenant to be performed or observed and shall be
subject to all of the covenants, agreements, terms, provisions and conditions contained in this
Lease, except as expressly provided for therein. Notwithstanding any such sublease or assignment
and the acceptance of rent by Landlord from any subtenant or assignee, Tenant and any guarantor
shall and will remain fully liable for the payment of the rent and additional rent due hereunder,
and to become due hereunder, for the performance of all of the covenants, agreements, terms,
provisions and conditions contained in this Lease on the part of Tenant to be performed and for all
acts and omissions of any licensee, subtenant, assignee or any other person claiming under or
through any subtenant or assignee that shall be in violation of any of the terms and conditions of
this Lease, and any such violation shall be deemed to be a violation by Tenant. Tenant shall
further indemnify, defend and hold Landlord harmless from and against any and all losses,
liabilities, damages, costs and expenses (including reasonable attorney fees) resulting from any
claims that may be made against Landlord by the proposed assignee or subtenant or by any real
estate brokers or other persons claiming a commission or similar compensation in connection with
the proposed assignment or sublease.

          D. Effect of Default: In the event of Tenant’s default, Tenant hereby assigns all rents due
from any assignment or subletting to Landlord as security for performance of its obligations under
this Lease and Landlord may collect such rents, except that Tenant may collect such rents unless a
default occurs as described in Article 22 and 24 above. The termination of this Lease due to
Tenant’s default shall not automatically terminate any assignment or sublease then in existence; at
the election of Landlord such assignment or sublease shall survive the termination of this Lease
and, upon such election, the assignee or subtenant shall attorn to Landlord and Landlord shall
undertake the obligations of the Tenant under the sublease or assignment; provided the Landlord
shall not be liable for prepaid rent, or security deposits not received by Landlord or other
defaults of the Tenant to the subtenant or assignee, or any acts or omissions of Tenant, its
agents, employees, contractors or invitees. Notwithstanding anything to the contrary in this Lease,
no event of default shall be deemed to have occurred by virtue of any of act or omission of any
subtenant or assignee of Tenant, unless Landlord has delivered to Tenant written notice of such act
or omission, and has given Tenant the period(s) of time specified in Article 22 to cure such
default.

Page 24

 

          E. Excluded Transfers: Tenant may assign this Lease or sublet any portion of the Premises
without Landlord’s consent to any of the following (i) any corporation which controls, is
controlled by
or under common control with Tenant; (ii) any corporation resulting from the merger or
consolidation of Tenant if (a) the successor to Tenant has a net worth, computed in accordance with
generally accepted accounting principles, at least equal to the greater of (1) the net worth of
Tenant immediately prior to such transfer or (2) the net worth of Tenant herein named on the date
of this Lease, and (b) proof satisfactory to Landlord of such net worth shall have been delivered
to Landlord at least ten (10) days prior to the effective date of any such transaction; (iii) any
person or entity which acquires all of the assets of Tenant as a going concern of the business that
is being conducted on the Premises (collectively, “Tenant Affiliate”), provided that such assignee
assumes in full the obligations of Tenant under the Lease.

     30. CONDEMNATION: If any part of the Premises shall be taken for any public or quasi-public
use, under any statute or by right of eminent domain or private purchase in lieu thereof, and only
a part thereof remains which is susceptible of occupation hereunder, this Lease shall as to the
part so taken, terminate as of the day before title shall vest in the condemnor or purchase
(“Vesting Date”), and the Base Monthly Rent payable hereunder shall be adjusted so that the Tenant
shall be required to pay for the remainder of the Lease Term only such portion of such Base Monthly
Rent as the value of the part remaining after such taking bears to the value of the entire Premises
prior to such taking; but in such event Landlord and Tenant shall have the option to terminate this
Lease as of the Vesting Date. If all of the Premises, or such part thereof be taken so that the
remaining portion is unusable for Tenant’s business therein, as reasonably determined by Tenant,
Tenant may terminate this Lease as of Vesting Date. Landlord shall be entitled to any award paid
for if the Premises is wholly or partially condemned, except that Tenant shall have the right to
receive from either the condemning authority or Landlord, as applicable, all proceeds and other
compensation received in connection with condemnation to the extent paid for (i) any Tenant
Improvements or Alterations made by or at the expense of Tenant; (ii) Tenant’s loss of goodwill;
(iii) Tenant’s relocation costs; and (iv) Tenant’s loss of business and business interruption.
Tenant hereby waives the provisions of California Code of Civil Procedures Section 1265.130 and any
other similarly enacted statue are waived by Tenant and the provisions of this Article 30 shall
govern in the case of such destruction.

