Document:

Exhibit 10.2

 

September 5,
2005

 

 

To:          Tim Callahan

 

Dear
Tim:

 

As
discussed, this letter agreement and the accompanying Confidentiality,
Proprietary Rights & Non-Solicitation Agreement (“Confidentiality
Agreement”) have been prepared in recognition of your importance to SIRVA.

 

Pursuant
to this letter agreement, SIRVA will pay to you, severance pay equal to twelve
months of your then current base salary if your employment with SIRVA and all
affiliates is terminated by SIRVA Without Cause, less the amount, if any,
payable to you under the terms of any other severance plan, policy, or program
and you sign a general release in a form satisfactory to SIRVA.  Provided, however, that no severance pay will
be payable under this letter agreement if your employment terminates in
connection with a sale, merger or other corporate transaction and, due to your
receipt of an offer of comparable employment in connection with the
transaction, you are not eligible for severance under any SIRVA severance plan,
policy, or program.

 

For
purposes of this letter agreement, the term “Without Cause” means a termination
of your employment by SIRVA for reasons other than (i) the continued
willful failure to substantially perform the duties and obligations of your
employment (other than any such failure due to a physical or mental illness), (ii) willful
and serious misconduct that has caused or is reasonably expected to result in
material injury to SIRVA or any of its affiliates, (iii) conviction of, or
entering a plea of guilty or nolo contendere to, a crime that constitutes a
felony or (iv) the willful or material breach of any of your obligations
under the Confidentiality Agreement or under any other written agreement or
covenant with SIRVA or any of its affiliates.

 

To
be eligible for the enhanced severance described in this letter agreement, you
must sign and return by September 12, 2005, both this letter agreement and
the Confidentiality Agreement, and must comply with the Confidentiality
Agreement’s terms.

 

This
letter agreement has been prepared in duplicate.  You should countersign and date both copies,
as well as both copies of the accompanying Confidentiality Agreement, and then
return one set of executed originals to my attention.  If you have any questions, please let me
know.

 

Sincerely,

 

 

	
  /s/ Todd Schorr

  	
   

  
	
  Todd Schorr

  	
   

  
	
  Senior VP Human
  Resources

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACCEPTED
  AND AGREED:

  
	
   

  	
   

  
	
  /s/ Tim Callahan

  	
   

  
	
  Tim Callahan

  	
   

  
	
   

  	
   

  
	
  September 6,
  2005

  	
   

  
	
  DateExhibit 10.1

 

 

LEASE AGREEMENT

 

by and between

 

EQUASTONE 2200
FARADAY, LLC

 

(“Landlord”)

 

and

 

DOT HILL SYSTEMS
CORPORATION

 

(“Tenant”)

 

Dated as of September 1,
2005

 

 

TABLE OF
CONTENTS

 

	
  1.

  	
  OCCUPANCY, USE AND
  DELIVERY CONDITIONS

  	
   

  
	
  2.

  	
  TERM AND POSSESSION

  	
   

  
	
  3.

  	
  TENANT
  IMPROVEMENTS/DESIGN AND CONSTRUCTION PROCESS

  	
   

  
	
  4.

  	
  RENT; RENT
  ADJUSTMENTS; ADDITIONAL CHARGES FOR EXPENSES AND TAXES

  	
   

  
	
  5.

  	
  SECURITY DEPOSIT

  	
   

  
	
  6.

  	
  RESTRICTIONS ON
  USE

  	
   

  
	
  7.

  	
  COMPLIANCE WITH
  LAWS

  	
   

  
	
  8.

  	
  ALTERATIONS

  	
   

  
	
  9.

  	
  REPAIR AND
  MAINTENANCE

  	
   

  
	
  10.

  	
  LIENS

  	
   

  
	
  11.

  	
  ASSIGNMENT AND
  SUBLETTING

  	
   

  
	
  12.

  	
  INSURANCE AND
  INDEMNIFICATION

  	
   

  
	
  13.

  	
  WAIVER OF
  SUBROGATION

  	
   

  
	
  14.

  	
  SERVICES AND
  UTILITIES

  	
   

  
	
  15.

  	
  ESTOPPEL
  CERTIFICATES

  	
   

  
	
  16.

  	
  HOLDING OVER

  	
   

  
	
  17.

  	
  SUBORDINATION

  	
   

  
	
  18.

  	
  RULES
  AND REGULATIONS

  	
   

  
	
  19.

  	
  RE-ENTRY
  BY LANDLORD

  	
   

  
	
  20.

  	
  DEFAULT.

  	
   

  
	
  21.

  	
  REMEDIES

  	
   

  
	
  22.

  	
  INSOLVENCY
  OR BANKRUPTCY

  	
   

  
	
  23.

  	
  DAMAGE
  BY FIRE, ETC.

  	
   

  
	
  24.

  	
  EMINENT
  DOMAIN

  	
   

  
	
  25.

  	
  LIABILITY
  OF LANDLORD

  	
   

  
	
  26.

  	
  RIGHT
  OF LANDLORD TO PERFORM

  	
   

  
	
  27.

  	
  SURRENDER
  OF PREMISES

  	
   

  
	
  28.

  	
  WAIVER

  	
   

  
	
  29.

  	
  NOTICES

  	
   

  
	
  30.

  	
  TAXES
  PAYABLE BY TENANT

  	
   

  
	
  31.

  	
  ABANDONMENT

  	
   

  
	
  32.

  	
  SUCCESSORS
  AND ASSIGNS

  	
   

  
	
  33.

  	
  ATTORNEY’S
  FEES

  	
   

  
	
  34.

  	
  LIGHT
  AND AIR

  	
   

  
	
  35.

  	
  CORPORATE
  AUTHORITY; FINANCIAL INFORMATION

  	
   

  
	
  36.

  	
  PARKING

  	
   

  
	
  37.

  	
  MISCELLANEOUS

  	
   

  
	
  38.

  	
  REAL
  ESTATE BROKERS

  	
   

  
	
  39.

  	
  LEASE
  EFFECTIVE DATE

  	
   

  
	
  40.

  	
  SIGNAGE

  	
   

  
	
  41.

  	
  HAZARDOUS
  SUBSTANCE LIABILITY

  	
   

  
	
  42.

  	
  TELECOMMUNICATIONS

  	
   

  
	
  43.

  	
  EXTENSION
  OPTION

  	
   

  

 

i

 

EXHIBITS

 

	
  Exhibit “A”

  	
  Premises

  	
   

  
	
  Exhibit “B”

  	
  Project

  	
   

  
	
  Exhibit “C”

  	
  Tenant Improvement Agreement

  	
   

  
	
  Exhibit “D”

  	
  Commencement Date Memorandum

  	
   

  
	
  Exhibit “E”

  	
  Rules and Regulations

  	
   

  
	
  Exhibit “F”

  	
  Telecommunications Rules

  	
   

  
	
  Exhibit “G”

  	
  Telecommunications
  Access Licens

  	
   

  

 

ii

 

BASIC LEASE INFORMATION

 

	
  Lease Date:

  	
   

  	
  September 1,
  2005

  
	
   

  	
   

  	
   

  
	
  Landlord:

  	
   

  	
  Equastone
  2200 Faraday, LLC

  
	
   

  	
   

  	
   

  
	
  Landlord’s
  Address:

  	
   

  	
  c/o Equus
  Realty Advisors, LLC

  800 Silverado Street, Suite 300

  La Jolla, CA 92037-4234

  Attn: Mr. Roger Simsiman

  
	
   

  	
   

  	
   

  
	
  With a copy
  to:

  	
   

  	
  Sheppard,
  Mullin, Richter & Hampton LLC

  12544 High Bluff Drive, Suite 300

  San Diego, CA 92130-3051

  Attn: Scott Biel, Esq.

  
	
   

  	
   

  	
   

  
	
  Tenant:

  	
   

  	
  Dot Hill
  Systems Corporation

  
	
   

  	
   

  	
   

  
	
  Tenant’s Address:

  	
   

  	
  6305 El
  Camino Real

  Carlsbad, CA 92009

  Attn: CFO

  
	
   

  	
   

  	
   

  
	
  Building:

  	
   

  	
  That certain
  229,753 square foot office building (the “Building”)
  located at 2200 Faraday Avenue, Carlsbad, CA 92008

  
	
   

  	
   

  	
   

  
	
  Premises:

  	
   

  	
  Suite 100

  
	
   

  	
   

  	
   

  
	
  Rentable
  Area of the Premises:

  	
   

  	
  58,452
  rentable square feet (“Rentable Area”).

  
	
   

  	
   

  	
   

  
	
  Project:

  	
   

  	
  Faraday
  Corporate Center

  
	
   

  	
   

  	
   

  
	
  Parking
  Spaces:

  	
   

  	
  175
  non-exclusive passes to use as many spaces in the parking facilities of the
  Building (approximate ratio of 3 passes per 1,000 usable square feet of
  Premises). In the event Landlord permits another tenant in the Project to
  designate parking spaces for its own use, then Tenant shall have the right to
  designate that number of parking spaces for its own use which when divided by
  the Rentable Area of the Premises equals the ratio of such other tenant’s
  number of designated parking spaces to the total number of rentable square
  feet of such other tenant’s premises, and the location of Tenant’s designated
  spaces shall be determined by mutual agreement of Landlord and Tenant in
  order to be consistent with the location of reserved spaces granted to other
  tenants of the Project.

  
	
   

  	
   

  	
   

  
	
  Tenant’s Use
  of the Premises:

  	
   

  	
  Any use
  permitted under the Project’s zoning and the CC&R’s (but in any case
  excluding uses that involve the use of Hazardous Substances, as defined in Article 41,
  beyond levels typical for office/electronics and engineering uses; provided
  that any Hazardous Substances not typically associated with general office
  use shall be disclosed to Landlord on a Hazardous Materials List (as defined
  in Article 41) before such Hazardous Substances may be introduced
  into the Premises by Tenant).

  
	
   

  	
   

  	
   

  
	
  Lease Term:

  	
   

  	
  Seven (7) years
  four (4) months (the “Initial Term”).
  The Initial Term, and the any Extension Term and/or any holdover period shall
  collectively be defined as the “Term”.

  
	
   

  	
   

  	
   

  
	
  Commencement
  Date:

  	
   

  	
  January 1,
  2006 subject to any Landlord Delays pursuant to the terms of the Work Letter

  

 

iii

 

	
  Renewal
  Options:

  	
   

  	
  Two (2) Five
  (5) year options to renew

  

 

Monthly Base Rent:  The Monthly Base Rent is set forth below and
is payable in accordance with the terms of Article 4 (the fifth (5th)
month’s Monthly Base Rent shall be paid by Tenant upon the Tenant’s execution
and delivery of this Lease):

 

	
  Months of Term

  	
   

  	
  Amount of Monthly Base Rent

  Payable Per Month (Per Square Foot of Rentable

  Area)

  	
   

  	
  Amount of Base Rent Payable Per

  Month

  	
   

  
	
  1-12

  	
   

  	
  1.25

  	
   

  	
  $

  	
  73,065.00

  	
  *

  
	
  13-24

  	
   

  	
  1.36

  	
   

  	
  $

  	
  79,494.72

  	
   

  
	
  25-36

  	
   

  	
  1.39

  	
   

  	
  $

  	
  81,248.28

  	
   

  
	
  37-48

  	
   

  	
  1.43

  	
   

  	
  $

  	
  83,586.36

  	
   

  
	
  49-60

  	
   

  	
  1.46

  	
   

  	
  $

  	
  85,339.92

  	
   

  
	
  61-72

  	
   

  	
  1.50

  	
   

  	
  $

  	
  87,678.00

  	
   

  
	
  73-84

  	
   

  	
  1.54

  	
   

  	
  $

  	
  90,016.08

  	
   

  
	
  85-88

  	
   

  	
  1.58

  	
   

  	
  $

  	
  92,354.16

  	
   

  

 

*  See Section 4.2 regarding Abatement
Period for Months 1 through 4.

 

	
  Prepaid Rent:

  	
   

  	
  $73,065.00 (Monthly Base
  Rent payable during fifth month of Initial Term).

