Document:

exv10w2

 

	 	 	 	 	 

Exhibit 10.2

GMAC LLC

200 Renaissance Center

Tower 200, 12th Floor

Mail Drop 482-B12-D74

Detroit, MI 48265

March 13, 2008

Mr. Sanjiv Khattri

GMAC LLC

767 Fifth Avenue

New York, New York 10153

Dear Sanjiv:

     This letter agreement (this “Letter Agreement”) memorializes our agreement with respect to
your on-going employment arrangements with GMAC LLC (“GMAC” or the “Company”).

     As of the date of the Letter Agreement (the “Effective Date”), and at all times during the
period beginning on the Effective Date and ending on the close of business on May 30, 2008 (the
“Employment Period”), your title will be Executive Vice President for Corporate Strategy and
Development of the Company. Your new duties will be those duties as assigned by the CEO from time
to time at the CEO’s sole discretion, consistent with your position as a senior executive of GMAC,
and including but not limited to:

	 	•	 	transition various responsibilities and duties to GMAC’s Chief Financial Officer
(“CFO”), Chief Risk Officer, Treasurer and/or others as designated by me;
	 
	 	•	 	continue as CFO of Residential Capital, LLC (“ResCap”);
	 
	 	•	 	support the CEO on GMAC corporate strategy and development matters;
	 
	 	•	 	oversee various corporate business development and audit activities;
	 
	 	•	 	remain a member of the GMAC management committee (formerly the GMAC EC) and GMAC
management HRM committee (formerly GMAC EC HRM); and
	 
	 	•	 	remain a member of the subsidiary boards of ResCap, GMACI, and GMAC CF.

     You will work out of GMAC’s offices in New York City and out of ResCap’s offices in
Minneapolis, Minnesota and Fort Washington, Pennsylvania; provided, however, that at all times
during the Employment Period you will be provided with an office and support staff in New York
City. You will report directly and solely to the CEO throughout the Employment Period.

     During the Employment Period, the Company will pay to you an annualized base salary of
$700,000 “Base Salary”), payable in accordance with Company payroll policy. The Company will also
pay to you an annual cash bonus with respect to fiscal year 2008 based on (i) a target bonus amount
equal to $900,000 and (ii) achievement of key objectives set out by the CEO and overall performance
assessed by me, including but not limited to the preparation and completion of both GMAC’s and
ResCap’s 2007 calendar year financial and management reports. This annual cash bonus amount will
be guaranteed to be no less than $450,000, which in turn will be multiplied by a fraction the
numerator of which is the number of days you were employed by the Company in 2008 and the
denominator of which is 366 (“2008 Bonus”). The 2008 Bonus will be paid in a lump sum cash amount
when other GMAC executives are paid their bonuses with respect to fiscal year 2008, but in any
event not later than March 15, 2009 (in order to be exempt from Internal Revenue Code Section
409A).

     During the Employment Period, the Company will provide you with all employee benefits and
perquisites that you now currently have as of the Effective Date, and at the same employee cost (if
any) in effect as of the Effective Date,
and you will be entitled to all rights and benefits under such plans, programs and arrangements as
is provided to terminated employees.

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     Upon the earlier of the expiration of the Employment Period or the termination of your
employment with GMAC, you will be entitled to receive any unpaid Base Salary, earned but unpaid
bonuses, unreimbursed business expenses, and earned but unused PTO days in accordance with Company
policy. In addition, the Company will pay to you $2,792,800 (the “Severance Amount”) in cash in
accordance with the schedule below and in compliance with Internal Revenue Code Section 409A:

	 	 	 	 	 	 	 
	 	Amount	 	 	Date Paid
	 
	 

	 	$	1,719,466.67	 	 	Earlier of May 30, 2008 or within seven days of termination of employment
	 
	 	 	 	 	 	 
	 

	 	$	1,073,333.33	 	 	January 2, 2009
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	TOTAL

	 	$	2,792,800.00	 	 	 

     To receive the above amounts, you must sign and not revoke within the required 7-day
revocation period: (i) the General Release contained in Exhibit A attached to this Letter
Agreement, to be executed on the Effective Date, and (ii) the General Release contained in Exhibit
B attached to this Letter Agreement, to be executed 7 days prior to the date of your termination of
employment with GMAC, and you must not be terminated for Cause. In addition, upon the execution of
this Letter Agreement, you agree to terminate your (i) GMAC Management LLC Class C Membership
Interest Plan Award Agreement dated January 3, 2007, (ii) GMAC Long-Term Incentive Plan LLC
Long-Term Phantom Interest Plan Award Agreement dated January 3, 2007, and (iii) GMAC Long-Term
Incentive Plan LLC Long-Term Phantom Interest Plan Award Agreement dated January 30, 2007

     If the Company terminates your employment without Cause during the Employment Period, or if
you terminate your employment for any reason before the end of the Employment Period, the Company
will continue to pay your Base Salary until the end of the Employment Period (i.e., May 30, 2008)
and your 2008 Bonus will be prorated as if your employment had ended on May 30, 2008. In addition,
if the Company terminates your employment for Cause, there will be no salary continuation and you
will not be entitled to receive the Severance Amount and the 2008 Bonus.

     For purposes of this Letter Agreement, “Cause” shall mean: (i) indictment of you for a felony;
(ii) conduct by you in connection with your employment duties or responsibilities described above
that is fraudulent or grossly negligent, (iii) willful misconduct on an ongoing basis after written
notice from the Company or any of its subsidiaries to you, (iv) your contravention of specific
written lawful directions related to a material duty or responsibility which is directed to be
undertaken from the CEO which is not cured within 20 days of your receipt of written notice of such
contravention; (v) breach of your restrictive covenants set forth below; (vi) any acts of
dishonesty by you resulting or intending to result in personal gain or enrichment at the expense of
the Company, its subsidiaries or affiliates; or (vii) your continued failure to comply with a
material policy of the Company, its subsidiaries or affiliates after receiving notice from the CEO
of such failure to comply. An act or failure to act shall not be “willful” if you reasonably
believed that such action or inaction was in the best interests of the Company. In addition, for
purposes of this Letter Agreement, “Good Reason” shall mean a material breach of any provision of
this Letter Agreement by the Company, provided that you must notify the Company within 90 days of
the first occurrence of Good Reason and you must give the Company 30 days to cure.

     Following the end of the Employment Period, you will be entitled to receive the employer
portion of the cost (consistent with the Company’s policy for active employees) of continuation
coverage of group health coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended (“COBRA”) for 18 months, to the extent you elect such continuation coverage and is
eligible for such coverage and subject to the terms of the plan and the law. Notwithstanding the
foregoing, the benefits provided under this paragraph shall cease when you are covered under
another group health plan. In addition, the Company will provide you with outplacement services
through a mutually agreeable provider, which will include things such as telephone, computer and
email access, and part-time use of office space and administrative support, through December 31,
2008.

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     You will be under no obligation to seek other employment after your termination of employment
with the Company and the obligations of the Company to you which arise upon the termination of your
employment pursuant to this Letter Agreement shall not be subject to mitigation or offset.

     You agree that you will not at any time publish or communicate to any person or entity any
Disparaging (as defined below) remarks, comments or statements concerning the Company, its parent,
subsidiaries and affiliates, and their respective present and former members, partners, directors,
officers, shareholders, employees, agents, attorneys, successors and assigns. The Company agrees to
instruct its executive officers and directors to refrain from publishing or communicating to any
person or entity any Disparaging remarks, comments or statements concerning you at any time,
provided that, nothing shall prevent the Company from (a) responding in a truthful manner to
inquiries regarding your employment or the termination thereof, from investors, regulators, the
Company’s auditors or insurers, or as otherwise may be required by applicable law, rules or
regulations, or (b) disclosing information concerning your or the termination of your employment to
officers of the Company or its affiliates who, at the discretion of the Company, should know such
information. “Disparaging” remarks, comments or statements are those that impugn the character,
honesty, integrity or morality or business acumen or abilities in connection with any aspect of the
operation of business of the individual or entity being disparaged.

     During the course of your employment by the Company, you have had and will have access to
certain trade secrets and confidential information relating to the Company and its subsidiaries
(the “Protected Parties”) which is not readily available from sources outside the Company. The
confidential and proprietary information and, in any material respect, trade secrets of the
Protected Parties are among their most valuable assets, including but not limited to, their
customer, supplier and vendor lists, databases, competitive strategies, computer programs,
frameworks, or models, their marketing programs, their sales, financial, marketing, training and
technical information, their product development (and proprietary product data) and any other
information, whether communicated orally, electronically, in writing or in other tangible forms
concerning how the Protected Parties create, develop, acquire or maintain their products and
marketing plans, target their potential customers and operate their retail and other businesses.
The Protected Parties invested, and continue to invest, considerable amounts of time and money in
their process, technology, know-how, obtaining and developing the goodwill of their customers,
their other external relationships, their data systems and data bases, and all the information
described above (hereinafter collectively referred to as “Confidential Information”), and any
misappropriation or unauthorized disclosure of Confidential Information in any form would
irreparably harm the Protected Parties. You acknowledge that such Confidential Information
constitutes valuable, highly confidential, special and unique property of the Protected Parties.
You shall hold in a fiduciary capacity for the benefit of the Protected Parties all Confidential
Information relating to the Protected Parties and their businesses, which shall have been obtained
by you during your employment by the Company or its subsidiaries and which shall not be or become
public knowledge (other than by acts by you or your representatives in violation of this Letter
Agreement). You shall not, during the period you are employed by the Company or its subsidiaries
or at any time thereafter, disclose any Confidential Information, directly or indirectly, to any
person or entity for any reason or purpose whatsoever, nor shall you use it in any way, except (i)
in the course of your employment with, and for the benefit of, the Protected Parties, (ii) to
enforce any rights or defend any claims hereunder or under any other agreement to which you are a
party, provided that such disclosure is relevant to the enforcement of such rights or defense of
such claims and is only disclosed in the formal proceedings related thereto, (iii) when required to
do so by a court of law, by any governmental agency having supervisory authority over the business
of the Company or by any administrative or legislative body (including a committee thereof) with
jurisdiction to order you to divulge, disclose or make accessible such information; provided that
you shall give prompt written notice to the Company of such requirement, disclose no more
information than is so required, and cooperate with any attempts by the Company to obtain a
protective order or similar treatment, (iv) as to such Confidential Information that becomes
generally known to the public or trade without your violation of this paragraph of this Letter
Agreement or (iv) to your spouse, attorney and/or your personal tax and financial advisors as
reasonably necessary or appropriate to advance your tax, financial and other personal planning
(each an “Exempt Person”), provided, however, that any disclosure or use of Confidential
Information by an Exempt Person shall be deemed to be a breach of this paragraph of this Letter
Agreement by you. You shall take all reasonable steps to safeguard the Confidential Information
and to protect it against disclosure, misuse, espionage, loss and theft. You understand and agree
that you shall acquire no rights to any such Confidential Information.

     All files, records, documents, drawings, specifications, data, computer programs, evaluation
mechanisms and analytics and similar items relating thereto or to the Business (for the purposes of
this Letter Agreement, “Business”

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shall be as defined below), as well as all customer lists,
specific customer information, compilations of product research and marketing techniques of the
Company and its subsidiaries, whether prepared by you or otherwise coming into your possession,
shall remain the exclusive property of the Company and its subsidiaries.

     It is understood that while employed by the Company or its subsidiaries, you will promptly
disclose to it, and assign to it your interest in any invention, improvement or discovery made or
conceived by you, either alone or jointly with others, which arises out of your employment. At the
Company’s request and expense, you will assist the Company and its subsidiaries during the period
of your employment by the Company or its subsidiaries and thereafter (but subject to reasonable
notice and taking into account your schedule) in connection with any controversy or legal
proceeding relating to such invention, improvement or discovery and in obtaining domestic and
foreign patent or other protection covering the same.

     As requested by the Company and at the Company’s expense, from time to time and upon the
termination of your employment with the Company for any reason, you will promptly deliver to the
Company and its subsidiaries all copies and embodiments, in whatever form, of all Confidential
Information in your possession or within your control (including, but not limited to, memoranda,
records, notes, plans, photographs, manuals, notebooks, documentation, program listings, flow
charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential
Information) irrespective of the location or form of such material. If requested by the Company,
you will provide the Company with written confirmation that all such materials have been delivered
to the Company as provided herein.

     During the Employment Period and for a period of 12-month following the termination of your
employment for any reason, you shall not (a) directly or indirectly solicit or attempt to solicit
or induce, directly or indirectly, (x) any party who is a customer of the Company or its
subsidiaries, who was a customer of the Company or its subsidiaries at any time during the 12-month
period immediately prior to the date your employment terminates or who is a prospective customer
that has been identified and targeted by the Company or its subsidiaries, for the purpose of
marketing, selling or providing to any such party any services or products offered by or available
from the Company or its subsidiaries (provided that if you intend to solicit any such party for any
other purpose, you shall notify the Company of such intention), or (y) any supplier to the Company
or any subsidiary to terminate, reduce or alter negatively its relationship with the Company or any
subsidiary or in any manner interfere with any agreement or contract between the Company or any
subsidiary and such supplier or (b) directly or indirectly solicit or attempt to solicit any
employee of the Company or any of its subsidiaries (a “Current Employee”) or any person who was an
employee of the Company or any of its subsidiaries during the 12-month period immediately prior to
the date your employment terminates (a “Former Employee”) to terminate such employee’s employment
relationship with the Protected Parties in order, in either case, to enter into a similar
relationship with you, or any other person or any entity or hire any employee or Former Employee,
provided, however, that Current Employees and Former Employees do not include your personal
assistant(s) or your administrative support personnel.

     During the period beginning on the Effective Date and ending on May 30, 2008, you will not,
whether individually, as a director, manager, member, stockholder, partner, owner, employee,
consultant or agent of any business, or in any other capacity, other than on behalf of the Company
or a subsidiary, organize, establish, own, operate, manage, control, engage in, participate in,
invest in, permit your name to be used by, act as a consultant or advisor to, render services for
(alone or in association with any person, firm, corporation or business organization), or otherwise
assist any person or entity that engages in or owns, invests in, operates, manages or controls any
venture or enterprise which engages or proposes to engage in any business conducted by the Company
or any of its subsidiaries on the date of your termination of employment or within 12 months of
your termination of employment in the geographic locations where the Company and its subsidiaries
engage or propose to engage in such business (the “Business”). Notwithstanding the foregoing,
nothing in this Letter Agreement shall prevent you from (i) owning for passive investment purposes
not intended to circumvent this Letter Agreement, less than five percent (5%) of the publicly
traded common equity securities of any company engaged in the Business (so long as you have no
power to manage, operate, advise, consult with or control the competing enterprise and no power,
alone or in conjunction with other affiliated parties, to select a director, manager, general
partner, or similar governing official of the competing enterprise other than in connection with
the normal and customary voting powers afforded you in connection with any permissible equity
ownership), (ii) being employed by or otherwise associated with an organization or entity of which
a subsidiary, division, segment, unit, etc. is
engaged in the Business (a “Competing Division”), provided that (x) you have no direct or indirect
responsibilities or involvement with such Competing Division and (y) the Competing Division does
not account for more that 5% of the

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gross revenues of such organization or entity for its prior
fiscal year or (iii) being employed by or otherwise associated with an organization or entity
engaged in the Business; provided that the Business that is competitive with the Company or any of
its Subsidiaries does not account for more than 5% of the gross revenues of the Company and its
Subsidiaries.

     You acknowledge that all originals and copies of materials, records and documents generated by
you or coming into your possession during your employment by the Company or its subsidiaries are
the sole property of the Company and its subsidiaries (“Company Property”). During the Employment
Period, and at all times thereafter, you shall not remove, or cause to be removed, from the
premises of the Company or its subsidiaries, copies of any record, file, memorandum, document,
computer related information or equipment, or any other item relating to the business of the
Company or its subsidiaries, except in furtherance of your duties under this Letter Agreement.
When your employment with the Company terminates, or upon request of the Company at any time, you
shall promptly deliver to the Company all copies of Company Property in your possession or control.

     We both acknowledge and agree that your breach or threatened breach of any of the restrictions
set forth in this above 8 paragraphs of this Letter Agreement will result in irreparable and
continuing damage to the Protected Parties for which there may be no adequate remedy at law and
that the Protected Parties shall be entitled to seek equitable relief, including specific
performance and injunctive relief as remedies for any such breach or threatened or attempted
breach, without requiring the posting of a bond. You hereby consent to the grant of an injunction
(temporary or otherwise) against you or the entry of any other court order against you prohibiting
and enjoining you from violating, or directing you to comply with any provision of the above 8
paragraphs of this Letter Agreement, if such is determined by a court of competent jurisdiction.
You also agree that such remedies shall be in addition to any and all remedies, including damages,
available to the Protected Parties against you for such breaches or threatened or attempted
breaches. In addition, without limiting the Protected Parties’ remedies for any breach of any
restriction on you set forth in the above 8 paragraphs of this Letter Agreement, except as required
by law, you shall not be entitled to any payments set forth in this Letter Agreement if you have
breached the covenants applicable to you contained in the above 8 paragraphs of this Letter
Agreement, you will immediately return to the Protected Parties any such payments previously
received under this Letter Agreement upon such a breach, and, in the event of such breach, the
Protected Parties will have no obligation to pay any of the amounts that remain payable by the
Company under this Letter Agreement.