     31. EFFECTS OF CONVEYANCE: The term “Landlord” as used in this Lease, means only the owner
for the time being of the Premises so that, in the event of any sale or other conveyance of the
Premises, or in the event of a master lease of the Premises, the Landlord shall be and hereby is
entirely freed and relieved of all covenants and obligations of the “Landlord” hereunder, but only
so long as the new Landlord expressly assumes in writing all the obligations of Landlord under this
Lease, and delivers to Tenant a written agreement by which the new Landlord assumes such
obligations, and it shall be deemed and construed, without further agreement between the parties

Page 25

 

and the purchaser at any such sale, or the master tenant of the Premises, that the purchaser or
master tenant of the Premises has assumed and agreed to carry out any and all covenants and
obligations of the Landlord hereunder arising after the effective date of the transfer to the new
Landlord. Such transferor shall transfer and deliver Tenant’s security deposit to the purchaser at
any such sale or the master tenant of the Premises, and thereupon the such transferor shall be
discharged from any further liability in reference thereto.

     32. SUBORDINATION: Simultaneously with the execution of this Lease, Landlord shall deliver to
Tenant a non-disturbance agreement from Landlord’s existing lender or lenders, if any, in form and
substance acceptable to Tenant, by which such lender or lenders agree not to disturb Tenant’s
possession of the Premises so long as Tenant is not in material default of the terms of this Lease
beyond any applicable cure period at the time such lender or lenders foreclose on the Premises.
This Lease shall be subordinate to any future ground lease, deed of trust, or other hypothecation
for security only so long as Landlord delivers to Tenant prior to effective of such subordination a
written non-disturbance agreement, in form and substance acceptable to Tenant, by which such Lender
or other party agrees not to disturb Tenant’s possession of the Premises if Tenant is not in
material default of Tenant’s obligations under this Lease beyond any applicable cure period at the
time such party becomes the fee owner of the Premises. Subject to the above, in the event Landlord
notifies Tenant in writing, this Lease shall be subordinate to any ground Lease, deed of trust, or
other hypothecation for security now or hereafter placed upon the real property of which the
Premises are a part and to any and all advances made on the security thereof and to renewals,
modifications, replacement and extensions thereof. Tenant agrees to promptly execute and deliver
any documents which may be required to effectuate such subordination.

     33. WAIVER: 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 such term, covenant or condition or any
subsequent breach of the same or any other term, covenant or condition herein contained. The
subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant or condition of this Lease, other than the failure
of Tenant to pay the particular rental so accepted, regardless of Landlord’s knowledge of such
proceeding breach at the time of acceptance of such rent. No payment by Tenant or receipt by
Landlord of a lesser amount than any installment of rent due shall be deemed to be other than
payment on account of the amount due. No delay or omission in the exercise of any right or remedy
by Landlord or Tenant shall impair such right or remedy or be construed as a waiver thereof by the
non-defaulting party. No act or conduct of Landlord, including, without limitation, the acceptance
of keys to the Premises, shall constitute acceptance of the surrender of the Premises by Tenant
before the Expiration Date (only written notice from Landlord to Tenant of acceptance shall
constitute such acceptance of surrender of the Premises). Landlord’s consent to or approval of any
act by Tenant which require Landlord’s consent or approvals shall not be deemed to waive or render
unnecessary Landlord’s consent to or approval of any subsequent act by Tenant.

Page 26

 

     34. HOLDING OVER: Any holding over after the termination or Expiration Date, shall be
construed to be a tenancy from month to month, terminable on thirty (30) days written notice from
either party, and Tenant shall pay Base Monthly Rent to Landlord at a rate equal to one hundred
twenty five percent (125%) of the Base Monthly Rent due in the month preceding the termination or
Expiration Date for the first two (2) months of any hold over and one hundred fifty percent (150%)
of the Base Monthly Rent thereafter plus all other amounts payable by Tenant under this Lease. Any
holding over shall otherwise be on the terms and conditions herein specified, except those
provisions relating to the Lease Term and any options to extend or renew, which provision shall be
of no further force and effect following the expiration of the applicable exercise period.

