Document:

exv10w7

 

EXHIBIT 10.7

[EXECUTIVE OFFICER FORM]

[Emulex Letterhead]

[DATE]

[NAME]

[ADDRESS]

[ADDRESS]

     Re: Key Employee Retention Agreement

Dear _________:

     This Key Employee Retention Agreement (“Agreement”) relates to your appointment as [TITLE] of
Emulex [name] Corporation, a [California or Delaware] corporation (the “Company”), which is an
affiliate of Emulex Corporation, a Delaware corporation (“Emulex”). Because the Company and Emulex
wish to assure themselves of both present and future continuity of management in the event of any
Change in Control (as defined below), as well as objectivity of management in the event of a
proposed Change in Control, you, the Company and Emulex are hereby entering into the following
agreements:

1. Severance Payment and Employee Benefits. If a Change in Control (as defined below)
shall occur after the date of this Agreement, and you are then still an employee of the Company,
and at any time within two years after the Change in Control and prior to your Normal Retirement
Date (as defined below) your employment is terminated by the Company without Cause (as defined
below) or by you because of a Demotion (as defined below):

     1.1 Severance Payment.

          (a) The Company will pay to you within 15 days after the date of termination of your
employment (the “Termination Date”) a lump-sum severance payment (the “Severance Payment”) equal to
the present value of 100% of the sum of your Annual Base Pay (as defined below) plus your Annual
Incentive Pay (as defined below); provided, however, that the Severance Payment will be reduced by
the aggregate amount of severance payments received by you under any other severance policy, plan,
program, or arrangement of the Company. Such present value shall be determined as if an aggregate
amount equal to the sum of your Annual Base Pay plus your Annual Incentive Pay (minus, if
applicable, the aggregate amount of severance payments received by you under any other severance
policies, plan, program, or arrangement of the Company) would otherwise have been paid to you in 12
equal monthly installments commencing one month after the Termination Date, using a discount rate
equal to the then-applicable interest rate adopted by the Pension Benefit Guaranty Corporation for

 

 

purposes of benefit valuations in connection with non-multiemployer pension plan terminations
assuming the immediate commencement of benefit payments, as set forth in Table II in Appendix B to
Part 4044 (formerly Part 2619) of Title 29 of the Code of Federal Regulations (29 C.F.R. §
4044.75(b)), or any successor appendix, schedule, rule or regulation.

          (b) [insert the following paragraph if the agreement is a new agreement and the participant
has not previously been a party to a KERA] Unless you notify us in writing within 30 days of
entering into this agreement of your election to receive installments, your Severance Payment will
be paid in a lump sum as provided in Section 1.1(a) hereof. In lieu of a cash lump sum, you may,
in your sole discretion, elect to receive the Severance Payment in equal annual installments over
five years (or such lesser number of years as you may elect). Any election must specify the
installment period in a form that is acceptable to the Company. Such installments shall be paid to
you on each anniversary of the Termination Date, beginning with the first such anniversary and
continuing on each such anniversary thereafter until fully paid. Such election to receive the
Severance Payment in installments must be made in writing within 30 days of entering into this
agreement by providing written notice to the Secretary of Emulex of such election. Any such
election by you to receive the Severance Payment in installments that has been made shall be
irrevocable and binding on all parties hereto.

          [insert the following paragraphas paragraph (b) if the agreement is an amendment to an
existing agreement or the participant has previously been a party to a KERA in a different
classification] In lieu of a cash lump sum, you may, in your sole discretion, elect to receive the
Severance Payment in equal annual installments over five years (or such lesser number of years as
you may elect) beginning on the Deferred Commencement Date described below. Any election must
specify the installment period in a form that is acceptable to the Company and in compliance with
the conditions herein. Such installments, plus interest calculated at the discount rate specified
in Section 1.1(a) hereof determined as of the Termination Date, shall be paid to you on each
anniversary of the Deferred Commencement Date, beginning with the first such anniversary and
continuing on each such anniversary thereafter until fully paid. Such election to receive the
Severance Payment in installments must be made in writing by providing written notice to the
Secretary of Emulex of such election and must satisfy the following conditions: (1) such election
may not take effect until at least twelve months after the date on which the election is made; and
(2) except in the event of your death, disability or unforeseeable emergency, the Deferred
Commencement Date that is the date of the first payment to which the installment payment election
applies must be deferred for not less than five years after the Termination Date on which such
Severance Payment would otherwise have been made. Any such election by you to receive the
Severance Payment in installments shall be irrevocable and binding on all parties hereto.

          (c) In the event that on your Termination Date there is not in effect a timely election by you
to receive the Severance Payment in installments, such Severance Payment shall be paid to you in a
single cash lump sum as provided in Section 1.1(a) hereof. In the event that you have made an
appropriate and timely election to receive the Severance Payment in annual installments, and you
become entitled to such Severance Payment as provided in this Agreement, then such Severance
Payment, to the extent at any time unpaid and/or deferred, shall be deemed to bear interest at the
aforementioned discount rate (based on the discount rate determined as of

 

 

the Termination Date) or, if less, the maximum rate permitted by law. Accrued interest shall
be due and payable together with each annual installment of the Severance Payment.

          (d) Notwithstanding anything to the contrary in this Section 1.1, in the event any Severance
Payment or other benefits under this agreement are determined, in whole or in part, to constitute
“nonqualified deferred compensation” within the meaning of Section 409A of the Code and you are a
specified employee as defined in Section 409A(2)(B)(i) of the Code, such amounts will not be paid
before the date which is six months after your Termination Date. Although it is contemplated that
Severance Payment or other benefits resulting from an involuntary termination of employment without
Cause will be short-term deferrals that will not constitute “nonqualified deferred compensation”
within the meaning of Section 409A of the Code, it is not clear that such treatment will be
available in all instances, including, for example, a termination by you because of a Demotion.
The determination of whether and what amount of the Severance Payment or other benefits constitute
deferred compensation and whether you are a specified employee within the meaning of Section
409A(2)(B)(i) of the Code shall be determined by the by the board of directors of the Company or
its delegate and any such determination shall be final and binding on the Company and you, unless
such decisions are determined to be arbitrary and capricious by a court having jurisdiction. The
Company makes no representation and the Company shall have no liability to you or any other person
if any Severance Payment or other benefits provided pursuant to the terms of this Agreement are
determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of
the Code and the payment terms of such Severance Payment or other benefits do not satisfy the
additional conditions applicable to nonqualified deferred compensation under Section 409A of the
Code and this Section 1.1(d).

     1.2 Employee Benefits. The Company shall provide or arrange to provide to you
continuation of your Employee Benefits (as defined below) for one year following the Termination
Date; provided, however, that such Employee Benefits will be reduced to the extent comparable
benefits are actually received by you (i) from another employer during such one-year period (and
any such benefits actually received by you shall be reported promptly by you to the Company) or
(ii) under any other policy, plan, program, or arrangement of the Company.

          Any or all of such Employee Benefits may be provided to you, in the discretion of the Company,
pursuant to policies or plans of the Company which exist as of the Termination Date and/or pursuant
to policies, plans, or arrangements which are implemented or adopted by the Company on or after the
Termination Date, including those which are implemented or adopted by the Company for your benefit
only or for the benefit of you and selected other employees or former employees of the Company.
The Company, in its discretion, may also fulfill its obligation to provide continuation of any or
all of your Employee Benefits in accordance with the foregoing by paying to you in cash from time
to time the minimum amount necessary to enable you to purchase a comparable Employee Benefit from
another benefit provider; provided, however, that this cash alternative shall not be utilized by
the Company if and to the extent comparable Employee Benefits are available to you under the terms
of the existing policies or plans of the Company.

 

 

     1.3 Certain Payment Reductions.

          (a) For purposes of this Section 1.3, (i) a Payment shall mean any payment or distribution in
the nature of compensation to or for your benefit, whether paid or payable pursuant to this
Agreement or otherwise; (ii) Agreement Payment shall mean a Payment paid or payable pursuant to
this Agreement (determined without regard to this Section 1.3); (iii) Net After Tax Receipt shall
mean the Present Value of a Payment net of all taxes imposed on you with respect thereto under
Sections 1 and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), determined by
applying the highest marginal rate under Section 1 of the Code which applied to your taxable income
for the immediately preceding taxable year; (iv) “Present Value” shall mean such value determined
in accordance with Section 280G(d)(4) of the Code; and (v) “Reduced Amount” shall mean the smallest
aggregate amount of Payments which (a) is less than the sum of all Payments (determined without
regard to this Section 1.3)) and (b) results in aggregate Net After Tax Receipts which are equal to
or greater than the Net After Tax Receipts which would result if the aggregate Payments were equal
to the sum of all Payments (determined without regard to this Section 1.3) or any other amount less
than the sum of all payments (determined without regard to this Section 1.3).

          (b) Anything in this Agreement to the contrary notwithstanding, in the event accountants
selected by the Company (the “Accounting Firm”) shall determine that receipt of all Payments would
subject you to tax under Section 4999 of the Code, it shall determine whether some amount of
Payments would meet the definition of a “Reduced Amount.” If the Accounting Firm determines that
there is a Reduced Amount, the aggregate Agreement Payments shall be reduced to such Reduced
Amount; provided, however, that if the Reduced Amount exceeds the aggregate Agreement Payments, the
aggregate Payments shall, after the reduction of all Agreement Payments, be reduced (but not below
zero) in the amount of such excess.

          (c) If the Accounting Firm determines that aggregate Agreement Payments or Payments, as the
case may be, should be reduced to the Reduced Amount, the Company shall promptly give you notice to
that effect and a copy of the detailed calculation thereof, and you may then elect, in your sole
discretion, which and how much of the Payments shall be eliminated or reduced (as long as after
such election the present value of the aggregate Payments equals the Reduced Amount), and you shall
advise the Company in writing of your election within ten days of your receipt of notice. If no
such election is made by you within such ten-day period, the Company may elect which of the
Agreement Payments or Payments, as the case may be, shall be eliminated or reduced (as long as
after such election the present value of the aggregate Agreement Payments or Payments, as the case
may be, equals the Reduced Amount) and shall notify you promptly of such election. All
determinations made by the Accounting Firm under this Section 1.3 shall be binding upon the Company
and you and shall be made within 60 days after a termination of your employment. As promptly as
practicable following such determination, the Company shall pay to or distribute for your benefit
such Payments as are then due to you under this Agreement and shall promptly pay to or distribute
for your benefit in the future such Payments as become due to you under this Agreement.

          (d) While it is the intention of the Company and you to reduce the amounts payable or
distributable to you hereunder only if the aggregate Net After Tax Receipts to you would thereby be
increased, as a result of the uncertainty in the application of Section 4999 of
the

 

 

Code at the time of the initial determination by the Accounting Firm hereunder, it is
possible that amounts will have been paid or distributed by the Company to or for your benefit
pursuant to this Agreement which should not have been so paid or distributed (“Overpayment”) or
that additional amounts which will have not been paid or distributed by the Company to or for your
benefit pursuant to this Agreement could have been so paid or distributed (“Underpayment”), in each
case, consistent with the calculation of the Reduced Amount hereunder. The Company shall have no
obligation to make an Overpayment to you or for your benefit. In the event that the Accounting
Firm, based either upon the assertion of a deficiency by the Internal Revenue Service against the
Company or you which the Accounting Firm believes has a high probability of success or controlling
precedent or other substantial authority, determines that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for your benefit shall be repaid by you
promptly to the Company; provided, however, that no such Overpayment shall be repaid by you to the
Company if and to the extent such Overpayment and repayment would not either reduce the amount on
which you are subject to tax under Section 1 and Section 4999 of the Code or generate a refund of
such taxes. In the event that the Accounting Firm, based upon controlling precedent or other
substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Company to or for your benefit together with interest at the applicable
federal rate provided for under Section 7872(f)(2) of the Code.

          (e) The Company will bear the fees and expenses of the Accounting Firm in making the
determinations required by this Section 1.3.

2. Accelerated Vesting of Stock Options and Restricted Stock. If a Change in Control shall
occur after the date of this Agreement and you are then still an employee of the Company:

     2.1 Partial Acceleration. Upon the Change in Control, the vesting of your right to
exercise each Emulex Option (as defined below) and the vesting of any shares of Restricted Stock
held by you as of the Change in Control based on the length of your continued employment following
the grant of such Emulex Option or Restricted Stock will be accelerated by one year so that your
right to exercise such Emulex Option or to vest in shares of Restricted Stock after the Change in
Control will be determined as if such Emulex Option or Restricted Stock had been granted to you one
year before the actual date of grant of such equity award; provided, however, that the term and
expiration date of, and any other restrictions on your right to exercise, such Emulex Option or
Restricted Stock shall not be affected by the Change in Control; provided further, however, that,
if the agreement evidencing such Emulex Option or Restricted Stock shall provide for acceleration
of vesting of your right to exercise such Emulex Option or vest in such Restricted Stock upon a
Change in Control which is more favorable to you than the foregoing provisions of this Section 2.1,
the acceleration provisions of your Emulex Option or Restricted Stock agreement shall apply and
this Section 2.1 shall be disregarded.

     2.2 Full Acceleration. If, within two years after the Change in Control and prior to
your Normal Retirement Date, your employment with the Company is terminated by the Company without
Cause or by you because of a Demotion, the vesting of your right to exercise each Emulex Option and
vest in the Restricted Stock held by you as of the Termination Date will be fully accelerated as of
the Termination Date so that you will have the right to exercise such Emulex Option and vest in the
Restricted Stock in full at any time during its remaining term.

 

 

3. No Mitigation. You shall not be obligated to seek employment or otherwise mitigate the
Severance Payment to you under this Agreement, nor shall the Severance Payment be reduced by any
compensation earned by you as a result of your employment by another employer after the Termination
Date.

4. Employment Rights. Nothing in this Agreement, expressed or implied, shall obligate
Emulex, the Company or you to continue your employment with the Company or limit the right of you
or the Company to terminate your employment at any time before or after a Change in Control.
Notwithstanding the foregoing, if your employment is terminated by the Company without Cause or by
you because of a Demotion after commencement by Emulex or the Company of substantive discussions
with any third party which result in a Change in Control in which such third party has a
significant involvement within one year after commencement of such discussions and prior to your
Normal Retirement Date, your right to receive payments and benefits under this Agreement will be
determined as if your employment had terminated immediately following the Change in Control.
Nothing in this Agreement, expressed or implied, shall obligate Emulex or the Company to make a
loan to you or to arrange for the extension of credit to you.

5. Definitions. For purposes of this Agreement, the terms set forth below are defined as
follows:

     5.1 “Annual Base Pay” means an amount equal to the greatest of (i) your annual fixed
or base compensation as in effect immediately prior to a Change in Control, (ii) your annual fixed
or base compensation as in effect immediately prior to commencement by Emulex or the Company of
substantive discussions with any third party that results in a Change in Control in which such
third party has a significant involvement within one year after commencement of such discussions,
and (iii) your annual fixed or base compensation as in effect immediately prior to the Termination
Date.