     The Company agrees, to the extent permitted by applicable law and its organizational
documents, to indemnify, defend and hold you harmless from and against any and all losses, suits,
actions, causes of action, judgments, damages, liabilities, penalties, fines, costs or claims of
any kind or nature (“Indemnified Claim”), including reasonable legal fees and related costs
incurred by you in connection with the preparation for or defense of any Indemnified Claim, whether
or not resulting in any liability, to which you may become subject or liable or which may be
incurred by or assessed against you, relating to or arising out of your employment by the Company
or the services to be performed pursuant to this Letter Agreement, provided that the Company shall
only defend, but not indemnify or hold you harmless, from and against an Indemnified Claim in the
event there is a final, non-appealable, determination that your liability with respect to such
Indemnified Claim resulted from your willful misconduct or gross negligence. The Company’s
obligations under this paragraph shall be in addition to any other right, remedy or indemnification
that you may have or be entitled to at common law or otherwise. During the Employment Period and
for a period of 6 years after the termination of your employment, the Company agrees to continue
and maintain a directors and officers’ liability insurance policy covering you to the extent the
Company provides such coverage for its managers, directors and/or other executive officers.

     Any notice or other communication required or which may be given hereunder shall be in writing
and shall be delivered personally, telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered or express mail, postage prepaid or overnight mail and shall be deemed given
when so delivered personally, telegraphed, telexed, or sent by facsimile transmission or, if
mailed, 4 days after the date of mailing or one day after overnight mail, as follows:

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If to the Company, to:

GMAC LLC

200 Renaissance Center

Tower 200, 9th Floor

MC 482-B09-B11

Detroit, MI 48265

Attention: General Counsel

Telephone: (313) 656-6128

Fax: (313) 656-6189

If to you, to your home address reflected in the Company’s records.

     This Letter Agreement contains the entire agreement between you and the Company with respect
to the subject matter hereof and supersedes all prior agreements, written or oral, with respect
thereto.

     You represent and warrant that you are not a party to or subject to any restrictive covenants,
legal restrictions or other agreements in favor of any entity or person which would in any way
preclude, inhibit, impair or limit your ability to perform your obligations under this Letter
Agreement, including, but not limited to, non-competition agreements, non-solicitation agreements
or confidentiality agreements. The Company represents and warrants that it is fully authorized and
empowered to enter into this Letter Agreement and that the performance of its obligations under
this Letter Agreement will not violate any agreement between it and any other person, firm or
organization.

     This Letter Agreement may be amended, modified, superseded, canceled, renewed or extended, and
the terms and conditions hereof may be waived, only by a written instrument signed by both you and
the CEO or, in the case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any right, power or privilege hereunder, nor any single or partial
exercise of any right, power or privilege hereunder, preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder.

     This Letter Agreement shall be governed and construed in accordance with the laws of the State
of New York applicable to agreements made and not to be performed entirely within such state,
without regard to conflicts of laws principles, unless superseded by federal law.

     We both agree irrevocably to submit to the exclusive jurisdiction of the federal courts or, if
no federal jurisdiction exists, the state courts, located in the City of New York, Borough of
Manhattan, for the purposes of any suit, action or other proceeding brought by any party arising
out of any breach of any of the provisions of this Letter Agreement and hereby waive, and agree not
to assert by way of motion, as a defense or otherwise, in any such suit, action, or proceeding, any
claim that it is not personally subject to the jurisdiction of the above-named courts, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action
or proceeding is improper, or that the provisions of this Letter Agreement may not be enforced in
or by such courts. In addition, we both agree to waive trial by jury.

     This Letter Agreement, and the rights and obligations hereunder, may not be assigned by the
Company or by you without written consent signed by the other party, provided that the Company may
assign this Letter Agreement to any successor that continues the business of the Company.

     This Letter Agreement may be executed in counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same instrument.

     If any term, provision, covenant or restriction of this Letter Agreement, or any part thereof,
is held by a court of competent jurisdiction of any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or authority to be
invalid, void, unenforceable or against public policy for any reason, the
remainder of the terms, provisions, covenants and restrictions of this Letter Agreement shall
remain in full force and effect and shall in no way be affected or impaired or invalidated. You
acknowledge that the restrictive covenants

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contained in this Letter Agreement are a condition of
this Letter Agreement and are reasonable and valid in temporal scope and in all other respects.

     If any court determines that any of the restrictive covenants contained in this Letter
Agreement, or any part of any of them, is invalid or unenforceable, the remainder of such covenants
and parts thereof shall not thereby be affected and shall be given full effect, without regard to
the invalid portion. If any court determines that any of such covenants, or any part thereof, is
invalid or unenforceable because of the geographic or temporal scope of such provision, such court
shall reduce such scope to the minimum extent necessary to make such covenants valid and
enforceable.

     The Company or other payor is authorized to withhold from any benefit provided or payment due
hereunder, the amount of withholding taxes due any federal, state or local authority in respect of
such benefit or payment and to take such other action as may be necessary in the opinion of the
Company to satisfy all obligations for the payment of such withholding taxes.

     Notwithstanding any other provision of this Letter Agreement, if at the time of the
termination your employment you are a “specified employee” (as defined in Section 409A of the
Internal Revenue Code of 1986, as amended (“Section 409A”)) and any payments under this Letter
Agreement will result in additional tax or interest to you under Section 409A, you will not be
entitled to receive such payments until the date which is six (6) months after the termination of
your employment for any reason, other than as a result of your death or disability (as such term is
defined in Section 409A). In addition, if any provision of this Letter Agreement would subject you
to any additional tax or interest under Section 409A, then the Company shall reform such provision;
provided that the Company shall (x) maintain, to the maximum extent practicable, the original
intent of the applicable provision without subjecting you to such additional tax or interest and
(y) not incur any additional compensation expense as a result of such reformation.

Sincerely,

Eric Feldstein

Chief Executive Officer

GMAC LLC

Accepted and Agreed:

                                             

Sanjiv Khattri

                                             

Date

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Exhibit A

GENERAL RELEASE

     I, Sanjiv Khattri, in consideration of and subject to the terms and conditions set forth in
the letter agreement from Eric Feldstein to me dated March 13, 2008 (the “Letter Agreement”) to
which this General Release is attached, and other good and valuable consideration, do hereby
release and forever discharge GMAC LLC (the “Company”) and its current and former officers,
directors, partners, members, shareholders, investors, employees, attorneys, agents, predecessors,
successors, affiliates, assigns and legal representatives (together, the “Company Released
Parties”), from any and all claims, charges, manner of actions and causes of action, suits, debts,
dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, and demands
whatsoever which I, my heirs, executors, administrators and assigns have, or may hereafter have
against the Company Released Parties arising out of or by reason of any cause, matter or thing
whatsoever, whether known or unknown, from the beginning of the world to the date hereof (“Claims”)
in connection with or relating to my employment or termination of employment with the Company and
its subsidiaries, the Letter Agreement, my Employment Agreement dated November 30, 2006, all
employment-related matters arising under any federal, state or local statute, rule or regulation or
principle of contract law or common law and any claims of employment discrimination, unlawful
harassment or retaliation claims and claims arising under Title VII of the Civil Rights Act of
1964, 42 U.S.C. § 2000 et seq., the Employee Retirement Income Security Act of
1974, 29 U.S.C. § 1001 et seq., the Fair Labor Standards Act (to the extent allowed
by law), 29 U.S.C. § 201 et seq., Age Discrimination in Employment Act of 1967, 29
U.S.C. § 621, et seq., the Reconstruction Era Civil Rights Act, 42 U.S.C. § 1981
et seq., the Americans with Disabilities Act of 1993, 42 U.S.C. § 12900 et
seq., the Family and Medical Leave Act of 1990 (to the extent allowed by law), 42 U.S.C. §
12101, et seq., the New York State Human Rights Law, N.Y. Exec. Law § 290
et seq., the New York State Labor Law, N.Y. Labor Law § 1 et seq.,
and the New York City Human Rights Law, N.Y.C. Admin. Code § 8-107 et seq.

     This General Release does include any claim arising under or in connection with any existing
obligation of the Company (i) to pay or provide any compensation or benefit required to be paid or
provided under the Letter Agreement, (ii) to indemnify me for my acts as an officer or director of
the Company in accordance with the bylaws of the Company and the policies and procedures of the
Company that are presently in effect, or (iii) to me and my eligible, participating dependents or
beneficiaries under any existing welfare, retirement or other fringe-benefit plan or program of the
Company in which I and/or my dependents are participants.

     I acknowledge that I have been advised to consult with legal counsel. I acknowledge that I
have been provided with the opportunity to review and consider this General Release for twenty-one
(21) days from the date it was provided to me. If I elect to sign before the expiration of the
twenty-one (21) days, I acknowledge that I will have chosen, of my own free will without any
duress, to waive my right to the full twenty-one (21) day period. I understand that I may revoke
this General Release within seven (7) days after my execution by sending a written notice of
revocation to Mr. Anthony S. Marino, Group Vice President and Chief Human Resources Officer, GMAC
LLC, 200 Renaissance Center, Tower 200, 14th Floor, MC 482-B14-D46, Detroit, MI 48265, received
within the seven-day revocation period.

     I acknowledge that I have not relied on any representations or statements not set forth in the
Letter Agreement or in this General Release. Unless otherwise publicly filed by the Company, I will
not disclose the contents or substance of this General Release to any third parties, other than my
attorneys, accountants, or as required by law, and I will instruct each of the foregoing not to
disclose the same. I am signing this General Release knowingly, voluntarily and with full
understanding of its terms and effects.

     This General Release will be governed by and construed in accordance with the laws of the
State of New York. If any provision in this General Release is held invalid or unenforceable for
any reason, the remaining provisions shall be construed as if the invalid or unenforceable
provision had not been included.

     In witness hereof, I have executed this General Release this 13th day of March, 2008.

	 	 	 	 	 
	 	 	 
	 	                                           
 	 
	 	Sanjiv Khattri 	 
	 	 	 
	 

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Exhibit B

GENERAL RELEASE

     I, Sanjiv Khattri, in consideration of and subject to the terms and conditions set forth in the
letter agreement from Eric Feldstein to me dated March 13, 2008 (the “Letter Agreement”) to which
this General Release is attached, and other good and valuable consideration, do hereby release and
forever discharge GMAC LLC (the “Company”) and its current and former officers, directors,
partners, members, shareholders, investors, employees, attorneys, agents, predecessors, successors,
affiliates, assigns and legal representatives (together, the “Company Released Parties”), from any
and all claims, charges, manner of actions and causes of action, suits, debts, dues, accounts,
bonds, covenants, contracts, agreements, judgments, charges, claims, and demands whatsoever which
I, my heirs, executors, administrators and assigns have, or may hereafter have against the Company
Released Parties arising out of or by reason of any cause, matter or thing whatsoever, whether
known or unknown, from March 13, 2008 to the date hereof (“Claims”) in connection with or relating
to my employment or termination of employment with the Company and its subsidiaries, the Letter
Agreement, my Employment Agreement dated November 30, 2006, all employment-related matters arising
under any federal, state or local statute, rule or regulation or principle of contract law or
common law and any claims of employment discrimination, unlawful harassment or retaliation claims
and claims arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000 et
seq., the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et
seq., the Fair Labor Standards Act (to the extent allowed by law), 29 U.S.C. § 201
et seq., Age Discrimination in Employment Act of 1967, 29 U.S.C. § 621, et
seq., the Reconstruction Era Civil Rights Act, 42 U.S.C. § 1981 et seq.,
the Americans with Disabilities Act of 1993, 42 U.S.C. § 12900 et seq., the Family
and Medical Leave Act of 1990 (to the extent allowed by law), 42 U.S.C. § 12101, et
seq., the New York State Human Rights Law, N.Y. Exec. Law § 290 et seq.,
the New York State Labor Law, N.Y. Labor Law § 1 et seq., and the New York City
Human Rights Law, N.Y.C. Admin. Code § 8-107 et seq.

     This General Release does include any claim arising under or in connection with any existing
obligation of the Company (i) to pay or provide any compensation or benefit required to be paid or
provided under the Letter Agreement, (ii) to indemnify me for my acts as an officer or director of
the Company in accordance with the bylaws of the Company and the policies and procedures of the
Company that are presently in effect, or (iii) to me and my eligible, participating dependents or
beneficiaries under any existing welfare, retirement or other fringe-benefit plan or program of the
Company in which I and/or my dependents are participants.

     I acknowledge that I have been advised to consult with legal counsel. I acknowledge that I
have been provided with the opportunity to review and consider this General Release for twenty-one
(21) days from the date it was provided to me. If I elect to sign before the expiration of the
twenty-one (21) days, I acknowledge that I will have chosen, of my own free will without any
duress, to waive my right to the full twenty-one (21) day period. I understand that I may revoke
this General Release within seven (7) days after my execution by sending a written notice of
revocation to Mr. Anthony S. Marino, Group Vice President and Chief Human Resources Officer, GMAC
LLC, 200 Renaissance Center, Tower 200, 14th Floor, MC 482-B14-D46, Detroit, MI 48265, received
within the seven-day revocation period.

     I acknowledge that I have not relied on any representations or statements not set forth in the
Letter Agreement or in this General Release. Unless otherwise publicly filed by the Company, I will
not disclose the contents or substance of this General Release to any third parties, other than my
attorneys, accountants, or as required by law, and I will instruct each of the foregoing not to
disclose the same. I am signing this General Release knowingly, voluntarily and with full
understanding of its terms and effects.

     This General Release will be governed by and construed in accordance with the laws of the
State of New York. If any provision in this General Release is held invalid or unenforceable for
any reason, the remaining provisions shall be construed as if the invalid or unenforceable
provision had not been included.

     In witness hereof, I have executed this General Release this ___day of
                    , 2008.

	 	 	 	 	 
	 	 	 
	 	 
 	 
	 	Sanjiv Khattri 	 
	 	 	 
	 

Page 9 of 9exv10w17

 

EXHIBIT 10.17

STANDARD INDUSTRIAL LEASE

	 	 	 	 	 	 	 	 	 	 	 	 	 
	1.	 	Basic Lease Provisions.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.1	 	 	Date:
	 	July 14, 2004	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	1.2	 	 	Landlord:	 	Nordhoff Industrial Complex, a California general partnership
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	1.3	 	 	Tenant:	 	LuminentOIC Inc., a Delaware corporation
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	1.4	 	 	Premises Address:	 	20550 Nordhoff Street, Chatsworth, California
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	1.5	 	 	Approximate Leasable
Area of Premises:
(in square feet)	 	49,920	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	1.6	 	 	Use:	 	Engineering, manufacture, assembly and distribution of electrical, telecommunications, computer
and related products and associated office uses
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.7	 	 	Term:
	 	Ten (10) years	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.8	 	 	Commencement Date:	 	July 14, 2004	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.9	 	 	Monthly Base Rent:
	 	July 14, 2004 through July 13, 2005:	 	$	43,430.40;	 
	 

	 	 	 	 	 	 	 	July 14, 2005 through July 13, 2006:	 	$	44,733.31;	 
	 

	 	 	 	 	 	 	 	July 14, 2006 through July 13, 2007:	 	$	46,075.31;	 
	 

	 	 	 	 	 	 	 	July 14, 2007 through July 13, 2008:	 	$	47,457.57;	 
	 

	 	 	 	 	 	 	 	July 14, 2008 through July 13, 2009:	 	$	48,881.30;	 
	 

	 	 	 	 	 	 	 	July 14, 2009 through July 13, 2010:	 	$	50,347.74;	 
	 

	 	 	 	 	 	 	 	July 14, 2010 through July 13, 2011:	 	$	51,858.17;	 
	 

	 	 	 	 	 	 	 	July 14, 2011 through July 13, 2012:	 	$	53,413.91;	 
	 

	 	 	 	 	 	 	 	July 14, 2012 through July 13, 2013:	 	$	55,016.33; and
	 

	 	 	 	 	 	 	 	July 14, 2013 through July 13, 2014:	 	$	56,666.82.	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.10	 	 	Base Rent Paid
Upon Execution:	 	None	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	          Applied
To:	 	N/A	 	 	 	 
	 
	 	 	 	 	 	          (insert month(s))	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.11	 	 	Security Deposit:
	 	 $37,939.20 (See Addendum)	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.12	 	 	Real Estate Broker:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	          Landlord:
	 	None	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	          Tenant:
	 	Julien J. Studley, Inc.	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	1.13	 	 	Exhibits
Attached to Lease:	 	Exhibit A — “Premises;” Exhibit B — “Form of HazMat Certificate;”
Exhibit C — “Work Letter Agreement;” Exhibit D — “Addendum
to Lease;” and Exhibit E — “Guaranty of Lease”; Exhibit F
—“License Agreement (Satellite Dish)”
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.14	 	 	Addresses for
Notices:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	          Landlord:
	 	Nordhoff Industrial Complex	 	 	 	 
	 

	 	 	 	 	 	 	 	c/o Trail’s End Development Corporation	 	 	 	 
	 

	 	 	 	 	 	 	 	P.O. Box 3778	 	 	 	 
	 

	 	 	 	 	 	 	 	Mammoth Lakes, California 93546-3778	 	 	 	 
	 

	 	 	 	 	 	 	 	Attention: James J. Smith	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	          With a Copy to:
	 	Mid Valley Properties	 	 	 	 
	 
	 	 	 	 	 	 	 	26901 Agoura Road, Suite 180	 	 	 	 
	 
	 	 	 	 	 	 	 	Calabasas Hills, California 91301	 	 	 	 
	 

	 	 	 	 	 	 	 	Attention: Julee Rich	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	          Tenant:
	 	LuminentOIC Inc.	 	 	 	 
	 
	 	 	 	 	 	 	 	20550 Nordhoff Street	 	 	 	 
	 
	 	 	 	 	 	 	 	Chatsworth, California 91311	 	 	 	 
	 

	 	 	 	 	 	 	 	Attention: President	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	          Guarantor:
	 	MRV Communications, Inc.	 	 	 	 
	 