     35. SUCCESSORS AND ASSIGNS: The covenants and conditions herein contained shall, subject to
the provisions of Article 29, apply to and bind the heirs, successors, executors, administrators
and assigns of all the parties hereto; and all of the parties hereto shall be jointly and
severally liable hereunder.

     36. ESTOPPEL CERTIFICATES: Tenant shall at any time during the Lease Term, within ten (10)
days following receipt of written notice from Landlord, respond to any request by Landlord for a
statement in writing certifying (i) that this Lease is unmodified and in full force and effect (or,
if modified, stating the nature of such modification); (ii) the date to which the rent and other
charges are paid in advance, if any; (iii) acknowledging that there are not, to Tenant’s knowledge,
any uncured defaults on the part of Landlord hereunder or specifying such defaults if they are
claimed; and (iv) such other information as Landlord may reasonably request. Any such statement may
be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises. Tenant
also agrees to provide the most current three (3) years of audited financial statements within five
(5) days of a request by Landlord for Landlord’s use in financing the Premises with commercial
lenders.

     37. OPTION TO EXTEND THE LEASE TERM:

          A. Grant and Exercise of Option: Landlord hereby grants to Tenant, upon and subject to the
terms and conditions set forth in this Article 37 four (4) options (the “Options”) to extend the
Lease Term for an additional term (the “Option Term”), each Option Term shall be for a period of
sixty (60) months. Each such Option shall be exercised, if at all, by written notice to Landlord no
earlier than the date that is twenty four (24) months prior to the Expiration Date but no later
than the date that is twelve (12) months prior to the Expiration Date. Thirteen (13) months prior
to the Expiration Date Landlord shall provide Tenant with a written notice of the fact that the
Option will expire in thirty (30) days. If Tenant exercises the Option, each of the terms,
covenants and conditions of this Lease except this Article shall apply during the Option Term as
though the expiration date of the Option Term was the date originally set forth herein as the
Expiration Date, provided that the Base Monthly Rent to be paid by Tenant during the Option Term
shall be the greater of (i) the Base

Page 27

 

Monthly Rent payable on the Commencement Date, or (ii) ninety five percent (95%) of the Fair Market
Rental, as hereinafter defined, for the Premises for the Option Term. Anything contained herein to
the contrary notwithstanding, if Tenant is in monetary or material non-monetary default beyond any
applicable cure period under any of the terms, covenants or conditions of this Lease either at the
time Tenant exercises the Option or at any time thereafter prior to the commencement date of the
Option Term, Landlord shall have, in addition to all of Landlord’s other rights and remedies
provided in this Lease, the right to terminate the Option upon notice to Tenant, in which event the
expiration date of this Lease shall be and remain the Expiration Date or the expiration of the then
relevant Option Term. As used herein, the term “Fair Market Rental” for the Premises shall mean the
rental and all other monetary payments including any escalations and adjustments thereto (including
without limitation Consumer Price Indexing) then being obtained for leases of space comparable in
age and quality to the Premises in the locality of the Building that Landlord could obtain during
the Option Term from a third party desiring to lease the Premises for the Option Term based upon
the current use and other potential uses of the Premises. The appraisers shall be instructed that
the foregoing five percent (5%) discount is intended to reduce comparable rents which include (i)
brokerage commissions, (ii) tenant improvement allowances, and (iii) vacancy costs, to account for
the fact that Landlord will not suffer such costs in the event Tenant exercises its Option. The
Fair Market Rental shall specifically exclude any additional rental attributable to the value of
the Tenant Improvements or Alterations paid for by Tenant.