  
	
   

  	
   

  	
   

  
	
  Tenant’s Share:

  	
   

  	
  25.44%

  
	
   

  	
   

  	
   

  
	
  Security Deposit:

  	
   

  	
  $83,586.36

  
	
   

  	
   

  	
   

  
	
  Normal Business Hours of
  Building:

  	
   

  	
  Monday – Friday 8:00 a.m.
  to 6:00 p.m.; Saturday 9:00 a.m. to 1:00 p.m. (Sundays and
  holidays excepted)

  
	
   

  	
   

  	
   

  
	
  Landlord’s Work:

  	
   

  	
  See Work Letter

  
	
   

  	
   

  	
   

  
	
  Guarantor of Lease:

  	
   

  	
  None.

  
	
  Landlord’s Broker:

  	
   

  	
  CB Richard Ellis

  
	
   

  	
   

  	
   

  
	
  Tenant’s Broker:

  	
   

  	
  Irving Hughes

  
	
   

  	
   

  	
   

  
	
  Broker’s Fee or Commission
  paid by:

  	
   

  	
  Payable by Landlord
  pursuant to a separate agreement

  

 

iv

 

The foregoing Basic Lease Information is hereby
incorporated into and made a part of this Lease.  Each reference in this Lease to any of the
Basic Lease Information shall mean the respective information hereinabove set
forth and shall be construed to incorporate all of the terms provided under the
particular section pertaining to such information.  In the event of any conflict between any
Basic Lease Information and the Lease, the latter shall control.

 

	
  TENANT:

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
   

  
	
  DOT HILL
  SYSTEMS CORPORATION,

  a Delaware corporation

  	
  EQUASTONE
  2200 FARADAY, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  
	
  By:

  	
  /s/ James L. Lambert

  	
   

  	
  By:

  	
  Equastone Faraday, LLC,

  
	
  Name:

  	
  James L. Lambert

  	
   

  	
   

  	
  a Delaware limited
  liability company,

  
	
  Its:

  	
  Chief Executive Officer

  	
   

  	
   

  	
  its Manager

  
	
   

  	
   

  
	
  By:

  	
  /s/ Preston S. Romm

  	
   

  	
   

  	
  By:

  	
  /s/ Chad M. Carpenter

  	
   

  
	
  Name:

  	
  Preston S. Romm

  	
   

  	
   

  	
  Name:

  	
  Chad M. Carpenter

  	
   

  
	
  Its:

  	
  Chief Financial Officer

  	
   

  	
   

  	
  Its:

  	
  President and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Roger C. Simsiman

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Roger C. Simsiman

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Chief Operating Officer

  	
   

  
																

 

v

 

LEASE AGREEMENT

 

THIS LEASE
AGREEMENT (the “Lease”) is made and entered into as of September 1,
2005, by and between Equastone
2200 Faraday, LLC, a Delaware limited liability company (herein called “Landlord”), and Dot Hill Systems
Corporation, a Delaware corporation (herein called “Tenant”).

 

Upon and subject to the terms, covenants and
conditions hereinafter set forth, Landlord hereby leases to Tenant and Tenant
hereby hires from Landlord those premises as depicted on Exhibit A
(the “Premises”) comprising a
portion of the first floor of the two-story building (hereinafter referred to
as the “Building”) specified in
the Basic Lease Information attached hereto. Prior to the execution of this
Lease, Tenant has reviewed and approved the Rentable Area specified in the
Basic Lease Information, which shall be conclusive and binding on the parties
for purposes of calculating Rent and the Tenant Allowance.  The Project, consisting of the Building, and
such other buildings as may be constructed as part of the Project improvements
from time to time is located within the area outlined on Exhibit B,
subject to modification in accordance with Section 1.1 below.  The term “Common
Area” shall mean all areas and facilities provided by Landlord for
the common use of Landlord and tenants and their respective employees and
invitees within the Project, to the extent such facilities are not designated
by Landlord for the exclusive use of Tenant or any other tenant or other
occupant of the Building, and such common use improvements may include, but are
not limited to a Building lobby, hallways, stairwells, restrooms, elevators,
parking areas, access and perimeter roads, pedestrian sidewalks, landscaped
areas, trash enclosures, recreation areas and the like, and to the extent the
tenants have non-exclusive rights to use the driveways, sidewalks and common
areas of the Project, such appurtenant rights of record are hereby granted
non-exclusively to Tenant during the Term of this Lease.

 

1.                                      OCCUPANCY,
USE AND DELIVERY CONDITIONS.

 

1.1                                 Permitted Use.  Tenant may use and occupy the Premises during
the Term for the purposes specified in the Basic Lease Information (“Permitted Use”), subject to the terms and conditions
of this Lease, and for no other use or purpose without the prior written
consent of Landlord.  Tenant shall be
entitled to the nonexclusive use of the Common Area with Landlord and other
occupants (if any) of the Project in accordance with the Rules and
Regulations established by Landlord from time to time.  Notwithstanding anything to the contrary in
the Basic Lease Information or in this Lease, Tenant understands and agrees
that (a) one or more Reciprocal Easement Agreements and Declarations of
Covenants, Conditions and Restrictions (collectively, the “CC&Rs”) and/or (b) a mortgage
and/or ground lease may encumber all or a portion of the Project now or in the
future, and (c) Tenant shall fully comply with any and all restrictions on
the use of the Premises specified in such CC&Rs and/or ground lease,
provided that Tenant shall have been provided with a true, correct and complete
copy of any existing CC&Rs, ground lease or Mortgage (as defined in Article 17
hereof) prior to the date hereof, and any approval given by Landlord hereunder
shall be limited to the matters covered by such approval with respect to this
Lease only and shall not be interpreted to include any approval or consent in
respect of the CC&R’s and/or ground lease and/or Mortgage.  If necessary, Tenant shall execute such
documents as are reasonably necessary to cause this Lease to become subordinate
to such CC&R’s and/or ground lease and/or mortgage, subject to Tenant’s
rights set forth in Article 17 hereof.

 

Landlord hereby reserves the
following rights with respect to the Common Areas:  to establish reasonable rules and
regulations for the use thereof; to use or permit the use by others to whom
Landlord may have granted such rights; to close all or any portion thereof as
may be deemed necessary by Landlord to prevent a dedication thereof or the
accrual of any rights by any person or the public therein; and to change the
layout of the Common Areas, including the right to reasonably add to or
subtract from their shape and size, whether by the addition of building
improvements or otherwise provided in all such cases reasonably equivalent
access to the Premises shall be maintained. 
Landlord shall operate, manage, equip, light, repair and maintain the
Common Areas, and all equipment and fixtures serving the Common Areas, for
their intended purposes a manner 
consistent with Class A buildings of comparable type in the
Carlsbad and San Diego California areas. 
Landlord may from time to time change the size, location, nature and use
of the Common Areas and may make installations therein and move and remove the
same, so long as such actions do not substantially adversely affect the overall
character of the Common Areas or Tenant’s access to or use of the Premises or
Common Areas.

 

1.2                                 Intentionally Deleted.

 

1

 

1.3                                 BOMA.  For purposes of this
Lease, “rentable square feet” and “usable square feet” shall be calculated
pursuant to the Building Owners’ and Managers’ Association (BOMA) Standard
Method of Measuring Floor Area in Office Building in effect at the time of
measurement.  Within thirty (30) days
after substantial completion of the Tenant Improvements, Landlord’s space
planner/architect shall measure and certify the rentable and usable square feet
of the Premises in accordance with the provisions of this Section 1.3
and the results thereof shall be presented to Tenant in writing.  In the event that it is determined that the
square footage amounts are different from those set forth in this Lease, whether
higher or lower, all amounts, percentages and figures appearing or referred to
in this Lease based upon such incorrect amount shall be modified in accordance
with such determination.  If such
determination is made, it will be confirmed in writing by Landlord to Tenant,
and shall not be changed, at any time, for any reason other than a change in
the physical size of the Premises or the Common Area.

 

2.                                      TERM
AND POSSESSION.

 

2.1                                 Term; Requirement of
Completion of Landlord’s Work.  The Term of this Lease shall begin on the
Commencement Date specified in the Basic Lease Information (unless extended as
a result of a Landlord’s Delay as described in the Work Letter attached hereto
as Exhibit C) and shall terminate on the Expiration Date specified
in the Basic Lease Information, unless extended or sooner terminated in
accordance with the provisions of this Lease. 
Landlord shall tender possession of the Premises with all the work to be
performed by Landlord pursuant to Exhibit C to this Lease
substantially completed (“Landlord’s Work”).  Tenant shall, at Landlord’s request, execute
and deliver a memorandum agreement provided by Landlord in the form of Exhibit D
attached hereto, setting forth the Commencement Date, Expiration Date and, if
necessary, a revised rent schedule. 
Should Tenant fail to do so within thirty (30) days after Landlord’s
request, the information set forth in such memorandum provided by Landlord
shall be conclusively presumed to be agreed to and correct.

 

2.2                                 Landlord’s Work in Common Areas and Premises.  Landlord shall cause the Landlord’s Work to
be Substantially Completed in accordance with the terms, covenants and
conditions of the Tenant Work Letter. 
Landlord shall otherwise deliver the Premises to Tenant broom clean condition,
free of all debris.  Tenant agrees to
accept possession of the Premises in its current “as is” condition, “with all
faults”, and “without any representations or warranties” except as expressly
set forth herein or in the Tenant Work Letter, Tenant hereby agrees and
warrants that it has inspected the condition of the Project, Building and
Premises, including, without limitation, all Building systems and structural
elements, the parking facilities of the Project, and the safety, security and suitability
of Building and Project for Tenant’s purposes, and Tenant does hereby waive and
disclaim any objection to, cause of action based upon, or claim that its
obligations hereunder should be reduced or limited because of the condition of
the Premises or the Project or the including the as to the nature, quality, or
suitability for Tenant’s business of the Project, the Building, or the
Premises.  Notwithstanding the foregoing,
Landlord, at Landlord’s sole cost, will cause the Premises (as delivered to
Tenant on the Entry Date set forth below) and the Common Area (including the
parking areas) to comply with all current codes and conditions, including with
respect to fire and life safety and the Americans With Disabilities Act of 1990
and its implementing regulations (the “ADA Requirements”),
as applicable to the Premises and Common Area on the date of this Lease, but
without liability of Landlord for any ADA Requirements associated with the
design of the Tenant Improvements or any increased occupancy density or other
unusual Tenant requirement associated with its occupancy of or business in the
Premises.

 

2.3                                 Moving Allowance. 
Provided that Tenant is not in Default under this Lease (after the
expiration of any applicable cure period) as of the Commencement Date, then
following the Commencement Date and Tenant’s occupancy of the Premises,
Landlord shall reimburse Tenant, within fifteen (15) business days following Landlord’s
receipt of an itemized invoice and copies of receipts from all vendors and
contractors providing such services and property, for Tenant’s Relocation Costs
(as defined below)  associated with its
occupancy of the Premises in an amount not to exceed Ten Dollars ($10.00) per rentable
square foot of the Premises (the “Relocation Allowance”).  Tenant’s “Relocation Costs” shall be limited
to Tenant’s out-of-pocket costs for the cost of moving Tenant’s property to the
Premises, the cost of Tenant’s voice and data cabling in the Premises, Tenant’s
furniture, trade fixtures and equipment in the Premises, and Tenant’s Building
signage; provided, however, that Tenant’s voice and data cabling and any Tenant
furniture, trade fixtures and equipment, the cost of which is reimbursed out of
the Relocation Allowance, shall at Landlord’s election be Landlord’s property
and remain in the Premises following the expiration or earlier termination of
this Lease.

 

2

 

3.                                      TENANT
IMPROVEMENTS.

 

3.1                                 Tenant Improvements; Allowances. 
Tenant shall construct and own during the Term (with the
understanding that (i) such ownership shall not in any way reduce any bonus
rent payable to Landlord pursuant to any subletting or assignment by Tenant,
and (ii) upon any termination of this Lease, the Tenant Improvements shall
be surrendered by Tenant without cost to Landlord, who shall own the Tenant
Improvements), and will pay for certain improvements (the “Tenant Improvements”) to be constructed in
the Premises prior to Tenant’s occupancy of the Premises in accordance with the
terms, covenants and conditions of the Tenant Work Letter attached hereto as Exhibit C,
and subject to Landlord’s agreement to reimburse Tenant for the costs of
design, permitting and construction of the Tenant Improvements in an amount not
to exceed Twenty Two Dollars ($22.00) per rentable square foot of the Premises
(the “T.I. Allowance”) in accordance with the
terms, covenants and conditions of the Tenant Work Letter.  The Tenant Improvements shall consist of all
interior improvements constructed by Tenant in the Premises which are not part
of the Building’s structure or shell and which can be removed and the Premises
restored to its current shell condition without damage to the Building
structure or systems.