     5.2 “Annual Incentive Pay” means an amount equal to the highest annual average of the
aggregate bonuses or incentive payments of cash compensation in addition to fixed or base
compensation paid to you for your services in any two of the last three full fiscal years of the
Company immediately preceding the fiscal year of the Company in which the Change in Control occurs
(or such lesser number of full fiscal years during which you were employed by the Company if less
than three) or, if higher, the highest annual average of the aggregate annual bonuses or incentive
payments of cash compensation paid to you for services in any two of the last three full fiscal
years of the Company immediately preceding the fiscal year of the Company in which the Termination
Date occurs (or such lesser number of full fiscal years during which you were employed by the
Company if less than three).

     5.3 “Cause” for termination of your employment by the Company will exist if (i) you
become permanently disabled and are unable to perform your duties as an employee of the Company or
(ii) you commit any of the following acts and any of such acts shall be determined by the board of
directors of the Company to have been materially harmful to the Company at a meeting of the board
of directors called and held for such purpose (after reasonable notice to you and an opportunity
for you and your representative to make a presentation to the board of directors): an act of
fraud, embezzlement or theft in connection with your duties or in the course of

 

 

your employment
with the Company; intentional wrongful damage to property of the Company;
intentional wrongful disclosure of trade secrets or confidential information of the Company;
or intentional wrongful engagement in any Competitive Activity (as defined below) while you are
employed by the Company.

     5.4 “Change in Control” shall be deemed to have occurred only if (i) Emulex is merged
or consolidated or reorganized into or with another corporation and less than 51% of the combined
voting power of the then-outstanding securities of the surviving corporation immediately thereafter
is held in the aggregate by the holders of Voting Stock (as defined below) of Emulex immediately
prior to such transaction; (ii) Emulex sells or otherwise transfers all or substantially all of its
assets to any other corporation if less than 51% of the combined voting power of the
then-outstanding voting securities of such corporation immediately after such sale or transfer is
held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale
or transfer; (iii) there is consummated a transaction which results in Emulex beneficially owning,
directly or indirectly, less than a majority of the outstanding shares of Voting Stock of the
Company, unless common stock of the Company has been listed, approved or otherwise qualified for
quotation or trading on the NASDAQ National Market System, the American Stock Exchange or the New
York Stock Exchange and no person (as the term “person” is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act, as defined below) other than Emulex beneficially owns (as “beneficial
ownership” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act), as of consummation of such transaction, more than 33-1/3% of the Voting Stock of the
Company; (iv) the Company sells or otherwise transfers all or substantially all of its assets to
another corporation if less than 51% of the Voting Stock of the transferee corporation immediately
after such sale or transfer is held in the aggregate by Emulex, the Company or the holders of
Voting Stock of Emulex immediately prior to such sale or transfer; (v) there is a report filed on
Schedule 13D or Schedule 14D-1 (or any successor schedule or report) promulgated under the
Securities Exchange Act of 1934 (the “Exchange Act”) disclosing that any person has become the
beneficial owner of securities representing 33-1/3% or more of the combined voting power of the
then-outstanding securities entitled to vote generally in the election of directors of Emulex (the
“Voting Stock”); (vi) Emulex shall file a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in response to Item 1 of Form 8-K
thereunder or Item 6(e) of Schedule 14A thereunder (or any successor schedule or report) that a
change in control of Emulex has or may have occurred or will or may occur in the future pursuant to
any then-existing contract or transaction; or (vii) during any period of two consecutive years,
individuals who at the beginning of any such period constitute the directors of Emulex cease for
any reason to constitute at least a majority thereof unless the election or the nomination for
election by Emulex’s shareholders of each director of Emulex first elected during such period (y)
was approved by a vote of at least a majority of the directors of Emulex then still in office who
were directors of Emulex at the beginning of any such period and (z) such election or nomination
was not made in connection with an actual or threatened election contest relating to the election
of directors of Emulex, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act. Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have
occurred for purposes of this Agreement solely because Emulex, an entity in which Emulex directly
or indirectly beneficially owns more than 50% of the voting securities, or any Emulex-sponsored
employee stock ownership plan or any other employee benefit plan of Emulex or any entity holding
shares of Voting Stock for or pursuant to the terms of any such plan

 

 

either files or becomes
obligated to file a report or proxy statement under or in response to Schedule 13D, or Schedule
14D-1, Item 1 of Form 8-K or Item 6(e) of Schedule 14A (or any successor report or schedule) under the Exchange Act, disclosing beneficial ownership by it of
shares of Voting Stock of Emulex, whether in excess of 33-1/3% or otherwise, or because Emulex
reports that a change in control of Emulex has or may have occurred or will or may occur in the
future by reason of such beneficial ownership.

     5.5 “Competitive Activity” means your participation, without the consent of the board
of directors of the Company, in the management of any business enterprise if such enterprise
engages in substantial and direct competition with the Company and such enterprise’s sales of any
product or service competitive with any product or service of the Company amounted to 10% of such
enterprise’s net sales for its most recently completed fiscal year and if the Company’s
consolidated net sales of such products or services amounted to 10% of the Company’s consolidated
net sales for its most recently completed fiscal year. “Competitive Activity” shall not include
(i) the mere ownership of securities in any enterprise and exercise of rights appurtenant thereto
or (ii) participation in management of any enterprise or business operation thereof other than in
connection with competitive operation of such enterprise.

     5.6 “Deferred Commencement Date” means the date of the first payment to which the
installment payment election applies which must be deferred for not less than five years after the
Termination Date on which such Severance Payment would otherwise have been made.

     5.7 “Demotion” will be deemed to have occurred if any of the following changes with
respect to your employment with the Company shall occur during the two-year period immediately
following a Change in Control and prior to your Normal Retirement Date, and if you provide written
notice to the Company within 30 days of the first occurrence of such change and such change is not
remedied within 15 days after written notice thereof from you to the Company: (i) a significant
adverse change in the nature or scope of the powers, functions, titles, responsibilities or duties
in respect of the Company or Emulex which you had immediately prior to the Change in Control; (ii)
a reduction of your annual fixed or base compensation below the sum of your annual fixed or base
compensation as in effect immediately prior to the Change in Control; (iii) a reduction of your
aggregate bonus or incentive payment opportunities below the amount equal to the highest annual
average of the aggregate bonuses or incentive payments of cash compensation in addition to fixed or
base compensation paid to you for your services in any two of the last three full fiscal years of
the Company immediately preceding the fiscal year of the Company in which the Change in Control
occurred (or such lesser number of full fiscal years during which you were employed by the Company
if less than three), provided that nothing herein shall be construed as a commitment or a guarantee
that payment of any cash bonuses or incentive payments will actually be made and no Demotion will
occur if actual performance does not result in attainment of the goals required to receive the
specified bonus or incentive payment opportunities; (iv) a reduction of the Employee Benefits
which you were receiving immediately prior to the Change in Control below the comparable employee
benefits provided by the Company to its other executive officers from time to time; or (iv)
relocation of the principal executive offices of the Company to, or any requirement of you to have
as your principal location of work at, any place which is more than 50 miles from the location
thereof immediately prior to the Change in Control.

 

 

          The parties acknowledge that, in the event of a Change in Control, it may be mutually
advantageous for you and your employer to discuss and implement changes in your employment on a
trial basis even though such employment changes may constitute a “Demotion”
under the terms of this Agreement. Accordingly, any change with respect to your employment to
which you do not object in writing will not constitute a Demotion; provided, however, that your
acceptance on a trial basis of a change which would otherwise constitute a Demotion will not
constitute a waiver of your right to object in writing to such change within 30 days and to treat
such change as a Demotion if it is not remedied within 15 days after written notice to the Company
of your unwillingness to continue accepting such change.

     5.8 “Employee Benefits” means benefits provided to you by the Company immediately
prior to a Change in Control, or, if greater, benefits provided to you by the Company immediately
prior to commencement by the Company of substantive discussions with any third party which result
in a Change in Control in which such third party has a significant involvement within one year
after commencement of such discussions, or, if greater, benefits provided to you by the Company
immediately prior to the Termination Date, in each case under any and all medical or health, life
insurance, disability income, tax assistance, or executive automobile benefit policies, plans,
programs or arrangements in which you are a participant at the applicable time.

     5.9 “Emulex Option” means each option to purchase shares of stock of Emulex which is
granted to you by Emulex prior to a Change in Control and each option to purchase shares of stock
of Emulex’s successor (by purchase of assets, merger, consolidation, reorganization or otherwise)
which is granted to you by such successor in connection with or after a Change in Control in
exchange or substitution for an option granted to you by Emulex prior to the Change in Control.

     5.10 “Normal Retirement Date” means the date designated by Emulex or the Company for
your normal retirement under any retirement policy or plan which is applied to the Company’s
executive officers in a non-discriminatory manner or, if no such policy or plan has been
established, the date when you attain age 65.

     5.11  “Restricted Stock” means shares of stock of Emulex which is awarded to you by
Emulex prior to a Change in Control and each share of stock of Emulex’s successor (by purchase of
assets, merger, consolidation, reorganization or otherwise) which is awarded to you by such
successor in connection with or after a Change in Control in exchange or substitution for an option
granted to you by Emulex prior to the Change in Control, which shares are subject to a substantial
risk of forfeiture and restrictions on transferability during a specified vesting period.

6. Withholding of Taxes. The Company or Emulex may withhold from any amounts payable under
this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or
government regulation or ruling.

7. Notice. For all purposes of this Agreement, all communications provided for herein
shall be in writing and shall be deemed to have been duly given when delivered or five business
days after having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the Company or Emulex (to the attention of the Secretary
of the Company or Emulex) at its principal executive office and to you at your principal residence,
or to

 

 

such other address as either party may have furnished to the other in writing and in
accordance herewith, except that any notice of change of address shall be effective only upon
receipt.

8. Successors. This Agreement shall inure to the benefit of and be binding upon the
Company, Emulex, their affiliates, and their successors. In the event of a Change in Control, any
parent company, which directly or indirectly controls a majority of the outstanding Voting Stock of
Emulex or the Company, or a successor to Emulex or the Company (by way of merger, consolidation,
reorganization, sale of assets or otherwise) shall, in the case of a successor, by an agreement in
form and substance reasonably satisfactory to you, expressly assume and agree to perform this
Agreement and, in the case of a parent company, by an agreement in form and substance reasonably
satisfactory to you, guarantee and agree to cause the performance of this Agreement, in each case,
in the same manner and to the same extent as Emulex or the Company would be required to perform if
no Change in Control had taken place.

9. Severability; Entire Agreement; Amendments. This Agreement sets forth the entire
understanding among us as to the subject matter hereof. The terms of any prior plans, policies or
agreements relating to the subject matter hereof are hereby superseded and replaced by this
Agreement. There are no terms, conditions, representations, warranties or covenants other than
those contained herein. No term or provision of this Agreement may be amended, waived, released,
discharged or modified in any respect, except in writing, signed by the appropriate party(s). No
waiver of any breach or default shall constitute a waiver of any other breach or default whether of
the same or any other covenant or condition. A delay or failure to assert rights or a breach of
this Agreement shall not be deemed to be a waiver of such rights either with respect to that breach
or any subsequent breach. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement.

10. Governing Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California, without giving effect to the
principles of conflict of laws of such State.

11. Counterparts. This agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall constitute one and the same
agreement.

12. Board Approval. Each of Emulex and the Company hereby represents that the execution,
delivery, and performance of this Agreement has been duly authorized by its board of directors.

13. Dispute Resolution. Except as provided herein, any controversy or claim arising out of
or relating in any way to this Agreement or the breach thereof, or your employment and any
statutory claims including all claims of employment discrimination shall be subject to private and
confidential arbitration in the City of Costa Mesa in accordance with the laws of the State of
California and the Executive Employment Dispute Resolution Rules (“Rules”) of the American
Arbitration Association (but shall not be required to be conducted under the auspices of the
American Arbitration Association). You waive any right to a jury trial. This provision will not
apply to disputes where injunctive relief would be appropriate or in connection with claims under
the Employee Invention and Non-Disclosure Agreement.

 

 

     13.1 The arbitration shall be conducted in a procedurally fair manner by a mutually agreed
upon arbitrator selected in accordance with the Rules or if none can be mutually agreed upon, then
by one arbitrator appointed pursuant to the Rules;

     13.2 The arbitration shall be conducted confidentially in accordance with the Rules;

     13.3 The arbitration fees shall be paid by the Company;

     13.4 Each party shall have the right to conduct discovery including (3) three depositions,
requests for production of documents and such other discovery as permitted under the Rules or
ordered by the arbitrator;

     13.5 The arbitrator shall have the authority to award any damages authorized by law for the
claims presented including punitive damages and shall have the authority to award reasonable
attorneys fees to the prevailing party;

     13.6 The decision of the arbitrator shall be final and binding on all parties and shall be the
exclusive remedy of the parties; and

     13.7 The award shall be in writing in accordance with the Rules, and shall be subject to
judicial enforcement in accordance with California law.

14. Late Payment Interest. Any payment which is not made to you when due under this
Agreement shall bear interest at the rate of 10% per annum from the due date to the payment date.

	 	 	 	 	 
	 	Very truly yours,

EMULEX [name] CORPORATION,

a [California or Delaware] corporation

 	 
	 	By:  	 	 
	 	 	James M. McCluney, CEO and President 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	EMULEX CORPORATION,

a Delaware corporation

 	 
	 	By:  	 	 
	 	 	James M. McCluney, CEO and President 	 
	 	 	 	 
	 

AGREED:

__________________________

[NAME]exv10w8

 

EXHIBIT 10.8

NOTE: In this exhibit, square brackets [   ] surrounding text denotes strikeout characters

STANDARD FORM BUSINESS CENTER LEASE

ARTICLE 1

PARTIES

This Lease, dated as of this 18th day of March 2003 , is made by and
between Eureka Development Company LLC, a California Limited Liability Company  (herein
called “Landlord”) and Sierra Logic, a Delaware Corporation (herein called “Tenant”).

ARTICLE 2

PREMISES

Landlord does hereby lease to Tenant and Tenant hereby leases from Landlord that certain space
(herein called “Premises”), having dimensions of approximately 10,200 square feet of floor
area. The Premises are situated within building 9083 Foothills Boulevard (the “Building”)
within the Blue Oaks Technical Center (the “Center”). The location, address and dimensions
of the Building and the Premises are delineated on Exhibit “A” attached hereto and incorporated
herein by reference. Said Premises and the Center are located at 9083 Foothills Boulevard,
Suite 300. in the City of Roseville, County of Placer, State of California. The Common Area
is defined in Article 25.

This Lease is subject to the terms, covenants and conditions herein set forth and the Tenant
covenants as a material part of the consideration for this Lease to keep and perform each and all
of said terms, covenants and conditions by it to be kept and performed.

ARTICLE 3

USE

Tenant shall use the Premises for general office use including computer and software
development and other general office use and shall not use or permit the Premises to be used
for any other purpose without prior written consent of Landlord.