          B. Determination of Fair Market Rental: If Tenant exercises the Option, Landlord shall send to
Tenant a notice setting forth the Fair Market Rental for the Premises for the Option Term within
thirty (30) days of Tenant’s exercise of the Option. If Tenant disputes Landlord’s determination of
the Fair Market Rental for the Option Term, Tenant shall, within thirty (30) days after the date of
Landlord’s notice setting forth the Fair Market Rental for the Option Term, send to Landlord a
notice stating that Tenant either (i) elects to terminate its exercise of the Option, in which
event the Option shall lapse and this Lease shall terminate on the Expiration Date, or (ii)
disagrees with Landlord’s determination of Fair Market Rental for the Option Term and elects to
resolve the disagreement as provided in Article 37.C below. If Tenant does not send to Landlord a
notice as provided in the previous sentence, Landlord’s determination of the Fair Market Rental
shall be the basis for determining the Base Monthly rent to be paid by Tenant hereunder during the
Option Term. If Tenant elects to resolve the disagreement as provided in Article 37.C below and
such procedures shall not have been concluded prior to the commencement date of the Option Term,
Tenant shall pay as Base Monthly Rent to Landlord the rent due hereunder during the month preceding
the Expiration Date. If the amount of Fair Market Rental as finally determined pursuant to Article
37.C below is greater than Landlord’s determination, Tenant shall pay to Landlord the difference
between the amount paid by Tenant and the he rent due hereunder during the month preceding the
Expiration Date within thirty (30) days after the determination. If the Fair Market Rental as
finally determined in Article 37.C below is less than Landlord’s determination, the difference
between the amount paid by Tenant and the Fair Market Rental as so determined in

Page 28

 

Article 37.C below shall be credited against the next installments of rent due from Tenant to
Landlord hereunder.

          C. Resolution of a disagreement over the Fair Market Rental: Any disagreement regarding the
Fair Market Rental shall be resolved as follows:

               1. Within thirty (30) days after Tenant’s response to Landlord’s notice to Tenant of the Fair
Market Rental, Landlord and Tenant shall meet no less than two (2) times, at a mutually agreeable
time and place, to attempt to resolve any such disagreement.

               2. If within the thirty (30) day period referred to in (i) above, Landlord and Tenant can not
reach agreement as to the Fair Market Rental, they shall each select one appraiser to determine the
Fair Market Rental. Each such appraiser shall arrive at a determination of the Fair Market Rental
and submit their conclusions to Landlord and Tenant within thirty (30) days after the expiration of
the thirty (30) day consultation period described in (i) above.

               3. If only one appraisal is submitted within the requisite time period, it shall be deemed to
be the Fair Market Rental. If both appraisals are submitted within such time period, and if the two
appraisals so submitted differ by less than ten percent (10%) of the higher of the two, the average
of the two shall be the Fair Market Rental. If the two appraisals differ by more than ten percent
(10%) of the higher of the two, then the two appraisers shall immediately select a third appraiser
who shall within thirty (30) days after his or her selection shall select one of the two (2)
existing determinations of Fair Market Rental as correct. This third appraiser’s conclusion shall
be the Fair Market Rental.

               4. All appraisers specified pursuant to this Article shall be members of the American
Institute of Real Estate Appraisers with not less than five (5) years experience appraising office
and industrial properties in the Santa Clara Valley. Each party shall pay the cost of the appraiser
selected by such party and one-half of the cost of the third appraiser.

     38. Tenant’s Right of First Refusal:

          A. Grant. Landlord hereby grants to Tenant a right of first refusal during the Term of this
Lease and any extension thereof to purchase the Premises (“Right of First Refusal to Purchase”).

          B. Covenants of Landlord. Landlord hereby covenants and agrees with Tenant that if, during the
Term of the Lease, Landlord shall receive or solicit a bona fide offer from a prospective buyer to
purchase either the Premises, Landlord shall furnish Tenant with a copy of the proposed contract
and notify Tenant of the intention of Landlord to accept the same (the “Notice of Intention to
Sell”). Such Notice of Intention to Sell shall contain all material business terms on which

Page 29

 

Landlord intends to sell the Premises. Landlord shall not sell the space in question to anyone
other than Tenant without first providing Tenant the opportunity to buy the space in question upon
the same terms and conditions described in the Notice of Intention to Sell.