 

3.2                                 Entry Date.  Within
ten (10) days after the date by which this Lease has been fully executed
and delivered, Landlord will allow Tenant access to the Premises (the “Entry Date”) in order to install Tenant
Improvements (subject to the terms of Section 2.2 and Article 3),
fixtures, furnishings and equipment and to otherwise prepare the Premises for
Tenant’s occupancy; provided that such early entry, access and possession shall
be subject to all the provisions of this Lease as though the Commencement Date
had occurred, other than the payment of Monthly Base Rent and Tenant’s Share of
Building Expenses and Real Estate Taxes as set forth in Section 4.3,
including, without limitation, during such period of early entry and possession
for Tenant’s work, Tenant shall pay for all services and utilities provided to
the Premises and required to be paid by Tenant pursuant to Article 14.  As a condition to Tenant’s entry into the
Premises on or after the Entry Date, Tenant shall have provided Landlord with
certificates of the insurance required to be carried by Tenant pursuant to the
Work Letter.  Said early possession prior
to the Commencement Date shall not advance the Expiration Date.

 

4.                                      RENT;
RENT ADJUSTMENTS; ADDITIONAL CHARGES FOR EXPENSES AND TAXES.

 

4.1                                 Monthly Base Rent and
Additional Charges.  Commencing on the Commencement Date and throughout
the Term of this Lease, Tenant shall pay the monthly base rent specified in the
Basic Lease Information, as adjusted pursuant to Section 4.2 (as so
adjusted from time to time, “Monthly
Base  Rent”), on the first day of each month, in advance, with the  Monthly Base Rent for the fifth month of the
Term due upon execution of this Lease, in lawful money of the United States
(without any prior demand, notice or invoice therefor and without deduction or
offset whatsoever, except as expressly provided in this Lease) to Landlord or
its property manager at the address specified in the Basic Lease Information or
to such other firm or to such other place as Landlord may from time to time
designate in writing.  In addition,
Tenant shall pay to Landlord all charges and other amounts whatsoever as
provided in this Lease (“Additional
Charges”) at the place where the
Monthly Base Rent is payable, and Landlord shall have the same remedies for a
Default in the payment of Additional Charges as for a Default in the payment of
Monthly Base Rent.  As used herein, the
term “Rent” shall include all
Monthly Base Rent and Additional Charges (including, without limitation,
Additional Charges for Real Estate Taxes and Expenses pursuant to Section 4.3
below, and Additional Charges pursuant to Article 8, Section 9.4,
and Articles 10, 12 and 26).   If the Commencement Date occurs on a day
other than the first day of a calendar month, or the Expiration Date occurs on
a day other than the last day of a calendar month, then the Monthly Base Rent
and Additional Charges for such fractional month shall be prorated on a daily
basis.

 

Landlord and
Tenant hereby agree and acknowledge that, so long as no Default shall have
occurred under this Lease, during the first (1st) through fourth (4th) months,
inclusive, of the Lease Term, Tenant’s obligation to pay Monthly Base Rent
shall be conditionally abated (“Conditional Rent Abatement
Period”).  Notwithstanding the
foregoing, Tenant hereby agrees and acknowledges that, if a Default by Tenant
results in the termination of this Lease, specifically as part of the remedies
to which Landlord is entitled pursuant to Article 21 of this Lease,
Landlord shall be entitled to recover the unamortized amount of the abated
Monthly Base Rent that would have been due during the Conditional Rent
Abatement Period (i.e., Two Hundred Ninety Two Thousand Two Hundred Sixty
Dollars ($292,260.00)) (“Conditionally Abated Rent
Amount”).  The Conditionally
Abated Rent

 

3

 

Amount shall amortize on a
straight-line basis, in equal monthly installments at the discount rate set
forth in Section 21.1 of this Lease, over the entire Lease Term,
commencing with the Fifth (5th) month thereof.

 

4.2                                 Annual Adjustments in Monthly Base Rent.  The Monthly Base Rent under Section 4.1
shall be adjusted throughout the Term (including any Extension Term(s)) as
provided in the Basic Lease Information under the heading “Monthly Base Rent”.

 

4.3                                 Additional Charges for Expenses and Real Estate Taxes.

 

4.3.1                        Definitions of Additional Charges:  For purposes of this Section 4.3,
the following terms shall have the meanings hereinafter set forth:

 

(i)                                     “Expenses” shall mean the reasonable and
customary costs and expenses paid or incurred by Landlord in connection with
the management, operation, maintenance and repair of the Building, Parcel and
Project, including, without limitation (a) the cost of air conditioning,
electricity, steam, heating, mechanical, ventilating, elevator systems and all
other utilities provided to the Common Area, and the cost of supplies and
equipment and maintenance and service contracts in connection therewith; (b) the
cost of repairs and general maintenance and cleaning; (c) the cost of
fire, extended coverage, boiler, sprinkler, public liability, property damage,
rent, earthquake (if Landlord elects to obtain it) and other insurance for the
Building or Project obtained by Landlord, or otherwise obtained by Landlord in
connection with the Project, all including, without limitation, insurance
premiums and any deductible amounts paid by Landlord, including, without
limitation, the insurance required by Article 12; (d) fees,
charges and other costs directly related to the operation of the Project (as
distinct from the operation of the entity which owns the Building), including management
fees, consulting fees, legal fees and accounting fees, fees of all independent
contractors engaged by Landlord directly related to the operation of the
Building and/or Parcel or reasonably charged by Landlord if Landlord performs
management services in connection with the Building (provided that the
management fees, whether charged by charged by Landlord if Landlord provides
such management services or charged by a third party, provided that the annual
cost of Tenant’s Share of management fees shall not exceed three percent (3%)
of the gross rents payable by Tenant in any calendar year of the Lease Term); (e) the
cost of any capital improvements made to the Building or Project after the
Commencement Date (i) as a labor saving device or to effect other
economies in the operation or maintenance of the Project (from which a
reasonable person would anticipate that savings would actually result), (ii) to
repair or replace capital items which are no longer capable of providing the
services required of them (other than in connection with a casualty which is
addressed by Article 23), or (iii) that are made to the
Building or Project after the date of this Lease and are required under any
Laws (as defined in Article 7) (excluding, however, any capital
improvements required by Laws that are Tenant’s responsibility under Article 7,
which shall be paid directly by Tenant pursuant to Article 7),
where such capital improvements were not required under any such Laws to be
completed with respect to the Project prior to the date the Lease was executed;
and the cost of capital improvements incurred by Landlord, which are the
responsibility of Tenant pursuant to this Lease, shall be amortized over the
useful life of the capital item in question as determined in accordance with
generally accepted accounting principles (“GAAP”),
but not to exceed ten (10) years, together with interest on the
unamortized balance at the greater of (A) the rate paid by Landlord on
funds borrowed from an institutional lender for the purpose of constructing
such capital improvements; or (B) 6% per annum; and (f) any other
reasonable expenses of any other kind whatsoever reasonably incurred in
managing, operating, maintaining and repairing the Project.  Any “deductible” amounts relating to capital
improvements required to be paid by Tenant hereunder in connection with any
property or earthquake insurance policy carried by Landlord shall be amortized
over the useful life of the restoration work to which such deductible amount
relates in accordance with GAAP (but not to exceed ten (10) years) in the
same manner as other capital improvements that are included in Expenses as
provided above.

 

Notwithstanding anything to
the contrary herein contained, Expenses shall not include, and in no event
shall Tenant have any obligation to pay for pursuant to this Section 4.4.1
or Section 9.2, (aa) the initial construction cost of the Building
or Landlord’s Work or acquisition cost of the land on which the Building is
located; (bb) the cost of providing tenant improvements to Tenant or any other
tenant and costs of preparing any other premises in the Building for occupancy
by any other tenant, including brokerage commissions, attorneys fees and other
fees incurred in connection with the leasing thereof; (cc) any rent payable
pursuant to a ground lease, and debt service (including, but without
limitation, interest, principal and any impound payments) required to be made
on any mortgage or deed of trust recorded with respect to all or any portion of
the Project other than debt service and

 

4

 

financing
charges imposed pursuant to Section 4.4.1 (iv) (e) above;
(dd) the cost of special services, goods or materials provided to any tenant; (ee)
depreciation; (ff) the portion of a management fee paid to Landlord or
affiliate in excess of three percent (3%) of Monthly Base Rent and Additional
Charges for Expenses and Taxes (excluding the management fee); (gg) costs
occasioned by Landlord’s fraud or willful misconduct under applicable laws;
(hh) costs for which Landlord has a right of and has received reimbursement
from others; (ii) costs to correct any construction or design defects in
the original construction of the Building structure; (jj) repairs, replacement
and upgrades to the structural elements of the Building (e.g. steel frame and
slab) and structural components of the roof (not including the roof membrane),
other than capital maintenance, repairs and replacements made pursuant to Section 4.4.1
(iv) (e) above; (kk) environmental pollution remediation related
costs for which Landlord has released Tenant pursuant to Section 41.1,
including costs arising from the presence of Hazardous Substances (as defined
in Section 41.1) in, on, under or about the Building; provided that
the presence of such Hazardous Substances predates the Commencement Date; (ll)
advertising or promotional expenditures; (mm) leasing commissions; (nn) costs
to the extent Landlord receives (or is reasonably likely to receive)
reimbursement from any source (less Landlord’s reasonable expenses in obtaining
such reimbursement); (oo) costs incurred in connection with Landlord’s
compliance as to all Laws, as they exist and are interpreted prior to the
Commencement Date; provided, however, that any costs incurred in connection
with any amendments to Laws on or after the Commencement Date, or as a result
of any new or different interpretations of Laws as they currently exist, shall
be costs included in Expenses; (pp) electrical power costs that otherwise would
have been allocated to the Premises but for the Premises being served by an
electrical submeter; and (qq) costs fairly attributable to other Tenant
occupied buildings in the Project.  All
costs and expenses shall be determined in accordance with GAAP which shall be
consistently applied (with accruals appropriate to Landlord’s business).

 

(ii)                                  “Expense
Year” shall mean each twelve (12) consecutive month period
commencing January 1 of the calendar year during which the Commencement
Date of the Lease occurs, provided that Landlord, upon notice to Tenant, may
change the Expense Year from time to time to any other twelve (12) consecutive
month period, and, in the event of any such change, Tenant’s Share of Expenses
shall be equitably adjusted for the Expense Years involved in any such change.

 

(iii)                               “Real Estate Taxes” shall mean all taxes,
assessments and charges levied upon or with respect to the Project or any
personal property of Landlord used in the operation thereof, or Landlord’s
interest in the Project or such personal property.  Real Estate Taxes shall include, without
limitation, all general real property taxes and general and special
assessments, charges, fees or assessments for transit, housing, police, fire or
other governmental services or purported benefits to the Project (provided,
however, that any refunds of Real Estate Taxes paid by Tenant shall be credited
against Tenant’s further obligation to pay Real Estate Taxes during the Term or
refunded to Tenant if received by Landlord within one year after the Expiration
Date), service payments in lieu of taxes, and any tax, fee or excise on the act
of entering into this Lease, or any other lease of space in the Building, or on
the use or occupancy of the Building or any part thereof, or on the rent
payable under any lease or in connection with the business of renting space in
the Building, that are now or hereafter levied or assessed against Landlord by
the United States of America, the State of California, or any political subdivision,
public corporation, district or any other political or public entity, and shall
also include any other tax, fee or other excise, however described, that may be
levied or assessed as a substitute for, or as an addition to, in whole or in
part, any other Real Estate Taxes, whether or not now customary or in the
contemplation of the parties on the date of this Lease.  Real Estate Taxes shall not include any
franchise, transfer, inheritance or capital stock taxes or income taxes
measured by the net income of Landlord from all sources unless, due to a change
in the method of taxation, any of such taxes is levied or assessed against
Landlord as a substitute for, in whole or in part, any other tax that would
otherwise constitute a Real Estate Tax.

 

(iv)                              “Real Estate  Tax Year” shall mean each twelve (12) consecutive month period
commencing January 1st of the calendar year during which the Commencement
Date of this Lease occurs, provided that Landlord, upon notice to Tenant, may
change the Real Estate Tax Year from time to time to any other twelve (12)
consecutive month period and, in the event of any such change, Tenant’s Share
of Real Estate Taxes (as hereinafter defined) shall be equitably adjusted for
the Real Estate Tax Years involved in any such change.