ARTICLE 4

MINIMUM RENT

4.1 Initial Minimum Rent. Tenant agrees to pay to Landlord as minimum rent (“Minimum Rent”),
without notice or demand, the monthly sum of ELEVEN THOUSAND SEVEN HUNDRED THIRTY AND
NO/100ths Dollars ($11,730.00), in advance, on or before the first day of each and
every successive calendar month during the term hereof, except that the first month’s rent shall be
paid upon the execution hereof. Rent for any period which is for less than one (1) month shall be
a prorated portion of the monthly installment herein based upon a thirty (30) day month. Said
rental shall be paid to Landlord, without deduction or offset, in lawful money of the United States
of America and at such place as Landlord may from time to time designate in writing.

4.2 [  Minimum Rent Adjustment. The Minimum Rent as set forth in Section 4.1 above
shall be increased for each year of the term of this Lease following the first year (“Subsequent
Year”) if the Consumer Price Index for Urban Wage Earners and Clerical Workers (San
Francisco/Oakland/San Jose, Area: Base 1982/1984 = 100) (“Index”), as published by the United
States Department of Labor, Bureau of Labor Statistics, for the “Comparison Month” (described
below) increases over the Index for the calendar month which is four (4) months prior to the month
in which Minimum Rent commences (“Base Month”). The Base Month Index shall be compared with the
Index for the same calendar month for each Subsequent Year (“Comparison Month”). If the Index for
any Comparison Month is higher than the Base Month Index, then the Minimum Rent for the Subsequent
Year following the Comparison Month shall be increased commencing with the first month of such
Subsequent Year by a percentage which shall be calculated by dividing the Base Month Index into
that number which represents the difference, if any, when subtracting the Base Month Index from the
index for any Comparison Month. In no event shall the Minimum Rent be less than that set forth in
Section 4.1 above. By way of illustration only, if Tenant commences paying Minimum Rent in August
of 1996, then the Base Month Index would be that for April, 1996 (assume such Index at 130) and
that Index shall be compared with the Index for April  ,1997 (assume such Index at 136), and because
the Index for April 1997 is 4.6% higher than the Index for April, 1996 based on the assumptions of
136 and 130, respectively, the Minimum Rent commencing in
August of 1997 would be 4.6% higher than the Minimum Rent for the month of August, 1996; likewise
the Index for April, 1998 would be compared with the Index for April, 1996.

 

 

Should said Bureau discontinue the publication of the above Index, or publish the same less frequently, or after the
same in some other manner, then Landlord shall adopt a substitute index or substitute procedure
which reasonably reflects and monitors consumer prices.]

ARTICLE 5

TERM

5.1 Commencement. The Lease term shall be sixty-three (63) Months, plus any partial
month in which the rental commences. The parties hereto acknowledge that certain obligations under
various articles hereof may commence prior to the Lease term, i.e., construction, hold harmless,
liability insurance, etc.; and the parties agree to be bound by these articles prior to
commencement of the Lease term. The lease term shall commence (“Commencement Date”) (check
applicable box):

	þ.	 	On June 1, 2003 , if the Premises are being leased in its “as is” condition or
subject to such incidental work as is to be performed by Landlord prior to said date (this
work, if any, to be set forth in the attached Exhibit “B” attached hereto and incorporated
herein by reference and, in this latter event, the rental shall commence on said date only
if Landlord shall have substantially completed said work).

	o.	 	Upon substantial completion of Landlord’s Work as set forth in Exhibit “B” attached hereto
and incorporated herein by reference, or when the Tenant opens for business, whichever is
sooner. Subject to delay by causes beyond the reasonable control of Landlord, or
attributable to Tenant’s action or inaction, Landlord shall use reasonable speed and
diligence in the construction of the Premises after the commencement of such construction,
and shall use best efforts to perform the work to be performed by Landlord, as specified in
Exhibit “B”, but failure so to complete the work in the time specified in Exhibit “B” shall
in no way affect the validity of this lease or the obligations of Tenant under this Lease,
nor shall Tenant have any claim against Landlord on account thereof. The Premises shall be
treated as having been completed in accordance with the requirements of Exhibit “B”, on the
first day of which Landlord gives Tenant notice that Landlord has substantially completed
the work to be performed by Landlord according to Exhibit “B”, and such other work in the
Center as well, upon reasonable completion thereof, enable Tenant reasonably to use the
Premises for the use specified in Article 3 upon completion of Tenant’s Work, for which
provision is made in Exhibit “C” attached hereto and incorporated by reference, and
concurrent completion of common facilities in the Center reasonably needed for access to and
egress from the Premises. “Substantial completion”, as used in this Article 5, shall mean
completed to such an extent that Tenant may reasonably commence the work to be performed by
Tenant under Exhibit “C” without undue interference with the balance of the work to be
performed by Landlord in the Premises, in accordance with Exhibit “B” or undue interference
by Landlord with the work to be performed by Tenant in the Premises in accordance with
Exhibit “C”.

5.2 Tenant’s Work. Tenant’s “Construction and Fixture Period” shall commence upon substantial
completion by Landlord of the work to be performed by Landlord in accordance with Section
36.10. Tenant shall, during Tenant’s Construction and Fixture Period, perform, at Tenant’s own
cost and expense, all of Tenant’s Work, and shall equip the Premises with all trade fixtures and
personal property suitable or appropriate to the regular and normal operation of the type of
business in which Tenant is engaged, and Tenant shall open for business as soon as possible after
substantial completion by Landlord of Landlord’s work, as specified in Section 36.10. In
any event, Tenant agrees to open for business not later than the end of Tenant’s Construction and
Fixture Period. Rent shall commence at the start of the Construction and Fixture Period.

5.3 Performance of Landlord’s Work. Except to the extent to which Tenant shall have given Landlord
notice, not later than the end of the second full calendar month next beginning after the
Commencement Date, of those matters which Landlord has not performed its obligations under
Section 36.10, Tenant shall have no claim that Landlord has failed to perform any of
Landlord’s obligations under Section 36.10.

ARTICLE 6

SECURITY DEPOSIT

Concurrently with Tenant’s execution of this Lease, Tenant has deposited with Landlord the sum
of  ELEVEN THOUSAND SEVEN HUNDRED THIRTY AND  no/100ths Dollars
($11,730.00) in addition to the first month’s rent. Said sum shall be held by Landlord as
security for the faithful performance by Tenant of all the terms, covenants, and conditions of this
Lease to be kept and performed by Tenant during the term hereof. If Tenant defaults with respect
to any provision of this Lease, including, but not limited to the provisions relating to the
payment of rent, Landlord may (but shall not be required to) use, apply or retain all or any part
of this security deposit for the payment of any rent or any other sum in default, or for the
payment of any amount which Landlord may spend or become obligated to spend by reason of Tenant’s
default, or to compensate Landlord for any other loss or damage which Landlord may suffer by reason
of Tenant’s default. If any portion of said deposit is so used or applied, Tenant shall, within
five (5) days after written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the security deposit to its original amount and Tenant’s failure to do so shall be a default under this Lease. Landlord shall not be required to keep this
security deposit separate from its general funds, and Tenant shall not be entitled to interest on
such deposit. If Tenant shall fully and faithfully perform every provisions of this Lease to be
performed by it, the security deposit or any balance thereof shall be returned to Tenant (or, at
Landlord option, to the last assignee of Tenant’s interest hereunder) within ten (10) days
following the expiration of the Lease term. In the event of termination of Landlord’s interest in
this Lease, said deposit, or any part thereof

 

 

not previously applied, may be turned over by
Landlord to Landlord’s grantee and, if so turned over, Tenant agrees to look solely to such grantee
for proper application of the deposit in accordance with the terms of this Article 6, and the
return thereof in accordance herewith. The holder of a mortgage on property which includes the
Premises shall never be responsible to Tenant for the return or application of any such deposit,
whether or not such holder succeeds to the position of Landlord hereunder, unless such deposit
shall have been received in hand by such holder. Tenant shall also provide a letter of credit
equal to one (1) year’s equivalent of rent ($140,760.00) which shall be released within ten (10)
days of Tenant’s next round of funding after Landlord has had a chance to review all documentation
with regards to burn rate and financial information. This shall occur only if Tenant is not in
default of their Lease and shall be at Landlord’s sole discretion, which shall not be unreasonably
withheld.

ARTICLE 7

ADDITIONAL CHARGES

7.1 Percentage Rent

     [ (a) In addition to the Minimum Rent to be paid by Tenant pursuant to Article 4,
Tenant shall pay to Landlord at the time and in the manner herein specified additional rent in an
amount equal to n/a  percent ( %) of the amount of Tenant’s gross sales made
in, upon or from the Premises during each calendar year of the Lease term, less the aggregate
amount of the Minimum Rent previously paid by Tenant for said calendar year.

     (b) Within thirty (30) days after the end of each calendar month following commencement of
rents, Tenant shall deliver to Landlord a statement showing the gross sales for such calendar
month, and, if same is due, a payment equal to said hereinabove stated percentage of the total
monthly gross sales made in, upon, or from the Premises during each calendar month, less the
Minimum Rent for such prior calendar month, if previously paid. Said payment shall be made with
the succeeding month’s regular rental payment. Within sixty (60) days after the end of each
calendar year of the term hereof, Tenant shall furnish to Landlord the annual statement described
in Section 7.1 (d) below, showing the total gross sales by months made in, upon, or from the
Premises during the preceding calendar year, at which time an adjustment shall be made between
Landlord and Tenant to the end that the total percentage rent paid for each such calendar year
shall be a sum equal to said hereinabove stated percentages of the total gross sales made in, upon,
or from the Premises during each calendar year of the term hereof, less the Minimum Rent pursuant
to Article 4 for each such calendar year, if previously paid, so that the percentage rent, although
payable monthly, shall be computed and adjusted on an annual basis.

     (c) The term “gross sales” as used in this lease shall include the entire gross receipts of
every kind and nature from sales and services made in, upon, or from the Premises, whether upon
credit or for cash, in every department operating in the Premises, whether operated by the Tenant
or by a subtenant or subtenants, or by a concessionaire or concessionaires, excepting therefrom any
rebates and/or refunds to customers and the amount of all sales tax receipts which has to be
accounted for by Tenant to any government, or any governmental agency. Sales upon credit shall be
deemed cash sales and shall be included in the gross sales for the period which the merchandise is
delivered to the customer, whether or not title to the merchandise passes with delivery.

     (d) Tenant shall utilize, and cause to be utilized, cash registers equipped with sealed
continuous totals to record all gross sales, and Tenant shall keep on the Premises for at least
three (3) years after the expiration of each Lease year records, conforming to usual accounting
practices, showing all of the gross sales at or from the Premises for such Lease year, including
all tax reports, sales slips, sales checks, bank deposit records and other supporting data. Within
fifteen (15) days after the end of each calendar quarter, or portion thereof, included in the Lease
term, Tenant shall furnish Landlord, at the place at which rent is payable, a statement, certified
by one of Tenant’s Executive Officers, of Tenant’s gross sales during such quarter or portion
thereof; and, on or before March 1 in each calendar year included in the Lease term and within
sixty (60) days after the end of the Lease term. Tenant shall furnish Landlord a statement,
hereinafter called the “annual statement”, certified by an independent Certified Public Accountant
approved by Landlord, of Tenant’s gross sales during the preceding Lease year. Landlord shall have
the right from time to time, using its accountants or representatives, to audit all annual
statements of gross sales and, in connection with such audits, to examine all of Tenant’s records
(including all supporting data) of gross sales disclosed in any annual statement given to Landlord
by Tenant; and Tenant shall make all such records readily available for such examination. If any
such audit discloses that the actual gross sales by Tenant exceed those reported by more than two
percent (2%), Tenant shall pay the cost of such audit and examination. In any event, Tenant shall
pay Landlord any percentage rents due under such audit. If such audit shall disclose any willful
or substantial inaccuracies, this Lease may thereupon be canceled and terminated, at the option of
Landlord . If is further agreed that Landlord shall never be treated as a partner or associate of
Tenant in the conduct of Tenant’s business, nor shall Landlord be liable for any debts incurred by
Tenant in the conduct of Tenant’s business or otherwise; but it is understood and agreed that the
relationship is and at all times shall remain that of Landlord and Tenant. ]

 

 

7.2 Adjustments

     (a) In addition to the Minimum Rent provided in Article 4 hereinabove, and commencing at the
same time as any rental commences under this Lease, Tenant shall pay as additional rent to Landlord
the following items, herein called Adjustments:

     (1) All real estate taxes, bonds or other assessments and insurance premiums on the
Premises, including land, building, and improvements thereon. Said real estate taxes shall
include all real estate taxes and assessments that are levied upon and/or assessed against
the Premises, including any taxes which may be levied on rents. Said insurance shall
include all insurance premiums required to be paid by Tenant pursuant to Article 8
hereinbelow. Said taxes and insurance premiums for purpose of this provision shall be
reasonably apportioned in accordance with the total floor area of the Premises as it relates
to the gross leasable floor area of the Center which is from time to time completed as of
the first day of each calendar quarter (provided, however, that if any other tenants in the
Center pay taxes directly to any taxing authority or carry their own insurance, as may be
provided in their lease, their square footage shall not be deemed a part of the floor area).

     (2) That percent of the total cost of the following items as Tenant’s total floor area
bears to the gross leasable floor area of Blue Oaks Technical Center which is from time to
time completed as of the first day of each calendar quarter:

     (i) All real estate taxes, including bonds and assessments, all insurance
costs, and all costs to maintain, repair, and replace the “Common Area” of the
Center, which includes all areas outside the building wall footprints plus building
roofs and exterior walls, parking lots, sidewalks, driveways and other areas used in
common by the tenants of the Center, such costs including, but not limited to,
landscaping, lighting, security and rubbish removal in connection with such areas.

     (ii) All property management costs to supervise and administer the Premises,
Buildings, Project and Common Area. Said costs shall include such fees as may be
paid to a third party or an affiliate of the Landlord in connection with same and
shall also include, as a separate charge, a market competitive property management
fee and a fee payable to Landlord to supervise and administer the common area and the
premises in an amount equal to ten percent (10%) of the total costs of Section 7.2(a)
(2) (i) above.

     (iii) Any parking charges, utilities surcharges, or any other costs levied,
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any governmental authority in
connection with the use or occupancy of the Premises or the parking facilities
serving the Premises.