          C. Exercise of Tenant’s Right of First Refusal to Purchase. Provided that Tenant is not in
default under the terms and conditions of this Lease beyond any applicable grace periods, Tenant
may exercise Tenant’s Right of First Refusal to Purchase by providing Landlord with written notice
thereof within fifteen (15) days of Tenant’s receipt of the Notice of Landlord’s Intention to Sell.
If Tenant does not exercise its Right of First Offer to Purchase within said fifteen (15) day
period, then Landlord shall be relieved of Landlord’s obligation to offer the space identified in
the Notice of Intention to Sell to Tenant, except as provided for in Section 38.E below.

          D. Terms for Right of First Refusal to Purchase. In the event that Tenant exercises Tenant’s
Right of First Refusal to Purchase, Tenant’s purchase shall be on all of the same terms and
conditions as are offered to a bona-fide third-party purchaser of the space identified in the
Notice of Intention to Sell.

          E. Continuing Right. In no event shall Tenant’s failure to exercise its Right of First Refusal
to Purchase be deemed a waiver or relinquishment by Tenant of Tenant’s Right of First Refusal to
Purchase should (i) the space identified in the Notice of Intention to Sell be offered for sale to
a potential purchaser other than the purchaser specified in the Notice of Landlord’s Intention to
Sell during the Term of this Lease or any extension thereof, or (ii) the space identified in the
Notice of Landlord’s Intention to Sell be offered for sale to any purchaser on terms different than
those specified in the Notice of Landlord’s Intention to Sell during the Term of this lease or any
extension thereof.

          F. Exclusive Nature of Option. Landlord represents and warrants to Tenant that no party other
than Tenant has any option, right of first offer or right of first refusal to purchase the
Premises. Landlord hereby covenants to Tenant that Landlord shall not grant an option to purchase,
right of first offer or right of first refusal to purchase the Premises during the Term of this
Lease or any extension thereof.

          G. Successors and Assigns. Except as provided in this paragraph 38.G, this Right of First
Refusal to Purchase shall be binding on the successors and assigns of Landlord and Tenant. This
Right of First Refusal shall not specifically not apply to (but shall survive the same and be
binding upon any purchaser or successor of such sale or foreclosure) (i) any transfer of ownership
of the Premises by a judicial foreclosure sale or sale pursuant to a power of sale provision in any
relevant deed of trust or mortgage lien, transfers of the Building, or (ii) a “Sobrato Family
Transfer”. A Sobrato Family Transfer shall be a transfer of the Premises to (i) John A. Sobrato
and/or John M. Sobrato (individually and collectively “Sobrato”), (ii) any immediate family member
of Sobrato, (iii)

Page 30

 

any trust established, in whole or in part, for the benefit of Sobrato and/or any immediate
family member of Sobrato, (iv) any partnership in which Sobrato or any immediate family member,
either directly or indirectly (e.g., through a partnership or corporate entity or a trust)
retains a general partner interest, and/or (v) any corporation under the control, either directly
or indirectly, by Sobrato or any immediate family member of Sobrato.

     39. OPTIONS: Except with respect to any Tenant Affiliate, all Options provided Tenant in
this Lease are personal and granted to original Tenant and are not exercisable by any third party
should Tenant assign or sublet (except for any assignment permitted by the third to last
paragraph of Article 29) all or a portion of its rights under this Lease, unless Landlord
consents to permit exercise of any option by any assignee or subtenant, in Landlord’s sole
discretion. In the event that Tenant hereunder has any multiple options to extend this Lease, a
later option to extend the Lease cannot be exercised unless the prior option to extend has been
so exercised.

     40. QUIET ENJOYMENT: Landlord covenants with Tenant for itself and Landlord’s successors
that so long as no Event of Default on the part of Tenant has occurred hereunder, (i) Tenant
shall and may peaceably and quietly have, hold and enjoy the Premises for the Term of this Lease,
and any renewals or extensions thereof; and (ii) neither Landlord, nor any Party claiming under
or through Landlord, shall disturb the use or the occupancy of the Premises by Tenant.

     41. BROKERS: Landlord and Tenant each warrants and represents for the benefit of the other
that it has had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, except for CB Madison, and that it knows of no other real estate broker
or agent who is or might be entitled to a real estate brokerage commission or finder’s fee in
connection with this Lease. Each party shall indemnify and hold harmless the other from and
against any and all liabilities or expenses arising out of claims made by any broker (other than
CB Madison) or individual for commissions or fees resulting from the actions of the indemnifying
party in connection with this Lease.