 

(v)                                 “Tenant’s Share” shall mean the percentage
figure so specified in the Basic Lease Information.

 

5

 

4.3.2                        Payment of Expenses and Real
Estate Taxes:  Tenant shall pay as additional rent for each
Expense Year, Tenant’s Share of Expenses and Real Estate Taxes incurred for
such Expense Year.

 

4.3.3                        Annual Determination: 
The annual determination of Expenses shall be made by
Landlord and shall be binding upon Landlord and Tenant, subject to the
provisions of this Section 4.3.3. 
During the Term, Tenant may review, at Tenant’s sole cost and expense
(subject to reimbursement by Landlord if the results of such audit reveal that
Tenant was overcharged by 5% or more), the books and records supporting such
determination in an office of Landlord, or Landlord’s agent, during normal
business hours, upon giving Landlord five (5) days advance written notice
within sixty (60) days after receipt of such determination, but in no event
more often than once in any one (1) year period, subject to execution of a
confidentiality agreement acceptable to Landlord in its reasonable discretion,
and provided that if Tenant utilizes an independent accountant to perform such
review it shall be one of national standing which is reasonably acceptable to
Landlord, is not compensated on a contingency basis and is also subject to such
confidentiality agreement.  Landlord
shall cooperate in good faith with Tenant and the Tenant’s accountant to
provide the information upon which the certification is to be based.  However, if such certification of the actual
Expenses by the accountant proves that Tenant’s Share of the Expenses set forth
in the Statement were overstated by more than five percent (5%), then Tenant’s
reasonable out-of-pocket costs for the performance of the review of Landlord’s
books and records shall be paid for by Landlord.  Promptly following the parties receipt of
such certification, the parties shall make such appropriate payments or
reimbursements, as the case may be, to each other, as are determined to be
owing pursuant to such certification. 
Tenant agrees that this section shall be the sole method to be used
by Tenant to dispute the amount of any Expenses payable by Tenant pursuant to
the terms of this Lease, and Tenant hereby waives any other rights at law or in
equity relating thereto.  If Tenant fails
to object to Landlord’s determination of Expenses within ninety (90) days after
receipt, Tenant shall be deemed to have approved such determination and shall
have no further right to object to or contest such determination. In the event
that during all or any portion of any Expense Year or Base Year, the Building
is not fully rented and occupied Landlord shall make an appropriate adjustment
in occupancy-related Expenses for such year for the purpose of avoiding
distortion of the amount of such Expenses to be attributed to Tenant by reason
of variation in total occupancy of the Building, by employing consistent and
sound accounting and management principles to determine Expenses that would
have been paid or incurred by Landlord had the Building been at least
ninety-five percent (95%) rented and occupied, and the amount so determined
shall be deemed to have been Expenses for such Expense Year.

 

4.3.4                        Estimate of Expenses and Real Estate Taxes: Prior
to the actual determination thereof for an Expense Year or Real Estate Tax
Year, as applicable, Landlord may from time to time estimate Tenant’s liability
for Expenses and/or Real Estate Taxes under Section 4.3.2, Article 8
and Article 29 for the Expense Year or Real Estate Tax Year, as
applicable, or portion thereof.  Landlord
will give Tenant written notification of the amount of such estimate and Tenant
agrees that it will pay, by increase of its Monthly Base Rent due in such
Expense Year or Real Estate Tax Year, as applicable, additional rent in the
amount of such estimate.  Any such
increased rate of Monthly Base Rent pursuant to this Section 4.3
shall remain in effect until further written notification to Tenant pursuant
hereto.

 

4.3.5                        Payment of Expenses and Real Estate Taxes.  When the above mentioned actual determination
of Tenant’s liability for Expenses and/or Real Estate Taxes is made for any
Expense Year or Real Estate Tax Year, as applicable, and when Tenant is so
notified in writing, then:

 

(i)                                     If the total additional rent Tenant actually
paid pursuant to Section 4.3.3 on account of Expenses and/or Real
Estate Taxes for the Expense Year or Real Estate Tax Year, as applicable, is
less than Tenant’s liability for Expenses and/or Real Estate Taxes, then Tenant
shall pay such deficiency to Landlord as additional rent in one lump sum within
thirty (30) days of receipt of Landlord’s bill therefor; and

 

(ii)                                  If
the total additional rent Tenant actually paid pursuant to Section 4.3.3
on account of Expenses and/or Real Estate Taxes for the Expense Year or Real
Estate Tax Year, as applicable, is more than Tenant’s liability for Expenses
and/or Real Estate Taxes, then Landlord shall credit the difference against the
then next due payments to be made by Tenant under this Article 4,
or, if the Lease has terminated, refund the difference in cash.

 

6

 

4.3.6                        If the Commencement Date is other than January 1
or if the Expiration Date is other than December 31, Tenant’s liability
for Expenses and Real Estate Taxes for the Expense Year or Real Estate Tax
Year, as applicable, in which said Date occurs shall be prorated based upon a
three hundred sixty-five (365) day year.

 

4.4                                 Late Charges. 
Tenant acknowledges and agrees that late payment of any Monthly Base
Rent or Additional Charges will result in additional expenses to Landlord not
contemplated by this Lease, the exact amount of which additional expense is
extremely difficult and economically impractical to ascertain.  Those additional expenses may include, but
are not limited to, administrative, processing and accounting charges, and late
charges which may be imposed on Landlord by the terms of any ground lease,
mortgage or trust deed covering the Premises. 
Tenant therefore agrees that if any Monthly Base Rent or Additional
Charges remain unpaid three (3) days after such amount is due, the amount
of such unpaid Monthly Base Rent or Additional Charges shall be increased by a
late charge to be paid to Landlord by Tenant in an amount equal to five percent
(5%) of the amount of the delinquent Monthly Base Rent or Additional
Charges.  In addition, any outstanding
Monthly Base Rent, Additional Charges, late charges and other outstanding Rent
amounts shall accrue interest at an annualized rate equal to the lesser of (i) ten
percent (10%) until paid to Landlord, or (ii) the maximum rate permitted
by law (the “Default Rate”).  Tenant agrees that such amount is a
reasonable estimate of the loss and expense to be suffered by Landlord as a
result of such late payment by Tenant and may be charged by Landlord to defray
such loss and expense.  The provisions of
this Section 4.4 in no way relieve Tenant of the obligation to pay
Monthly Base Rent or Additional Charges on or before the date on which they are
due, nor do the terms of this Section 4.4 in any way affect
Landlord’s remedies pursuant to Article 20 in the event any Monthly
Base Rent or Additional Charges are unpaid after the date due.  Notwithstanding the foregoing, the late fee
referenced above shall not be charged with respect to the first occurrence (but
without such limitation for any subsequent occurrence) during any 12-month
period of Tenant’s failure to timely pay rent if Tenant cures such failure
within five (5) calendar days following Landlord’s delivery of notice that
such amount was not received by Landlord when due.

 

5.                                      SECURITY
DEPOSIT.  Concurrently with Tenant’s delivery of the
Lease, Tenant shall deposit with Landlord the sum of Eighty Three Thousand Five
Hundred Eighty Six and 36/100 Dollars ($83,586.36) to be retained by Landlord
without responsibility for payment of interest thereon, as security for Tenant’s
payment and performance of all its obligations under the terms, covenants and
conditions of this Lease, including payment of all rent due under the terms
hereof.  Deductions may be made by
Landlord from the amount so retained for the reasonable cost of repairs to the
Premises (ordinary wear and tear excepted), for any rent delinquent under the
terms hereof and/or for any sum used in any manner to cure any default of
Tenant under the terms of this Lease. 
Upon any default by Tenant, following notice from Landlord to Tenant (if
required by the terms and conditions of this Lease) and the lapse of any
applicable grace period without timely cure by Tenant, the Security Deposit
shall be deemed to be automatically and immediately applied, without waiver of
any rights Landlord may have under this Lease or at law or in equity as a
result of the default, as a setoff for full or partial compensation for that
default.  In the event deductions are so
made, the Tenant shall, within five (5) days of notice from the Landlord,
redeposit with the Landlord such amounts so expended so as to maintain the
deposit in the amount as herein provided for, and failure to so redeposit shall
be deemed a failure to pay rent under the terms hereof.  Nothing herein contained shall limit the
liability of Tenant as to any damage to the Premises, and Tenant shall be
responsible for the total amount of any damage and/or loss occasioned by
actions of Tenant.  Landlord may deliver
the funds deposited hereunder by Tenant to any purchaser of Landlord’s interest
in the Leased Premises in the event such interest shall be sold, and thereupon
Landlord shall be discharged from any further liability with respect to such
deposit.  If Tenant fully performs its
obligations under this Lease, the Security Deposit shall be returned to Tenant
(or, at Landlord’s option, to the last assignee of Tenant’s interest in this
Lease) after the expiration of the Term, provided that Landlord may retain the
Security Deposit to the extent and until such time as all amounts due from
Tenant in accordance with this Lease have been determined and paid in full.  Notwithstanding anything to the contrary
contained herein, Tenant hereby waives the provisions of Section 1950.7 of
the California Civil Code, or any similar or successor Regulations or other
laws now or hereinafter in effect.

 

6.                                      RESTRICTIONS ON USE. 
Tenant shall only use the Premises for the permitted Use set forth in
the Basic Lease Information, and for no other purpose without Landlord’s prior
written approval.  Tenant shall not do or
permit anything to be done in, on or about the Premises which will obstruct or
interfere with the rights of other tenants or occupants of the Building or the
Project or injure or annoy them, nor use or allow the Premises to be used for
any  unlawful purpose, nor shall Tenant
cause or maintain or permit any nuisance in, on or about the Premises or

 

7

 

Project.  Tenant shall not commit or suffer the
commission of any waste in, on or about the Premises or Project.  Tenant shall provide and maintain all
licenses and permits legally required or necessary for the operation of its
business and allow Landlord to inspect the same from time to time upon
reasonable prior notice.  Tenant shall be
solely responsible to determine all zoning information and secure all necessary
or required permits and approvals for the Permitted Uses.  Landlord makes no representations or
warranties as to the suitability of, or the ability to obtain regulatory
approval for, the Permitted Uses.  Tenant
shall not place or store, nor permit any other person or entity to place or
store, any property, equipment, materials, supplies, personal property or any
other items or goods outside of the Premises for any period of time except in
any outside enclosures that are fully fenced and screened in compliance with
all CC&R’s and Laws, and which enclosures are designed for such purpose,
and which have been approved by Landlord for such use.  Other than seeing-eye dogs for the blind,
Tenant shall not permit any animals, including, but not limited to, any
household pets, to be brought or kept in or about the Premises.  Tenant shall place no loads upon the floors,
walls, or ceilings in excess of the maximum designed load permitted by the
applicable Uniform Building Code or which may damage the Buildings or outside
areas; nor place any harmful liquids in the drainage systems; nor dump or store
waste materials, refuse or other such materials, or allow such to remain
outside the Building, except for ordinary quantities of any non-hazardous or
non-harmful materials which may be stored in refuse dumpsters or in any
enclosed trash areas.