     (b) Upon the Commencement Date Landlord shall submit to Tenant a statement of the anticipated
monthly Adjustments for the period between such commencement and the following January and Tenant
shall pay these Adjustments on a monthly basis concurrently with the payment of the Rent. Tenant
shall continue to make said monthly payments until notified by Landlord of a change thereof. By
March 1 of each year Landlord shall endeavor to give Tenant a statement showing the total
Adjustments for the Center for the prior calendar year and Tenant’s allocable share thereof,
prorated from the Commencement Date. In the event the total of the monthly payments which Tenant
has made for the prior calendar year be less than the Tenant’s actual share of such Adjustments
then Tenant shall pay the difference in a lump sum within ten (10) days after receipt of such
statement from Landlord and shall concurrently pay the difference in monthly payments made in the
next calendar year and the amount of monthly payments which are then calculated as monthly
Adjustments based on the prior year’s experience. Any overpayment by Tenant shall be credited
towards the monthly Adjustments next coming due. The actual Adjustments for the prior year shall
be used for purposes of calculating the anticipated monthly Adjustments for the then current year
with actual determination of such Adjustments after each calendar year as above provided; excepting
that in any year in which resurfacing of the parking area of the Center is contemplated, Landlord
shall be permitted to include the anticipated cost of same as part of the estimated monthly
Adjustments. Even though the term has expired and Tenant has vacated the Premises, when the final
determination is made of Tenant’s share of said Adjustments for the year in which this Lease
terminates, Tenant shall immediately pay any increase due over the estimated Adjustments previously
paid and, conversely, any overpayment made shall be immediately rebated by Landlord to Tenant.
Failure of Landlord to submit statements as called for herein shall not be deemed to be a waiver of
Tenant’s requirement to pay sums as herein provided.

ARTICLE 8

INSURANCE AND INDEMNITY

8.1 Insuring Party. As used in this Article 8, the term “insuring party” shall mean the party
who has the obligation to obtain the insurance required hereunder. This insuring party shall be
designated in each Section of this Article 8. Whether the insuring party is Landlord or Tenant,
Tenant shall, as additional rent for the Premises, pay the cost of all insurance so obtained.

8.2 Liability Insurance. Tenant shall, at Tenant’s expense obtain and keep in force during the
term of this Lease, as the insuring party under this Section 8.2, a policy of Combined Single
Limit, Bodily Injury and Property Damage Insurance insuring Landlord and Tenant against any
liability arising out of the ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be a combined single limit policy in an amount not less
than Two Million Dollars ($2,000,000). The policy shall
contain cross liability endorsements and shall insure performance by Tenant of the indemnity
provisions of this Article 8. The limits of said insurance shall not, however, limit the
liability of Tenant hereunder. Said insurance shall have a Landlord’s Protective Liability
endorsement attached thereto. If Tenant shall fail to procure and maintain said insurance,
Landlord may, but shall not be required to, procure and maintain the same, but at the expense of
Tenant. Not more frequently than each year, if, in the reasonable opinion of Landlord, the

 

 

amount of liability insurance required hereunder is not adequate, Tenant shall increase said insurance
coverage as required by Landlord; provided, however, that in no event shall the amount of the
liability insurance increase be more than fifty percent (50%) greater than the amount thereof
during the preceding year of the term of this Lease. However, the failure of Landlord to require
any additional insurance coverage shall not be deemed to relieve Tenant from any obligations under
this Lease.

8.3 Property Insurance

     (a) Landlord, as insuring party under this Section 8.3, shall obtain and keep in force during
the term of this Lease a policy or policies of insurance covering loss or damage to the Premises,
in the amount of ninety percent (90%) of the replacement value thereof, as the same may exist from
time to time against all perils included within the classification of fire, extended coverage,
vandalism, malicious mischief, special extended perils (all risk) and sprinkler leakage. Said
insurance shall provide for payment of loss thereunder to Landlord or to the holders of mortgages
or deeds of trust on the Premises. Landlord shall, in addition, obtain and keep in force during
the term of this Lease a policy of rental income insurance covering a period of one (1) year, with
loss payable to Landlord, which insurance shall also cover all real estate taxes and insurance
costs for said period. The cost of all insurance provided by Landlord will be payable by the Tenant
as set forth in Article 7.2

     (b) Tenant shall pay for any increase in the property insurance of other building or
buildings in the Center if said increase is caused by Tenant’s acts, omissions, use or occupancy of
the Premises. It is provided, however, that Tenant shall not be required to pay for any such
increases in insurance costs of adjacent properties unless such increased insurance costs was the
result of unusual features of Tenant’s occupancy of the Premises or of Tenant’s unusual acts or
omissions, the intent of the parties being to require Tenant to be financially responsible to the
extent of such cost increases for creating situations of unusual hazard on the Premises not
reasonably contemplated by the use to which the Premises shall be put pursuant to Article 3 above.

     (c) Landlord will not insure Tenant’s fixtures, equipment or Tenant improvements unless the
Tenant improvements have become a part of the Premises under Article 11 hereof. Tenant shall have
such responsibility in accordance with Section 8.7 hereinbelow.

     (d) Not more frequently than once each year, if, in the opinion of Landlord, the amount of
property insurance required hereunder is not adequate, Landlord shall increase said insurance
coverage as determined by Landlord. However, such increase may be more frequent than each year if
required by the insurance carrier in order to maintain insurance for the full replacement value of
the Premises.

8.4 Insurance Policies. Insurance required hereunder shall be in companies holding a “General
Policyholders Rating” of A or better as set forth in the most current issue of “Best’s Insurance
Guide”. The insuring party shall deliver to the other party copies of policies of such insurance
or certificates evidencing the existence and amounts of such insurance with loss payable clauses
satisfactory to Landlord. No such policy shall be cancelable or subject to reduction of coverage
or other modifications except after ten (10) days prior written notice to Landlord. If Tenant is
the insuring party, Tenant shall, within ten (10) days prior to the expiration of such policies,
furnish Landlord with renewals or “binders” thereof, or Landlord may order such insurance and
charge the cost thereof to Tenant, which amount shall be payable by Tenant upon demand. Tenant
shall not do or permit to be done anything which shall invalidate the insurance policies referred
to in Section 8.3. If Tenant does or permits to be done anything which shall increase the cost of
the insurance policies referred to in Section 8.3, then Tenant shall forthwith upon Landlord’s
demand reimburse Landlord for any additional premiums attributable to any act or omission or
operation of Tenant causing such increase in the cost of insurance. If Landlord is the insuring
party and if the insurance policies maintained hereunder cover other improvements in addition to
the Premises, Landlord shall deliver to Tenant a written statement setting forth the amount of any
such insurance cost increase and showing in reasonable detail the manner in which it has been
computed.

8.5 Waiver of Subrogation. Tenant and Landlord each hereby waive any and all rights of recovery
against the other, or against the officers, employees, agents and representatives of the other, for
loss of or damage to such waiving party or its property or the property of others under its control
to the extent that such loss or damage is insured against under any insurance policy in force at
the time of such loss or damages. The insuring party shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance carrier or carriers that the foregoing
mutual waiver of subrogation is contained in this Lease. Notwithstanding, the waiver of
subrogation would not be effective if its inclusion would cancel an insurance policy of any party.

8.6 Indemnity. Tenant shall indemnify and hold harmless Landlord from and against any and all
claims arising from Tenant’s use of the Premises, or from the conduct of Tenant’s business or from
any activity, work or things done, permitted or suffered by Tenant in or about the Premises or
elsewhere and shall further indemnify and hold harmless Landlord from and against any and all
claims arising from any breach or default in the performance of any obligation on Tenant’s part to
be performed under the terms of this Lease, or arising from any negligence of the Tenant, or any of
such claim or any action or proceeding brought thereon; and in case any action or proceeding be
brought against Landlord by reason of any such claim, Tenant upon notice from Landlord shall defend
the same at Tenant’s expense by counsel satisfactory to Landlord, to the extent such claim arises
from Tenant’s use. Tenant, as a material part of the consideration to Landlord, hereby assumes all
risk of damage to property or injury to persons, in, upon or about the Premises arising from any
cause and Tenant hereby waives all claims in respect thereof against Landlord, except in the event
of Landlord’s negligence or default hereunder.

 

 

8.7 Exemption of Landlord from Liability. Except in the event of Landlord’s, his agent’s, or
employee’s negligence, Tenant hereby agrees that Landlord shall not be liable for injury to
Tenant’s business or any loss of income therefrom or for damage to the improvements, trade
fixtures, contents, goods, wares, merchandise or other property of Tenant (“Tenant’s Contents”),
Tenant’s employees, invitees, customers, or any other person in or about the Premises, nor shall
Landlord be liable for injury to the person of Tenant, Tenant’s employees, agents or contractors,
whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or
rain, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether the
said damage or injury results from conditions arising upon the Premises or upon other portions of
the building of which the Premises are a part, or from other sources or places, and regardless of
whether the cause of such damage or injury or the means of repairing the same is inaccessible to
Tenant. Landlord shall not be liable for any damages arising from any act or neglect of any other
tenant, if any, of the building in which the Premises are located. Tenant shall maintain the
following insurance coverage with respect to the insurable losses contemplated by this Section 8.7
during the term of this Lease insuring Landlord, Tenant and any lender of record encumbering the
Premises, with full waiver of subrogation:

     (a) against fire, extended coverage and vandalism and malicious mischief perils, including
coverage for Tenant’s Contents, in an amount of not less than ninety percent (90%) of the full
replacement cost thereof.

     (b) Broad form boiler and machinery insurance on a blanket repair and replacement basis with
limits per accident not less than the replacement cost of all leasehold improvements and of all
boilers, pressure vessels, air conditioning equipment, miscellaneous electrical apparatus and all
other insurable objects owned or operated by Tenant or by others (other than Landlord) on behalf of
Tenant in the Premises or relating or serving the Premises;

     (c) Business interruption insurance in such amount as will reimburse Tenant for direct or
indirect loss of earnings attributable to all such perils insured against in Section 8.7(a) and
8.7(b) above; and

     (d) Workmen’s compensation insurance covering all Tenant’s employees working in the Premises.

8.8 Additional Insurance. Notwithstanding any provisions to the contrary contained in this Lease,
the insuring party shall also provide insurance against damage by such other perils as any mortgage
lending institution holding a mortgage on the Premises may from time to time require against damage
by such other perils as mortgage lending institutions generally may from time to time require in
case of similar properties and in such amounts.

8.9 Blanket Policy. If at any time during the term of this Lease the insuring party shall have in
full force and effect a blanket policy of general liability insurance and/or property insurance
with the same coverage for the Premises or for Tenant’s property as applicable all as described
above, as well as coverage of other premises and properties of the insuring party or in which the
insuring party has some interest, such blanket insurance shall satisfy the requirements hereof.

ARTICLE 9

USES PROHIBITED

Tenant shall not do nor permit anything to be done in or about the Premises, nor bring or keep
anything therein which is not within the permitted use of the Premises, which will in any way
increase the existing rate of or affect any fire or other insurance upon the Building or any of its
contents, nor cause a cancellation of any insurance policy covering said Building or the Center or
any part thereof or any of its contents. Tenant shall not do nor permit anything to be done in or
about the Premises which will in any way obstruct or interfere with the rights of other tenants or
occupants of the Building or the Center or injure or annoy them nor use or allow the Premises to be
used for any improper, immoral, unlawful or objectionable purpose; nor shall Tenant cause, maintain
or permit any nuisance in, on or about the Premises. Tenant shall not commit nor allow to be
committed any waste in or upon the Premises.

ARTICLE 10

COMPLIANCE WITH LAW

     Tenant shall not use the Premises, nor permit anything to be done in or about the Premises,
which will in any way conflict with any law, statute, ordinance or governmental rule or regulation
now in force or which may hereafter be enacted or promulgated. Tenant shall, at its sole cost and
expense, promptly comply with all laws, statutes, ordinances and governmental rules, regulations or
requirements now in force or which may hereafter be in force and with the requirements of any board
of fire underwriters or other similar bodies now or
hereafter constituted relating to or affecting the condition, use or occupancy of the Premises,
excluding structural changes not related to or affected by Tenant’s improvements or acts. The
judgment of any court of competent jurisdiction or the admission of Tenant in any action against
Tenant, whether Landlord be a party thereto or not, that Tenant has violated any law, statute,
ordinance or governmental rule, regulation or requirement, shall be conclusive of that fact as
between Landlord and Tenant.

 

 

ARTICLE 11

ALTERATIONS AND ADDITIONS

Tenant shall not make or allow to be made any alterations, additions or improvements to or of
the Premises or any part thereof excepting non-structural interior alterations not exceeding Five
Thousand Dollars ($5,000.00) in cost without first obtaining the written consent of Landlord, and
any alterations, additions or improvements to or of said Premises, including, but not limited to,
wall covering, paneling and built-in cabinet work, but excepting movable furniture and trade
fixtures, shall at once become a part of the realty and belong to the Landlord and shall be
surrendered with the Premises. In the event Landlord consents to the making of any alterations,
additions or improvements to the Premises by Tenant, the same shall be made by Tenant at Tenant’s
sole cost and expense. Notwithstanding anything to the contrary herein, no installation,
alterations, additions or improvements to or of any electrical system or outlet to or of the
Premises, or any part thereof, shall be made, or allowed to be made by Tenant without first
obtaining the written consent of Landlord. Upon the expiration or sooner termination of the term
hereof, Tenant shall, upon written demand by Landlord, give at least thirty (30) days prior to the
end of the term, at Tenant’s sole cost and expense, forthwith and with all due diligence, remove
any alterations, additions, or improvements made by Tenant designated by Landlord to be removed,
including trade fixtures, movable furniture and inventory, and Tenant shall, forthwith and with all
due diligence, at its sole cost and expense, repair any damage to the Premises caused by such
removal.

ARTICLE 12

REPAIRS

12.1 Tenant’s Repairs. By entry hereunder, Tenant shall be deemed to have accepted the
Premises as being in good, sanitary order, condition and repair. Tenant shall, at Tenant’s sole
cost and expense, keep the Premises and every part thereof in good condition and repair (except as
hereinafter provided with respect to Landlord’s obligations) including, without limitation, the
maintenance, replacement and repair of any storefront, doors, window casements, glazing, heating
and air-conditioning system (when there is an air conditioning system, Tenant shall obtain a
service contract for repairs and maintenance of said system, said maintenance contract to conform
to the requirements under the warranty, if any, on said system), pest control, plumbing, pipes,
electrical system, electrical wiring, outlets, fixtures, lighting and conduits. Tenant shall, upon
the expiration or sooner termination of the term of this Lease, surrender the Premises to the
Landlord in good condition, broom clean, ordinary wear and tear and damage from causes beyond the
reasonable control of Tenant excepted. Any damage to adjacent premises caused by Tenant’s use of
the Premises shall be repaired at the sole cost and expense of Tenant.

12.2 Landlord’s Repairs. Notwithstanding the provisions of Section 12.1 hereinabove, Landlord
shall, subject to Tenant’s reimbursement as provided in Section 7.2(a)(2)(i), repair and maintain
the structural portions of the Building, including the exterior walls and roof, unless such
maintenance and repairs are caused in part or in whole by the act, neglect, fault or omission of
any duty by the Tenant, its agents, servants, employees, invitees, or any damage caused by breaking
and entering, in which case Tenant shall pay to Landlord the actual cost of such maintenance and
repairs. Landlord shall not be liable for any failure to make such repairs or to perform any
maintenance unless such failure shall persist for an unreasonable time after written notice of the
need of such repairs or maintenance is given to Landlord by Tenant. There shall be no abatement of
rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business
arising from the making of any repairs, alterations or improvements in or to any portion of the
Building or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant waives
the right to make repairs at Landlord’s expense under any law, statutes or ordinance now or
hereafter in effect. Landlord may, at Landlord’s election, provide, through a third party vendor,
regular inspections and periodic maintenance but not repairs for HVAC. Any repairs to the HVAC
system shall be the Tenant’s responsibility pursuant to Article 12.1 above. The cost of said
inspections and maintenance provided by the Landlord shall be paid by the Tenant as an adjustment
pursuant to Article 7.2.