     42. LANDLORD’S LIABILITY: If Tenant should recover a money judgment against Landlord arising
in connection with this Lease, the judgment shall be satisfied only out of Landlord’s interest in
the Premises including the improvements and real property and neither Landlord or any of its
partners, officers, directors, agents, trustees shareholders or employees shall be liable
personally for any deficiency. And furthermore, Tenant expressly waives any and all rights to
proceed against the individual partners or the officers, directors by shareholders of any
corporate partner, except to the extent of their interest in said limited partnership.

          Notwithstanding the foregoing, the following shall apply with respect to claims by Tenant
directly resulting from any and all defaults by Landlord with respect to any of its obligations
under

Page 31

 

(i) Section 18 with respect to Hazardous Materials, or (ii) Section 28 with respect to destruction
to the Premises (collectively, the “Special Defaults”). In the event of any Special Defaults,
Tenant shall be entitled to seek recourse against any assets of Landlord, and the recourse of
Tenant against Landlord for any Special Default shall not be limited to Landlord’s interest in the
Premises and the rents and other forms of income originating therefrom.

     43. AUTHORITY OF PARTIES: Landlord and Tenant represents and warrants to each other that it is
duly formed and in good standing and is duly authorized to execute and deliver this Lease on behalf
of said corporation or partnership, as relevant, in accordance with a duly adopted resolution of
the Board of Directors of said corporation or in accordance with the by-laws of said corporation,
and that this Lease is binding upon said corporation or partnership, as relevant in accordance with
its terms. At either party’s request, the other party shall provide the requesting party with
corporate resolutions or other proof in a form acceptable to the requesting party, authorizing the
execution of the Lease.

     44. TRANSPORTATION DEMAND MANAGEMENT PROGRAMS: Should a government agency or municipality
require Landlord to institute TDM (Transportation Demand Management) facilities and/or program,
Tenant hereby agrees that the cost of TDM imposed facilities required on the Premises, including
but not limited to employee, showers, lockers, cafeteria, or lunchroom facilities, shall be
included as Tenant Improvement Costs (unless such costs qualify for amortization pursuant to
Article 17) and any ongoing costs or expenses associated with a TDM program, such as an on-site
TDM coordinator, which are required for the Premises and not provided by Tenant shall be provided
by Landlord with such costs being included as additional rent and reimbursed to Landlord by
Tenant.

     45. DISPUTE RESOLUTION: Except for the failure by Tenant to timely pay the Base Monthly Rent,
any controversy, dispute, or claim of whatever nature arising out of, in connection with, or in
relation to the interpretation, performance or breach of this agreement, including any claim based
on contract, tort, or statute, shall be resolved at the request of any party to this agreement
through a two-step dispute resolution process administered by JAMS or another judicial and
mediation service mutually acceptable to the parties involving first mediation, followed, if
necessary, by final and binding arbitration administered by and in accordance with the then
existing rules and practice of the judicial and mediation service selected, and judgment upon any
award rendered by the arbitrator(s) may be entered by any State or Federal Court having
jurisdiction thereof.

     46. MISCELLANEOUS PROVISIONS:

          A. Rent: All monetary sums due from Tenant to Landlord under this Lease, including, without
limitation those referred to as “additional rent”, shall be deemed to be rent.

Page 32

 

          B. Performance by Landlord: If Tenant fails to perform any obligation required under this
lease or by law or governmental regulation and Tenant is not disputing such law or governmental
regulation in accordance with the terms of this Lease, Landlord, in its sole discretion may
without notice and without releasing Tenant from its obligations hereunder or waiving any rights or
remedies, perform such obligation, in which event Tenant shall pay Landlord as additional rent all
sums reasonably paid by Landlord in connection with such substitute performance including interest
as provided in Article 48.C below within thirty (30) days following Landlord’s written notice for
such payment.

          C. Interest: All rent due hereunder (but not late charges thereon), if not paid when due,
shall bear interest at the reference rate of Union Bank plus two percent (2%) accruing from the
date due until the date paid to Landlord.