 

7.                                      COMPLIANCE
WITH LAWS.

 

7.1                                 Tenant’s Compliance
Obligations.  Tenant shall not use the Project or permit
anything to be done in or about the Project which will in any way conflict with
any present and future laws, statutes, ordinances, resolutions, regulations,
proclamations, orders or decrees of any municipal, county, state or federal
government or other governmental or regulatory authority with jurisdiction over
the Project, or any portion thereof, whether currently in effect or adopted in
the future and whether or not in the contemplation of the parties hereto
(collectively, “Laws”), and Tenant
shall promptly, at its sole expense, maintain the Premises, any Alterations (as
defined in Article 9 below) permitted hereunder and Tenant’s use
and operations thereon in strict compliance at all times with all Laws.  “Laws” shall include, without limitation, all
Laws relating to health and safety, disabled accessibility (including, without
limitation, the Americans with Disabilities Act, 42 U.S.C. section 12101 et
seq.), Hazardous Substances, and all present and future life safety,
fire, sprinkler, seismic retrofit, building code and municipal code
requirements; provided however, that Tenant’s obligation to comply with Laws
relating to Hazardous Substances is subject to the terms and conditions of Article 41,
and Tenant shall not be responsible for compliance with clean-up provisions of
any Laws with respect to Hazardous Substances except to the extent of any release
caused by the Tenant or any of its servants, employees, contractors, agents,
licensees or invitees (collectively, including Tenant, the “Tenant  Parties”)
or otherwise included in Tenant’s indemnity contained in Article 41.  Notwithstanding the foregoing, Landlord, and
not Tenant, shall be responsible for correcting any condition with respect to
violations of Laws relating to the Common Area, any Building systems or
equipment serving the Common Areas, the improvements to the Common Areas, and
the exterior or structural portions of the Building (but not with respect to
the interior of the Premises), (subject to Tenant’s obligation to pay such
costs to the extent they are included as Expenses under Section 4.3.1(i)),
except to the extent such violation is caused by the negligent or intentional
acts or omissions of the Tenant Parties, or such violation results from Tenant’s
particular use of the Premises, or such violation arises in connection with the
installation of or any Alterations. Tenant shall be responsible for compliance
of the Tenant’s Alterations with all Laws. 
Notwithstanding the first sentence of this Section 7.1,
Tenant shall not be required to make any structural alterations to the Premises
in order to comply with Laws unless the requirement that such alterations be
made is triggered by any of the following (or, if such requirement results from
the cumulative effect of any of the following when added to other negligent or
intentional acts, omissions, or events, to the extent such alterations are required
by any of the following): (i) the installation, use or operation of, any
Alterations, or any of Tenant’s trade fixtures or personal property; (ii) the
negligent or intentional acts or omissions of any of the Tenant Parties; or (iii) the
particular use or particular occupancy or manner of use or occupancy of the
Premises by the Tenant Parties.  Any
alterations that are Tenant’s responsibility pursuant to this Article 7
shall be made in accordance with Article 8 below, at Tenant’s sole
cost.  The parties acknowledge and agree
that Tenant’s obligation to comply with all Laws as provided in this section (subject
to the limitations contained herein) is a material part of the bargained-for
consideration under this Lease.

 

7.2                                 Insurance Requirements.  Tenant shall not do or permit anything to be
done in or about the Premises or bring or keep anything therein which will in
any way increase the rate of any insurance upon the Project or any of its
contents (unless Tenant agrees to pay for such increase) or cause a
cancellation of any insurance

 

8

 

on the Project or
otherwise violate any requirements, guidelines, conditions, rules or
orders with respect to such insurance. 
Tenant shall at its sole cost and expense promptly comply with the
requirements of the Insurance Services Office (ISO), board of fire
underwriters, or other similar body now or hereafter constituted relating to or
affecting Tenant’s use or occupancy of the Project (other than in situations
where compliance involves repair, maintenance or replacement of items that
Landlord is expressly required to repair, maintain or replace under this
Lease).

 

7.3                                 No Limitation on Obligations.  The provisions of this Article 7
shall in no way limit Tenant’s maintenance, repair and replacement obligations
under Article 9 or Tenant’s obligation to pay Expenses under Section 4.3.  The judgment of any court of competent
jurisdiction or the admission of Tenant in an action against Tenant, whether
Landlord is a party thereto or not, that Tenant has so violated any such Law
shall be conclusive of such violation as between Landlord and Tenant.

 

8.                                      ALTERATIONS.

 

8.1                                 Landlord Consent. 
Tenant shall not make or suffer to be made any alterations, additions or
improvements in, on or to the Premises or any part thereof (“Alterations”), other than Diminimus
Changes, as defined below, without Landlord’s prior written consent and
approval by Landlord of Tenant’s designated contractor and major subcontractors
performing the work of such Alterations and fully detailed and dimensioned
plans and specifications pertaining to the work in question, prepared and
submitted by Tenant at its sole cost and expense.  If Landlord fails to give its approval or
disapproval of the Alterations as set forth on the proposed plans and the
contractors performing such work within fifteen (15) calendar days after
receipt of Tenant’s written request for approval, Tenant may deliver an
additional notice to Landlord specifying such failure by Landlord and stating,
in bold 12 point, all cap type on such notice: 
“LANDLORD’S FAILURE TO RESPOND TO THIS REQUEST
SHALL BE DEEMED LANDLORD’S CONSENT TO THE TENANT’S REQUESTED ALTERATIONS.”
If Landlord does not approve or disapprove Tenant’s proposed Alterations within
five (5) business days of receipt of such second notice, then Tenant such
failure shall constitute approval by Landlord of the work of the Alterations
and the contractors designated by Tenant. 
Subject to the terms of Section 8.5 below, any Alterations
in, on or to the Premises, except for Tenant’s trade fixtures and movable
furniture and equipment, shall be the property of Tenant during the Term and
shall become the property of Landlord without compensation to Tenant upon the
termination of this Lease.  Landlord
shall not unreasonably withhold or delay its consent to Alterations that (i) do
not materially affect the structure of the Building or its electrical,
plumbing, HVAC, security or other systems, (ii) are not visible from the
exterior of the Premises and do not otherwise affect the exterior appearance of
the Building, (iii) are consistent with Tenant’s Permitted Use hereunder; (iv) do
not require any application to a political jurisdiction for rezoning, general
plan amendment, variance, conditional use permit or architectural review
approval, (v) will not interfere with the use and occupancy of any other
portion of the Project by Landlord or by any other tenants or occupants or
their invitees, or by any other party with the right to use any portion of the
Project, (vi) comply with any ground lease, CC&Rs and Mortgages, (vii) do
not increase the occupant density of the Premises in excess of the parking
rights of Tenant, and (vii) do not adversely affect the value or
marketability of the Premises in Landlord’s reasonable determination (or if
required by any mortgagee holding a security interest in the Building, such
mortgagee).  No consent of Landlord shall
be required in connection with alterations which cost $10,000 or less annually
and which comply with clauses (i) through (vi) in the previous
sentence (“Diminimus Changes”)

 

8.2                                 Landlord’s Additional Approval Rights.  If Landlord consents to the making of any
Alterations by Tenant, the same shall be made by Tenant, at Tenant’s sole cost
and expense, in accordance with plans and specifications reasonably approved by
Landlord, and any contractor or person selected by Tenant to make the same must
first be approved in writing by Landlord in its sole discretion (including, if
required by Landlord, the exclusive use of landlord’s contractor).  With respect to any Alterations that affect
the structure of the Building, the Building Systems, or any portion of the
Project outside the Premises, at Landlord’s option the Alterations shall be
made by Landlord, or by a contractor specified by Landlord, for Tenant’s
account and Tenant shall reimburse Landlord for the cost thereof as an
Additional Charge, within twenty (20) days after receipt of a statement from
Landlord therefor.

 

8.3                                 Building Electrical Limitations.  Notwithstanding anything to the
contrary herein, Tenant shall make no alterations or additions to the
electrical equipment or systems in the Premises or the Building without the
prior written consent of Landlord in each instance.  Tenant shall not install in the Premises or
the

 

9

 

Building any equipment
which represents or uses a substantial amount of electrical current, including,
without limitation, computer or data processing equipment and Tenant shall
ascertain from Landlord the maximum amount of load or demand for or use of
electrical current which can be accommodated or permitted in the Premises,
taking into account, among other items, the capacity of the electrical feeders,
risers, conduits, wiring and other facilities and equipment of the Premises and
the Building and the needs of other tenants (both present and future) of the
Building.  Tenant’s use of electrical
current at the Premises shall not exceed the maximum amount of load or demand
for or use of electrical current which can be accommodated or permitted at the
Premises by the Premises Supply Panels (as defined in Section 14.3
below).

 

8.4                                 Landlord Supervision.  Tenant shall reimburse Landlord upon demand
for any reasonable out-of-pocket expenses incurred by Landlord in the review of
any Alterations made by Tenant, including, but not limited to Tenant’s
electrical equipment, and including, but not limited to, fees charged by
Landlord’s contractors or consultants to review plans and specifications, and
such obligation shall be an Additional Charge. 
With the exception of Deminimus Changes not requiring Landlord consent
as provided in Section 8.1 above, Landlord shall be entitled to
receive an administrative/supervision fee based upon the total cost of (i) all
Alterations work performed; (ii) materials, plans and drawings furnished;
and (iii) all other costs and expenses related to such Alterations
(collectively, the “Alterations Costs”).  Such fee shall be (A) ten percent (10%)
of the Alterations Costs if such costs are not in excess of Fifty Thousand
Dollars ($50,000.00), and (B) five percent (5%) if such costs exceed Fifty
Thousand Dollars ($50,000.00).  Landlord’s
consent to any Alterations shall not obligate Landlord to repair, maintain,
insure or otherwise assume any responsibility or liability with respect to any
such Alteration.  In addition,
notwithstanding Landlord’s review, Tenant and not Landlord shall be responsible
for compliance of the Alterations, and plans and specifications therefor, with
all applicable Laws, and Landlord shall not be responsible for any omissions or
errors therein.  If any governmental
entity requires, as a condition to any proposed Alterations, additions or
improvements to the Premises or Common Areas, and if Landlord consents to such
improvements to the Premises or Common Areas, then Tenant shall, at Tenant’s
sole expense, make such required improvements to the Premises or Common Areas
in such a manner, utilizing such materials, and with such contractors,
(including, if required by Landlord, Landlord’s contractors) as Landlord may
require in its commercially reasonable discretion.

 

8.5                                 Construction Insurance. 
In addition to the requirements of Article 12 of this Lease, in the
event that Tenant makes any Alterations, prior to the commencement of such
Alterations, Tenant shall provide Landlord with evidence that Tenant carries “Builder’s
All Risk” insurance in an amount approved by Landlord covering the construction
of such Alterations, and such other insurance as Landlord may require, it being
understood and agreed that all of such Alterations shall be insured by Tenant
pursuant to Article 12 of this Lease immediately upon completion
thereof.  In addition, if the cost of any
Alteration exceeds One Hundred Thousand Dollars ($100,000.00), Landlord may, in
its discretion, require Tenant to obtain a lien and completion bond or some
alternate form of security satisfactory to Landlord in an amount sufficient to
ensure the lien-free completion of such Alterations and naming Landlord as a co-obligee.

 

8.6                                 Removal/Surrender of Alterations.  Upon the expiration or sooner termination of
the Term, Tenant shall upon demand by Landlord, at Landlord’s election either (i) at
Tenant’s sole cost and expense, forthwith and with all due diligence remove any
Alterations made by or for the account of Tenant, designated by Landlord to be
removed (provided, however, that upon the written request of Tenant prior to
installation of such Alterations, Landlord shall advise Tenant at that time
whether or not  such Alterations must be
removed upon the expiration or sooner termination of this Lease), and restore
the Premises to substantially its original condition as of the Commencement
Date, subject to normal wear and tear and the rights and obligations of Tenant concerning
casualty damage pursuant to Article 23 or (ii) pay Landlord
the reasonable estimated cost thereof. 
Landlord hereby confirms that no portion of the initial Tenant
Improvements to the extent previously approved by Landlord shall be required to
be removed as a condition to Tenant’s surrender of the Premises, provided that
this Lease is not terminated as a result of the exercise by Landlord of any of
its remedies under Article 21 below (which shall be subject to all of
Landlord’s rights set forth therein).

 

10

 

9.                                      REPAIR
AND MAINTENANCE.

 

9.1                                 Landlord’s Obligations.

 

9.1.1                        Common Area, Roof, Structural
Elements.  Landlord shall maintain, repair and replace,
the exterior (excluding windows and window frames), roof structure (including
the roof membrane) and structural portions of the Building including load
bearing walls and foundations) as an Operating Expense (but subject to the
limitations thereto and exclusions therefrom set forth in Section 4.2
above), and any parking areas, courtyards, sidewalks, entryways, lawns,
fountains, landscaping and other similar facilities located in the Common
Area.  The Project shall at all times be
maintained by Landlord in the condition of a first-class office space project.