ARTICLE 13

LIENS

Tenant shall keep the Premises and the property in which the Premises are situated free from
any liens arising out of any work performed, materials furnished or obligations incurred by or on
behalf of Tenant. Landlord may require, at Landlord’s sole option, that Tenant shall provide to
Landlord, at Tenant’s sole cost and expense, a lien and completion bond in an amount equal to one
and one-half (11/2) times the estimated cost of any improvements, additions, alterations in the
Premises which the Tenant desires to make, to insure Landlord against any liability for mechanics’
and materialmen’s liens and to insure completion of the work.

ARTICLE 14

ASSIGNMENT AND SUBLETTING

Tenant shall not voluntarily, or by operation of law, assign, transfer, mortgage, sublet or
otherwise transfer or encumber all or any part of Tenant’s interest in this lease or in the
Premises without Landlord’s prior written consent, which shall not be unreasonably withheld. Any
attempt to assignment, transfer, mortgage, encumbrance or subletting without such consent shall be
void and shall constitute a breach of this Lease. Regardless of Landlord’s consent, no subletting
or assignment shall release Tenant from Tenant’s obligation or alter the primary liability of
Tenant to pay the rent and to perform all other obligations to be performed by Tenant hereunder.
The acceptance of rent by Landlord from any person shall not be deemed to be a waiver by Landlord
of any provision hereof. Consent to one assignment or subletting shall not be deemed a consent to
any subsequent assignment or subletting. In the event that Landlord shall consent to a sublease or

 

 

assignment under the provisions of this Article 14, Tenant shall pay Landlord’s reasonable
attorney’s fees incurred in connection with giving such consent. Prior to such approval by
Landlord of subletting or assignment, Tenant shall provide Landlord with information concerning the
proposed assignee’s or subtenant’s financial responsibility. Further, if for any proposed
assignment or sublease Tenant receives rent or other consideration either initially or over the
term of the assignment of sublease, in excess of the rent called for hereunder, or in case of the
sublease of a portion of the Premises in excess of such rent fairly allocable to such portion,
after appropriate adjustments to assure that all other payments called for hereunder taken into
account, Tenant shall pay to Landlord as additional rent hereunder all of the excess of each such
payment of rent or other consideration received by Tenant promptly after its receipt.

ARTICLE 15

UTILITIES

Tenant shall pay for all water, gas, heat, light, power and sewer charges, telephone service
and all other services and utilities supplied to the Premises, together with any taxes thereon. If
any such services are not separately metered to Tenant, Tenant shall pay a reasonable proportion to
be determined by Landlord of all charges jointly metered with other premises.

ARTICLE 16

PERSONAL PROPERTY TAXES

Tenant shall pay, or cause to be paid, before delinquency, any and all taxes levied or assessed
and which become payable during the term hereof upon all Tenant’s leasehold improvements,
equipment, furniture, fixtures, and any other personal property located in the Premises. In the
event any or all of the Tenant’s leasehold improvements, equipment, furniture, fixtures, and other
personal property shall be assessed and taxed with the real property, Tenant shall pay to Landlord
its share of such taxes within ten (10) days after delivery to Tenant by Landlord of a statement in
writing setting forth the amount of such taxes applicable to Tenant’s property.

ARTICLE 17

RULES AND REGULATIONS

Tenant shall faithfully observe and comply with the rules and regulations affecting the Center
that Landlord shall from time to time promulgate and/or modify. The rules and regulations shall be
binding upon the Tenant upon delivery of a copy of them to Tenant. Landlord shall not be
responsible to Tenant for the nonperformance of any said rules and regulations by any other tenants
or occupants of the Center.

ARTICLE 18

HOLDING OVER

If Tenant shall remain in possession of the Premises after the expiration of the term of this
Lease, Tenant will be deemed to be occupying the Premises as a tenant-at-sufferance subject to all
the covenants and obligations of this Lease and at a daily rental of twice the per diem Minimum
Rent provided hereunder, computed on the basis of a thirty (30) day month, and Tenant will vacate
the Premises and deliver the same to Landlord upon Tenant’s receipt of notice from Landlord to
vacate the Premises. If any Property not belonging to Landlord remains at the Premises after the
expiration of the term of this Lease, Tenant hereby authorizes Landlord to make such disposition of
such property as Landlord may desire without liability for compensation or damages to Tenant. In
the event that such property belongs to someone other than Tenant, Tenant agrees to indemnify and
hold Landlord harmless from all suits, actions, liabilities, losses, damages and expenses in
connection with or incident to any removal, exercise of dominion over and/or disposition of such
property by Landlord.

ARTICLE 19

ENTRY BY LANDLORD

Landlord reserves, and with 24 hour notice and during normal business hours except in the case
of an emergency, the right to enter the Premises to inspect the same, to submit said Premises to
prospective purchasers or tenants, to post notices of non-responsibility, to repair
the Premises and any portion of the Building of which the Premises are a part that Landlord may
deem necessary or desirable, without abatement of rent, and may for that purpose erect scaffolding
and other necessary structures where reasonably required by the character of the work to be
performed, always providing that the entrance to the Premises shall not be unreasonably blocked
thereby, and further providing that the business of the Tenant shall not be interfered with
unreasonably. Tenant hereby waives any claim for damages or for any injury or inconvenience to or
interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and
any other loss occasioned thereby. Landlord shall have the right to use any and all means which
Landlord may deem proper to gain access in an emergency, in order to obtain entry to the Premises
without liability to Tenant except for any failure to exercise due care for Tenant’s property and
any entry to the Premises obtained by Landlord by any means, or otherwise, shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the
Premises, or an eviction of Tenant from the Premises or any portion thereof.

 

 

ARTICLE 20

TENANT’S DEFAULT

20.1 Events of Default. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant:

     (a) Failure to pay Minimum Rent, adjustments, additional rent or any other monetary
obligation which Tenant is required to pay under this lease when due.

     (b) Abandonment or vacation of the Premises or any substantial portion thereof (failure to
occupy and operate the Premises for ten (10) consecutive days shall be deemed an abandonment and
vacation).

     (c) Failure to perform any other provision of this Lease if the failure to perform is not
cured within thirty (30) days after notice has been given to Tenant. If the default cannot
reasonably be cured within thirty (30) days, Tenant shall not be in default of this Lease if Tenant
commences to cure the default within the thirty (30) day period and diligently and in good faith
continues to cure the default.

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

20.2 Notices of Default. Notices given under this Article 20 shall specify the alleged default and
the applicable Lease provisions, and shall demand that Tenant perform the provisions of this Lease
within the applicable period of time, or quit the Premises. No such notice shall be deemed a
forfeiture or a termination of this Lease unless Landlord so elects in the notice.

ARTICLE 21

LANDLORD’S REMEDIES

Landlord shall have the following remedies if Tenant commits a default. These remedies are not
exclusive; they are cumulative in addition to any remedies now or later allowed by law.

21.1 Tenant’s Right to Possession Not Terminated. Landlord can continue this Lease in full force
and effect, and the Lease will continue in effect as long as Landlord does not terminate Tenant’s
right to possession, and Landlord shall have the right to collect rent when due. During the period
Tenant is in default, Landlord can enter the Premises and relet them, or any part of them, to third
parties for Tenant’s account. Tenant shall be liable immediately to Landlord for all costs
Landlord incurs in reletting the Premises, including, without limitation, brokers’ commissions,
expenses of remodeling the Premises required by the reletting, and like costs. Reletting can be
for a period shorter or longer than the remaining term of this Lease. Tenant shall pay to Landlord
the rent due under this Lease on the dates the rent is due, less the rent Landlord receives from
any reletting. No act by Landlord allowed by this Section 21.1 shall terminate this Lease unless
Landlord notifies Tenant that Landlord elects to terminate this Lease. After Tenant’s default and
for as long as Landlord does not terminate Tenant’s right to possession of the Premises, if Tenant
obtains Landlord’s consent Tenant shall have the right to assign or sublet its interest in this
Lease, but Tenant shall not be released from liability.

21.2 Termination of Tenant’s Right to Possession. Landlord can terminate Tenant’s right to
possession of the Premises at any time. No act by the Landlord other than giving notice to Tenant
shall terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the appointment
of a receiver on Landlord’s initiative to protect Landlord’s interest under this Lease shall not
constitute a termination of Tenant’s right to possession. On termination, Landlord has the right
to recover from Tenant:

     (a) The worth, at the time of the award, of the unpaid rent that had been earned at the time
of termination of this Lease;

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

     (c) The worth, at the time of the award, of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of the loss of rent that Tenant
proves could have been reasonably avoided; and

     (d) Any other amount, and court costs, necessary to compensate Landlord for all detriment
approximately caused by Tenant’s default.

 

 

“The worth, at the time of the award”, as used in Section 21.2(a) and 21.2(b), is to be computed by
allowing interest at the rate of ten percent (10%) per annum. “The worth, at the time of the
award”, as referred to in Section 21.2(c), is to be computed by discounting the amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one
percent (1%).

21.3 Appointment of Receiver. If Tenant is in default of this Lease, Landlord shall have the right
to have a receiver appointed to collect rent and conduct Tenant’s business. Neither the filing of
a petition for the appointment of a receiver nor the appointment itself shall constitute an
election by Landlord to terminate this Lease.

21.4 Landlord’s Right to Cure Tenant’s Default. Landlord, at any time after Tenant commits a
default, can cure the default at Tenant’s cost. If Landlord at any time, by reason of Tenant’s
default, pays any sum or does any act that requires the payment of any sum, the sum paid by
Landlord shall be due immediately from Tenant to Landlord at the time the sum is paid, and if paid
at a later date shall bear interest at the rate of ten percent (10%) per annum from the date the
sum is paid by Landlord until Landlord is reimbursed by Tenant. The sum, together with interest on
it, shall be additional rent.

ARTICLE 22

DEFAULT BY LANDLORD

Landlord shall not be in default unless Landlord fails to perform obligations required of
Landlord within a reasonable time, but in no event later than thirty (30) days after written notice
by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Tenant in writing
specifying wherein Landlord has failed to perform such obligation; provided, however, that if the
nature of Landlord’s obligation is such that more than thirty (30) days are required for
performance then Landlord shall not be in default if Landlord commences performance within such
thirty (30) day period and thereafter diligently prosecutes the same to completion. In no event
shall Tenant have the right to terminate this Lease as a result of Landlord’s default and Tenant’s
remedies shall be limited to damages and/or an injunction.

ARTICLE 23

RECONSTRUCTION

In the event the Premises are damaged by fire or other perils covered by extended coverage
insurance, Landlord agrees to forthwith repair same, and this Lease shall remain in full force and
effect, except that Tenant shall be entitled to a proportionate reduction of the Minimum Rent from
the date of damage and while such repairs are being made, such proportionate reduction to be based
upon the extent to which the damage and making of such repairs shall reasonably interfere with the
business carried on by the Tenant in the Premises. If the damage is due to the fault or neglect of
Tenant or its employees, there shall be no abatement of rent. In the event the Premises are
damaged as a result of any cause other than the perils covered by fire and extended coverage
insurance, then Landlord shall have the option: (1) to repair or restore such damage, this Lease
continuing in full force and effect, but the Minimum Rent to be proportionately reduced as provided
hereinabove in this Article 23; or (2) give notice to Tenant any time within sixty (60) days after
such damage, terminating this Lease as of the date specified in such notice, which date shall be no
more than thirty (30) days after the giving of such notice. In the event of giving such notice,
this Lease shall expire and all interest of the Tenant in the Premises shall terminate on the date
so specified in such notice and the Minimum Rent, reduced by a proportionate reduction, based upon
the extent, if any, to which such damage interfered with the business carried on by the Tenant in
the Premises, shall be paid up to the date of such termination. Notwithstanding anything to the
contrary contained in this Article 23, Landlord shall not have any obligation whatsoever to repair,
reconstruct or restore the Premises when the damage resulting from any casualty covered in this
Article 23 occurs during the last twenty-four (24) months of the term of this Lease or any
extension thereof. Landlord shall not be required to repair any injury or damage by fire or other
cause, or to make any repairs or replacements of any leasehold improvements, fixtures, or other
personal property of Tenant.

ARTICLE 24

EMINENT DOMAIN

If more than twenty five percent (25%) of the Premises shall be taken or appropriated by any
public or quasi-public authority under the power of eminent domain, either party hereto shall have
the right, at its option, within sixty (60) days after said taking, to terminate this Lease upon
thirty (30) days written notice. If less than twenty five percent (25%) of the Premises are taken,
or if more than twenty five percent (25%) is taken and neither party elects to terminate as herein
provided, the Minimum Rent thereafter to be paid shall be equitably reduced. If any part of the
Center other than the Premises may be so taken or appropriated, Landlord shall within sixty (60)
days of said taking have the right at its option to terminate this Lease upon written notice to
Tenant. In the event of any taking or appropriation whatsoever, Landlord shall be entitled to any
and all awards and/or settlements which may be given and Tenant shall have no claim against
Landlord for the value of any unexpired term of this Lease.

 

 

ARTICLE 25

PARKING AND OTHER COMMON AREA

All areas within the exterior boundaries of the Center which are not now or hereafter held for
lease or occupation by Landlord or used by other persons entitled to occupy floor space in the
Center shall be deemed Common Areas. Landlord may make changes at any time and from time to time
in the size, shape, location, and extent of the Common Area, and no such change shall entitle
Tenant to any abatement of Rent. Landlord covenants that except as otherwise provided hereinbelow,
an area approximately equal to the Common Area which includes automobile parking, shall be at all
times available for the non-exclusive use of Tenant during the full term of this Lease or any
extension of the term hereof, provided that the condemnation or other taking by any public
authority, or sale in lieu of condemnation, of any or all of such Common Area shall not constitute
a violation of this covenant; provided further, however, that Landlord reserves the right to change
the entrances, exits, traffic lanes and the boundaries and locations of such Common Area including
automobile parking and to construct buildings and other improvements thereon if in the sole good
faith judgment of Landlord such construction shall be for the overall benefit of the Center and
will not substantially interfere with ingress and egress from the Premises or the flow of vehicular
traffic in the Center.

25.1 Maintenance. Landlord shall keep said Common Area, including automobile parking, in a neat,
clean and orderly condition and shall repair any damage to the facilities thereof, but all expenses
in connection with said Common Area including automobile parking shall be charged and prorated in
the manner as set forth in Section 7.2(a).