          D. Rights and Remedies: All rights and remedies hereunder are cumulative and not alternative
to the extent permitted by law and are in addition to all other rights and remedies in law and in
equity.

          E. Survival of Indemnities: All indemnification, defense, and hold harmless obligations of
Landlord and Tenant under this Lease shall survive the expiration or sooner termination of the
Lease for a period of four (4) years.

          F. Severability: If any term or provision of this Lease is held unenforceable or invalid by a
court of competent jurisdiction, the remainder of the Lease shall not be invalidated thereby but
shall be enforceable in accordance with its terms, omitting the invalid or unenforceable term.

          G. Choice of Law: This Lease shall be governed by and construed in accordance with California
law. Venue shall be Santa Clara County.

          H. Time: Time is of the essence hereunder.

          I. Entire Agreement: This instrument contains all of the agreements and conditions made
between the parties hereto and may not be modified orally or in any other manner other than by an
agreement in writing signed by all of the parties hereto or their respective successors in
interest.

          J. Representations: Tenant acknowledges that neither Landlord nor any of its employees or
agents have made any agreements, representations, warranties or promises with respect to the
demised Premises or with respect to present or future rents, expenses, operations, tenancies or any
other matter. Except as herein expressly set forth herein, Tenant relied on no

Page 33

 

statement of Landlord or its employees or agents for that purpose.

          K. Headings: The headings or titles to the Articles of this Lease are not a part of this Lease
and shall have no effect upon the construction or interpretation of any part thereof.

          L. Exhibits: All exhibits referred to are attached to this Lease and incorporated by
reference.

          M. Approvals: With respect to any consent of Landlord which Tenant may request pursuant to the
terms of this Lease, such consent shall not be unreasonably withheld or delayed by Landlord. If
Landlord fails to grant or withhold such requested consent within five (5) business days after
request by Tenant, such consent shall be deemed granted.

          N. Recordation. Within twenty (20) days following the execution of this Lease, both Landlord
and Tenant shall execute, acknowledge and cause to be recorded in the Official Records of County of
Santa Clara, California a short form memorandum of this Lease in form reasonably acceptable to
Landlord and Tenant.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and year first above
written.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Landlord: Sobrato Development Cos. #871
a California Limited Partnership	 	 	 	Tenant: Komag Incorporated

a Delaware Corporation	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 		 	 	 	By:	 		 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Its:
	 	GP.
	 	 	 	 	 	Its:
	 	SVP, CFO	 	 

Page 34

 

 

 

EXHIBIT “B” — Formula for Determination of Base Monthly Rent

After receipt of the final pricing for the Building Shell, Landlord shall determine Total Project
Costs (as defined below) based on competitive bids. During this period Landlord shall also solicit
permanent loan quotes from institutional lenders to determine the best available financing. Based
on these inputs Landlord shall then apply the following formula to determine the Base Monthly Rent
due under this Lease.

Base Monthly Rent shall be equal to one hundred twenty percent of (i) the product of the (i) Total
Project Costs as defined below and (ii) the best non-participating ten (10) year fixed rate
permanent loan constant available prior to the start of construction of the Option Building. The
determination of which loan comprises the best available financing shall be made in good faith by
both Landlord and Tenant. The parties acknowledge that it is their current intention that such
amortization schedule shall be for a minimum period of twenty (20) years and Landlord shall use its
best efforts to obtain such financing.

Total Project Costs shall be equal to the sum of (i) the value of the land based on a land value of
Nine and 90/100 Dollars ($9.90) per square foot, (ii) the Building Shell Allowance, (iii) fees for
building permits, licenses, inspection, utility connections or extensions, and any other fees
imposed by governmental entities, (iv) fees of engineers, architects, consultants and others
providing professional services in connection with the construction of the Building, (v)
construction loan interest paid by Landlord including interest on Landlord’s equity with respect to
the construction of the Building, calculated at the reference rate charged by Union Bank plus one
percent (1%), (vi) loan fees payable for the construction and /or permanent loan for the Building
(vii) real property taxes and assessments levied against the Property during the period the
Building is constructed, (viii) liability and builders risk insurance premiums paid by Landlord
with respect to the construction of the Building, and (ix) real estate leasing commissions or fees
payable by Landlord with respect to the Building.