 

9.1.2                        Building Systems.  Landlord
shall maintain, repair and replace the Building electrical, mechanical, HVAC
and plumbing systems and all controls appurtenant thereto, and any elevators in
the Building (collectively, including elevators, “Building  Systems”)
provided, however, that Landlord shall not be responsible for any Building
Systems installed by or for Tenant as Alterations unless Landlord elects to
assume such responsibility at the time of Landlord’s consent to such
Alterations.  Tenant’s Share of all costs
incurred by Landlord in connection with the foregoing obligations shall be
payable by Tenant as Additional Charges in accordance with Section 4.3.  Landlord shall not be in default of its
obligations under this Section 9.1 with respect to any particular
repair, replacement or maintenance requirement until Tenant notifies Landlord
in writing of any circumstances which Tenant believes may trigger Landlord’s
obligations, and Landlord fails to perform Landlord obligations associated with
Tenant’s written notice, if any, within a reasonable time, not to exceed thirty
(30) days; provided, however, that if such failure is curable but cannot be
cured within such thirty (30) day period, Landlord shall have such additional
time as may be reasonably required to perform its obligations relating to
Tenant’s notice so long as Landlord commences such cure within such thirty (30)
day period and diligently prosecutes such cure to completion.

 

9.2                                 Tenant’s Obligations. 
Tenant shall maintain, repair and replace, at its sole cost and expense,
all portions of the Premises which are not Landlord’s obligations under Section 9.1,
including, without limitation, (i) the windows and window frames of the
Premises; and (ii) the interior portions of the Premises, the Alterations,
and any additional tenant improvements, fixtures or equipment installed by or
on behalf of Tenant within the Premises. 
Tenant shall be responsible for the expense of installation, operation,
and maintenance of its telephone and other communications cabling from the
point of entry into the Building to the Premises and throughout the Premises;
though Landlord shall have the right to perform such work on behalf of Tenant
in Common Areas, provided Landlord performs such work in coordination with Tenant
and its contractors in such a manner as will accommodate Tenant’s reasonable
objectives with respect thereto.  The
Premises shall at all times be maintained by Tenant in the condition of a
first-class office space.

 

9.3                                 Additional Obligations of Tenant.  The purpose of Section 9.1 and 9.2
is to define the obligations of Landlord and Tenant to perform various repair
and maintenance functions; the allocation of the costs therefor are covered
under this Section 9.3. 
Tenant shall bear the full cost of repairs and maintenance, interior or
exterior, structural or otherwise, to preserve the Premises and the Building in
good working order and first-class condition, arising out of (i) the
existence, installation, removal, use or operation of any Tenant Improvements,
Alterations, or any of Tenant’s trade fixtures or personal property; (ii) the
moving of Tenant’s property or fixtures in or out of the Building or Project or
in and about the Premises; (iii) the particular use or particular
occupancy or manner of use or occupancy of the Premises by any Tenant Party; or
(iv) except to the extent any claims arising from any of the foregoing are
reimbursed by insurance carried by Landlord, are covered by the waiver of
subrogation in Article 13 or are otherwise provided for in Article 23,
the acts, omissions or negligence of any Tenant Parties.

 

9.4                                 Cure Rights.  Tenant shall have a period of thirty (30)
days from the date of written notice from Landlord within which to cure any
failure to fulfill any of its obligations under this Article 9;
provided, however, that if such failure is curable but cannot be cured within
such thirty (30) day period, Tenant shall have such additional time as may be
reasonably required to cure so long as Tenant commences such cure within such
thirty (30) day period and diligently prosecutes such cure to completion; but
further provided, that if the failure to cure such failure (i) threatens
the integrity (water-tight or otherwise) or stability of the Buildings
structural elements, (ii) adversely affects the operation or efficiency of
any Building Systems serving portions of the Building not included in the
Premises, or (iii) involves a risk to the safety or security of persons or
property, Landlord may

 

11

 

immediately commence
curing all or a portion of such failure as an emergency cure.  Landlord shall have the rights set forth in Article 26
with respect to any failure of Tenant to perform its obligations under this Article 9.  The remedies described in this section are
cumulative and in addition to any other remedies Landlord may have at law or
under this Lease.

 

9.5                                 No Abatement.  Except to the extent any claims arising from
any of the foregoing are reimbursed by rental abatement insurance proceeds actually
received by Landlord, are covered by the waiver of subrogation in Article 13
or are otherwise provided for in Article 23, there shall be no
abatement of Rent with respect to, and except for Landlord’s gross negligence
or willful misconduct, Landlord shall not be liable for any injury to or
interference with Tenant’s business arising from, any repairs, maintenance,
alteration or improvement in or to any portion of the Project, including the
Premises, or in or to the fixtures, appurtenances and equipment therein.  Tenant hereby waives any and all rights under
and benefits of subsection 1 of Section 1932 and Sections 1941 and
1942 of the California Code of Civil Procedure, or any similar or successor
Regulations or other laws now or hereinafter in effect.

 

10.                               LIENS. 
Tenant shall keep the Premises free from any liens arising out of any
work performed, material furnished or obligations incurred by Tenant.  In the event that Tenant shall not, within
fifteen (15) days following the imposition of any such lien, cause the same to
be released of record by payment or posting of a proper bond, Landlord shall
have, in addition to all other remedies provided herein and by law, the right,
but not the obligation, to cause the same to be released by such means as it shall
deem proper, including without limitation by the payment of the claim giving
rise to such lien or by the posting of a bond. 
All such sums paid by Landlord and all expenses incurred by Landlord in
connection therewith shall be considered Additional Charges and shall be
payable to Landlord by Tenant on demand with interest from the date incurred by
Landlord at the Default Rate.  Landlord
shall have the right at all times to post and keep posted on the Premises any notices
permitted or required by law, or which Landlord shall deem proper, for the
protection of Landlord, the Premises, the Project and any other party having an
interest therein, from mechanics’ and materialmen’s liens, and Tenant shall
give written notice to Landlord at least fifteen (15) business days prior to
commencement of any construction on the Premises.  In addition to Tenant’s obligations under Article 8
of this Lease, upon completion of any Alterations, Tenant shall deliver to the
Landlord a reproducible copy of the “as built” drawings of the Alterations as
well as all permits, approvals and other documents issued by any governmental
agency in connection with the Alterations, if such Alterations are of a type
for which as-built plans are reasonably available.

 

11.                               ASSIGNMENT
AND SUBLETTING.

 

11.1                           Consent Required. 
Except in connection with a Permitted Transfer (defined below) Tenant
shall not voluntarily or by operation of law, (1) mortgage, pledge,
hypothecate or encumber this Lease or any interest herein or (2) assign or
transfer this Lease or any interest herein, sublease the Premises or any part
thereof, or any right or privilege appurtenant thereto, or allow any other
person (the employees and invitees of Tenant excepted) to occupy or use the
Premises, or any portion thereof, without first obtaining the written consent
of Landlord, which consent shall not be withheld unreasonably as set forth
below in this Article 11, provided that (i) Tenant is not then
in default under this Lease, and (ii) as a result of any requested
sublease (or sub-sublease), the Premises shall not contain more then two (2) separately
demised sublease premises of ten thousand (10,000) rentable square feet or less.  A transfer of greater than a twenty-five
percent (25%) interest (whether stock, partnership interest, membership
interest or otherwise) of Tenant, either in one (1) transaction or a
series of transactions, except for a Permitted Transfer, shall be deemed to be
an assignment under this Lease.  When
Tenant requests Landlord’s consent to such assignment or subletting, it shall
notify Landlord in writing of the name and address of the proposed assignee or
subtenant and the nature and character of the business of the proposed assignee
or subtenant and shall provide current and prior financial statements for the
proposed assignee or subtenant, which financial statements shall be audited to
the extent available and shall in any event be prepared in accordance with
generally accepted accounting principles and Tenant shall also provide Landlord
with a copy of the proposed sublease or assignment agreement, including all
material terms and conditions thereof. 
Landlord shall have the option, to be exercised within thirty (30) days
of receipt of the foregoing, to (1) terminate this Lease as of the
commencement date stated in the proposed sublease for the remainder of the Term
or assignment, (2) sublease or take an assignment, as the case may be,
from Tenant of the interest, or any portion thereof, in this Lease and/or the
Premises that Tenant proposes to assign or sublease, on the same terms and
conditions as stated in the proposed sublet or assignment agreement, (3) consent
to the proposed assignment or sublease, or (4) refuse its consent to the
proposed assignment or sublease,

 

12

 

providing
that such consent shall not be unreasonably withheld so long as Tenant is not
then in default under this Lease beyond any applicable grace period.  In the event Landlord elects to terminate
this Lease or sublease or take an assignment from Tenant of the interest, or
portion thereof, in the Lease and/or the Premises that Tenant proposes to
assign or sublease as provided in the foregoing clauses (1) and (2),
respectively, then Landlord shall have the additional right to negotiate directly
with Tenant’s proposed assignee or subtenant and to enter into a direct lease
or occupancy agreement with such party on such terms as shall be acceptable to
Landlord in its sole and absolute discretion, and Tenant hereby waives any
claims against Landlord related thereto, including, without limitation, any
claims for any compensation or profit related to such lease or occupancy
agreement.

 

11.2                           Permitted Transfers. 
Notwithstanding anything to the contrary contained in this Lease,
Landlord and Tenant agree that, so long as no default by Tenant exists under
this Lease and Dot Hill Systems Corporation or its Permitted Transferee is the
Tenant hereunder, and subject to the satisfaction of the conditions set forth
in this Section 11.2, Tenant may assign this Lease or sublet all or
a portion of the Premises, or any portion thereof, without Landlord’s consent to
a Permitted Transferee (as hereinafter defined) of Dot Hill Systems Corporation
(hereinafter, each a “Permitted Transfer”),
without the prior written consent of Landlord, but otherwise subject to all of
the terms and conditions of this Article 11, except
that Tenant shall not be obligated to pay the amounts contemplated under Section 11.4
below.  Notwithstanding the foregoing,
such assignment or sublease shall not be effective until Tenant has given
Landlord all of the following at least thirty (30) days prior to the effective
date of such Permitted Transfer:  (i) written
notice of such assignment or sublease; (ii) the identity of the Permitted
Transferee and evidence (reasonably satisfactory to Landlord) that such entity
qualifies as a Permitted Transferee of Dot Hill Systems Corporation; (iii) an
executed copy of the assignment or sublease (which shall include an undertaking
by the assignee or subtenant to assume, perform and be bound by all of the
obligations of Tenant under this Lease with respect to the portion of the
Premises assigned or subleased and which shall specify that such assignment or
sublease is not effective until the conditions in this Section 11.2
have been satisfied); and (iv) if such assignee or subtenant is not an
Affiliate (as defined below) of Dot Hill Systems Corporation, such financial
information with respect to the assignee or subtenant as Landlord may
reasonably request to verify the tangible net worth requirements set forth
below.  In no event shall any Permitted
Transfer release Dot Hill Systems Corporation as Tenant from any liability
under this Lease.  As used herein, a “Permitted Transferee” shall mean a domestic entity (specifically
excluding a joint venture) formed, existing and governed pursuant to the laws
of one of the fifty (50) states of the United States of America (or the
District of Columbia), which (i) controls, is controlled by, or is under
common control with Tenant (an “Affiliate”); (ii) results
from a merger of, reorganization of, or consolidation with Tenant; or (iii) acquires
substantially all of the stock or assets of Tenant, as a going concern, with
respect to the business that is being conducted in the Premises; provided,
however, with respect to any Permitted Transferee that is not an Affiliate of
Dot Hill Systems Corporation, such Permitted Transferee must have a tangible
net worth equal to or greater than the tangible net worth of Dot Hill Systems
Corporation as of the Effective Date of this Lease.  For purposes of this Section 11.2,
“tangible net worth” shall mean (x) total assets, minus (y) goodwill
and/or any other intangible assets, and total liabilities.  In addition, a sale or transfer of the
capital stock or interests in or memberships in Tenant shall be deemed a
Permitted Transfer if such sale or transfer occurs in connection with any bona
fide financing or capitalization for the benefit of Dot Hill Systems
Corporation, as long as such sale does not (or is not part of a series of sales
or transfers that) result in the ownership of fifty-one percent (51%) or more
of both (A) the ownership and/or economic interest, and (B) the
voting securities (or possession of the right to vote the voting interest in the
ordinary direction of the entity’s affairs), of Dot Hill Systems Corporation.