	 	 	 	 	 	 	 	20415 Nordhoff Street	 	 	 	 
	 

	 	 	 	 	 	 	 	Chatsworth, California 91311	 	 	 	 
	 

	 	 	 	 	 	 	 	Attention: President	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 

2. Premises.

     2.1

Acceptance. Landlord leases to Tenant, and Tenant leases from Landlord, the
Premises, to have and to hold for the term of this Lease, subject to the terms, covenants and
conditions of this Lease. The Premises is depicted on Exhibit “A” attached hereto and contains
one or more buildings (collectively, the “Building”) and the other areas depicted on Exhibit “A”
as being part of the Premises. Tenant accepts the Premises in its condition as of the
Commencement Date, subject to all applicable laws, ordinances and regulations, and all
covenants, conditions, restrictions and easements recorded prior to the date hereof, and except
as may be otherwise expressly provided herein, Landlord shall not be obligated to make any
repairs or alterations to the Premises. Tenant acknowledges that Landlord has made no
representation or warranty as to the suitability of the Premises for the conduct of Tenant’s
business, and Tenant
waives any implied warranty that the Premises are suitable for Tenant’s intended purposes.

 

3.
Term and Commencement Date. The term
and Commencement Date of this Lease are as specified in sections 1.7 and 1.8.

4. Use.

     4.1 Permitted Use. The Premises shall be used only for the purpose described in
section 1.6 and for no other purpose without Landlord’s prior written consent, which consent shall
not be unreasonably withheld or delayed. Landlord makes no representation or warranty that Tenant’s
use is permitted by applicable zoning laws or other laws and regulations. In no event shall any
portion of the Premises be used for retail sales. Tenant shall not initiate, submit an application
for, or otherwise request, any land use approvals or entitlements with respect to the Premises,
without limitation, any variance, conditional use permit or rezoning, without first obtaining
Landlord’s prior written consent, which may be given or withheld in Landlords sole discretion.
Tenant shall not (a) permit any animals or pets to be brought to or kept in the Premises, (b)
subject to Tenant’s rights under the License Agreement attached hereto as
Exhibit “ F”, install any
antenna dish or other device on the roof of the Building or outside of
the Premises, (c) make any
penetrations into the roof of the Building, (d) place loads upon floors, walls or ceilings in
excess of the load such items were designed to carry, (e) place or store, nor permit any other
person or entity to place or store, any property, equipment, materials, supplies or other items
outside of the Building or (f) change the exterior of the Premises or the Building.

     4.2 Compliance
With Laws. Tenant shall, at Tenant’s sole expense, promptly comply
with all applicable laws, ordinances, rules, regulations, orders, certificates of occupancy,
conditional use or other permits, variances, covenants, conditions, restrictions, easements, the
recommendations of Landlord’s engineers or other consultants, and requirements of any fire
insurance underwriters, rating bureaus or government agencies, now in effect or which may
hereafter come into effect, whether or not they reflect a change in policy from that now
existing, during the term or any part of the term hereof, relating in any manner to the Premises
or the occupation and use by Tenant of the Premises; provided, however that to the extent that
improvements or alterations are required to be made to the Landlord Repair items (as defined
below) in order to comply with any such requirements, and such alterations are not necessitated
by Tenant’s negligence or misuse, Landlord and not Tenant shall be responsible for such
improvements and/or alterations. Tenant shall, at Tenant’s sole expense, comply with all
requirements of the Americans With Disabilities Act that relate to the
Premises, and all federal, state and local laws and regulations governing occupational
safety and health. Tenant shall not
permit any objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to emanate
from the Premises, or take any other action that would constitute a nuisance or would disturb,
unreasonably interfere with or endanger Landlord or persons or property within the vicinity of
the Premises. Tenant shall obtain, at its sole expense, any permit or other governmental
authorization required to operate its business from the Premises. Landlord shall not be liable
for the failure of any other tenant or person to abide by the requirements of this section or to
otherwise comply with applicable laws and regulations, and Tenant shall not be excused from the
performance of its obligations under this Lease due to such a failure.

5. Rent.

     5.1 Base Rent. Tenant shall
pay Base Rent in the amount set forth on the first page of
this Lease. Tenant promises to pay to Landlord in advance, without demand, deduction or set-off
(except as expressly permitted in this Lease), monthly installments of Base Rent on or before the
first day of each calendar month succeeding the Commencement Date, Payments of Base Rent for any
fractional calendar month shall be prorated. All payments required to be made by Tenant to
Landlord hereunder shall be payable at such address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant shall have no right at any time to abate,
reduce, or set off any rent due hereunder except where expressly provided in this Lease.

     5.2 Audits. Any bill sent by Landlord to Tenant requesting payment for insurance
costs or Real Property Taxes is hereinafter referred to as a “Statement”. If Tenant disputes the
amount set forth in the Statement, Tenant shall have the right, at Tenant’s sole expense, not later
than one hundred eighty (180) days following receipt of such Statement, to cause Landlord’s books
and records with respect to the calendar year which is the subject of the Statement to be audited
by a certified public accountant mutually acceptable to Landlord and Tenant. The audit shall take
place at the offices of Landlord where its books and records are located at a mutually convenient
time during Landlord’s regular business hours. Insurance costs and Real Property Taxes shall be
appropriately adjusted based upon the results of such audit, and the results of such audit shall
be final and binding upon Landlord and Tenant. Tenant shall have no right to conduct an audit or
to give Landlord notice that it desires to conduct an audit at any time Tenant is in default
under the Lease beyond any applicable notice and cure periods. The accountant conducting the
audit shall be compensated on an hourly basis and shall not be compensated based upon a
percentage of overcharges it discovers. No subtenant shall have any right to conduct an audit, and
no assignee shall conduct an audit for any period during which such assignee was not in
possession of the Premises. Tenant’s right to undertake an audit shall expire one hundred eighty
(180) days after Tenant’s receipt of the Statement, and such Statement shall be final
and binding upon Tenant and shall, as between the parties, be conclusively deemed correct, at
the end of such one hundred eighty (180) day period, unless prior thereto Tenant shall have given Landlord
written notice of its intention to audit the insurance costs or Real Property Taxes which are the
subject of the Statement. If Tenant gives Landlord notice of its intention to audit a Statement,
it must commence such audit within sixty (60) days after such notice is delivered to Landlord,
and the audit must be completed within one hundred twenty (120) days after such notice is
delivered to Landlord. If Tenant does not commence and complete the audit within such periods, the
Statement which Tenant elected to audit shall be deemed final and binding upon Tenant and shall,
as between the parties, be conclusively deemed correct. Tenant agrees that the results of any
audit shall be kept strictly confidential by Tenant and shall not be disclosed to any other
person or entity. If any such audit reveals that Landlord has overcharged Tenant, then within
thirty (30) days after the results of such audit are made available to Landlord, Landlord shall
promptly reimburse Tenant the amount of such overcharge.

6. Security deposit. Subject to the provisions of Section 5 of the Addendum
attached hereto, Tenant shall deliver to Landlord at the time it executes this Lease the security
deposit set forth in section 1.11 as security for Tenant’s faithful performance of Tenant’s
obligations hereunder. If Tenant fails to pay Base Rent or other charges due hereunder, or
otherwise defaults with respect to any provision of this Lease beyond applicable notice and cure
periods, Landlord may use all or any portion of said deposit for the payment of any Base Rent or
other charge due hereunder, to pay any other sum to which Landlord may become obligated by reason
of Tenant’s default, or to reimburse Landlord for any loss or damage which Landlord may suffer
thereby. If Landlord so uses or applies all or any portion of said deposit. Tenant shall within
ten (10) days after written demand therefor deposit cash with Landlord in an amount sufficient to
restore said deposit to its full amount. Landlord shall not be required to keep said security
deposit separate from its general accounts. If Tenant performs all of Tenant’s obligations
hereunder, said deposit, or so much thereof as has not heretofore been applied by Landlord, shall
be returned, without payment of interest or other amount for its use, to Tenant (or, at
Landlord’s option, to the last assignee, if any, of Tenant’s interest hereunder) at the
expiration of the term hereof, and in any event within thirty (30) days after Tenant has vacated
the Premises. No trust relationship is created herein between Landlord and Tenant with respect to
said security deposit. Tenant acknowledges that the security deposit is not an advance payment of
any kind or a measure of Landlord’s damages in the event of Tenant’s default. Tenant hereby
waives the provisions of any law which is inconsistent with this section.

2

 

7. Utilities.

     7.1
Payment. Tenant shall pay for all water, gas, electricity, telephone, sewer,
sprinkler services, refuse and trash collection, and other utilities and services used at the
Premises (collectively “Services”), together with any taxes, penalties, surcharges
or the like pertaining thereto. Tenant shall contract directly with all providers of Services. Tenant agrees
to limit use of water and sewer for normal restroom use and nothing herein contained shall impose
upon Landlord any duty to provide sewer or water usage for other than normal restroom usage.

     7.2 Interruptions. Tenant shall be solely responsible for obtaining all
Services, and Landlord shall have no liability to Tenant if Tenant is unable to obtain Services
for any reason Including, but not limited to, repairs, replacements or improvements, by any
strike, lockout or other labor trouble, by inability to secure electricity, gas, water, telephone
service or other utility at the Premises, by any accident, casualty or event arising from any
cause whatsoever, by act, negligence or default of Tenant or any other person or entity, or by any
other cause, and such failures shall never be deemed to constitute an eviction or disturbance of
Tenant’s use and possession of the Premises or relieve Tenant from the obligation of paying rent
or performing any of its obligations under this Lease except as set forth in section 7.3 below;
provided, however, the forgoing shall not release Landlord from liability arising out of the
gross negligence or willful misconduct of Landlord and Landlord’s employees, agents and
contractors. Furthermore, Landlord shall not be liable under any circumstances for loss of
property or for Injury to, or interference with, Tenant’s business, including, without
limitation, loss of profits, however occurring, through or in connection with or incidental to
Tenant’s Inability to obtain Services, unless caused by the gross negligence or willful
misconduct of Landlord or Landlord’s employees, agents and contractors.

     7.3 Abatement of Rent. In the event that Tenant is prevented from using, and does
not use, the Premises or any portion thereof, for five (5) consecutive business days or ten (10)
days in any twelve (12) month period (the “Eligibility
Period”) as a result of (a) any repair,
maintenance or alteration performed by Landlord to the Premises after the Commencement Date and
required by the Lease, which substantially interferes with Tenant’s use of the Premises, (b)
substantial interference with Tenant’s access to the Premises, or (c) any failure to provide
Services due to Landlord’s negligence or default, then Tenant’s rent shall be abated or reduced,
as the case may be, after expiration of the Eligibility Period for such time that Tenant
continues to be so prevented from using, and does not use, the Premises or a portion thereof, in
the proportion that the rentable area of the portion of the Premises that Tenant is prevented
from using, and does not use, bears to the total rentable area of the Premises. However, in the
event that Tenant is prevented from conducting, and does not conduct, its business in any portion
of the Premises for a period of time in excess of the Eligibility Period, and the remaining
portion of the Premises is not sufficient to allow Tenant to effectively conduct its business
therein, and if Tenant does not conduct its business from such remaining portion, then for such
time after expiration of the Eligibility Period during which Tenant is so prevented from
effectively conducting its business therein, the rent for the entire Premises shall be abated;
provided, however, if Tenant reoccupies and conducts its business from any portion of the
Premises during such period, the rent allocable to such reoccupied portion, based on the
proportion that the rentable area of such reoccupied portion of the Premises bears to the total
rentable area of the Premises, shall be payable by Tenant from the date such business operations
commence.

8. Real and Personal Property Taxes.

     8.1 Payment of Taxes. Tenant
shall pay to Landlord during the term of this Lease,
in addition to Base Rent all “Real Property Taxes” (as defined below). Real Property Taxes shall
be payable by Tenant by the later of (i) twenty (20) days
after a reasonably detailed statement of actual expenses is presented to Tenant by Landlord, and
(II) ten days prior to the date such Real Property Taxes are due and payable. At Landlord’s
option, however, Landlord may, from time to time, reasonably estimate what Real Property Taxes
will be, and the same shall be payable by Tenant monthly during each calendar year of the Lease
term, on the same day as the Base Rent is due hereunder. In the event that Tenant pays Landlord’s
estimate of Real Property Taxes, Landlord shall use its best efforts to deliver to Tenant within
one hundred eighty (180) days after the expiration of each calendar year a reasonably detailed
statement (the “Statement”) showing the Real Property Taxes incurred during such year.
Landlord’s
failure to deliver the Statement to Tenant within said period shall not constitute
Landlord’s waiver of its right to collect said amounts or otherwise prejudice
Landlord’s rights hereunder. If Tenant’s payments under this section during said calendar year exceed the Real Property Taxes as
indicated on the Statement, Tenant shall be entitled to credit the amount of such overpayment
against the Base Rent next falling due. If Tenant’s payments under this section during said
calendar year were less than Real Property Taxes as indicated on the Statement, Tenant shall pay
to Landlord the amount of the deficiency within thirty (30) days after delivery by Landlord to
Tenant of the Statement. Landlord and Tenant shall forthwith adjust between them by cash payment
any balance determined to exist with respect to that portion of the last calendar year for which
Tenant is responsible for Real Property Taxes, notwithstanding that the Lease term may have
terminated before the end of such calendar year; and this provision shall survive the expiration
or earlier termination of the Lease.

     8.2 Definition of Real Property Tax. As used
 herein,
the term “Real
Property Taxes” shall include any form of real estate tax or assessment, general, special,
ordinary or extraordinary, improvement bond or bonds Imposed on the Premises or any portion
thereof by any authority having the direct or indirect power to tax, including any city, county,
state or federal government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, as against any legal or equitable interest of Landlord in the
Premises or in any portion thereof. Real Property Taxes shall not Include income, inheritance,
gift, excise, corporate, partnership, transfer and documentary taxes. If Landlord receives a
refund of Real Property Taxes previously paid by Tenant, Landlord shall refund such refund to
Tenant.

     8.3 Personal Property Taxes. Tenant shall pay prior to delinquency ail
taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the Premises or related to Tenant’s use of the Premises.
If any of Tenant’s personal property shall be assessed with Landlord’s real or personal property,
Tenant shall pay to Landlord the taxes attributable to Tenant by the
later of: (i) twenty (20) days after a reasonably detailed written statement from Landlord
setting forth the taxes applicable to Tenant’s property, and (ii) ten (10) days prior to the date
such taxes are due and payable.

9. Insurance.

     9.1 Insurance-Tenant.

          (a) Tenant shall obtain and keep in force during the term of this Lease a commercial general
liability policy of insurance with coverages acceptable to Landlord, in Landlord’s reasonable
discretion, which, by way of example and not limitation, protects Tenant and Landlord (as an
additional insured) against claims for bodily injury, personal injury and property damage based
upon, involving or arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence basis providing
single-limit coverage in an amount not less than $2,000,000 per occurrence with an “Additional
Insured-Managers and Landlords of Premises Endorsement” and contain the “Amendment of the
Pollution Exclusion” for damage caused by heat, smoke or fumes from a hostile fire. The policy
shall not contain any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an “insured contract” for the
performance of Tenant’s indemnity obligations under this Lease.

          (b) Tenant shall obtain and keep in force during the term of this Lease “all-risk” extended
coverage property insurance with coverages acceptable to Landlord, In Landlord’s reasonable
discretion. Said Insurance shall be written on a

3

 

one hundred percent (100%) replacement cost basis on Tenant’s personal property, all tenant
improvements installed at the Premises by Landlord or Tenant, Tenant’s trade fixtures and
Tenant’s other property. By way of example, and not limitation, such policies shall provide
protection against any peril included within the classification “fire and extended coverage “against
vandalism and malicious mischief, theft sprinkler leakage. Tenant shall not be obligated to
purchase insurance for earthquake damage and flood damage.

          (c) Tenant shall, at all times during the term hereof, maintain in effect workers’ compensation
insurance as required by applicable law and business interruption and extra expense insurance
satisfactory to Landlord.

          (d) Notwithstanding any rights of Landlord to approve insurance coverages and amounts,
Landlord acknowledges that the insurance currently carried by Tenant satisfies Tenant’s obligations
under this section 9.1 as of the date of this Lease.

     9.2 Insurance-Landlord.

          (a) Landlord
shall obtain and keep in force a policy of general liability insurance with
coverage against such risks and in such amounts as Landlord deems advisable insuring Landlord
against liability arising out of the ownership, operation and management of the Premises.

          (b) Landlord shall also 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 not less than one
hundred percent (100%) of the full replacement cost thereof, as determined by Landlord from time
to time. The terms and conditions of said policies and the perils and covered thereby shall be
determined by Landlord, from time to time, in Landlord’s reasonable discretion but shall include,
at a minimum, protection against any peril included within the classification “fire and extended
coverage”. In addition, at Landlord’s option, Landlord shall obtain and keep in force, during the
term of this Lease, a policy of rental interruption insurance (not to exceed twelve (12) months’
rent), with loss payable to Landlord, which insurance shall, at Landlords option, also cover all
Real Property Taxes. Tenant will not be named as an additional insured in any insurance policies
carried by Landlord and shall have no right to any proceeds therefrom. The policies purchased by
Landlord shall contain such deductibles as Landlord may reasonably determine. Tenant shall pay at
Tenant’s sole expense any increase in the property insurance premiums for the Premises over what
was payable immediately prior to the increase to the extent the Increase is specified by
Landlord’s insurance carrier as being caused by the nature of Tenant’s occupancy or any act or omission of Tenant.

          (c) Tenant shall pay for all insurance purchased by Landlord pursuant to this section 9.2
in the same manner as Tenant pays Real Property Taxes. Landlord shall provide Tenant with a
certificate of insurance evidencing Landlord’s coverage and an Itemized statement of the
insurance premium for such coverage.