For example, if Total Project Costs were $14,000,000, and Landlord was able to obtain a 7.75% loan
with a 20 year amortization, the Base Monthly Rent would be 120% X ($14,000,000 X .008209), or
$137,911.

Page 36

 

EXHIBIT “C” — Shell Plans and Specifications

(sheet references to be attached)

Page 37

 

EXHIBIT “D” — Building Shell Definition

The Building Shell includes the following items:

1. Site Work

     a. Asphalt concrete paving, wheel stops, and striping.

     b. Concrete sidewalks, curbs, gutter, driveway, approaches, and planter walls.

     c. Landscaping, landscape lighting, waterscape, and irrigation.

     d. Underground utilities — water, gas, fire line, sanitary line (including pump station if
required), site storm drainage system, transformers and primary and secondary electrical lines
stubbed into building. The routing of the under slab utilities shall be done as part of the
Building Shell construction if the location of the lines are determined prior to the pouring of the
floor slab.

     e. Service area of approximately 12,500 SF including the mezzanine. The Building Shell shall
include the pad of such area and all structures related to the tank farm shall be considered Tenant
Improvements.

     f. Offsite improvement work required by the City of San Jose to obtain building permits.

2. Building Structure

Includes all elements necessary to provide for a completely waterproof Building Shell including but
not limited to:

     a. Concrete foundation and slab on grade including all reinforcing steel and wire mesh
including four loading docks.

     b. Structural steel columns and beams.

     c. Steel joist and girder second floor system with concrete and metal deck (if multi-story
building).

     d. Wood panelized glulam roof structure or steel frame with metal deck and rigid insulation
with fiberglass built-up roofing including roof drainage plumbing.

     e. Glass, glazing and perimeter roll up or hollow metal doors including normal passage
hardware.

     f. Concrete tilt up or plaster on metal stud framed exterior walls.

     g. Exterior painting.

     h. All city permits, fees, and taxes, connection charges related to the Building Shell
construction.

     i. Main fire sprinkler grid.

     j. All architectural and engineering costs related to the design of the Building Shell.

Page 38

 

EXHIBIT “E” — Tenant Improvement Plans and Specifications

(sheet references to be attached)

Page 39

 

EXHIBIT “F” — Tenant’s Trade Fixtures

Page 40

 

EXHIBIT “G” — Fee Agreement

Tenant shall pay to Sobrato Construction Corporation, an affiliate of Landlord, a fee of One
Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) as compensation to Landlord for
its services as general contractor for the Building Shell and Tenant Improvements (“Construction
Fee”).

The Construction Fee shall be paid in monthly installments of One Hundred Fifty Thousand and No/100
Dollars ($150,000.00). In no event, however, shall the final installment of the Construction Fee be
due from Tenant until Substantial Completion of the Premises has occurred.

The Construction Fee includes the general conditions associated with the construction of the
Building Shell and Tenant Improvements. It is agreed by the parties that the general conditions
included in the Construction Fee consist of the following costs: (i) all project management and
scheduling personnel costs, (ii) field office expenses including set-up and rent, janitorial,
security and furniture, (iii) general office expenses including supplies, computers, postage,
telephone, reproduction and copying, travel expense, subsistence, drinking water, etc., (iv)
management vehicles and fuel, (v) general safety costs including a safety engineer, flagman/traffic
control, barricades and signs, protective equipment and first aid supplies, and fire protection,
(vi) temporary services including temporary electrical (light strings, tempower boxes, cords,
trailer office connection, light stands and transformer), utility costs/generator, water
(installation, connection and utility), heating, ladders and stairs, and chemical toilets, (vii)
field services such as janitorial, security, interim clean-up, debris boxes, project sign, (viii)
worker/employee parking and drinking water, (ix) insurance (liability and building risk), (x) City
Gross Receipts Tax, (xi) gas, oil, diesel fuel and lubrication for equipment owned by general
contractor, and (xii) site conditions including temporary roads, staging and storage areas, site
dewatering, winter protection and maintenance, site fencing, tree protection, dust control, tool
shed, walkietalkies, etc.

Page 41

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