 

11.3                           Landlord Consent.  Without otherwise limiting the criteria upon
which Landlord may withhold its consent, Landlord shall be entitled to consider
all reasonable criteria including, but not limited to, the following: (1) whether
or not the proposed subtenant or assignee is engaged in a business which, and
the use of the Premises will be in an manner which, is in keeping with the then
character and nature of all other tenancies in the Building, (2) whether
the use to be made of the Premises by the proposed subtenant or assignee will
conflict with any so-called “exclusive” use then in favor of any other tenant
of the Building, and whether such use would be prohibited by any other portion
of this Lease, including, but not limited to, any rules and regulations
then in effect, or under applicable laws, and whether such use imposes a
greater load upon the Premises and the Building services then imposed by
Tenant, (3) the business reputation of the proposed individuals who will
be managing and operating the business operations of the assignee or subtenant,
and the long-term financial and competitive business prospects of the proposed
assignee or subtenant, (4) the creditworthiness and financial stability of
the proposed assignee or subtenant in light of the responsibilities involved,
and (5) whether such transaction will require the making of any
Alterations to the Premises (and if so, the nature and preliminary design of
such Alterations).  In any event,

 

13

 

Landlord may withhold its
consent to any assignment or sublease, if (i) the actual use proposed to
be conducted in the Premises or portion thereof conflicts with the provisions
of Section 2.1 above or with any other lease which restricts the
use to which any space in the Building may be put, (ii) the Alterations to
the Premises required for the assignment or subletting are not acceptable to
Landlord in accordance with its approval rights, if applicable, as set forth in
Article 8 above, (iii) the portion of the Premises proposed to be
sublet is irregular in shape and/or does not permit safe or otherwise
appropriate means of ingress and egress, or does not comply with governmental
safety and other codes, (iv) the proposed subtenant or assignee is either
a governmental agency or an instrumentality thereof, or (v) the proposed
subtenant or assignee, or any person or entity which directly or indirectly,
controls, is controlled by, or is under common control with, the proposed subtenant
or assignee, either (x) occupies space in the Project at the time of the
request for consent, or (y) is negotiating with Landlord or has negotiated with
Landlord during the six (6) month period immediately preceding the date
Landlord receives Tenant’s request for consent, to lease space in the Project
and Landlord has space of comparable size and quality available for lease
during the relevant period.  As a further
condition to any rights Tenant may have under this Lease to sublet all or any
portion of the Premises, Tenant shall offer space for sublease at a starting
base rental rate no lower than Landlord’s then current highest asking base
rental rate for other space in the Building which is then on the market for
direct lease.  If there is space in the
Project then currently on the market for direct lease, Tenant shall offer the
space for sublease at a starting base rental rate no lower than a rate which is
the average of the starting rate for Landlord’s last two new leases and/or
renewals in the Project within the last six months, or if there is no space in
the Project for direct Lease (or if Landlord has not entered into a direct
lease of space in the Project within the six months preceding Tenant’s proposed
sublease), then Tenant shall offer the space for sublease at a starting base
rental rate no lower than the fair market rental rate.

 

11.4                           Terms of Assignment or Sublease.  If Landlord approves an assignment or
subletting as herein provided, Tenant shall pay to Landlord, as Additional
Rent, fifty percent (50%) of the excess, if any, of (1) the rent and any
additional rent payable by the assignee or subtenant to Tenant, less reasonable
and customary market-based leasing commissions, reasonable attorneys fees, and
tenant improvement costs, if any, incurred by Tenant in connection with such
assignment or sublease; minus (2) Base Rent plus Additional Rent allocable
to that part of the Premises affected by such assignment or sublease pursuant
to the provisions of this Lease, which amounts shall, for purposes of the
aforesaid calculation, be amortized on a straight-line basis over the term of
such assignment or sublease.  The
assignment or sublease agreement, as the case may be, after approval by
Landlord, shall not be amended without Landlord’s prior written consent, and
shall contain a provision directing the assignee or subtenant to pay the rent
and other sums due thereunder directly to Landlord upon receiving written
notice from Landlord that Tenant is in default beyond any applicable cure
period under this Lease with respect to the payment of Rent.  In the event that, notwithstanding the giving
of such notice, Tenant collects any rent or other sums from the assignee or
subtenant, then Tenant shall hold such sums in trust for the benefit of
Landlord and shall immediately forward the same to Landlord.  Landlord’s collection of such rent and other
sums shall not constitute an acceptance by Landlord of attornment by such
assignee or subtenant.  A consent to one
assignment, subletting, occupation or use shall not be deemed to be a consent
to any other or subsequent assignment, subletting, occupation or use, and
consent to any assignment or subletting shall in no way relieve Tenant of any
liability under this Lease.  Any assignment
or subletting without Landlord’s consent shall be void, and shall, at the
option of Landlord, constitute a default under this Lease.

 

11.5                           General Conditions.

 

11.5.1                  No Release.  Notwithstanding any assignment or subletting, Tenant and any guarantor
or surety of Tenant’s obligations under this Lease shall at all times remain
fully and primarily responsible and liable for the payment of the Rent and for
compliance with all of Tenant’s other obligations under this Lease (regardless
of whether Landlord’s approval has been obtained for any such assignment or
subletting).

 

11.5.2                  Landlord’s Fees.  Tenant
shall pay Landlord’s reasonable fees and costs (including, without limitation,
the fees of Landlord’s counsel), incurred in connection with Landlord’s review
and processing of documents regarding any proposed assignment or sublease, provide
that Tenant’s liability for such fees and costs shall not exceed Two Thousand Five
Hundred Dollars ($2,500.00) for any assignment or sublease request unless
Tenant request Landlord’s certification or separate agreement with the
subtenant or assignee, in which case Tenant shall be liable for Landlord’s
actual reasonable fees and costs.

 

14

 

11.5.3                  Consent Required to Further Assignment or Subletting.  In the event Landlord consents to
an assignment or subletting by Tenant in accordance with the terms of this Article 11,
Tenant’s assignee or subtenant shall have no right to further assign this Lease
or any interest therein or thereunder or to further sublease all or any portion
of the Premises without the consent of Landlord.

 

11.5.4                  Collection of Rent From Transferee. 
If this Lease is assigned, whether or not in violation of the
provisions of this Lease, Landlord may collect Rent from the assignee.  If the Premises or any part thereof is sublet
or used or occupied by anyone other than Tenant, whether or not in violation of
this Lease, Landlord may, after a default by Tenant beyond any applicable grace
period, collect Rent from the subtenant or occupant. In either event, Landlord
may apply the net amount collected to Rent, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver of any of the provisions of
this Article 11, or the acceptance of the assignee, subtenant or
occupant as tenant, or a release of Tenant from the further performance by
Tenant of Tenant’s obligations under this Lease.  The consent by Landlord to an assignment,
mortgaging, pledging, encumbering, transfer, use, occupancy or subletting
pursuant to any provision of this Lease shall not, except as otherwise provided
herein, in any way be considered to relieve Tenant from obtaining the express
consent of Landlord to any other or further assignment, mortgaging, pledging,
encumbering, transfer, use, occupancy or subletting.  References in this Lease to use or occupancy
by anyone other than Tenant shall not be construed as limited to subtenants and
those claiming under or through subtenants but as including also licensees or
others claiming under or through Tenant, immediately or remotely.  The listing of any name other than that of
Tenant on any door of the Premises or on any directory or in any elevator in
the Building, or otherwise, shall not, except as otherwise provided herein, operate
to vest in the person so named any right or interest in this Lease or in the
Premises, or be deemed to constitute, or serve as a substitute for, or any
waiver of, any prior consent of Landlord required under this Article 11.

 

11.5.5                  Transfer Subject to This Lease; Indemnity.  Each subletting and/or assignment
pursuant to this Article 11 shall be subject to all of the
covenants, agreements, terms, provision and conditions contained in this
Lease.   If Landlord shall consent to, or
reasonably withhold its consent to, any proposed assignment or sublease, Tenant
shall indemnify, defend and hold harmless Landlord against and from any and all
loss, liability, damages, costs and expenses (including reasonable counsel
fees) resulting from any claims that may be made against Landlord by the
proposed assignee or sublessee or by any brokers or other persons claiming a
commission or similar in connection with the proposed assignment or sublease.

 

11.5.6                  Assumption; Form of Landlord’s Consent.  Each assignee pursuant to an
Assignment as provided in this Article 11 shall assume all
obligations of Tenant under this Lease, and shall be and remain liable jointly
and severally with Tenant for the payment of Monthly Base Rent and Additional
Charges, and for the performance of all the terms, covenants, conditions and
agreements herein contained on Tenant’s part to be performed for the Term.  No Assignment shall be binding on Landlord
unless the assignee or Tenant shall deliver to Landlord a counterpart of the
Assignment and an instrument in recordable form that contains a covenant of
assumption by the assignee satisfactory in substance and form to Landlord, but
the failure or refusal of the assignee to execute such instrument of assumption
shall not release or discharge the assignee from its liability as set forth
above.  Notwithstanding anything to the
contrary in this Lease, no sublease or assignment shall be binding on Landlord
unless and until the subtenant or assignee shall agree in writing, in Landlord’s
commercially reasonable form of consent then in use by Landlord, to attorn to
Landlord on the terms and conditions of the sublease or assignment approved by
Landlord (including the obligations under this Lease to the extent that they
relate to the portion of the Premises subleased), and any Sublease entered into
by Tenant hereunder shall include an obligation by the sublessee to so attorn
to Landlord if Landlord, in Landlord’s sole discretion, elects to recognize
such Sublease upon any termination of this Lease.

 

11.5.7                  Delivery of Copy of Transfer Documents. 
If Landlord consents to a sublease or assignment in
accordance with this Article 11, (i) Tenant shall deliver to
Landlord, promptly after execution, an original executed copy of all
documentation pertaining to such subletting or assignment in form reasonably
acceptable to Landlord, and (ii) Tenant shall furnish upon Landlord’s
request a complete statement, certified by an independent certified public
accountant, or Tenant’s chief financial officer, setting forth in detail the
computation of any Bonus Rent which Tenant has derived and shall derive from
such subletting or assignment.  Landlord
or its authorized representatives shall have the right at all reasonable times
to audit the books, records and papers of Tenant relating to any subletting or
assignment, and shall have the right to make copies thereof.  If the Bonus Rent respecting any Transfer
shall be found understated, Tenant shall, within thirty (30) days after demand,
pay the

 

15

 

deficiency plus a 5% late
charge and interest on the understated amount, and if understated by more than
five percent (5%), Tenant shall additionally pay Landlord’s costs of such
audit.

 

11.6                           Occurrence of Default.  Any
subletting or assignment hereunder shall be subordinate and subject to the
provisions of this Lease, and if this Lease shall be terminated during the term
of any sublease or assignment, Landlord shall have the right to:  (i) treat such sublease or assignment as
cancelled and repossess the sublet premises by any lawful means, or (ii) require
that subtenant attorn to and recognize Landlord as its direct landlord under
any such sublease.  If Tenant shall be in
default beyond any applicable grace period under this Lease, Landlord is hereby
irrevocably authorized, as Tenant’s agent and attorney-in-fact, to direct any
subtenant or assignee to make all payments under or in connection with the
sublease or assignment directly to Landlord (which Landlord shall apply towards
Tenant’s obligations under this Lease) until such default is cured.  Such subtenant or assignee shall rely on any
representation by Landlord that Tenant is in default hereunder, without any
need for confirmation thereof by Tenant. 
Upon any assignment, the assignee shall assume in writing all
obligations and covenants of Tenant thereafter to be performed or observed
under this Lease.  No collection or
acceptance of rent by Landlord from any subtenant or assignee shall be deemed a
waiver of any provision of this Article 11 or the approval of any
subtenant or assignee not previously approved by Landlord or a release of
Tenant from any obligation under this Lease, whether theretofore or thereafter
accruing.  In no event shall Landlord’s
enforcement of any provision of this Lease against any subtenant or assignee be
deemed a waiver of Landlord’s right to enforce any term of this Lease against
Tenant or any other person.  If Tenant’s
obligations hereunder have been guaranteed, Landlord’s consent to any sublease
or assignment shall not be effective unless the guarantor also consents to such
sublease or assignment.