     9.3 Insurance Policies.
Tenant shall deliver to Landlord certificates of the
insurance policies required under section 9.1 within fifteen (15) days prior to the Commencement
Date of this Lease. Tenant’s insurance policies shall not be cancelable or subject to reduction
of coverage or other modification except after thirty (30) days prior written notice to Landlord.
Tenant shall, at least thirty (30) days prior to the expiration of such policies, furnish
Landlord with renewals thereof. Tenant’s insurance policies shall be issued by insurance
companies authorized to do business in the state in which the Premises is located, and said
companies shall maintain during the policy term a “General Policyholder’s Rating” of at least
A-and a financial rating of at least “Class VIII” (or such other rating as may be required by any
lender having a lien on the Premises) as set forth in the most recent edition of “Best Insurance
Reports,” All insurance obtained by Tenant shall be primary to and not contributory with any
similar insurance carried by Landlord, whose Insurance shall be considered excess insurance only.
Landlord and, at Landlord’s option, the holder of any mortgage or deed of trust encumbering the
Premises and any person or entity managing the Premises on behalf of Landlord, shall be named as
an additional insured on all insurance policies Tenant is obligated to obtain by section 9.1 above. Tenant’s insurance
policies shall not include deductibles in excess of Fifty Thousand Dollars ($50,000).

     9.4 Waiver of Subrogation. Landlord waives any and all rights of recovery
against Tenant, Tenant’s employees and agents for or arising out of damage to, or destruction of,
the Premises to the extent that Landlord’s insurance policies then in force or the insurance
policies Landlord is required to obtain by section 9.2 (whether or not the insurance Landlord is
required to obtain by section 9.2 is then in force and effect), whichever is broader, Insure
against such damage or destruction. Landlord’s waiver shall not relieve Tenant from liability under
section 18 below except to the extent Landlord’s insurance company actually satisfies Tenants
obligations under section 18 in accordance with the requirements of section 18. Tenant waives any
and all rights of recovery against Landlord, Landlord’s employees and agents for liability or
damages to the extent that such liability or damage is covered by Tenant’s insurance policies
then in force or the insurance policies Tenant Is required to obtain
by Section 9.1 (whether or not the
insurance Tenant is required to obtain by section 9.1 is then in force and
effect), whichever is broader. Landlord’s and Tenant’s waiver shall not be limited by the amount
of insurance then carried by Landlord and Tenant or the deductibles applicable thereto. Each
party shall cause the insurance policies it obtains in accordance with this section 9 that insure
against damage or destruction of property to provide that the insurance company waives all right
of recovery by subrogation against the other party in connection with any liability or damage
covered by the applicable insurance policy.

     9.5 Coverage. Landlord makes no representation to Tenant that the limits
or forms of coverage specified above or approved by Landlord are adequate to insure Tenant’s
property or Tenant’s obligations under this Lease, and the limits of any insurance carried by
Tenant shall not limit Tenant’s obligations or liability under any indemnity provision included
in this Lease or under any other provision of this Lease.

10. Landlord’s repairs. Landlord shall maintain, at Landlord’s expense, only
the structural elements of the roof of the Building (excluding the roof membrane), the
structural soundness of the foundation of the Building and the structural elements of the
exterior walls of the Building (collectively, the “Landlord Repair Items”). Tenant shall
reimburse Landlord for the cost of any maintenance, repair or replacement of the foregoing
necessitated by Tenant’s misuse, negligence, alterations to the Premises or any breach of Its
obligations under this Lease. By way of example, and not limitation, the term “exterior walls”
as used in this section shall not include windows, glass or plate glass, doors or overhead
doors, special store fronts dock bumpers, dock plates or levelers, or office entries. Tenant
shall immediately give Landlord written notice of any repair required by Landlord pursuant to
this section, after which Landlord shall have a reasonable time in which to commence and
diligently complete the repair. Nothing contained in this section shall be construed to obligate
Landlord to seal or otherwise maintain the surface of any foundation, floor or slab. Tenant
expressly waives the benefits of any statute now or hereafter in effect which would otherwise
afford Tenant the right to make repairs at Landlord’s expense or to terminate this Lease because
of Landlord’s failure to keep the Premises in good order, condition and repair.

11. Tenant’s repairs.

     11.1 Obligations of Tenant. Tenant shall, at its sole cost and expense, keep and
maintain all parts of the Premises (except those listed as Landlord’s responsibility in section
10 above) in good and sanitary condition, promptly making all necessary repairs and
replacements, including but not limited to, windows, glass and plate glass, doors, skylights, roof
membranes, any special store front or office entry, walls and finish work, floors and floor
coverings, heating and air

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conditioning systems, dock boards, bumpers, plates, seals, levelers and lights, plumbing work and
fixtures (including periodic backflow testing), electrical systems, lighting facilities and bulbs,
sprinkler systems, alarm systems, fire detection systems, termite and pest extermination, parking
lots, asphalt, curbs, gutters, fencing, landscaped areas, irrigation systems, light standards,
gates, tenant signage and regular removal of trash and debris. Tenant shall notify Landlord in
writing prior to making any repair or performing any maintenance pursuant to this section, and
Landlord shall have the right to reasonably approve the contractor Tenant shall use to make any
repair or to perform any maintenance on the roof, heating, ventilation and air conditioning systems
(“HVAC”), plumbing systems, electrical systems, sprinkler systems, fire alarm systems or fire
detection systems located at the Premises; provided, however, that (a) Tenant shall have the right
to perform routine repairs and maintenance in the Premises without notifying Landlord provided that
the routine maintenance item (i) is not a Landlord Repair Item and (ii) will not cost of more than
Five Thousand Dollars ($5,000) and (b) Tenant shall have the right to begin an emergency repair if
such repair is necessary to prevent imminent damage to persons or property without notifying
Landlord provided that Tenant notifies Landlord that it has commenced the emergency repair as soon
as is reasonably possible. Tenant shall not paint or otherwise change the exterior appearance of
the Premises without Landlord’s prior written consent, which may be given or withheld in Landlord’s
sole discretion, if Tenant fails to keep the Premises in good condition and repair, Landlord may,
but shall not be obligated to, after providing Tenant with written notice and a reasonable time to
complete the applicable repairs, make any necessary repairs. If Landlord makes such repairs,
Landlord may bill Tenant for the cost of the repairs as additional rent, and said additional rent
shall be payable by Tenant within tan (10) days after demand by Landlord.

     11.2 Maintenance Contracts. Tenant shall enter into regularly scheduled preventative
maintenance/service contracts for some or all of the following: the HVAC units servicing the
Premises, the sprinkler, fire alarm and fire detection systems servicing the Premises, backflow
testing for the plumbing servicing the Premises, landscaping and for the roof membrane of the
Premises (the “Maintenance Contracts”). The Maintenance Contracts shall include maintenance
services satisfactory to Landlord, in Landlord’s reasonable discretion. Tenant shall pay the cost
of the Maintenance Contracts at Tenant’s sole cost and expense.

12. Alterations and Surrender.

     12.1 Consent of Landlord. Tenant shall have the right, upon ten (10) days
prior written notice to Landlord, to make alterations (“Permitted Alterations”) to the inside of
the Premises (e.g., paint and carpet, communication systems, telephone and computer system wiring)
that do not (i) involve the expenditure of more than $15,000 in any one year and $60,000 over the
term of this Lease; (it) affect the exterior appearance of the Building or the roof, (iii) affect
the Building’s electrical, plumbing, HVAC, life, fire safety or similar Building systems or the
structural elements of the Building or (iv) affect the parking areas. The $15,000 and the $60,000
amounts described above shall apply separately to each consecutive five year period during the
term of the Lease (e.g., such amounts shall be separately applied to the period beginning July 14,
2004 and ending July 13, 2009 and the period beginning July 14, 2009 and ending July 13, 2014).
Except with respect to Permitted Alterations, Tenant shall not, without Landlord’s prior written
consent, which may be given or withheld in Landlord’s reasonable discretion, make any alterations,
Improvements, additions, utility installations or repairs (hereinafter collectively referred to as
“Non-Permitted Alterations”) in, on or about the Premises. References in this Lease to
“Alterations” shall mean both Permitted Alterations and Non-Permitted Alterations. At the
expiration of the term, Tenant shall remove all Alterations installed by Tenant and shall restore
the Premises and the Project to their prior condition, at Tenant’s expense if, at the time of
Landlord’s consent, Landlord did not agree that Tenant would not be obligated to remove the
Alterations. Within ten (10) days after Tenant provides to Landlord a written notice requesting
Landlord’s decision concerning the removal of proposed Alterations (a “Tenant Notice”), Landlord
shall respond to Tenant’s request. If Landlord fails to respond to Tenant’s request within ten
(10) days after Landlord receives a Tenant Notice, Tenant may give Landlord a second written
notice (a “Second Notice”) again requesting Landlord’s decision concerning the removal of the
Alterations. The Second Notice shall expressly state that Landlord’s failure to respond to the
Second Notice within five (5) business days will be deemed Landlord’s election pursuant to this
section 12.1 of the Lease not to require Tenant to remove the Alterations at the end of the term
of this Lease. If Landlord fails to respond to Tenant’s Second Notice within such five (5)
business day period, Landlord shall be deemed to have elected not to require Tenant to remove the
Alterations at the end of the term of this Lease. Should Landlord permit Tenant to make its own
Alterations, Tenant shall use only such architect and contractor as has been reasonably approved
by Landlord. In addition, if Landlord supervises the construction of the Alterations at the
request of Tenant, Tenant shall pay to Landlord a fee equal to three percent (3%) of the hard
costs incurred in connection with the construction of the Alterations to compensate Landlord for
the overhead and other costs it incurs in supervising the construction of the Alterations. If
Landlord approves the Alterations but does not supervise the construction of the Alterations,
Tenant shall reimburse Landlord for Landlord’s actual out-of-pocket costs in reviewing the plans
for the Alterations and in monitoring the construction of the Alterations. Should Tenant make any
Alterations without the prior approval of Landlord, or use a contractor not expressly approved by
Landlord, Landlord may, at any time during the term of this Lease, require that Tenant remove all
or part of the Alterations and return the Premises to the condition it was in prior to the making
of the Alternations. In the event Tenant makes any Alterations, upon Landlord’s written request,
Tenant agrees to obtain or cause its contractor to obtain, prior to the commencement of any work,
“builders all risk” insurance In an amount approved by Landlord, workers compensation insurance
and any other insurance reasonably requested by Landlord.

     12.2 Permits. Any Alterations in or about the Premises that Tenant shall
desire to make shall be presented to Landlord in written form, and if the Alterations will modify
the location of existing improvements, with plans and specifications which are sufficiently
detailed to obtain a building permit. If Landlord consents to an Alteration that requires a
building permit under applicable law, the consent shall be deemed conditioned upon Tenant
acquiring a building permit from the applicable governmental agencies, furnishing a copy thereof
to Landlord prior to the commencement of the work, and compliance by Tenant with all conditions of
said permit in a prompt and expeditious
manner. Tenant shall provide Landlord with as-built plans and specifications for any
Alterations made to the Premises if the Alterations will modify the location of existing
improvements.

     12.3 Mechanics Liens. Tenant shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Tenant at or for use in the
Premises, which claims are or may be secured by any mechanic’s or materialmen’s lien against the
Premises, or any interest therein. If Tenant shall, in good faith, contest the validity of any
such lien, Tenant shall furnish to Landlord a surety bond satisfactory to Landlord in an amount
equal to not lass than one and one-half times the amount of such contested lien claim indemnifying
Landlord against liability arising out of such lien or claim. Such bond shall be sufficient in
form and amount to free the Premises from the effect of such lien. In addition, Landlord may
require Tenant to pay Landlord’s reasonable attorneys’ fees and costs in participating in such
action.

     12.4 Notice. Tenant shall give Landlord not less than ten (10) days’
advance written notice prior to the commencement of any work in the Premises by Tenant, and
Landlord shall have the right to post notices of non-responsibility in or on the Premises.

     12.5 Surrender. All Alterations made by Tenant to the Premises shall be the
property of Tenant, but shall be considered to be a part of the Premises. Except as provided
above, Tenant shall remove all Alterations prior to the end of the term of this Lease and any
damages caused by such removal shall be repaired at Tenant’s sole expense. On the last day of the
term hereof, or on any sooner termination, Tenant shall surrender the Premises (including, but not
limited to, all doors, windows, floors and floor coverings, skylights, heating and air
conditioning systems, dock boards, truck doors, dock bumpers, plumbing work and fixtures,
electrical systems, lighting facilities, sprinkler systems, fire detection systems and
nonstructural

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elements of the exterior walls, foundation and roof (collectively the “Elements of the Premises”))
to Landlord In the same condition as received, ordinary wear and tear and casualty damage
excepted, clean and free of debris and Tenant’s personal property, trade fixtures and equipment.
Tenant’s personal property shall include all computer wiring and cabling installed by Tenant.
Tenant shall repair any damage to the Premises occasioned by the installation or removal of
Tenant’s trade fixtures, furnishings and equipment. Damage to or deterioration of any Element of
the Premises or any other item Tenant is required to repair or maintain at the Premises shall not
be deemed ordinary wear and tear if the same could have been prevented by good maintenance
practices. If the Premises are not surrendered at the expiration of the term or earlier
termination of this Lease in accordance with the provisions of this section, at Landlord’s option,
Tenant shall continue to be responsible for the payment of Base Rent and all other amounts due
under this Lease until the Premises are so surrendered in accordance with said provisions.

     12.6 Failure of Tenant to Remove Property. If this Lease is terminated due to the
expiration of its term or otherwise, and Tenant fails to remove its property, in addition to any
other remedies available to Landlord under this Lease, and subject to any other right or remedy
Landlord may have under applicable law, Landlord may remove any property of Tenant from the
Premises and store the same elsewhere at the expense and risk of Tenant.

13. Damage and Destruction.

     13.1 Effect of Damage or Destruction.  If all or part of the Premises is
damaged by fire, earthquake, flood, explosion, the elements, riot, the release or existence of
Hazardous Materials (as defined below) or by any other cause whatsoever (hereinafter collectively
referred to as “damages”), but the damages are not material (as defined in section 13.2 below),
Landlord shall repair the damages to the Premises as soon as is reasonably possible, and this
Lease shall remain in full force and effect. If the Premises are destroyed or all or part of the
Premises is materially damaged (as defined in section 13.2 below), Landlord shall have the right,
in its sole and complete discretion, to repair or to rebuild the Premises or to terminate this
Lease. Landlord shall within sixty (60) days after the discovery of such material damage or
destruction notify Tenant in writing of Landlord’s intention to repair or to rebuild or to
terminate this Lease. Tenant shall in no event be entitled to compensation or damages on account
of annoyance or inconvenience in making any repairs, or on account of construction, or on account
of Landlord’s election to terminate this Lease. Notwithstanding the foregoing, if Landlord shall
elect to rebuild or repair the Premises after material damage or destruction, but in good faith
determines that a the Premises cannot be substantially repaired within two hundred seventy (270)
days after the date of the discovery of the material damage or destruction, without payment of
overtime or other premiums, and the damage to the Premises will render a substantial portion of
the Premises unusable during said two hundred seventy (270) day period, Landlord shall notify
Tenant thereof in writing at the time of Landlord’s election to rebuild or repair (along with an
estimated completion date), and Tenant shall thereafter have a period of fifteen (15) days within
which Tenant may elect to terminate this Lease, upon thirty (30) days’ advance written notice to
Landlord. Tenant’s termination right described in the preceding sentence shall not apply if the
damage was caused by the gross negligence or willful misconduct of Tenant or its employees,
agents, contractors or invitees. Failure of Tenant to exercise said election within said fifteen
(15) day period shall constitute Tenant’s agreement to accept delivery of the Premises under this
Lease whenever tendered by Landlord, provided Landlord thereafter pursues reconstruction or
restoration diligently to completion, subject to delays caused by Force Majeure Events. Tenant
shall also have the right to terminate this Lease in the event that, notwithstanding Landlord’s
good faith estimate that the Premises can be substantially repaired within two hundred seventy
(270) days after the date of damage or destruction, the Premises are not in fact substantially
repaired within such two hundred seventy (270) day period (as extended by Force Majeure Events).
Tenant shall provide Landlord with written notice of its election to terminate this Lease because
the repairs are not completed in two hundred seventy (270) days within fifteen (15) days after the
two hundred seventieth (270th) day. Failure of Tenant to exercise said election within said
fifteen (15) day period shall constitute Tenant’s agreement to accept delivery of the Premises
under this Lease whenever tendered by Landlord, provided Landlord thereafter pursues
reconstruction or restoration diligently to completion, subject to delays caused by Force Majeure
Events. If Landlord is unable to repair the damage to the Premises during such two hundred seventy
(270) day period due to Force Majeure Events, the two hundred seventy (270) day period shall be
extended by the period of delay caused by the Force Majeure Events. Subject to section 13.3 below,
if Landlord or Tenant terminates this Lease in accordance with this section 13.1, Tenant shall
continue to pay all Base Rent and other amounts due hereunder which arise prior to the date of
termination. Tenant shall also have the right to terminate this Lease if damage occurs to the
Premises during the last twelve (12) months of the Lease term, such damage renders a substantial
portion of the Premises unusable, and such damage cannot be substantially repaired within sixty
(60) days. Tenant’s termination right described in the previous sentence shall be exercised by
providing Landlord with written notice within fifteen (15) days after the occurrence of the
damage.