25.2 Common Rights. Tenant, for the use and benefit of Tenant, its agents, employees, customers,
licensees and subtenants, shall have the non-exclusive right in common with Landlord, and other
present and future owners, tenants and their agents, employees, customers, licensees and
sub-tenants, to use said Common Area during the entire term of this Lease, or any extension
thereof, for ingress and egress, and automobile parking.

25.3 Rules and Regulations. Tenant, in the use of said Common Area, agrees to comply with such
reasonable rules, regulations and charges for parking as Landlord may adopt from time to time for
orderly and proper operation of said Common Area. Such rules may include but shall not be limited
to the following: (1) the restricting of employee parking to a limited, designated area or areas;
and (2) the regulation of the removal, storage and disposal of Tenant’s refuse and other rubbish at
the sole cost and expense of Tenant.

25.4 Special Assessments. Tenant will be subject to any Special Assessment which may be levied in
the sole discretion of Landlord from time to time with respect to particular or extraordinary costs
or expenses which have been incurred by Landlord and/or the Center in respect of materials or
services furnished at the request, with the consent of or otherwise required by any special use of
the Common Area by Tenant as opposed to uses otherwise generally enjoyed by all tenants of the
Center. Such Special Assessment shall be considered as additional rental under this Lease which
shall be due and payable to Landlord upon demand.

ARTICLE 26

SIGNS

Tenant may affix and maintain upon the glass panes and supports of the show windows and within
twelve (12) inches of any window and upon the exterior walls of the Premises only such signs,
advertising, placards, names, insignia, trademarks and descriptive material as shall have first
received the written approval of Landlord as to type, size, color, location, copy nature and
display qualities. Landlord shall not withhold such written approval of such signage material so
long as it conforms with the Signage Criteria attached hereto as Exhibit D and incorporated herein
by this reference. Anything to the contrary in this Lease notwithstanding, Tenant shall not affix
any sign to the roof. Tenant shall, however, erect one sign on the front of the Premises not later
than the date Tenant opens for business, in accordance with a design to be prepared by Tenant and
approved in writing by Landlord.

ARTICLE 27

DISPLAYS

Tenant may not display or sell merchandise or allow grocery carts or other similar devices
within the control of Tenant to be stored or to remain outside the defined exterior walls and
permanent doorways of the Premises. Tenant further agrees not to install any exterior lighting,
amplifiers or similar devices or use in or about the Premises any advertising medium which may be
heard or seen outside the Premises, such as flashing lights, searchlights, loudspeakers,
phonographs or radio broadcasts.

ARTICLE 28

AUCTIONS

Tenant shall not conduct or permit to be conducted any sale by auction in, upon or from the
Premises whether said auction by voluntary, involuntary, pursuant to any assignment for the payment
of creditors or pursuant to any bankruptcy or other insolvency proceeding.

 

 

ARTICLE 29

HOURS OF BUSINESS

[Subject to the provisions of Article 23 hereof, Tenant shall continuously during the
entire term hereof conduct and carry on Tenant’s business in the Premises and shall keep the
Premises open for business and cause Tenant’s business to be conducted therein during the usual
business hours of each and every business day as is customary for businesses of like character in
the county in which the Premises are located to be open for business; provided, however, that this
provision shall not apply if the Premises should be closed and the business of Tenant temporarily
discontinued therein on account of strikes, lockouts or similar causes beyond the reasonable
control of Tenant. Tenant shall keep the Premises adequately stocked with merchandise, and with
sufficient sales personnel to care for the patronage, and to conduct said business in accordance
with sound business practice. In the event of breach by the Tenant of any of the conditions
contained in this Article 29, the Landlord shall have, in addition to any and all remedies herein
provided, the right at its option to collect not only the Minimum Rent herein provided, but
additional rent at the rate of one-thirtieth (1/30) of the Minimum Rent herein provided for each
and every day that the Tenant shall fail to conduct its business as herein provided; said
additional rent shall be deemed to be in lieu of any percentage rent that might have been earned
during such period of the Tenant’s failure to conduct its business as herein provided. ]

ARTICLE 30

RESTRICTION OF TENANT

[ 30.1 Area. In recognition of the fact that this Lease provides for a percentage rent
based on sales made by Tenant in or from the Premises, Tenant agrees (insofar as, and to the extent
that, it is lawful so to agree) that for the period commencing with the execution of this Lease and
ending at the end of the term hereof, neither Tenant nor any of Tenant’s affiliated, parent or
subsidiary businesses, firms or companies will operate, directly or indirectly, another store,
department or concession in another store under the name of the Tenant, or the name under which
Tenant does business in the Premises, or which is identifiable with the operation conducted in the
Premises, within a reasonable area of the Premises, without the prior consent of Landlord, Tenant
agreeing with Landlord that the area within a circle having as its center the Premises and having a
radius of (five (5) miles as a reasonable area for this purpose.

 30.2 Remedy. In addition to any other remedy otherwise available to Landlord for breach of
this covenant, it is specifically agreed that, at Landlord’s election, any and all sales made in
and from any such other store, department or concession shall be included in the computation of
percentage rent due hereunder, as if such gross sales had been made from the Premises. ]

ARTICLE
31

LANDLORD’S LIABILITY

Tenant specifically agrees to look solely to Landlord’s then equity interest in that part of
the Center at the time owned, or in which Landlord holds an interest as ground lessee, for recovery
of any judgment from Landlord, it being specifically agreed that neither Landlord, nor any
successor holder of Landlord’s interest hereunder, nor any beneficiary of any trusts of which any
person from time to time holding Landlord’s interest is trustee, shall ever be personally liable
for any such judgment, or for the payment of any monetary obligation to Tenant. The provision
contained in the foregoing sentence is not intended to, and shall not, limit any right that Tenant
might otherwise have to obtain injunctive relief against Landlord or Landlord’s successors in
interest, or any other action not involving the personal liability of Landlord, or any successor
holder of Landlord’s interest hereunder, or any beneficiary of any trust of which any person from
time to time holding Landlord’s interest is trustee, to respond in monetary damages from Landlord’s
assets other than Landlord’s equity interest aforesaid in the Center. In no event shall Landlord
ever be liable to Tenant for any indirect or consequential damages by reason of Landlord’s breach
or default of the terms of this Lease.

ARTICLE 32

ASSIGNMENT OF RENTS

32.1 Assumption. With reference to any assignment by Landlord of Landlord’s interest in this
Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made
to the holder of a mortgage or ground lease on property which includes the Premises, Tenant agrees
as follows:

     (a) That the execution thereof by Landlord, and the acceptance thereof by the holder of such
mortgage, or the ground lessor, shall never be treated as an assumption by such holder or ground
lessor of any of the obligation of Landlord hereunder, unless such holder, or ground lessor, shall
by notice sent to Tenant, specifically otherwise elect, and

     (b) That, except as aforesaid, such holder or ground lessor shall be treated as having
assumed Landlord’s obligations hereunder only upon foreclosure of such holder’s mortgage and the
taking of possession of the Premises, or, in the case of a ground lessor, the assumption of
Landlord’s position hereunder by such ground lessor.

32.2 Leaseback. Where a party acquires Landlord’s interest in property (whether land only, or land
and buildings) which includes the Premises, and simultaneously leases the same back, such
acquisition shall not be treated as an assumption of Landlord’s position hereunder, and this Lease
shall thereafter be subject and subordinate at all times to such lease.

 

 

ARTICLE 33

FINANCIAL STATEMENTS

At any time during the term of this Lease, Tenant shall, upon ten (10) days prior written
notice from Landlord, provide any institutional lender which is negotiating with Landlord for
interim, construction or permanent financing during the term of this Lease, with a confidential
current financial statement and financial statements for each of the two (2) years prior to the
then current fiscal statement year. Such statements shall be sent directly to such institutional
lender and not through Landlord. Such current statement shall be prepared in accordance with
generally accepted accounting principles and, if such is the normal practice of Tenant, shall be
audited by an independent certified public accountant.

ARTICLE 34

 LANDLORD’S RIGHT TO RELOCATE PREMISES 

[Landlord shall have the right to relocate the Premises to another part of the Center in
accordance with the following:

34.1 Decor. The new Premises shall be substantially the same in size, dimensions, configuration,
decor, and nature as the Premises described in this Lease, and shall be placed in that condition by
Landlord at its cost.

34.2 Relocation. The physical relocation of the Premises shall be accomplished by Landlord at its
cost.

34.3 Notice. Landlord shall give Tenant at least thirty (30) days notice of Landlord’s intention
to relocate the Premises.

34.4 Time. The physical relocation of the Premises shall take place on a weekend and shall be
completely accomplished before the Monday following the weekend in which the relocation takes
place. If the physical relocation has not been completed in that time, rent shall abate in full
from the time the physical relocation commences to the time it is completed.

34.5 Costs. All incidental costs incurred by Tenant as a result of the relocation, including,
without limitation, costs incurred in changing address on stationary, business cards, directories,
advertising, and other such items, shall be paid by Landlord, in a sum not to exceed Five Hundred
Dollars ($500.00).

34.6 Frequency. Landlord shall not have the right to relocate the Premises more than two (2) times
during the term of this Lease.

34.7 Size. If the relocated Premises are smaller than the Premises as they existed before the
relocation, rent shall be reduced to a sum computed by multiplying the rent specified in Section
4.1 by a fraction, the numerator of which shall be the total number of square feet in the relocated
Premises and the denominator of which shall be the total number of square feet in the Premises
before the relocation.

34.8 Amendment. The parties shall immediately execute an amendment to this Lease stating the
relocation of the Premises and the reduction of rent, if any.]

ARTICLE 35

MISCELLANEOUS

35.1 Plats and Riders. Clauses, plats, riders and addendums, if any, affixed to this Lease are
a part hereof.

35.2 Waiver. The waiver by Landlord of any term, covenant or condition herein contained shall not
be deemed to be a waiver of such terms, 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 default by Tenant of any
term, covenant or condition of this Lease, other than the failure of the Tenant to pay the
particular rental so accepted, regardless of Landlord’s knowledge of such preceding defaults at the
time of such rent.

35.3 Joint Obligation. If there be more than one Tenant the obligations hereunder imposed shall be
joint and several.

35.4 Marginal Headings. The marginal headings and titles to the Sections and Articles of this
Lease are not a part of the Lease and shall have no effect upon the construction or interpretation
of any part hereof.

35.5 Time. Time is of the essence of this Lease and of the performance of each and all of its
provisions in which performance is a factor.

35.6 Successors and Assigns. The covenants and conditions herein contained, subject to the
provision as to assignment, apply to and bind the heirs, successors, executors, administrators and
assigns of the parties hereto.

 

 

35.7 Recordation. Neither Landlord nor Tenant shall record this Lease, but a short form memorandum
hereof may be recorded at the request of Landlord.

35.8 Quiet Possession. Upon Tenant paying the rent reserved hereunder and observing and performing
all of the covenants, conditions, and provisions on Tenant’s part to be observed and performed
hereunder, Tenant shall have quiet possession of the Premises for the entire term hereof, subject
to all the provisions of this Lease.

35.9 Late Charges. Tenant hereby acknowledges that late payment by Tenant to Landlord of rent or
other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the
exact amount which will be extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges, and late charges which may be imposed upon Landlord
by terms of any mortgage or trust deed covering the premises. Accordingly, if any installment of
rent or any sum due from Tenant shall not be received by Landlord or Landlord’s designee within
five (5) days after due date specified by this lease, then Tenant shall pay to Landlord a late
charge equal to ten percent (10%) of all outstanding charges, included but not limited to the base
rental amount, tenant improvements financed and common area maintenance charges, but in no event
less than Fifty Dollars ($50.00), plus any attorneys’ fees incurred by Landlord by reason of
Tenants failure to pay rent and/or other charges when due hereunder. The parties hereby agree that
such late charges represent a fair and reasonable estimate of the costs that Landlord will incur by
reason of the late payment by Tenant. Acceptance of such late charges by the 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. Tenant hereby
agrees that if Tenant is subject to a late charge for two (2) consecutive months, Minimum Rent for
the following twelve (12) months shall automatically be adjusted to be quarterly rental, payable in
advance, commencing upon the first day of the month following such consecutive late month and
continuing for the next twelve (12) months on a quarterly basis in advance.

35.10 Prior Agreements. This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior agreements or understanding
pertaining to any such matters shall be effective for any purposes. No provision of this Lease may
be amended or added to except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding on any party until
fully executed by both parties hereto.

35.11 Inability to Perform. This Lease and the obligations of the Tenant hereunder shall not be
affected or impaired because the Landlord is unable to fulfill any of its obligations hereunder or
is delayed in doing so, if such inability or delay is caused by reason of strike, labor troubles,
acts of God, or any other cause beyond the reasonable control of the Landlord.

35.12 Partial Invalidity. Any provision of this Lease which shall prove to be invalid, void, or
illegal shall be in no way affect, impair or invalidate any other provision hereof and such other
provision shall remain in full force and effect.

35.13 Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall,
whenever possible, be cumulative with all other remedies at law or in equity.

35.14 Choice of Law. This Lease shall be governed by the laws of the State of California.

35.15 Attorneys’ Fees. In the event of any action or proceeding brought by either party against
the other under this Lease the prevailing party shall be entitled to recover for the fees of its
attorneys in such action or proceeding, including costs of appeal, if any, in such amount as the
court may adjudge reasonable as attorneys’ fees. In addition, should it be necessary for Landlord
to employ legal counsel to enforce any of the provisions herein contained, Tenant agrees to pay all
attorneys’ fees and court costs reasonably incurred.

35.16 Sale of Premises by Landlord. In the event of any sale of the Premises by Landlord, Landlord
shall be and is hereby entirely freed and relieved of all liability under any and all of its
covenants and obligation contained in or derived from this Lease arising out of any act, occurrence
or omission occurring after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further agreement between the parties
or their successors in interest or between the parties and any such purchaser, to have assumed and
agreed to carry out any and all of the covenants and obligations of the Landlord under this Lease.

35.17 Subordination and Attornment. Upon request of the Landlord, Tenant will in writing
subordinate its rights hereunder to the lien of any mortgage or deed of trust, to any bank,
insurance company or other lending institution, now or hereafter in force against the Premises, and
to all advances made or hereafter to be made upon the security thereof. In the event any
proceedings are brought for foreclosure, or in the event of the exercise of the power of sale under
any mortgage or deed of trust made by the Landlord covering the Premises, Tenant shall attorn to
the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under
this Lease. The provisions of this Section 35.17 to the contrary notwithstanding, and so long as
Tenant is not in default hereunder, this Lease shall remain in full force and effect for the full
term hereof.

35.18 Notices. All notices and demands which may or are to be required or permitted to be given by
either party on the other shall be in writing. All notices and demands by the Landlord to the
Tenant shall be sent by certified mail, return receipt requested, postage prepaid, or

 

 

delivered in
person addressed to the Tenant at the Premises, at the address hereinbelow, or to such other place
as Tenant may from time to time designate in a notice to the Landlord. All notices and demands by
the Tenant to the Landlord shall be sent by certified mail, return receipt requested, postage
prepaid, or delivered in person addressed to the Landlord at the address set forth herein, and to
such other person or place as the Landlord may from time to time designate in a notice to the
Tenant.

     To Landlord at: c/o Citadel Equities Group, 1512 Eureka Road, Suite 130, Roseville, CA 95661

     To Tenant at: 9083 Foothills Boulevard, Suite 300, Roseville, CA 95747

35.19 Tenant’s Statement. Tenant shall at any time and from time to time, upon not less than five
(5) days prior written notice from Landlord, execute, acknowledge and deliver to Landlord a
statement in writing as follows:

     (a) Certifying that this Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification and certifying that this Lease as so modified is in full
force and effect), and the date to which the rental and other charges are paid in advance, if any,
and

     (b) Acknowledging that there are not, to Tenant’s knowledge, any incurred defaults on the
part of the Landlord hereunder, or specifying such defaults if any are claimed, and

     (c) Setting forth the date of commencement of rents and expiration of the term hereof. Any
such statement may be relied upon by the prospective purchaser or encumbrance of all or any portion
of the real property of which the Premises are a part.

35.20 Authority of Tenant. If Tenant is a corporation, each individual executing this lease on
behalf of said corporation represents and warrants that he is duly authorized to execute and
deliver this Lease on behalf of said corporation, in accordance with the bylaws of said
corporation, and that this Lease is binding upon said corporation.

35.21 Exhibits. The following Exhibits are attached to this Lease after the signatures and are incorporate herein by reference:

	 	 	 
	Exhibit A-1 - Site Plan

	 	Exhibit D - Sign Criteria
	Exhibit A-2 - Floor Plan of Premises

	 	Exhibit E - Rules & Regulations
	[Exhibit B - Landlord’s Work Letter]

	 	Exhibit F — 2002 Adjustment Budget
	[Exhibit C - Tenant’s Work]

	 	[Exhibit G - Guaranty Of Lease]

36 Addendum Attached.

	 	 	 	 	 	 	 
	LANDLORD:	 	TENANT:
	 	 	 
	 	 	 	 
	EUREKA DEVELOPMENT COMPANY LLC	 	SIERRA LOGIC, a Delaware Corporation
	 	 	 
	 	 	 	 
	BY:
	 	 

	 	BY:	 	 
	 	 	 

	 	 	 	 
	 	 	Douglas M. Sutherland, Member
	 	 	 	 
	DATE:
	 	 

	 	DATE:	 	 
	 	 	 

	 	 	 	 
	BY:
	 	 

	 	BY:	 	 
	 	 	 

	 	 	 	 
	DATE:
	 	 

	 	DATE:	 	 
	 	 	 

	 	 	 	 

BUSINESS CENTER LEASE ADDENDUM — ARTICLE 36

This Addendum is to the Business Center Lease dated  March 18, 2003 in which
Eureka Development Company LLC, a California Limited Liability Company  is hereby referred
to as “Landlord” and Sierra Logic, a Delaware Corporation  is hereby referred to as
“Tenant”.

36.1 Tenant’s Failure to Maintain. In the event Tenant fails to maintain the Premises in good
order, condition and repair, Landlord shall give Tenant notice to do such acts as are reasonably
required so to maintain Premises. In the event Tenant fails promptly to commence such work or
diligently prosecute the same to completion, Landlord may but is not obligated to do such acts and
expend such fund at the expense of Tenant as are reasonably required to perform such work.
Landlord shall be paid by Tenant promptly after demand with interest at ten percent (10%) per annum
from the date of such work. Landlord shall have no liability to Tenant for any damage,
inconvenience or interference with the use of the Premises by Tenant as a result of performing any
such work or by reason of undertaking the repairs required by Section 12 above.

 

 

36.2 Installation of Fixtures. It is mutually agreed that in order to expedite the commencement of
Tenant’s business in the Premises, Tenant may enter upon the Premises for the purpose of installing
trade fixtures and furnishings during the construction period, provided that such activity on the
part of Tenant shall be done only in such manner as not to interfere with construction and that
Landlord shall not be liable to Tenant for damage to or loss of such fixtures, equipment or
furnishing, Tenant accepting the full risk for such damage or loss, if any. Tenant shall pay for
all utilities, consumed by Tenant or it’s contractors in preparing the Premises for the opening of
Tenant’s business.

36.3 Merchants Association. Deleted.

36.4 Prohibited Uses.

     (a) Tenant agrees that it will not use or permit any person to use the Premises for a
second-hand store, auction, distress or fire sale, or bankruptcy or going-out-of-business sale
(whether or not pursuant to any insolvency proceedings), or for any use or purpose in violation of
any governmental law or authority, and that Tenant shall at its sole cost and expense promptly
comply with all laws, statutes, ordinances and governmental rules, regulations and requirements now
in force of which may hereinafter be in force and with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted relating to or affecting the
condition, use or occupancy of the Premises, or not related or afforded by Tenant’s improvements or
acts. The judgment of any court of competent jurisdiction or the admission of Tenant in any action
against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any law,
statute, ordinance or governmental rules, regulation or requirement, shall be conclusive of that
fact as between Landlord and Tenant.

     (b) Tenant shall not do or permit anything to be done in or about the Premises which will in
any way obstruct or interfere with the rights of other Tenants or occupants of the building of
which the Premises may be a part or any other building in the shopping center, or injure or annoy
them, or use or allow the Premises to be used for any unlawful or objectionable purpose, nor shall
Tenant cause, maintain or permit any nuisance in, on or about the Premises. Tenant shall not
commit or allow to be committed any waste in or upon the Premises. Tenant shall keep the Premises
in a clean and wholesome condition, free of any objectionable noises, odors or nuisance.

36.5 Execution of Lease, No Option. The submission of this Lease to Tenant shall be for
examination purposes only and does not and shall not constitute a reservation of or option for
Tenant to lease, or otherwise create any interest by Tenant in, the Premises or any other Premises
situated in the shopping center. Execution of this Lease by Tenant and return to Landlord shall
not be binding upon Landlord, notwithstanding any time interval, until Landlord has in fact
executed and delivered this Lease to the Tenant.

36.6 Insolvency of Tenant. Tenant agrees that in the event all or substantially all of its assets
be placed in the hands of a receiver or trustee, and in the event such receivership of trusteeship
continue for a period of ten (10) days, or should Tenant make assignment for the benefit of
creditors, or be adjudicated a bankrupt, or should Tenant institute any state or federal bankruptcy
act wherein Tenant seeks to be adjudicated a bankrupt, or seeks to be discharged of its debts, or
should any voluntary proceeding be filed against such Tenant under such bankruptcy laws and Tenant
consents thereto or acquiesces therein by pleading or default, then this Lease or any interest in
and to the demised Premises shall not become an asset in any of such proceedings and in any of such
events and in addition to any and all rights or remedies of Landlord hereunder of as provided by
law, it shall be lawful for Landlord at his option to declare the term hereof ended and to re-enter
the demised Premises and take possession hereof and remove all persons therefrom and Tenant shall
have no further claim therein or hereunder.

36.7 Tenant’s Insurance. Tenant’s insurance as stated in Section 8 of the Lease, shall include
Owner as additionally insured. Tenant shall furnish to Landlord within twenty (20) days prior to
Tenant’s taking possession of the Premises, evidence of Tenant’s insurance.

36.8 Insufficient Funds Checks. Checks returned by Tenant’s bank for insufficient funds or closed
accounts will be subject to a $25.00 check charge, in addition to applicable late charges, which
will be paid immediately to Landlord.

36.9 Jurisdiction. Referenced paragraph 31, Placer County will be jurisdiction and venue of the
action concerning the Lease agreement. This lease will be interpreted subject to the laws of the
State of California.

36.10 Tenant Improvements. All Tenant Improvements as specified will be performed in accordance
with local building code standards in effect at the time lease agreement is executed. Tenant
agrees to install and pay for any improvements, changes or alterations in the Premises required by
any governmental authority provided that such changes are caused and peculiar to the business of
Tenant in the Premises. Landlord agrees to install and pay for any improvements, changes or
alterations in the Premises required by any governmental authority provided that such changes are
required generally for similar buildings in the area and are not specifically directed to Tenant’s
business in the Premises. Tenant shall not be responsible to cure or pay for the retrofit of any
condition of the building which existed prior to the Lease date, nor shall Tenant be responsible
for the removal or remediation of any asbestos or other toxic or hazardous substance. Tenant is
responsible for obtaining all necessary permits, approvals and licenses to occupy the Premises and
operate Tenant’s business therein prior to opening for business. Landlord, at Landlord’s sole
cost and expense, shall patch walls, touch up paint, repair damaged ceiling tiles, clean carpets
and provide a Tenant Improvement Allowance of THREE THOUSAND AND NO/100 DOLLARS ($3,000.00) for
HVAC work.

 

 

36.11 Tenant shall deposit with Landlord upon execution of this Lease:

	 	 	 	 	 	 	 	 	 
	 	1.	 	 	Security Deposit
	 	$	11,730.00	 
	 	 	 	 	 
	 	 	 
	 	2.	 	 	First Chargeable Month’s Rent
	 	$	11,730.00	 
	 	 	 	 	 
	 	 	 
	 	 	 	 	Total Deposit:
	 	$	23,460.00	 

36.12 Exhibit “F” attached hereto is the Landlord’s estimate for the 2002 Rental Adjustments
pursuant to Article 7.2 of this Lease. Tenant shall pay rental adjustments commencing with
Tenant’s occupancy as called for in said Article 7.2.

36.13 If necessary, Tenant shall supply all window coverings, at Tenant’s sole cost and expense.
Said window coverings must be one (1) inch wide horizontal metal blinds in silver, cream or white.
No other colors or materials are approved.

36.14 Hazardous Materials: Tenant shall not cause or permit any Hazardous Material to be
generated, produced, brought upon, used, stored, treated or disposed of in or about the Property by
Tenant, its agents, employees, contractors, subleases or invitees without the prior written consent
of Landlord. Landlord shall be entitled to take into account such other factors or facts as
Landlord may reasonably determine to be relevant in determining whether to grant or withhold
consent to Tenant’s proposed activity with respect to Hazardous Material. In no event, however,
shall Landlord be required to consent to the installation or use of any storage tanks on the
Property. As used in this Lease, the term “Hazardous Material” means any flammable items,
explosives, radioactive materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of “hazardous
substances”, “hazardous wastes”, “hazardous materials”, or “toxic substances” now or subsequently
regulated under any applicable federal, state or local laws or regulations, including without
limitation petroleum-based products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia compounds and other chemical products, asbestos, PCBs and similar compounds,
and including any different products and materials which are subsequently found to have adverse
effects on the environment or the health and safety of persons. (except for customary office
supplies including toner and soldering material).

36.15 Termination Clause: Tenant shall have the right to exercise an option to terminate the Lease
term at the expiration of thirty-six (36) months of paying rent. Tenant shall agree to reimburse
the Landlord all unamortized Tenant Improvement costs and Lease commissions for the remainder term.

36.15 Right of First Refusal: Tenant shall have a continuing first right of refusal on all spaces
contiguous to Tenant’s Premises. All space taken under the terms of first right of refusal shall
be at identical terms and conditions to those of the base Lease, including base Lease rates and
Tenant Improvement Allowances, subject to existing tenant’s rights.

36.16 Option to Expand: If Tenant needs to expand by fifty percent (50%) or greater, then Landlord
shall release Tenant from that Lease and negotiate for space in another property owned by the
Landlord.

36.17 Satellite Requirement: Tenant shall have the right, subject to Landlord’s consent, not to be
unreasonably withheld, to install a satellite dish on the roof or the side of the building in a
location to be satisfactory to both Landlord and Tenant. Prior to installation, Tenant shall submit
to Landlord elevations and specifications for the satellite dish. Tenant shall be responsible for
removing the dish from
its location and repairing any damage caused by such removal. There shall be no additional rental
paid to Landlord as a result of any satellite dish use and/or installation.

36.18 Option to Renew: Landlord hereby grants to Tenant the option to renew this Lease for two (2)
additional terms of five (5) years each, upon the same terms and conditions as herein contained,
except as modified by this section provided that Tenant not be in default under this Lease at the
time the option is exercised or upon commencement of the extended term. The new base year is reset
to the first option year. The option to renew shall not include broker’s commission for the option
period, free rent/pre-occupancy, additional option period, and/or new tenant improvements. In the
event Tenant desires to exercise its option to extend, Tenant shall so notify Landlord in writing
at least six (6) months prior to the expiration of the term. Landlord shall then, within fifteen
(15) days after the receipt of said notice, notify Tenant in writing of the new base monthly rent
to apply during the extension period. Within fifteen (15) days after receipt of Landlord’s notice,
Tenant shall give written notice to the Landlord either excepting the proposed new base monthly
rent or stating its exception to such proposal and appointing a real estate broker who is
experienced in leasing similar type business properties. Within ten (10) days after receipt of
such notice, Landlord shall designate a similarly qualified real estate broker and give written
notice thereof to Tenant. The two brokers so appointed shall select and appoint in writing a third
party similarly qualified real estate broker and then give written notice thereof to Landlord and
Tenant. The broker so appointed shall promptly fix a time for the completion of the appraisal,
which shall be no later than thirty (30) days from the date of appointment of the last broker.
Broker shall notify Landlord and Tenant as to the date fixed for the completion of that appraisal.
On that date, the brokers and Landlord and tenant shall meet and brokers shall each submit their
appraisal of fair rental value of the Premises for use then being made of the Premises in writing
in the usual form to Landlord and Tenant, and the fair rental value shall be determined by taking
the numerical average (mean) of the two (2) appraisal figures which are the closest together,
provided however, that such appraisals shall reasonably reflect the fair rental value of the
Premises. Each of the parties hereto shall pay for the services of his appointee broker and
one-half (1/2) of the cost of the services of the third broker. Fair market rental value for the

 

 

purpose of this Lease shall mean the then prevailing rent for premises comparable in size to the
premises located in buildings comparable in size, age, quality to, in the general vicinity of the
Building and leased on terms comparable to the terms contained in this lease. In no event shall
the Base Monthly Rent for the option period be less that the Base Monthly Rent for the previous
term of this Lease.

36.19 Signage: Landlord shall grant Tenant the right to place its sign on the building monument.
Signage shall conform to both Landlord’s and the City of Roseville’s signage criteria and
specifications. Tenant shall pay the cost of installation and maintenance of said signage.
Landlord to provide suite and listing directory signage at Landlord’s expense.

36.20 Parking: Tenant shall be permitted to park 41 cars on a non-exclusive basis in areas
designated by Landlord for parking. Tenant shall abide by and all parking regulations and rules
established by Landlord or Landlord’s parking operator.