     13.2 Definition of Material Damage. Damage to the Premises shall be deemed
material if, in Landlord’s reasonable judgment, the uninsured cost of repairing the damage will
exceed Three Hundred Thousand Dollars ($300,000). Damage to the Premises shall also be deemed
material if (a) the Premises cannot be rebuilt or repaired to substantially the same condition it
was in prior to the damage due to laws or regulations in effect at the time the repairs will be
made, (b) the holder of any mortgage or deed of trust encumbering the Premises requires that
insurance proceeds available to repair the damage in excess of Three Hundred Thousand Dollars
($300,000) be applied to the repayment of the indebtedness secured by the mortgage or the deed of
trust, or (c) the damage occurs during the last twelve (12) months of the Lease term and cannot be
substantially repaired within thirty (30) days.

     13.3 Abatement of Rent. if Landlord elects or is obligated to repair damage
to the Premises and all or part of the Premises will be unusable or inaccessible to Tenant in the
ordinary conduct of its business until the damage is repaired, Tenant’s Base Rent shall be abated
until the repairs are completed in proportion to the amount of the Premises which is unusable or
inaccessible to Tenant in the ordinary conduct of its business. Notwithstanding the foregoing,
there shall be no abatement of Base Rent by reason of any portion of the Premises being unusable
or inaccessible for a period equal to five (5) consecutive business days or less.

     13.4 Tenant’s Acts. If such damage or destruction occurs as a result of the
gross negligence or willful misconduct the intentional acts of Tenant or Tenant’s employees,
agents, contractors or invitees, and the proceeds of insurance which are actually received by
Landlord are not sufficient to pay for the repair of all of the damage, Tenant shall pay, at
Tenant’s sole cost and expense, to Landlord upon demand, the difference between the cost of
repairing the damage and the insurance proceeds received by Landlord.

     13.5 Tenant’s Property. Landlord shall not be liable to Tenant or its
employees, agents, contractors, invitees or customers for loss or damage to merchandise, tenant
improvements, fixtures, automobiles, furniture, equipment, computers, files or other property
(hereinafter collectively “Tenant’s property”) located at the Premises. Tenant shall repair or
replace all of Tenant’s property at Tenant’s sole cost and expense. Tenant acknowledges that it is
Tenant’s sole responsibility to obtain adequate insurance coverage to compensate Tenant for damage
to Tenant’s property.

     13.6 Waiver. Landlord and Tenant hereby waive the provisions of any present
or future statutes which relate to the termination of leases when leased property is damaged or
destroyed and agree that such event shall be governed by the terms of this Lease.

14. Condemnation. If any portion of the Premises is taken under the power of eminent
domain, or sold under the threat of the exercise of said power (all of which are herein called
“condemnation”), this Lease shall terminate as to the part so taken

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as of the date the condemning authority takes title or possession, whichever first occurs;
provided that if so much of the Premises is taken by such condemnation as would substantially and
adversely affect the operation and profitability of Tenant’s business conducted from the Premises,
and said taking lasts for ninety (90) days or more, Tenant shall have the option to be exercised
only in writing within thirty (30) days after Landlord shall have given Tenant written notice of
such taking (or in the absence of such notice, within thirty (30) days after the condemning
authority shall have taken possession), to terminate this Lease as of the date the condemning
authority takes such possession. If a taking lasts for less than ninety (90) days, Tenant’s rent
shall be abated during said period but Tenant shall not have the
right to terminate this Lease, if Tenant does not terminate this Lease in accordance with the foregoing, this Lease shall remain in
full force and effect as to the portion of the Premises remaining, except that the Base Rent shall
be reduced in the proportion that the usable floor area of the Premises taken bears to the total
usable floor area of the Premises. If such condemnation will materially and adversely affect the
use of the Building and said taking lasts for ninety (90) days or more, Landlord shall have the
option in its sole discretion to terminate this Lease as of the taking of possession by the
condemning authority, by giving written notice to Tenant of such election within thirty (30) days
after receipt of notice of a taking by condemnation of any part of
the Premises, Any award for the
taking of all or any part of the Premises under the power of eminent domain or any payment made
under threat of the exercise of such power shall be the property of Landlord, whether such award
shall be made as compensation for diminution in value of the leasehold, for the taking of the fee,
as severance damages, or as damages for tenant improvements; provided, however, that Tenant shall
be entitled to any separate award for loss of or damage for good will, Tenant’s removable personal
property and for moving expenses. In the event that this Lease is not terminated by reason of such
condemnation, and subject to the requirements of any lender that has made a loan to Landlord
encumbering the Premises, Landlord shall repair any damage to the Premises caused by such
condemnation except to the extent that Tenant has been reimbursed therefor by the condemning
authority. This section, not general principles of law or California Code of Civil Procedure
sections 1230.010 et seq., shall govern the rights and obligations of Landlord and
Tenant with respect to the condemnation of all or any portion of the Premises.

15. Assignment and Subletting.

     15.1 Landlord’s Consent Required. Subject to the provisions of Section 6 of the
Addendum attached hereto, Tenant shall not voluntarily or by operation of law assign, transfer,
hypothecate, mortgage, sublet, or otherwise transfer or encumber all or any part of Tenant’s
interest in this Lease or in the Premises (hereinafter collectively a “Transfer”) without
Landlord’s prior wntten consent, which shall not be unreasonably withheld. Landlord shall respond
to Tenant’s written request for consent hereunder within thirty (30) days after Landlord’s receipt
of the written request from Tenant. Any attempted Transfer without such consent shall be void and
shall constitute a material default and breach of this Lease. Tenant’s written request for
Landlord’s consent shall include, and Landlord’s thirty (30) day response period referred to above
shall not commence, unless and until Landlord has received from Tenant, all of the following
information: (a) financial statements for the proposed assignee or subtenant for the past year
prepared in accordance with generally accepted accounting principles, (b) (intentionally deleted)
(c) intentionally deleted(d) a detailed description of the business the assignee or subtenant
intends to operate at the Premises, (e) the proposed effective date of the assignment or sublease,
(f) a copy of the proposed sublease or assignment agreement which includes all of the terms and
conditions of the proposed assignment or sublease (provided that this item may be negotiated by
Tenant and the transferee following receipt of Landlord’s consent and submitted to Landlord for
approval thereafter), (g) a detailed description of any ownership or commercial relationship
between Tenant and the proposed assignee or subtenant, (h) a reasonably detailed description of
any Alterations the proposed assignee or subtenant desires to make to the Premises, and (i) a
Hazardous Materials Disclosure Certificate substantially in the form of Exhibit B attached hereto
(the “Transferee HazMat Certificate”). If the obligations of the proposed assignee or subtenant
will be guaranteed by any person or entity, Tenant’s written request shall not be considered
complete until the information described in (a), (b) and (c) of the previous sentence has been
provided with respect to each proposed guarantor.
“Transfer” shall also include the transfer (a) if
Tenant is a corporation, and Tenant’s stock is not publicly traded over a recognized securities
exchange, of more than fifty percent (50%) of the voting stock of such corporation during the term
of this Lease (whether or not in one or more transfers) or the dissolution, merger or liquidation
of the corporation, or (b) if Tenant is a partnership, limited liability company, limited
liability partnership or other entity, of more than fifty percent (50%) of the profit and loss
participation in such partnership or entity during the term of this Lease (whether or not in one
or more transfers) or the dissolution, merger or liquidation of the partnership, limited liability
company, limited liability partnership or other entity. Tenant’s sole remedy in the event that
Landlord shall wrongfully withhold consent to or disapprove any assignment or sublease shall be to
obtain an order by a court of competent jurisdiction that Landlord grant such consent; in no event
shall Landlord be liable for damages with respect to its granting or withholding consent to any
proposed assignment or sublease.

     15.2 Intentionally deleted.

     15.3 Standard For Approval. Landlord shall not unreasonably withhold its
consent to a Transfer provided that Tenant has complied with each and every requirement, term and
condition of this section 15. Tenant acknowledges and agrees that each requirement, term and
condition in this section 15 is a reasonable requirement, term or
condition. It shall be deemed
reasonable for Landlord to withhold its consent to a Transfer if any requirement, term or
condition of this section 15 is not complied with or: (a) the Transfer would cause Landlord to be
in violation of its obligations under another lease or agreement to which Landlord is a party;
(b) in Landlord’s reasonable judgment, a proposed assignee or subtenant is less able financially
to pay the rents due under this Lease as and when they are due and payable; (c) a proposed
assignee’s or subtenant’s business will impose a burden on the Premises’ parking facilities or
utilities that is greater than the burden imposed by Tenant, in Landlord’s reasonable judgment;
(d) (intentionally deleted) (e) a proposed assignee or subtenant refuses to enter into a written
assignment agreement or sublease, reasonably satisfactory to Landlord, which provides that it
will abide by and assume all of the terms and conditions of this Lease for the term of any
assignment or sublease and containing such other terms and conditions as Landlord reasonably
deems necessary; (f) the use of the Premises by the proposed assignee or subtenant will not be a
use permitted by this Lease; (g) any guarantor of this Lease refuses to consent to the Transfer
or to execute a written agreement reaffirming the guaranty; (h) Tenant is in default as defined
in section 16 at the time of the request beyond any applicable notice and cure periods; (i) if
requested by Landlord, the assignee or subtenant refuses to sign a
non-disturbance and attornment
agreement in favor of Landlord’s lender; (j) Landlord has sued or been sued by the proposed
assignee or subtenant or has otherwise been involved in a legal dispute with the proposed
assignee or subtenant; (k) the assignment or sublease will result in there being more than two
subtenants of the Premises; or (I) the assignee or subtenant will use, store or handle Hazardous
Materials in or about the Premises of a type, nature, quantity not acceptable to Landlord, in
Landlord’s reasonable discretion.

     15.4
Additional Terms and Conditions. The following terms and conditions shall be
applicable to any Transfer:

          (a) Regardless of Landlord’s consent (unless otherwise agreed by Landlord in writing), no
Transfer shall release Tenant from Tenant’s obligations hereunder or alter the primary liability
of Tenant to pay the rent and other sums due Landlord hereunder and to perform all other
obligations to be performed by Tenant hereunder or release any guarantor from its obligations
under its guaranty.

          (b) Landlord may accept rent from any person other than Tenant pending approval or
disapproval of an assignment or subletting.

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          (c) Neither a delay in the approval or disapproval of a Transfer, nor the
acceptance of rent, shall constitute a waiver or estoppel of Landlord’s right to exercise its
rights and remedies for the breach of any of the terms or conditions of this section 15.

          (d) The consent by Landlord to any Transfer shall not constitute a consent to any subsequent
Transfer by Tenant or to. any subsequent or successive Transfer by an assignee or subtenant.
However, Landlord may consent to subsequent Transfers or any amendments or modifications thereto
without notifying Tenant or anyone else liable on the Lease and without obtaining their consent,
and such action shall not relieve such persons from liability under this Lease.

          (e) In the event of any default under this Lease beyond any applicable notice and cure
periods, Landlord may proceed directly against Tenant, any guarantors or anyone else responsible
for the performance of this Lease, including any subtenant or assignee, without first exhausting
Landlord’s remedies against any other person or entity responsible therefor to Landlord, or any
security held by Landlord.

          (f) Landlord’s written consent to any Transfer by Tenant shall not constitute an
acknowledgment that no default then exists under this Lease nor shall such consent be deemed a
waiver of any then-existing default.

          (g) The
discovery of the fact that any financial statement relied upon by Landlord in giving
its consent to an assignment or subletting was materially false shall, at Landlord’s election,
render Landlord’s consent null and void.

          (h) Landlord shall not be liable under this Lease or under any sublease to any
subtenant.

          (i) No assignment or sublease may be modified or amended without Landlord’s prior
written consent.

          (j) Any assignee of, or subtenant under, this Lease shall, by reason of accepting such
assignment or entering into such sublease, be deemed, for the benefit of Landlord, to have assumed
and agreed to conform and comply with each and every term, covenant, condition and obligation
herein to be observed or performed by Tenant during the term of said assignment or sublease, other
than such obligations as are contrary or Inconsistent with provisions of an assignment or sublease
to which Landlord has specifically consented in writing.

          (k) At Landlord’s request, Tenant shall deliver to Landlord, Landlord’s standard consent to
assignment or consent to sublease agreement, as applicable, executed by Tenant, the assignee and
the subtenant, as applicable.

     15.5 Additional Terms and Conditions Applicable to Subletting. The following terms
and conditions shall apply to any subletting by Tenant of all or any part of the Premises and
shall be deemed included in all subleases under this Lease whether or not expressly incorporated
therein:

          (a) Tenant hereby absolutely and unconditionally assigns and transfers to Landlord all of
Tenant’s interest in all rentals and income arising from any sublease entered into by Tenant, and
Landlord may collect such rent and income and apply same toward Tenant’s obligations under this
Lease; provided, however, that until a default shall occur in the performance of Tenant’s
obligations under this Lease (beyond any applicable notice and cure periods), Tenant may receive,
collect and enjoy the rents accruing under such sublease. Landlord shall not, by reason of this or
any other assignment of such rents to Landlord nor by reason of the collection of the rents from a
subtenant, be deemed to have assumed or recognized any sublease or to be liable to the subtenant
for any failure of Tenant to perform and comply with any of Tenant’s obligations to such subtenant
under such sublease, including, but not limited to, Tenant’s obligation to return any security
deposit. Tenant hereby irrevocably authorizes and directs any such subtenant, upon receipt of a
written notice from Landlord stating that a default exists in the performance of Tenant’s
obligations under this Lease (beyond any applicable notice and cure periods), to pay to Landlord
the rents due as they become due under the sublease. Tenant agrees that such subtenant shall have
the right to rely upon any such statement and request from Landlord, and that such subtenant shall
pay such rents to Landlord without any obligation or right to Inquire as to whether such default
exists and notwithstanding any notice or claim from Tenant to the contrary.

          (b) In the event Tenant shall default in the performance of its obligations under this Lease
(beyond any applicable notice and cure periods), Landlord, at its option and without any
obligation to do so, may require any subtenant to attorn to Landlord, in which event Landlord shall
undertake the obligations of Tenant under such sublease from the time of the exercise of said
option to the termination of such sublease; provided, however, Landlord shall not be liable for
any prepaid rents or security deposit paid by such subtenant to Tenant or for any other prior
defaults of Tenant under such sublease.

     15.6 Transfer Premium from Assignment or Subletting. Landlord shall be
entitled to receive from Tenant (as and when received by Tenant) as an item of additional rent
one-half of the following amounts (such one-half being referred to hereinafter as the “Transfer
Premium”): all amounts received by Tenant from a subtenant or assignee in excess of the amounts
payable by Tenant to Landlord hereunder. The Transfer Premium shall be reduced by one-half of the
reasonable brokerage commissions, tenant improvement costs and legal fees actually paid by Tenant
in order to assign the Lease or to sublet a portion of the Premises. “Transfer Premium” shall
include one-half of all Base Rent, additional rent or other consideration of any type whatsoever
payable by the assignee or subtenant in excess of the Base Rent and additional rent payable by
Tenant under this Lease. If less than all of the Premises is transferred, the Base Rent and the
additional rent shall be determined on a per-leasable-square-foot basis. “Transfer Premium” shall
also include, but not be limited to, one-half of all key money and bonus money paid by the
assignee or subtenant to Tenant in connection with such Transfer, and any payment in excess of
fair-market value for services rendered by Tenant to the assignee or subtenant or for assets,
fixtures, inventory, equipment or furniture transferred by Tenant to the assignee or subtenant in
connection with such Transfer.

     15.7 Intentionally deleted.

     15.8 Landlord’s Expenses. In the event Tenant shall assign this Lease or
sublet the Premises or request the consent of Landlord to any Transfer, then Tenant shall pay
Landlord’s reasonable costs and expenses Incurred in connection therewith, including, but not
limited to, attorneys’, architects’, accountants’, engineers’ or other consultants’ fees;
provided, however, Landlord shall not be entitled to recover more than Two Thousand Five Hundred
Dollars ($2,500.00) of attorneys’ fees with respect to any one Transfer.

16. Default; Remedies.

     16.1 Default by Tenant. Landlord and Tenant hereby agree that the occurrence of any
one or more of the following events is a material default by Tenant under this Lease and that said
default shall give Landlord the rights described in section 16.2. Landlord or Landlord’s
authorized agent shall have the right to execute and to deliver any notice of default, notice to
pay rent or quit or any other notice Landlord gives Tenant.

          (a) Tenant’s failure to make any payment of Base Rent, Real Property Taxes or any other
payment required to be made by Tenant hereunder, as and when due, where such failure shall
continue for a period of three (3) business days after written notice thereof from Landlord to
Tenant. In the event that Landlord serves Tenant with a notice to

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pay rent or quit pursuant to applicable unlawful detainer statutes, such notice shall also
constitute the notice required by this section 16.1(a).

          (b) Intentionally deleted.

          (c) The failure of Tenant to comply with any of its obligations under sections 4, 9, 11, 12,
15, 18, 23, 25 and 26 where Tenant fails to comply with its obligations or fails to cure any
earlier breach of such obligation within twenty (20) days following written notice from Landlord to
Tenant. In the event Landlord serves Tenant with a notice to quit or any other notice pursuant to
applicable unlawful detainer statutes, said notice shall also constitute the notice required by
this section 16.1(c).

          (d) The failure by Tenant to observe or perform any of the covenants, conditions or
provisions of this Lease to be observed or performed by Tenant (other than those referenced in
sections 16.1(a), (b) and (c), above), where such failure shall continue for a period of thirty
(30) days after written notice thereof from Landlord to Tenant; provided, however, that if the
nature of Tenant’s nonperformance is such that more than thirty (30) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant commences such cure
within said thirty (30) day period and thereafter diligently pursues such cure to completion. In
the event that Landlord serves Tenant with a notice to quit or any other notice pursuant to
applicable unlawful detainer statutes, said notice shall also constitute the notice required by
this section 16.1(d).