	 	 	 	 	 	 	 
	AGREED AND ACCEPTED:	 	 	 	 
	LANDLORD:	 	TENANT:
	EUREKA DEVELOPMENT COMPANY LLC	 	SIERRA LOGIC, a Delaware Corporation
	 	 	 
	 	 	 	 
	BY:
	 	 

	 	BY:	 	 
	 	 	 

	 	 	 	 
	DATE:
	 	 

	 	DATE:	 	 
	 	 	 

	 	 	 	 
	BY:
	 	 

	 	BY:	 	 
	 	 	 

	 	 	 	 
	DATE:
	 	 

	 	DATE:	 	 
	 	 	 

	 	 	 	 

 

 

BUSINESS CENTER LEASE ADDENDUM ONE — ARTICLE 36

This Addendum One is to the Business Center Lease dated  March 18, 2003 in which
Eureka Development Company LLC, a California Limited Liability Company  is hereby referred
to as “Landlord” and Sierra Logic, a Delaware Corporation  is hereby referred to as
“Tenant”.

36.21.1 Rent Schedule.

	 	 	 	 	 
	Months	 	Rent
	01-03
	 	Free*
	04-15
	 	$	1.15	*
	16-27
	 	$	1.20	*
	28-39
	 	$	1.25	*
	40-51
	 	$	1.30	*
	52-63
	 	$	1.35	*

     *Plus NNN, utilities and janitorial.

 

 

AMENDMENT #1

LEASE BETWEEN EUREKA DEVELOPMENT COMPANY LLC AND

SIERRA LOGIC, INC DATED MARCH 18, 2003

JUNE __, 2004

The last two sentences of Article 6 (“Security Deposit”) of the Lease between Eureka Development
Company LLC and Sierra Logic, Inc. dated March 18, 2003 shall be amended as follows:

“Tenant shall also provide a letter of credit equal to $100,000 which shall be released within ten
(10) days of Tenant providing its income statement to show that Tenant’s business has become
profitable for three consecutive months. Tenant’s income statement shall be prepared in accordance
with generally accepted accounting principles. Release of the letter of credit shall only occur if
Tenant is not in default of their Lease and shall be at Landlord’s sole discretion, which shall not
be unreasonably withheld.”

	 	 	 	 	 	 	 	 	 
	 	LANDLORD:

	 	 	 	 	 	TENANT:	 
	 	Eureka Development Company LLC

	 	 	 
	 	 	Sierra Logic, Inc.	 
	 	By:

	 	 	 	 	 	By:	 
	 	Date:

	 	 	 	 	 	Date:	 
	 

 

 

BUSINESS CENTER LEASE ADDENDUM TWO

DATED OCTOBER 8, 2003

This Addendum One is to the Business Center Lease dated  March 18, 2003 in which
Eureka Development Company LLC, a California Limited Liability Company  is hereby referred
to as “Landlord” and Sierra Logic, a Delaware Corporation  is hereby referred to as
“Tenant”.

ARTICLE 2

PREMISES

Landlord does hereby lease to Tenant and Tenant hereby leases from Landlord that certain space
(herein called “Premises”), having dimensions of approximately 15,460 combined square feet
of floor area. The Premises are situated within building 9083 Foothills Boulevard (±10,200
square feet) and 9087 Foothills Boulevard (±5,260 square feet) (the “Building”) within the
Blue Oaks Technical Center (the “Center”). The location, address and dimensions of the
Building and the Premises are delineated on Exhibit “A” attached hereto and incorporated herein by
reference. Said Premises and the Center are located at 9083 Foothills Boulevard, Suite 300
and 9087 Foothills Boulevard, Suite 750. in the City of Roseville, County of Placer, State of
California. The Common Area is defined in Article 25.

This Lease is subject to the terms, covenants and conditions herein set forth and the Tenant
covenants as a material part of the consideration for this Lease to keep and perform each and all
of said terms, covenants and conditions by it to be kept and performed.

4.1 Initial Minimum Rent. Tenant agrees to pay to Landlord as minimum rent (“Minimum Rent”),
without notice or demand, the monthly sum of $11,730.00 for Suite 300 and $6,049.00 for Suite
750 for a total of SEVENTEEN THOUSAND SEVEN HUNDRED SEVENTY-NINE AND NO/100ths Dollars
($17,779.00), in advance, on or before the first day of each and every successive calendar
month during the term hereof, except that the first month’s rent shall be paid upon the execution
hereof. Rent for any period which is for less than one (1) month shall be a prorated portion of
the monthly installment herein based upon a thirty (30) day month. Said rental shall be paid to
Landlord, without deduction or offset, in lawful money of the United States of America and at such
place as Landlord may from time to time designate in writing. Payments shall be coterminous on
the expansion suite at 9087 Foothills with the initial Lease at 9083 Foothills.

5.1
Commencement. [ The Lease term shall be sixty-three (63) Months, plus any partial
month in which the rental commences. The parties hereto acknowledge that certain obligations under
various articles hereof may commence prior to the Lease term, i.e., construction, hold harmless,
liability insurance, etc.; and the parties agree to be bound by these articles prior to
commencement of the Lease term. The lease term shall commence (“Commencement Date”) (check
applicable box): ]

	x 	 	On December 1, 2003 or upon substantial completion of the Landlord’s Tenant Improvement
work, the lease term of 9083 and 9087 Foothills shall be coterminous , if the Premises
are being leased in its “as is” condition or subject to such incidental work as is to be
performed by Landlord prior to said date (this work, if any, to be set forth in the
attached Exhibit “B-1” attached hereto and incorporated herein by reference and, in this
latter event, the rental shall commence on said date only if Landlord shall have
substantially completed said work).

ARTICLE 6

SECURITY DEPOSIT

Concurrently with Tenant’s execution of this Lease, Tenant has deposited with Landlord the sum
of  ELEVEN THOUSAND SEVEN HUNDRED THIRTY AND no/100ths Dollars ($11,730.00)
and an additional $6,049.00, which combined with the original security deposit of $11,730.00
shall be $17,779.00 in addition to the first month’s rent. Said sum shall be held by Landlord
as security for the faithful performance by Tenant of all the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during the term hereof. If Tenant defaults with
respect to any provision of this Lease, including, but not limited to the provisions relating to
the payment of rent, Landlord may (but shall not be required to) use, apply or retain all or any
part of this security deposit for the payment of any rent or any other sum in default, or for the
payment of any amount which Landlord may spend or become obligated to spend
by reason of Tenant’s default, or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant’s default. If any portion of said deposit is so used or
applied, Tenant shall, within five (5) days after written demand therefor, deposit cash with
Landlord in an amount sufficient to restore the security deposit to its original amount and
Tenant’s failure to do so shall be a default under this Lease. Landlord shall not be required to
keep this security deposit separate from its general funds, and Tenant shall not be entitled to
interest on such deposit. If Tenant shall fully and faithfully perform every provisions of this
Lease to be performed by it, the security deposit or any balance thereof shall be returned to
Tenant (or, at Landlord option, to the last assignee of Tenant’s interest hereunder) within ten
(10) days following the expiration of the Lease term. In the event of termination of Landlord’s
interest in this Lease, said deposit, or any part thereof not previously applied, may be turned
over by Landlord to Landlord’s grantee and, if so turned over, Tenant agrees to look solely to such
grantee for proper application of the deposit in accordance with the terms of this Article 6, and
the return thereof in accordance herewith. The holder of a mortgage on property which includes the
Premises shall never be responsible to Tenant for the return or application of any such deposit,
whether or not such holder succeeds to the position of Landlord hereunder, unless such deposit
shall have been received in hand by such holder. Tenant shall also provide a letter of credit
equal to one (1) year’s equivalent of rent ($140,760.00) which shall be released within ten (10)
days of Tenant’s next round of funding after Landlord has had a chance to review all documentation
with

 

 

regards to burn rate and financial information. This shall occur only if Tenant is not in
default of their Lease and shall be at Landlord’s sole discretion, which shall not be unreasonably
withheld.

36.11 Tenant shall deposit with Landlord upon execution of this Addendum:

	 	 	 	 	 	 	 
	1.

	 	Security Deposit
	 	$	6,049.00	 
	2.

	 	First Chargeable Month’s Rent
	 	$	6,049.00	 
	 

	 	 	 	 	 	 
	 

	 	Total Deposit:
	 	$	12,098.00	 

	 	 	 	 	 	 	 
	AGREED AND ACCEPTED:	 	 	 	 
	LANDLORD:	 	TENANT:
	EUREKA
DEVELOPMENT COMPANY LLC	 	SIERRA LOGIC, a Delaware Corporation
	BY:	 	
 

 

Douglas M. Sutherland, Member
	 	BY:	 	 

 

	DATE:	 	 
 
	 	DATE:	 	 
 

	BY:	 	 
 
	 	BY:	 	 
 

	DATE:	 	 
 
	 	DATE:	 	 
 

 

 

BUSINESS CENTER LEASE ADDENDUM THREE

DATED OCTOBER 8, 2003

Superceeds Addendum Two

This Addendum Three is to the Business Center Lease dated  March 18, 2003 in which
Eureka Development Company LLC, a California Limited Liability Company  is hereby referred
to as “Landlord” and Sierra Logic, a Delaware Corporation is hereby referred to as
“Tenant”.

ARTICLE 2

PREMISES

Landlord does hereby lease to Tenant and Tenant hereby leases from Landlord that certain space
(herein called “Premises”); having dimensions of approximately 18,042 combined square feet
of floor area. The Premises are situated within building 9083 Foothills Boulevard (±10,200
square feet) and 9087 Foothills Boulevard (±7,842 square feet) (the “Building”) within the
Blue Oaks Technical Center (the “Center”). The location, address and dimensions of the
Building and the Premises are delineated on Exhibit “A” attached hereto and incorporated herein by
reference. Said Premises and the Center are located at 9083 Foothills Boulevard, Suite 300 and
9087 Foothills Boulevard, Suite 750 in the City of Roseville, County of Placer, State of
California. The Common Area is defined in Article 25.

This Lease is subject to the terms, covenants and conditions herein set forth and the Tenant
covenants as a material part of the consideration for this Lease to keep and perform each and all
of said terms, covenants and conditions by it to be kept and performed.

4.1 Initial Minimum Rent. Tenant agrees to pay to Landlord as minimum rent (“Minimum Rent”),
without notice or demand, the monthly sum of $11,730.00 for Suite 300 and $9,018.30 for Suite
750 for a total of TWENTY THOUSAND SEVEN HUNDRED FORTY-EIGHT AND 38/100ths Dollars
($20,748.38), in advance, on or before the first day of each and every successive calendar
month during the term hereof, except that the first month’s rent shall be paid upon the execution
hereof. Rent for any period which is for less than one (1) month shall be a prorated portion of
the monthly installment herein based upon a thirty (30) day month. Said rental shall be paid to
Landlord, without deduction or offset, in lawful money of the United States of America and at such
place as Landlord may from time to time designate in writing. Payments shall be coterminous on
the expansion suite at 9087 Foothills with the initial Lease at 9083 Foothills.

5.1 Commencement. [ The Lease term shall be sixty-three (63) Months, plus any partial
month in which the rental commences. The parties hereto acknowledge that certain obligations under
various articles hereof may commence prior to the Lease term, i.e., construction, hold harmless,
liability insurance, etc.; and the parties agree to be bound by these articles prior to
commencement of the Lease term. The lease term shall commence (“Commencement Date”) (check
applicable box): ]

	x	 	On July 1, 2004 (plus any temporary occupancy) or upon substantial completion of the
Landlord’s Tenant Improvement work. The lease term of 9083 and 9087 Foothills shall be
coterminous , if the Premises are being leased in its “as is” condition or subject to
such incidental work as is to be performed by Landlord prior to said date (this work, if
any, to be set forth in the attached Exhibit “B-1” attached hereto and incorporated herein
by reference and, in this latter event, the rental shall commence on said date only if
Landlord shall have substantially completed said work).

ARTICLE 6

SECURITY DEPOSIT

Concurrently with Tenant’s execution of this Lease, Tenant has deposited with Landlord the sum
of  ELEVEN THOUSAND SEVEN HUNDRED THIRTY AND no/100ths Dollars ($11,730.00)
and an additional $6,049.00, which combined with the original security deposit of $11,730.00
shall be $17,779.00 in addition to the first month’s rent. Said sum shall be held by Landlord
as security for the faithful performance by Tenant of all the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during the term hereof. If Tenant defaults with
respect to any provision of this Lease, including, but not limited to the provisions relating to
the payment of rent, Landlord may (but shall not be required to) use, apply or retain all or any
part of this security deposit for the payment of any rent or
any other sum in default, or for the payment of any amount which Landlord may spend or become
obligated to spend by reason of Tenant’s default, or to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of Tenant’s default. If any portion of said deposit is
so used or applied, Tenant shall, within five (5) days after written demand therefore, deposit cash
with Landlord in an amount sufficient to restore the security deposit to its original amount and
Tenant’s failure to do so shall be a default under this Lease. Landlord shall not be required to
keep this security deposit separate from its general funds, and Tenant shall not be entitled to
interest on such deposit. If Tenant shall fully and faithfully perform every provisions of this
Lease to be performed by it, the security deposit or any balance thereof shall be returned to
Tenant (or, at Landlord option, to the last assignee of Tenant’s interest hereunder) within ten
(10) days following the expiration of the Lease term. In the event of termination of Landlord’s
interest in this Lease, said deposit, or any part thereof not previously applied, may be turned
over by Landlord to Landlord’s grantee and, if so turned over, Tenant agrees to look solely to such
grantee for proper application of the deposit in accordance with the terms of this Article 6, and
the return thereof in accordance herewith. The holder of a mortgage on property which includes the
Premises shall never be responsible to Tenant for the return or application of any such deposit,
whether or not such holder succeeds to the position of Landlord hereunder, unless such deposit
shall have been received in hand by such holder.

 

 

Tenant shall also provide a letter of credit
in the amount of $100,000.00, which shall be released within ten (10) days of Tenant’s next round
of funding after Landlord has had a chance to review all documentation with regards to burn rate
and financial information. This shall occur only if Tenant is not in default of their Lease and
shall be at Landlord’s sole discretion, which shall not be unreasonably withheld.

36.11 Tenant has deposited with Landlord:

	 	 	 	 	 	 	 
	1.

	 	Security Deposit
	 	$	6,049.00	 
	2.

	 	First Chargeable Month’s Rent (Partial)
	 	$	6,049.00	 
	 

	 	 	 	 	 	 
	 

	 	Total Deposit:
	 	$	12,098.00	 

	 	 	 	 	 	 	 
	AGREED AND ACCEPTED:	 	 	 	 
	 	 	 	 	 	 	 
	LANDLORD:	 	TENANT:
	EUREKA DEVELOPMENT COMPANY LLC	 	SIERRA LOGIC, a Delaware Corporation
	 	 	 	 	 	 	 
	BY:
	 	 	 	BY:	 	 
	 
	 	 
	 	 	 	 
	DATE:
	 	 	 	DATE:	 	 
	 
	 	 
	 	 	 	 
	BY:
	 	 	 	BY:	 	 
	 
	 	 
	 	 	 	 
	DATE:
	 	 	 	DATE:

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