          (e) (i) The making by Tenant or any guarantor of Tenant’s obligations hereunder of any
general arrangement or general assignment for the benefit of creditors; (ii) Tenant or any
guarantor becoming a “debtor” as defined in 11 U.S.C. 101 or any successor statute thereto
(unless, in the case of a petition filed against Tenant or guarantor, the same is dismissed within
sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; (iv) the attachment,
execution or other judicial seizure of substantially all of Tenant’s assets located at the
Premises or of Tenant’s interest in this Lease, where such seizure is not discharged within thirty
(30) days; or (v) the insolvency of Tenant. In the event that any provision of this section
16.1(e) is unenforceable under applicable law, such provision shall be of no force or effect.

          (f) The discovery by Landlord that any financial statement, representation or warranty given
to Landlord by Tenant, or by any guarantor of Tenant’s obligations hereunder, was materially false
at the time given. Tenant acknowledges that Landlord has entered into this Lease in material
reliance on such information.

          (g) If Tenant is a corporation, partnership, limited liability company or similar entity, the
dissolution or liquidation of Tenant.

          (h) If Tenant’s obligations under this Lease are guaranteed: (i) the death of a guarantor,
(ii) the termination of a guarantor’s liability with respect to this Lease other than in
accordance with the terms of such guaranty, (iii) a guarantor’s becoming insolvent or the subject
of a bankruptcy filing, (iv) a guarantor’s refusal to honor the guaranty, or (v) a guarantor’s
breach of its guaranty obligation on an anticipatory breach basis.

     16.2 Remedies.

          (a) In the event of any material default or breach of this Lease by Tenant, Landlord may, at
any time thereafter, with or without notice or demand, and without limiting Landlord in the
exercise of any right or remedy which Landlord may have by reason of such default:

               (i) terminate Tenant’s right to possession of the Premises by any lawful means, in which case
this Lease and the term hereof shall terminate and Tenant shall immediately surrender possession
of the Premises to Landlord. If Landlord terminates this Lease, Landlord may recover from Tenant
(A) the worth at the time of award of the unpaid rent which had been earned at the time of
termination; (B) the worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount of such rental loss
that Tenant proves could have been reasonably avoided; (C) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could have been reasonably avoided; and (D) any
other amount necessary to compensate Landlord for all detriment proximately caused by Tenant’s
failure to perform its obligations under the Lease or which in the ordinary course of things would
be likely to result therefrom, including, but not limited to, the cost of recovering possession of
the Premises, expenses of releasing, including necessary renovation and alteration of the
Premises, reasonable attorneys’ fees, any real estate commissions actually paid by Landlord and
the unamortized value of any free rent, reduced rent, tenant improvement allowance or other
economic concessions provided by Landlord. The “worth at time of award” of the amounts referred to
in section 16.2(a)(i)(A) and (B) shall be computed by allowing interest at the lesser of ten
percent (10%) per annum or the maximum interest rate permitted by applicable law. The worth at the
time of award of the amount referred to in section 16.2(a)(i)(C) shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent.(1%). For purposes of this section 16.2(a)(i), “rent” shall be deemed to be all
monetary obligations required to be paid by Tenant pursuant to the terms of this Lease.

               (ii) maintain Tenant’s right of possession, in which event Landlord shall have the remedy
described in California Civil Code section 1951.4 which permits Landlord to continue this Lease in
effect after Tenant’s breach and abandonment and recover rent as it becomes due. In the event
Landlord elects to continue this Lease in effect, Tenant shall have the right to sublet the
Premises or assign Tenant’s interest In the Lease subject to the reasonable requirements contained
in section 15 of this Lease and provided further that Landlord shall not require compliance with
any standard or condition contained in section 15 that has become unreasonable at the time Tenant
seeks to sublet or assign the Premises pursuant to this section 16.2(a)(ii).

               (iii) collect sublease rents (or appoint a receiver to collect such rent) and otherwise
perform Tenant’s obligations at the Premises, it being agreed, however, that the appointment of a
receiver for Tenant shall not constitute an election by Landlord to terminate this Lease.

               (iv) pursue any other remedy now or hereafter available to Landlord under the laws or
judicial decisions of the state in which the Premises are located.

          (b) No remedy or election hereunder shall be deemed exclusive, but shall, wherever possible,
be cumulative with all other remedies at law or in equity. The expiration or termination of this
Lease and/or the termination of Tenant’s right to possession of the Premises shall not relieve
Tenant of liability under any indemnity provisions of this Lease as to matters occurring or
accruing during the term of the Lease or by reason of Tenant’s occupancy of the Premises.

          (c) If Tenant abandons or vacates the Premises following a default by Tenant under this Lease
beyond any applicable notice or cure period, Landlord may re-enter the Premises, and such re-entry
shall not be deemed to constitute Landlord’s election to accept a surrender of the Premises or to
otherwise relieve Tenant from liability for its breach of this Lease. No surrender of the
Premises shall be effective against Landlord unless Landlord has entered into a written

9

 

agreement with Tenant in which Landlord expressly agrees to (i) accept a surrender of
the Premises and (ii) relieve Tenant of liability under the Lease. The delivery by Tenant to
Landlord of possession of the Premises shall not constitute the termination of the Lease or the
surrender of the Premises.

          (d) Landlord waives the right to recover punitive damages from Tenant.

     16.3 Default by Landlord. Landlord shall not be in default under this Lease
unless Landlord fails to perform obligations required of Landlord within thirty (30) days after
written notice by Tenant to Landlord and to the holder of any mortgage or deed of trust
encumbering 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 its cure, then Landlord shall not be in default if Landlord commences performance within such
thirty (30) day period and thereafter diligently pursues 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. Tenant hereby waives its right to
recover consequential damages (including, but not limited to, lost profits) or punitive damages
arising out of a Landlord default. Except as may be otherwise provided in this Lease, this Lease
and the obligations of Tenant hereunder shall not be affected or impaired because 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 a Force Majeure Event, and the time for Landlord’s performance shall
be extended for the period of any such delay.

     16.4 Late Charges. Tenant hereby acknowledges that late payment by Tenant
to Landlord of Base Rent or other sums due hereunder will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges and late charges
which may be imposed on Landlord by the terms of any mortgage or trust deed encumbering the
Premises. Accordingly, if any installment of Base Rent or any other sum due from Tenant shall not
be received by Landlord within five (5) days after such amount shall be due, then, without any
requirement for notice or demand to Tenant, Tenant shall immediately pay to Landlord a late charge
equal to five percent (5%) of such overdue amount; provided, however, that Landlord shall waive
the late charge one (1) time during each calendar year of the term of this Lease if Tenant pays
all overdue sums within five (5) days after receipt of written notice by Landlord to Tenant
advising Tenant that such payment is overdue. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by reason of late
payment by Tenant. Acceptance of such late charge by Landlord shall in no event constitute a
waiver of Tenant’s default with respect to such overdue amount, nor prevent Landlord from
exercising any of the other rights and remedies granted hereunder, including the assessment of
interest under section 16.5.

     16.5 Interest on Past-Due Obligations. Except as expressly herein provided,
any amount due to Landlord that is not paid when due shall bear interest at the lesser of ten
percent (10%) per annum or the maximum rate permitted by applicable law. Payment of such interest
shall not excuse or cure any default by Tenant under this Lease; provided, however, that interest
shall not be payable on late charges incurred by Tenant nor on any amounts upon which late charges
are paid by Tenant.

     16.6 Payment of Rent and Security Deposit after Default. If Tenant fails to
pay Base Rent or any other monetary obligation due hereunder on the date it is due, after Tenant’s
third failure in any twelve (12) month period to pay any monetary obligation on the date it is
due, at Landlord’s option, all monetary obligations of Tenant hereunder shall thereafter be paid
by cashier’s check, and Tenant shall, upon demand, provide Landlord with an additional security
deposit equal to three (3) months’ Base Rent. If Landlord has required Tenant to make said
payments by cashier’s check or to provide an additional security deposit, Tenant’s failure to make
a payment by cashier’s check or to provide the additional security deposit shall be a material
default hereunder.

     16.7 Repairs by Tenant.

          (a) Generally. Notwithstanding anything to the contrary contained in the
Lease, if Tenant provides written notice to Landlord that an event or circumstance has occurred
which requires Landlord to complete a repair at the Premises, and Landlord fails to begin taking
the actions necessary to complete such repair within thirty (30) days after the receipt of such
notice (or immediately in the event of an emergency that poses imminent danger to persons or
property) and to thereafter diligently proceed to complete such repair, then, subject to the terms
and conditions set forth below, Tenant may proceed to make the repair ten (10) days after Tenant
gives Landlord an additional written notice specifying that Tenant intends to make the repair, and
if such repair was required under the terms of the Lease to be made by Landlord, then Tenant shall
be entitled to reimbursement by Landlord of Tenant’s reasonable costs and expenses in making such
repair. If Tenant makes a repair, and such repair will effect the Building’s life/safety system,
HVAC system, elevator system, electrical system, plumbing system, or the structural Integrity of
the Building, Tenant shall utilize the services of the contractors used by Landlord to provide
such services or, if Tenant is unable to determine which contractors Landlord uses to provide such
services after diligent inquiry, a qualified, experienced and solvent contractor that regularly
performs similar work in similar buildings in Carlsbad, California. If Landlord was obligated to
perform such repair, Landlord shall reimburse Tenant for the reasonable cost of the repair within
thirty (30) days after receiving reasonable evidence of the repair made, its cost and mechanics
lien releases from all contractors making the repair. Nothing contained herein shall be deemed to
give Tenant the right to take any action or to make any repair in any Common Area or the right to
modify the structure, layout or design of the Building. In addition, Tenant shall not have the
right to make any repair pursuant to this section, unless such repair is necessary to remedy a
problem which substantially and adversely effects Tenant’s use
of the Premises. All repairs made by Tenant shall be made in accordance with all applicable laws, and Landlord shall not be
responsible for any defective work performed by Tenant or contractors hired by Tenant. Subject to
Tenant’s right to reimbursement hereunder, Tenant shall pay all costs incurred with respect to any
actions or repairs made by Tenant and shall pay all claims for labor and materials furnished to
Tenant as and when due. Finally, all notices provided by Tenant to Landlord pursuant to this
section shall also, at Landlord’s request, be provided to any lender or other person designated by
Landlord; provided, however, that Landlord provides the address of such person or entity to
Tenant.

          (b) Arbitration. In the event Landlord disputes whether Tenant is entitled
to reimbursement under section 16.7(a), Landlord or Tenant shall have the right to commence a
reference proceeding as provided below. If it is determined pursuant to such proceeding that
Tenant is entitled to reimbursement under section 16.7(a), then Landlord shall within ten (10)
days following such determination, reimburse Tenant for the reasonable cost of such repair as
determined pursuant to such action, plus interest thereon at ten percent (10%) per annum from the
date of Tenant’s expenditure until Landlord’s reimbursement. The reference shall take place before
a referee pursuant to the provisions of California Code of Civil Procedure Section 638 et
seq., and the determination to be made shall be binding upon the parties as if tried
before a court or jury. The parties agree specifically as to the following:

               (i) Within five (5) business days after service of a demand by a party hereto, the parties
shall agree upon a single referee who shall then try all issues, whether of fact or law, and then
report a finding or judgment thereon. If the parties are unable to agree upon a referee either
party may seek to have one appointed, pursuant to California Code of Civil Procedure Section 640,
by the presiding judge of the Los Angeles County Superior Court.

               (ii) The compensation of the referee shall be such charge as is customarily charged by the
referee for like services. The cost of such proceedings shall initially be borne equally by the
parties. However, the prevailing party in

10

 

such proceedings shall be entitled, in addition to all other costs, to recover its contribution
for the cost of the reference as an item of damages and/or recoverable costs.

          (iii) If a reporter is requested by either party, then a reporter shall be present at all
proceedings, and the fees of such reporter shall be borne by the party requesting such reporter.
Such fees shall be an item of recoverable costs. Only a party shall be authorized to request a
reporter.

          (iv) The referee shall apply all California Rules of Procedure and Evidence and shall
apply the substantive law of California in deciding the issues to be heard. Notice of any
motions before the referee shall be given, and all matters shall be set at the convenience of
the referee.

          (v) The referee’s decision under California Code of Civil Procedure Section 644,
shall stand as the
judgment of the court, subject to appellate review as provided by the laws of the State of
California.

          (vi) The parties agree that they shall In good faith endeavor to cause any such
dispute to be decided within four (4) months. The date of hearing for any proceeding shall be determined by agreement
of the parties and the referee, or if the parties cannot agree, then by the referee.

17. Landlord’s Right to Cure Default; Payments by Tenant. All covenants and
agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at
Tenant’s sole cost and expense and without any reduction of rent (except as may be permitted
herein). If Tenant shall fail to perform any of its obligations under this Lease, Landlord may,
but shall not be obligated to, after five (5) days’ prior written notice to Tenant (such notice
to be given after and in addition to the notice and cure periods set forth in section 16.1
above), make any such payment or perform any such act on Tenant’s behalf without waiving its
rights based upon any default of Tenant and without releasing Tenant from any obligations
hereunder. Tenant shall pay to Landlord, within ten (10) days after delivery by Landlord to Tenant
of statements therefore, an amount equal to the expenditures reasonably made by Landlord in
connection with the remedying by Landlord of Tenant’s defaults pursuant to the provisions of this
section.

18. Indemnity. Tenant hereby agrees to indemnify, defend and hold harmless
Landlord and its employees, partners, agents, contractors, lenders and ground lessors (said
persons and entities are hereinafter collectively referred to as the
“Indemnified Parties”) from and against any and all liability, loss, cost, damage, claims, loss of
rents, liens, judgments, penalties, fines, settlement costs, investigation costs, cost of
consultants and experts, reasonable attorneys fees, court costs and other reasonable legal
expenses, effects of environmental contamination, cost of environmental testing, removal,
remediation and/or abatement of Hazardous Materials (as said term are defined below), Insurance
policy deductibles and other expenses (hereinafter collectively referred to as “Damages”) arising
out of or related to an indemnified Matter (as defined below). For purposes of this section, an
“Indemnified Matter” shall mean any matter for which one or more of the Indemnified Parties incurs
liability or Damages if the liability or Damages arise out of or involve, directly or indirectly,
(a) Tenant’s or its employees’, agents’, contractors’ or invitees’ (all of said persons or
entities are hereinafter collectively referred to as “Tenant Parties”) use or occupancy of the
Premises, (b) any act, omission or neglect of a Tenant Party, (c) (intentionally deleted) (d) the
existence, use or disposal of any Hazardous Materials brought on to the Premises by a Tenant Party
or (e) any other matters for which Tenant has agreed to indemnify Landlord pursuant to any other
provision of this Lease. Tenant’s obligations hereunder shall include, but shall not be limited to
(f) compensating the Indemnified Parties for Damages arising out of Indemnified Matters within
thirty (30) days after written demand from an Indemnified Party and (g) providing a defense, with
counsel reasonably satisfactory to the Indemnified Party, at Tenant’s sole expense, within twenty
(20) days after written demand from the Indemnified Party, of any claims, action or proceeding
arising out of or relating to an Indemnified Matter whether or not litigated or reduced to
judgment and whether or not well founded. If Tenant is obligated to compensate an Indemnified
Party for Damages arising out of an Indemnified Matter, Landlord shall have the immediate and
unconditional right, but not the obligation, without notice or demand to Tenant, to pay the
damages, and Tenant shall, upon thirty (30) days, advance written notice from Landlord, reimburse
Landlord for the costs incurred by Landlord. The Indemnified Parties need not first pay any Damages
to be indemnified hereunder. This indemnity is intended to apply to the fullest extent permitted
by applicable law. Tenant’s obligations under this section shall survive the expiration or
termination of this Lease unless specifically waived in writing by Landlord after said expiration
or termination. Notwithstanding anything to the contrary contained in this section, Tenant shall
not be obligated to indemnify an Indemnified Party from liability to the extent such liability
arises out of the Indemnified Party’s negligence or willful misconduct.

19. Exemption of Landlord from Liability. Tenant hereby agrees that Landlord shall not
be liable for injury to Tenant’s business or any loss of income therefrom or for loss of or
damage to the merchandise, tenant improvements, fixtures, furniture, equipment, computers, files,
automobiles, or other property of Tenant. Tenant’s employees, agents, contractors or invitees, 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, contractors or invitees, whether such damage or injury is
caused by or results from any cause whatsoever including, but not limited to, theft, criminal
activity at the Premises, negligent security measures, bombings or bomb scares. Hazardous
Materials, fire, steam, electricity, gas, water or rain, flooding, breakage of pipes, sprinklers,
plumbing, air conditioning or lighting fixtures, or from any other cause, whether said damage or
injury results from conditions arising upon the Premises, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of the Premises, and
regardless of whether the cause of the damage or injury arises out of Landlord’s or its
employees’, agents’ or contractors’ negligent or intentional acts. Landlord shall not be liable
for any damages arising from any act or neglect of any employees, agents, contractors or invitees
of any other tenant, occupant or user of the Premises. Tenant, as a material part of the
consideration to Landlord hereunder, hereby assumes all risk of damage to Tenant’s property or
business or injury to persons in, upon or about the Premises arising from any cause, including
Landlord’s negligence or the negligence of its employees, agents or contractors, and Tenant
hereby waives all claims in respect thereof against Landlord, its employees, agents and
contractors. Notwithstanding anything herein to the contrary, except to the extent covered by
Tenant’s insurance and waiver of subrogation provided in the Lease, the limitations on Landlord’s
liability contained in this section 20 shall not apply to injury or damage which results from the
gross negligence or willful misconduct of Landlord, its agents, employees, contractors,
subcontractors or assigns.

20. Landlord’s Liability. Tenant acknowledges that Landlord shall have the right to
transfer all or any portion of its interest in the Premises and to assign this Lease to the
transferee. Tenant agrees that in the event of such a transfer Landlord shall automatically be
released from all liability under this Lease; and Tenant hereby agrees to look solely to
Landlord’s transferee for the performance of Landlord’s obligations hereunder after the date of
the transfer. Upon such a transfer. Landlord shall, at its option, return Tenant’s security
deposit to Tenant or transfer Tenant’s security deposit to Landlord’s transferee and, in either
event, Landlord shall have no further liability to Tenant for the return of its security deposit.
Subject to the rights of any lender holding a mortgage or deed of trust encumbering all or part
of the Premises, Tenant agrees to look solely to Landlord’s equity interest in the Premises (and
any proceeds from the sale thereof) for the collection of any judgment requiring the payment of
money by Landlord arising out of (a) Landlord’s failure to perform its obligations under this
Lease or (b) the negligence or willful misconduct of Landlord, its partners, employees and
agents. No other property or assets of Landlord shall be subject to levy, execution or other
enforcement procedure for the satisfaction of any judgment or writ obtained by Tenant against
Landlord. No partner, employee or agent of Landlord shall be personally liable for the
performance of Landlord’s obligations hereunder or be named as a party in any lawsuit arising out
of or related to, directly or indirectly, this Lease and the obligations of Landlord hereunder.
The obligations under this Lease do not constitute personal

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obligations of the individual partners of Landlord, if any, and Tenant shall not seek recourse
against the individual partners of Landlord or their assets.

21. Signs. Tenant shall not make any changes to the exterior of the Premises, install
any exterior lights, decorations, balloons, flags, pennants, banners or painting, or erect or
install any signs, windows or door lettering, placards, decorations or advertising media of any
type which can be viewed from the exterior of the Premises, without Landlord’s prior written
consent, which may be given or withheld in Landlord’s sole discretion. Notwithstanding the
forgoing, Landlord hereby approves the existing monument sign at the Premises. Upon vacation of
the Premises, Tenant shall remove all signs and repair, paint and/or replace the building facia
surface to which its signs are attached. Tenant shall obtain all applicable governmental permits
and approvals for signs and exterior treatments. All signs, decorations, advertising media,
blinds, draperies and other window treatment or bars or other security installations visible
from outside the Premises shall be subject to Landlord’s approval and conform in all respects to
Landlord’s requirements.

22. Broker’s Fee. Tenant and Landlord each represent and warrant to the other that
neither has had any dealings or entered into any agreements with any person, entity, broker or
finder other than the persons, if any, listed in section 1.12, in connection with the negotiation
of this Lease, and no other broker, person, or entity is entitled to any commission or finder’s
fee in connection with the negotiation of this Lease, and Tenant and Landlord each agree to
indemnify, defend and hold the other harmless from and against any claims, damages, costs,
expenses, attorneys’ fees or liability for compensation or charges which may be claimed by any
such unnamed broker, finder or other similar party by reason of any dealings, actions or
agreements of the indemnifying party. The commission payable to Landlord’s broker with respect to
this Lease shall be pursuant to the terms of the separate commission agreement in effect between
Landlord and Landlord’s broker. Landlord’s broker shall pay a portion of its commission to
Tenant’s broker, if so provided in any agreement between Landlord’s broker and Tenant’s broker.
Nothing in this Lease shall impose any obligation on Landlord to pay a commission or fee to any
party other than Landlord’s broker.

23. Estoppel Certificate.

     23.1 Delivery of Certificate. Tenant shall from time to time, upon not less than
ten (10) days’ prior written notice from Landlord execute, acknowledge and deliver to Landlord a
statement in writing certifying such information as Landlord may reasonably request including,
but not limited to, the following: (a) 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), (b) the date to which the Base Rent and other charges are
paid in advance and the amounts so payable, (c) that there are not, to Tenant’s knowledge, any uncured
defaults or unfulfilled obligations on the part of Landlord, or specifying such defaults or
unfulfilled obligations, if any are claimed, (d) that all tenant improvements to be constructed
by Landlord, If any, have been completed in accordance with Landlord’s obligations, and (e) that
Tenant has taken possession of the Premises. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Premises.

     23.2 Failure To Deliver Certificate. At Landlord’s option, the failure of Tenant
to deliver such statement within such time shall constitute a material default of Tenant
hereunder, or it shall be conclusive upon Tenant that (a) this Lease is in full force and effect,
without modification except as may be represented by Landlord, (b) there are no uncured defaults
in Landlord’s performance, (c) not more than one month’s Base Rent has been paid in advance,
(d) all tenant improvements to be constructed by Landlord, if any, have been completed in
accordance with Landlord’s obligations, and (e) Tenant has taken possession of the Premises.

24. Financial Information. So long as all of the following conditions are satisfied,
Tenant shall have no obligation to provide Landlord with financial statements or other
information pursuant to this section: (a) MRV Communications, Inc. (“MRV”) is the guarantor of
Tenant’s obligations under this Lease, (b) MRV’s stock is traded on the New York Stock Exchange
and (c) not less than fifty percent (50%) of Tenant’s stock is owned by MRV Communications, Inc.
Except as otherwise provided above, from time to time, at Landlord’s request, but not more often
than once in any twelve (12) month period
(provided, however, Landlord shall be entitled to receive such information at any time such
information is requested by a lender or purchaser of the Premises) Tenant shall cause the
following financial information to be delivered to Landlord, at Tenant’s sole cost and expense,
upon not less than ten (10) days advance written notice from Landlord: (a) a current financial
statement for Tenant and Tenant’s financial statements for the previous two accounting years, (b)
a current financial statement for any guarantor(s) of this Lease and the guarantor’(s) financial
statements for the previous two accounting years and (c) such other financial information
pertaining to Tenant or any guarantor as Landlord or any lender or purchaser of Landlord may
reasonably request. All financial statements shall be prepared in accordance with generally
accepted accounting principals consistently applied and, if such is the normal practice of
Tenant, shall be audited by an independent certified public accountant. Tenant hereby authorizes
Landlord, from time to time, without notice to Tenant, to obtain a credit report or credit history
on Tenant from any credit reporting company.

25. Environmental Matters/Hazardous Materials.

     25.1 Hazardous Materials Disclosure Certificate. Prior to executing this Lease,
Tenant has delivered to Landlord Tenant’s executed initial Hazardous Materials Disclosure
Certificate (the “Initial HazMat Certificate”), a copy of which is attached hereto as Exhibit B.
Tenant covenants, represents and warrants to Landlord that the information in the initial HazMat
Certificate is true and correct and accurately describes the use(s) of Hazardous Materials which
will be made and/or used on the Premises by Tenant. Tenant shall, commencing with the date which
is one year from the Commencement Date and continuing every year thereafter, upon Landlord’s
written request, deliver to Landlord an executed Hazardous Materials Disclosure Certificate (the
“HazMat Certificate”) describing Tenant’s then-present use of Hazardous Materials on the
Premises, and any other reasonably necessary documents and information as requested by Landlord.
The HazMat Certificates required hereunder shall be in substantially the form attached hereto as
Exhibit B.

     25.2 Definition of Hazardous Materials. As used in this Lease, the term Hazardous
Materials shall mean and include (a) any hazardous or toxic wastes, materials or substances, and
other pollutants or contaminants, which are or become regulated by any Environmental Laws
(defined below); (b) petroleum, petroleum by-products, gasoline diesel fuel, crude oil or any
fraction thereof; (c) asbestos and asbestos-containing material, in any form, whether triable or
non-triable; (d) polychlorinated biphenyls; (e) radioactive materials; (f) lead and
lead-containing materials; (g) any other material, waste or substance displaying toxic, reactive,
ignitable or corrosive characteristics, as all such terms are used in their broadest sense, and
are defined or become defined by any Environmental Law; or (h) any materials which cause or
threatens to cause a nuisance upon or waste to any portion of the Premises or any surrounding
property; or poses or threatens to pose a hazard to the health and safety of persons on the
Premises, any other surrounding property. For purposes of this Lease, the term “Hazardous
Materials” shall not include nominal amounts of ordinary household cleaners, office supplies and
janitorial supplies which are not actionable under any Environmental Laws.

     25.3 Prohibition; Environmental Laws. Tenant shall not be entitled to use or store
any Hazardous Materials on, in, or about any portion of the Premises without, In each instance,
obtaining Landlord’s prior written consent thereto. If Landlord’, in its sole discretion,
consents to any such usage or storage, then Tenant shall be permitted to use and/or store only
those Hazardous Materials that are necessary for Tenant’s business and to the extent disclosed
in the HazMat Certificate and as expressly approved by Landlord in writing. Any such usage and
storage may only be to the extent of the quantities of Hazardous Materials as specified in the
then-applicable HazMat Certificate as expressly approved by Landlord. In all events

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such usage and storage must at all times be in full compliance with any and all local, state and
federal environmental, health and/or safety-related laws, statutes, orders, standards, courts’
decisions, ordinances, rules and regulations (as interpreted by judicial and administrative
decisions), decrees, directives, guidelines, permits or permit conditions, currently existing and
as amended, enacted, issued or adopted in the future which are or become applicable to Tenant or
all or any portion of the Premises (collectively, the “Environmental Laws”) and in compliance with
the reasonable recommendations of Landlord’s consultants Tenant agrees that any changes to the type
and/or quantities of Hazardous Materials specified in the most recent HazMat Certificate may be
implemented only with the prior written consent of Landlord, which consent may be given or withheld
in Landlord’s reasonable discretion. Tenant shall not be entitled nor permitted to install any
tanks under, on or about the Premises for the storage of Hazardous Materials without the express
written consent of Landlord, which may be given or withheld in Landlord’s sole discretion. Landlord
shall have the right, in Landlord’s sole discretion, at all times during the Term of this Lease to
(i) inspect the Premises, (ii) conduct tests and investigations to determine whether Tenant is in
compliance with the provisions of this section 25 or to determine if Hazardous Materials are
present in, on or about the Premises, (iii) request lists of all Hazardous Materials used, stored
or otherwise located on, under or about any portion of the Premises, and (iv) to require Tenant to
complete a survey of its use, storage and handling of Hazardous Materials in the Premises, using a
form and following procedures designated by Landlord, in
Landlord’s sole discretion (the “Survey”).
Tenant shall reimburse Landlord for the cost of all such inspections, tests and investigations, and
all costs associated with any Survey if it is determined that Tenant is not in compliance with its
obligations under this section 25. If as a result of an inspection, test or Survey Landlord
determines, in Landlord’s reasonable discretion, that Tenant should implement or perform safety,
security or compliance measures, Tenant shall within thirty (30) days after written request by
Landlord perform such measures, at Tenant’s sole cost and expense. The aforementioned rights
granted herein to Landlord and its representatives shall not create (a) a duty on Landlord’s part
to inspect, test, investigate, monitor or otherwise observe the Premises or the activities of
Tenant and Tenant Parties with respect to Hazardous Materials, including without limitation,
Tenant’s operation, use and any remediation relating thereto, or (b) liability on the part of
Landlord and its representatives for Tenant’s use, storage, disposal or remediation of Hazardous
Materials, it being understood that Tenant shall be solely responsible for all liability in
connection therewith.

     25.4
Tenant’s Environmental Obligations. Tenant shall give to Landlord
immediate verbal and follow-up written notice of any spills, releases, discharges, disposals,
emissions, migrations, removals or transportation of Hazardous Materials on, under or about any
portion of the Premises; provided that Tenant has actual, implied or constructive knowledge of
such event(s). Tenant, at its sole cost and expense, covenants and warrants to promptly
investigate, clean up, remove, restore and otherwise remediate (including, without limitation,
preparation of any feasibility studies or reports and the performance of any and all closures) any
spill, release, discharge, disposal, emission, migration or transportation of Hazardous Materials
brought onto the Premises by Tenant arising from or related to the intentional or negligent acts
or omissions of Tenant or Tenant Parties such that the affected portions of the Premises and any
adjacent property are returned to the condition existing prior to the appearance of such Hazardous
Materials. Any such investigation, clean up, removal, restoration and other remediation shall only
be performed after Tenant has obtained Landlord’s prior written consent, which consent shall not
be unreasonably withheld so long as such actions would not potentially have a material adverse
long-term or short-term effect on any portion of the Premises. Notwithstanding the foregoing,
Tenant shall be entitled to respond immediately to an emergency without first obtaining Landlord’s
prior written consent. Tenant, at its sole cost and expense, shall conduct and perform, or cause
to be conducted and performed, all closures as required by any Environmental Laws or any agencies
or other governmental authorities having jurisdiction thereof. If Tenant fails to so promptly
investigate, clean up, remove, restore, provide closure or otherwise so remediate, Landlord may,
but without obligation to do so, take any and all steps necessary to rectify the same, and Tenant
shall promptly reimburse Landlord, upon demand, for all costs and expenses to Landlord of
performing investigation, cleanup, removal, restoration, closure and remediation work. All such
work undertaken by Tenant, as required herein, shall be performed in such a manner so as to enable
Landlord to make full economic use of the Premises after the satisfactory completion of such work.
By way of clarification, in no event shall Tenant have any responsibility to remediate Hazardous
Materials that (a) were pre-existing on the Premises prior to Tenant’s occupancy thereof, or (b)
released, discharged or disposed of at the Premises or any adjacent premises by Landlord, its
agent, employees or contractors or any other third party.

     25.5
Environmental Indemnity. In addition to Tenant’s other indemnity
obligations under this Lease, Tenant agrees to, and shall, protect, indemnify, defend (with
counsel acceptable to Landlord) and hold Landlord and the other Indemnitees harmless from and
against any and all loss, cost, damage, liability or expense (including, without limitation,
diminution in value of any portion of the Premises, damages for the loss of or restriction on the
use of rentable or usable space, and from any adverse impact of Landlord’s marketing of any space
within the Premises) arising at any time during or after the term of this Lease in connection with
or related to, directly or indirectly, the use, presence, transportation, storage, disposal,
migration, removal, spill, release or discharge of Hazardous Materials on, in or about any portion
of the Premises as a result (directly or indirectly) of the intentional or negligent acts or
omissions of Tenant or Tenant Parties. Neither the written consent of Landlord to the presence,
use or storage of Hazardous Materials in, on, under or about any portion of the Premises nor the
strict compliance by Tenant with all Environmental Laws shall excuse Tenant from its obligations
of indemnification pursuant hereto. Tenant shall not be relieved of its indemnification
obligations under the provisions of this section 25.5 due to Landlord’s status as either an
“owner” or “operator” under any Environmental Laws. Notwithstanding the foregoing, in no event
shall Tenant’s obligations under this section 25.5 create an obligation with respect to Hazardous
Materials that (i) were pre-existing on the Premises prior to Tenant’s occupancy thereof, or (ii)
released, discharged or disposed of at the Premises or any adjacent premises by Landlord, its
agent, employees or contractors or any other third party.

     25.6
Survival. Tenant’s obligations and liabilities pursuant to the
provisions of this section 25 shall survive the expiration or earlier termination of this Lease.
If it is determined by Landlord that the condition of all or any portion of the Premises is not in
compliance with the provisions of this Lease with respect to Hazardous Materials, including
without limitation, all Environmental Laws at the expiration or earlier termination of this Lease,
then Landlord may require Tenant to hold over possession of the Premises until Tenant can
surrender the Premises to Landlord in the condition in which the Premises existed as of the
Commencement Date and prior to the appearance of such Hazardous Materials except for reasonable
wear and tear, including without limitation, the conduct or performance of any closures as
required by any Environmental Laws. The burden of proof hereunder shall be upon Tenant. For
purposes hereof, the term “reasonable wear and tear” shall not include any deterioration in the
condition or diminution of the value of any portion of the Premises in any manner whatsoever
related to, directly or indirectly, Hazardous Materials. Any such holdover by Tenant will be with
Landlord’s consent, will not be terminable by Tenant in any event or circumstance and will
otherwise be subject to the provisions of section 29 of this Lease.

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26. Subordination.

     26.1 Effect of Subordination. This Lease, and any Option (as defined below) granted
hereby, upon Landlord’s written election, shall be subject and subordinate to any ground lease,
mortgage, deed of trust, or any other hypothecation or security now or hereafter placed upon the
Premises and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof; provided, however, that Tenant
shall have a received an executed commercially reasonable non-disturbance agreement from any
ground lessor, mortgagee, trustor or other holder of a lien on the Premises. Notwithstanding such
subordination, Tenant’s right to quiet possession of the Premises shall not be disturbed if Tenant
is not in default and so long as Tenant shall pay the rent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. At the
request of any mortgagee, trustee or ground lessor, Tenant shall attorn to such person or entity.
If any mortgagee, trustee or ground lessor shall elect to have this Lease and any Options granted
hereby prior to the lien of its mortgage, deed of trust or ground
lease, and shall give written
notice thereof to Tenant, this Lease and such Options shall be deemed prior to such mortgage, deed
of trust or ground lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording thereof. In the
event of the foreclosure of a security device, the new owner shall not (a) be liable for any act
or omission of any prior landlord or with respect to events occurring prior to its acquisition of
title (except to the extent that such defaults continue after acquisition of title), (b) be liable
for the breach of this Lease by any prior landlord (except to the extent that such breach is of a
continuing nature and continues after the acquisition of title to the Premises by such party), (c)
be subject to any offsets or defenses which Tenant may have against the prior landlord or (d) be
liable to Tenant for the return of its security deposit (unless actually received thereby from
Landlord).

     26.2 Execution of Documents. Tenant agrees to execute and acknowledge any
documents Landlord reasonably requests Tenant execute to effectuate an attornment, a
subordination, or to make this Lease or any Option granted herein prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Tenant’s failure to execute such
documents within ten (10) days after written demand shall constitute a material default by Tenant
hereunder.

     26.3 Nondisturbance Agreement. Landlord has obtained a loan which is
secured by a deed of trust encumbering all or part of the Project. Landlord shall use
commercially reasonable efforts to obtain from Lender in favor of Tenant a commercially
reasonable nondisturbance agreement (a “Nondisturbance Agreement”). Provided that Tenant accepts
the form of Nondisturbance Agreement previously provided to Tenant by Landlord without
modification (the “Standard Form”), Tenant shall not be obligated to pay to Landlord or
Landlord’s lender any cost or expense in connection with the execution of the Nondisturbance
Agreement. If Tenant requests changes to the Standard Form, Landlord shall not be obligated to
incur any cost or expense to obtain the Nondisturbance Agreement, and any charges of Lender
(including attorneys fees) shall be paid by Tenant. Tenant’s obligations under this Lease are not
conditioned upon the Lender providing a Nondisturbance Agreement.

27.Options.

     27.1 Definition. As used in this Lease, the word “Option” has the following
meaning: (1) the right or option to extend the term of this Lease or to renew this Lease, (2) the
option or right of first refusal to lease the Premises or the right of first offer to lease the
Premises and (3) the right or option to terminate this Lease prior to its expiration date or to
reduce the size of the Premises. Any Option granted to Tenant by Landlord must be evidenced by a
written option agreement attached to this Lease as a rider or addendum or said option shall be of
no force or effect.

     27.2 Options Personal. Pursuant to Addendum section 10, Landlord has
granted to Tenant two (2) consecutive live (5) year options to extend the term of this Lease. The
first five (5) year extension option is hereinafter referred to as the
“First Extension Option” and the second five (5) year extension option is hereinafter referred to
as the “Second Extension Option”. The First Extension Option may be exercised by Tenant, any
Affiliate (as defined in the Addendum to this Lease) or any other person or entity to whom Tenant
assigns this Lease with Landlord’s approval in accordance with section 15. The Second Extension
Option is personal to the original Tenant and any Affiliate to whom Tenant assigns its interest
in this Lease (an “Assuming Affiliate”) and may be exercised only by the original Tenant or an
Assuming Affiliate white occupying the entire Premises and may not be exercised or be assigned,
voluntarily or involuntarily, by or to any person or entity other than Tenant or an Assuming
Affiliate, including, without limitation, any transferee approved by Landlord in section 15. The
Options, if any, herein granted to Tenant are not assignable separate and apart from this Lease,
nor may any Option be separated from this Lease in any manner, either by reservation or
otherwise. If at any time an Option is exercisable by Tenant or an Assuming Affiliate, a sublease
exists as to twenty five percent (25%) or more of the leasable area of the Premises to a person
or entity other than an Affiliate, the Option shall be deemed null and void and neither Tenant
nor any assignee or subtenant shall have the right to exercise the Option.

     27.3 Multiple Options. In the event that Tenant has multiple Options to
extend or renew this Lease, a later Option cannot be exercised unless the prior Option to extend
or renew this Lease has been so exercised.

     27.4 Effect of Default on Options. Tenant shall have no right to exercise
an Option (i) during the time commencing from the date Landlord gives to Tenant a notice of
default pursuant to section 16.1 and continuing until the noncompliance alleged in said notice of
default is cured, or (ii) if Tenant is in default of any of the terms, covenants or conditions of
this Lease beyond any applicable notice or cure periods. The period of time within which an
Option may be exercised shall not be extended or enlarged by reason of Tenant’s inability to
exercise an Option because of the provisions of this section.

     27.5 Intentionally deleted.

     27.6 Guarantees. Notwithstanding anything to the contrary contained in any
rider or addendum to this Lease, Tenant’s right to exercise and the effectiveness of an Option is
conditioned upon Landlord’s receipt from any prior tenant that has not been expressly released
from liability under this Lease, and any guarantor of any obligation of Tenant under this Lease,
of a written agreement reaffirming such person’s obligations under this Lease or the guaranty, as
modified by Tenant’s exercise of the Option.

28. Landlord Reservations. Landlord shall have the right to change the name and
address of the Building upon not less than ninety (90) days prior written notice.

29. Holding Over.  If Tenant remains in possession of the Premises or any part
thereof after the expiration or earlier termination of the term hereof with Landlord’s consent,
such occupancy shall be a tenancy from month to month upon all the terms and conditions of this
Lease pertaining to the obligations of Tenant, except that the Base Rent payable shall be one
hundred fifty percent (150%) of the Base Rent payable immediately preceding the termination date
of this Lease, and all Options, if any, shall be deemed terminated and be of no further effect.
If Tenant remains in possession of the Premises or any part thereof, after the expiration of the
term hereof without Landlord’s consent, Tenant shall, at Landlord’s option, be treated as a
tenant at sufferance or a trespasser. Nothing contained herein shall be construed to constitute
Landlord’s consent to Tenant holding over at the expiration or earlier termination of the Lease
term or to give Tenant the right to hold over after the expiration or earlier termination of the
Lease term.

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30. Landlord’s Access.

     30.1 Access. Landlord and Landlord’s agents, contractors and employees shall have the right to
enter the Premises at reasonable times following reasonable notice (except in the case of
emergencies where no advance notice shall be required) for the purpose of inspecting the Premises,
performing any services required of Landlord, showing the Premises to prospective purchasers,
lenders or tenants, undertaking safety measures and making alterations, repairs, improvements or
additions to the Premises. In the event of an emergency, Landlord may gain access to the Premises
by any reasonable means, and Landlord shall not be liable to Tenant for damage to the Premises or
to Tenant’s property resulting from such access except to the extent caused by Landlord’s gross
negligence or willful misconduct. Landlord may at any time place on or about the Building “for
sale” signs and Landlord may at any time during the last one hundred eighty (180) days of the term
hereof place on or about the Premises “for lease” signs.

     30.2 Restrictions on Landlord’s Rights.  Landlord shall use commercially
reasonable efforts to minimize interference with Tenant’s business operations caused by repairs,
maintenance, additions, alterations, modifications or other changes to the Premises made by
Landlord and shall coordinate and schedule all such activities with Tenant to ensure minimization
of Interference with Tenant’s business operations.

31.
Security Measures. Tenant hereby acknowledges that Landlord shall have no obligation
whatsoever to provide guard service or other security measures for the benefit of the Premises,
and Landlord shall have no liability to Tenant due to its failure to provide such services. Tenant
assumes all responsibility for the protection of Tenant, its agents, employees, contractors and
invitees and the property of Tenant and of Tenant’s agents, employees, contractors and invitees
from acts of third parties.

32. Easements. Landlord reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Landlord deems necessary or desirable, and to
cause the recordation of parcel maps and restrictions, so long as such easements, rights,
dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by
Tenant., and do not increase Tenant’s obligations under this Lease or diminish Tenants rights
under this Lease Tenant shall sign any of the aforementioned documents within ten (10) days after
Landlord’s request, and Tenant’s failure to do so shall constitute a material default by Tenant.
The obstruction of Tenant’s view, air or light by any structure erected in the vicinity of the
Premises, whether by Landlord or third parties, shall in no way affect this Lease or impose any
liability upon Landlord.

33.
Transportation Management. Tenant shall fully comply at Its sole expense
with all present or future programs implemented or required by any governmental or
quasi-governmental entity to manage parking, transportation, air pollution or traffic In and
around the Premises or the metropolitan area in which the Premises is located.

34.
Severability. The invalidity of any provision of this Lease as determined by
a court of competent jurisdiction shall in no way affect the validity of any other provision
hereof.

35.
Time of Essence. Time is of the essence with respect to each of the
obligations to be performed by Tenant and Landlord under this Lease.

36.
Definition of Additional Rent. All monetary obligations of Tenant to
Landlord under the terms of this Lease, including, but not limited to, Base Rent and late charges
shall be deemed to be rent.

37.
Incorporation of Prior Agreements. This Lease and the attachments listed in
section 1.13 contain all agreements of the parties with respect to the lease of the Premises and
any other matter mentioned herein. No prior or contemporaneous agreement or understanding
pertaining to any such matter shall be effective. Except as otherwise stated in this Lease, Tenant
hereby acknowledges that no real estate broker nor Landlord nor any employee or agents of any of
said persons has made any oral or written warranties or representations to Tenant concerning the
condition or use by Tenant of the Premises or concerning any other matter addressed by this Lease.

38. Amendments. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification.

39. Notices. All notices required or permitted by this Lease shall be in writing
and may be delivered (a) in person (by hand, by messenger or by courier service), (b) by U.S.
Postal Service regular mail, (c) by U.S. Postal Service certified mail, return receipt requested,
(d) by U.S. Postal Service Express Mail, Federal Express or other overnight courier, or (e) by
facsimile transmission, and shall be deemed sufficiently given if served in a manner specified in
this section. The addresses set forth in section 1,14 of this Lease shall be the address of each
party for notice purposes. Landlord or Tenant may by written notice to the other specify a
different address for notice purposes, except that upon Tenant’s taking possession of the
Premises, the Premises shall constitute Tenant’s address for the purpose of mailing or delivering
notices to Tenant. A copy of all notices required or permitted to be given to Landlord hereunder
shall be concurrently transmitted to such party or parties at such addresses as Landlord may from
time to time hereinafter designate by written notice to Tenant. Any notice sent by regular mail or
by certified mail, return receipt requested, shall be deemed given three (3) days after deposited
with the U.S. Postal Service. Notices delivered by U.S. Express Mail, Federal Express or other
courier shall be deemed given on the date delivered by the carrier to the appropriate party’s
address for notice purposes. if any notice is transmitted by facsimile transmission, the notice
shall be deemed delivered upon telephone confirmation of receipt of the transmission thereof at
the appropriate party’s address for notice purposes. A copy of all notices delivered to a party by
facsimile transmission shall also be mailed to the party on the date the facsimile transmission is
completed. If notice is received on Saturday, Sunday or a legal holiday, it shall be deemed
received on the next business day. Nothing contained herein shall be construed to limit Landlord’s
right to serve any notice to pay rent or quit or similar notice by any method permitted by
applicable law, and any such notice shall be effective if served in accordance with any method
permitted by applicable law whether or not the requirements of this section have been met.

40. Waivers.  No waiver by Landlord or Tenant of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by Landlord or Tenant of
the same or any other provision. Landlord’s consent to, or approval of, any act shall not be
deemed to render unnecessary the obtaining of Landlord’s consent to or approval of any subsequent
act by Tenant. The acceptance of rent hereunder by Landlord shall not be a waiver of any preceding
breach by Tenant of any provision hereof, other than the failure of Tenant to pay the particular
rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of
acceptance of such rent. No acceptance by Landlord of partial payment of any sum due from Tenant
shall be deemed a waiver by Landlord of its right to receive the full amount due, nor shall any
endorsement or statement on any check or accompanying letter from Tenant be deemed an accord and
satisfaction. Tenant hereby waives California Code of Civil Procedure section 1179 and Civil Code
section 3275 which allow tenants to obtain relief from the forfeiture of a lease. Tenant hereby
waives for Tenant and all those claiming under Tenant all rights now or hereafter existing to
redeem by order or judgment of any court or by legal process or writ Tenant’s right of occupancy
of the Premises after any termination of this Lease.

41. Covenants. This Lease shall be construed as though Landlord’s covenants
contained herein are independent and not dependent and Tenant hereby waives the benefit of any
statute to the contrary. All provisions of this Lease to be observed or performed by Tenant are
both covenants and conditions.

15

 

42.
Binding Effect; Choice of
Law. Subject to any provision hereof restricting assignment
or subletting by Tenant, this Lease shall bind the parties, their heirs, personal representatives,
successors and assigns. This Lease shall be governed by the laws of the state in which the Premises
is located and any litigation concerning this Lease between the parties hereto shall be initiated
in the county in which the Premises is located.

43.
Attorneys’ Fees. If Landlord or Tenant brings an action to enforce the terms
hereof or declare rights hereunder, the prevailing party in any such action, or appeal thereon,
shall be entitled to its reasonable attorneys’ fees and court costs to be paid by the losing party
as fixed by the court in the same or separate suit, and whether or not such action is pursued to
decision or judgment. The attorneys’ fee award shall not be computed in accordance with any court
fee schedule, but shall be such as to fully reimburse all attorneys’ fees and court costs
reasonably incurred in good faith. Landlord and Tenant agree that
attorneys’ fees incurred with
respect to defaults and bankruptcy are actual pecuniary losses within the meaning of section
365(b)(1)(B) of the Bankruptcy Code or any successor statute.

44. Auctions. Tenant shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction or going-out-of-business sale upon the Premises.

45. Merger. The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, or a termination by Landlord, shall not result in the merger of
Landlord’s and Tenant’s estates and shall, at the option of Landlord, terminate all or any
existing subtenancies or may, at the option of Landlord, operate as an assignment to Landlord of
any or all of such subtenancies.

46. Quiet Possession. Subject to the other terms and conditions of this Lease,
including, without limitation, Landlord’s rights and remedies in connection with a Tenant default,
and the rights of any lender. Tenant shall have quiet possession of the Premises for the entire
term hereof subject to all of the provisions of this Lease.

47. Authority. If Tenant is a corporation, trust, limited liability company,
limited liability partnership or general or limited partnership, Tenant, and each individual
executing this Lease on behalf of such entity, represents and warrants that such individual is
duly authorized to execute and deliver this Lease on behalf of said entity, that said entity is
duly authorized to enter into this Lease, and that this Lease is enforceable against said entity
in accordance with its terms. If Tenant is a corporation, trust, limited liability company,
limited liability partnership or other partnership, Tenant shall deliver to Landlord upon demand
evidence of such authority satisfactory to Landlord.

48. Conflict. Except as otherwise provided herein to the contrary, any conflict
between the printed provisions, exhibits, addenda or riders of this Lease and the typewritten or
handwritten provisions, if any, shall be controlled by the typewritten or handwritten provisions.

49.
Multiple Parties. If more than one person or entity is named as Tenant
herein, the obligations of Tenant shall be the joint and several responsibility of all persons or
entities named herein as Tenant. Service of a notice in accordance with section 39 on one Tenant
shall be deemed service of notice on all Tenants.

50.
Interpretation. This Lease shall be interpreted as if it was prepared by
both parties, and ambiguities shall not be resolved in favor of Tenant because all or a portion of
this Lease was prepared by Landlord. The captions contained in this Lease are for convenience only
and shall not be deemed to limit or alter the meaning of this Lease. As used in this Lease, the
words tenant and landlord include the plural as well as the singular. Words used in the neuter
gender include the masculine and feminine gender.

51.
Prohibition Against Recording. Neither this Lease, nor any memorandum,
affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting
through, under or on behalf of Tenant. Landlord shall have the right to record a memorandum of
this Lease, and Tenant shall execute, acknowledge and deliver to Landlord for recording any
memorandum prepared by Landlord.

52.
Relationship of Parties. Nothing contained in this Lease shall be deemed or
construed by the parties hereto or by any third party to create the relationship of principal and
agent, partnership, joint venturer or any association between Landlord and Tenant.

53. Intentionally deleted.

54.
Waiver of Jury Trial. LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHT TO
TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, COUNTERCLAIM OR CROSS-COMPLAINT IN ANY ACTION,
PROCEEDING AND/OR HEARING BROUGHT BY EITHER LANDLORD AGAINST TENANT OR TENANT AGAINST LANDLORD ON
ANY MATTER WHATSOEVER ARISING OUT OF, OR IN ANY WAY CONNECTED WITH, THIS LEASE, THE RELATIONSHIP
OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE PREMISES, OR ANY CLAIM OF INJURY OR
DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY LAW, STATUTE, OR REGULATION, EMERGENCY OR
OTHERWISE, NOW OR HEREAFTER IN EFFECT.

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LANDLORD AND TENANT ACKNOWLEDGE THAT THEY HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY
CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF
THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT
WITH RESPECT TO THE PREMISES. TENANT ACKNOWLEDGES THAT IT HAS BEEN GIVEN THE OPPORTUNITY TO HAVE
THIS LEASE REVIEWED BY ITS LEGAL COUNSEL PRIOR TO ITS EXECUTION. PREPARATION OF THIS LEASE BY
LANDLORD OR LANDLORD’S AGENT AND SUBMISSION OF SAME TO TENANT SHALL NOT BE DEEMED AN OFFER BY
LANDLORD TO LEASE THE PREMISES TO TENANT OR THE GRANT OF AN OPTION TO TENANT TO LEASE THE PREMISES.
THIS LEASE SHALL BECOME BINDING UPON LANDLORD ONLY WHEN FULLY EXECUTED BY BOTH PARTIES AND WHEN
LANDLORD HAS DELIVERED A FULLY EXECUTED ORIGINAL OF THIS LEASE TO TENANT.

LANDLORD:

Nordhoff Industrial Complex, a California general partnership

	 	 	 	 	 	 	 
	By:	 	Katell Family Company, LLC, General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gerald Katell	 	 
	 

	 	 	 	 

Gerald Katell, Manager
	 	 

TENANT*:

LuminentOIC Inc., a Delaware corporation

	 	 	 	 	 
	 

	 	/s/ HANOCH ELDAR	 	 
	 

	 	 
HANOCH ELDAR	 	 
	 

	 	PRESIDENT	 	 
	 

	 	NEAR MARGALIT	 	 
	 

	 	SECRETARY	 	 

 

			
	*	 	If Tenant is a corporation, the authorized officers must sign on behalf of the corporation and
indicate the capacity in which they are signing. The Lease must be executed by the president or
vice president and the secretary or assistant secretary, unless the bylaws or a resolution
of the board of directors shall otherwise provide, in which event, the bylaws or a certified copy
of the resolution, as the case may be, must be attached to this Lease.

17

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