 

11.7                           Space Planning and Substitution.  If as a result of any assignment or
subletting, the either the portion of Premises occupied by Tenant or any
separately-demised subleased premises is of an area of less than fifteen
thousand (15,000) rentable square feet (each, a “Fungible
Space”), Landlord shall have the right, upon providing not less than
forty-five (45) days written notice to the occupant of such Fungible Space (the
“Fungible Space Occupant”), to move such
occupant to other space of comparable size in the Building or in the Project,
provided that such new space shall be provided with improvements of comparable
quality to those within the Fungible Space at the time of such relocation.  Landlord shall pay the reasonable
out-of-pocket costs to relocate and reconnect the Fungible Space Occupant’s personal
property and equipment within the new space; provided that Landlord may elect
to cause such work to be done by its contractors and a reasonable estimate
thereof is given to Landlord within twenty (20) days following Landlord’s
relocation notice.  Within ten (10) days
following request by Landlord, Tenant shall execute an amendment to this Lease
prepared by Landlord to memorialize the relocation of the Fungible Space.  Should Tenant fail timely to execute and
deliver the amendment to Landlord for any reason (including without limitation
the inability of the parties to reach an agreement on the proposed relocation),
or should Tenant or any other Fungible Space Occupant thereafter fail to comply
with the terms thereof, then Landlord may at its option elect to either terminate
this Lease or recapture the Fungible Space (without obligation to relocate the
Fungible Space Occupant) upon not less than ninety (90) days prior written
notice to Tenant.  Upon the effective
date of any termination of this Lease or the recapture of the Fungible Space,
Tenant shall vacate the Premises in accordance with Article 27 of
this Lease.

 

12.                               INSURANCE
AND INDEMNIFICATION.

 

12.1                           Tenant Compliance with
Insurance Requirements.  Tenant’s obligation to comply with all
applicable Laws shall include, without limitation, all applicable fire codes
and rules and regulations of Landlord’s fire insurance underwriters, and
Tenant shall not, directly or indirectly, make any use of the Building or
Premises which may thereby be prohibited or be dangerous to person or property
or which may jeopardize any insurance coverage or may increase the cost of
insurance or require additional insurance coverage.  If, by reason of the failure of Tenant to
comply with the provisions of this Section 12.1, any insurance
coverage is jeopardized or insurance premiums are increased, Landlord shall
have the option, in its sole discretion, either to terminate this Lease or to
require Tenant to make immediate payment of such increased insurance
premium.  If Tenant fails to maintain any
insurance, which Tenant is required to maintain pursuant to this Article 12,
Tenant shall be liable to Landlord for any loss or costs resulting from such
failure to maintain.  Tenant may not
self-insure against any risks required herein to be covered by insurance.

 

12.2                           Tenant Indemnity.  Except to the extent arising from and caused
by the gross negligence or willful misconduct of Landlord Parties or Landlord’s
breach of this Lease, Tenant shall indemnify and hold

 

16

 

Landlord harmless from
and defend Landlord against any and all claims or liability for any injury or
damage to any person or property whatsoever: (i) occurring in or on the
Premises; or (ii) occurring in, on, or about any other portion of the
Project to the extent such injury or damage shall be caused by the negligence
or willful misconduct by the Tenant Parties. 
Tenant further agrees to indemnify and hold Landlord harmless from, and
defend Landlord against, any and all claims, losses, or liabilities (including
damage to Landlord’s property) arising from (x) any breach of this Lease by
Tenant, (y) any matter referred to in Section 12.8, and/or (z) the
conduct of any work or business of Tenant Parties in or about the Project,
including, but not limited to any release, discharge, storage or use of any
Hazardous Substance.  In the event of a
discrepancy between the terms of this section and the terms of Article 41
of the Lease concerning Hazardous Substance liability, the latter shall
control.

 

12.3                           Tenant’s Insurance Policies.  Tenant shall, at its own expense, at all
times during the term of this Lease provide and maintain in effect those
insurance policies and minimum limits of coverage as designated below, and any
other insurance required by law in any state where Tenant occupies any Premises
under this Lease.

 

12.3.1                  Workers’ Compensation and Employer’s
Liability Insurance.  Workers’ Compensation insurance shall be
provided as required by any applicable law or regulation and, in accordance
with the provisions of the laws of the nation, state, territory or province
having jurisdiction over Tenant’s employees at the Premises.  Employer’s Liability insurance shall be
provided in amounts not less than $1,000,000 per illness or injury.

 

12.3.2                  Commercial General Liability Insurance.  Tenant shall carry Commercial General
Liability insurance covering all operations by or on behalf of Tenant at the
Premises, and providing insurance for bodily injury, property damage, personal
injury and advertising injury, as those terms are defined by Commercial General
Liability insurance policies, with limits of not less than $2,000,000 each
occurrence and $3,000,000 in the aggregate. Tenant shall continue to maintain
the Commercial General Liability insurance required under this Lease for a
minimum of one year following termination of this Lease. Tenant shall furnish Certificates
of Insurance annually to Landlord as evidence of this required insurance.  Landlord, its officers, directors, employees,
agents and invitees shall be included as Additional Insureds for the Commercial
General Liability coverage required to be maintained by Tenant under this
Lease.

 

12.3.3                  Automobile Liability Insurance.  Tenant shall carry Business Automobile
Liability insurance, including bodily injury and property damage for all
vehicles, including but not limited to all owned, hired (or rented) and
non-owned vehicles.  The limits of
liability shall not be less than $1,000,000 combined single limit for each
accident.

 

12.3.4                  Employment Practices Liability Insurance.  Tenant shall carry Employment Practices
Liability insurance providing coverage for employment practices liability,
including by way of example but not limitation, wrongful termination, sexual or
other harassment, discrimination, invasion of privacy, employment-related
defamation, and violation of the Family and Medical Leave Act, with limits of
not less than $1,000,000 per occurrence or per claim and $1,000,000 in the
annual aggregate.

 

12.3.5                  Plate Glass.  Tenant shall be responsible for
the maintenance, repair or damage of the plate glass on the Premises, and shall
have the obligation to insure the risk pursuant to Section 12.3.6
hereof.  Tenant shall be liable for any
claim, loss or damage related thereto. 
Tenant’s responsibility for maintenance, repair or damage of the plate
glass includes its replacement in the event repair of the glass would not
restore the glass to its original condition at the time of installation.

 

12.3.6                  Tenant Improvements.  Special form property damage insurance
covering all of the Tenant Improvements; and Tenant’s other leasehold
alterations and additions permitted under Article 8 hereof, and
Tenant’s trade fixtures, merchandise and all personal property from time to
time in, on or upon the Premises, in an amount not less than one hundred
percent (100%) of their full replacement cost, without depreciation, during the
Lease Term, providing protection against any peril included within the
classification “Fire and Extended Coverage”, together with insurance against
sprinkler damage, vandalism and malicious mischief and such other coverages as
Landlord may from time to time require by notice to Tenant.  Any insurance policy proceeds shall be used
for the repair or replacement of the property damaged or destroyed unless this
Lease shall cease and terminate under the

 

17

 

provisions of Article 23
hereof, whereupon any proceeds of insurance covering the Tenant Improvements
and any alterations or additions permitted under Article 8 hereof,
shall be payable to Landlord or to Landlord’s designee(s).  Insurance coverage called for hereunder shall
also provide for business interruption coverage.  Any deductible provided in such insurance
shall not exceed Five Thousand Dollars ($5,000.00) per occurrence without
written approval from Landlord.

 

12.3.7                  Tenant’s Use of Consultants and Contractors on
Premises.  In the event Tenant
utilizes the services of consultants and/or contractors on the Premises, Tenant
shall require from or provide for all such consultants and contractors the same
minimum insurance requirements detailed above, unless otherwise agreed upon by
Landlord.  Landlord reserves the right to
request from Tenant copies of such consultants’ and contractors’ certificates
and/or certified copies of insurance policies when deemed necessary.

 

12.4                           Policies to be Primary.  The
policies carried by Tenant as required above shall be endorsed to stipulate
that Tenant’s insurance shall be primary to and noncontributory with any and
all other insurance maintained or otherwise afforded to Landlord, its officers,
directors, employees and agents.  Any
policy or policies of fire, extended or similar casualty insurance which either
party obtains in connection with the Premises shall include a clause or
endorsement denying the insurer any rights of subrogation against the other
party to the extent any rights have been waived by the insured prior to the
occurrence of injury of loss as set forth in Article 13 below.

 

12.5                           Certificates of Insurance.   Certificates of Insurance shall be furnished
by Tenant to Landlord before the commencement of this Lease by Tenant and
within ten (10) days prior to each policy renewal. The insurances required
above shall be subject to the approval of Landlord, but any acceptance of
insurance certificates by Landlord shall not limit or relieve Tenant of the duties
and responsibilities with respect to maintaining insurance assumed by it under
this Lease.  NOTICE TO TENANT:  IN ACCORDANCE WITH THE TERMS OF THIS LEASE,
TENANT MUST PROVIDE EVIDENCE OF THE REQUIRED INSURANCE TO LANDLORD’S MANAGEMENT
AGENT PRIOR TO OCCUPANCY OF THE PREMISES.

 

12.6                           Landlord May Provide Insurance.  If Tenant does not comply with the insurance
requirements of this Lease, Landlord may, at its option, provide insurance
coverage to protect Landlord and Tenant and add the cost of such coverage to
the fees invoiced by Landlord.

 

12.7                           Landlord’s Insurance.  Landlord may, at its election, provide any or
all of the following types of insurance, with or without deductible and in
amounts and coverages as may be determined by Landlord in its discretion:  “all risk” property insurance, subject to
standard exclusions, covering the Building or Project, and such other risks as
Landlord or its mortgagees may from time to time deem appropriate, including
leasehold improvements made by Landlord, and commercial general liability
coverage.  Landlord shall not be required
to carry insurance of any kind on Tenant’s property, including leasehold
improvements, trade fixtures, furnishings, equipment, plate glass, signs and
all other items of personal property, and shall not be obligated to repair or
replace that property should damage occur. 
All proceeds of insurance maintained by Landlord upon the Building and
Project shall be the property of Landlord, whether or not Landlord is obligated
to or elects to make any repairs.  At
Landlord’s option, Landlord may self-insure all or any portion of the risks for
which Landlord elects to provide insurance hereunder.

 

12.8                           Landlord’s Security Measures.  Tenant acknowledges that even if Landlord
installs and operates security cameras or other security equipment and/or
provides any other services that could be construed as being intended to
enhance security, Landlord shall have no obligation to Tenant or to any of
Tenant’s Parties for any damage, claim, loss or liability related to any claim
that Landlord had a duty to provide security or that the equipment or services
provided by Landlord were inadequate, inoperative or otherwise failed to
provide adequate security.  Any such
claim made against Landlord by any employee, customer or invitee of Tenant
shall be included within Tenant’s obligation of indemnity and defense set forth
in Section 12.2 above.

 

13.                               WAIVER OF SUBROGATION. 
Notwithstanding anything to the contrary in this Lease, Landlord and
Tenant each hereby waives all rights of recovery against the other and the
other’s agents on account of loss and damage occasioned to the property of such
waiving party to the extent only that such loss or damage is required to be
insured against under any property insurance policies required by this Lease;
provided however, that

 

18

 

(i) the foregoing
waiver shall not apply to the extent of Tenant’s obligations to pay deductibles
under any such policies and this Lease, and (ii) if any loss is due to the
act, omission or negligence or willful misconduct of Tenant or its agents,
employees, contractors, guests or invitees, Tenant’s liability insurance shall
be primary and shall cover all losses and damages prior to any other insurance
hereunder.  By this waiver it is the
intent of the parties that neither Landlord nor Tenant shall be liable to any
insurance company (by way of subrogation or otherwise) insuring the other party
for any loss or damage insured against under any property insurance policies
required by this Lease, even though such loss or damage might be occasioned by
the negligence of such party, its agents, employees, contractors, guests or
invitees.  The provisions of this Article 13
shall not limit the indemnification provisions elsewhere contained in this
Lease.

 

14.                               SERVICES
AND UTILITIES.

 

14.1                           Building Services. 
Landlord shall provide the maintenance and repairs described in Section 9.1,
except for damage occasioned by the act or omission of Tenant or for which
Tenant is responsible pursuant to Section 9.3, which damage shall
be repaired by Landlord at Tenant’s expense. 
Subject to the provisions elsewhere herein contained and to the Rules and
Regulations, Landlord, as an Expense payable by Tenant, shall arrange for,
garbage pickup, security, transportation management programs, water,
electricity, gas and heating, ventilating and air-conditioning services to the
Premises.  Tenant shall provide the
maintenance, repair and replacement of those portions of the Building Systems
located in the Premises in connection with such utilities and services.  Tenant shall cooperate fully with Landlord
and abide by all the reasonable regulations and requirements that Landlord may
prescribe for the proper functioning and protection of the Building Systems.

 

14.1.1                  HVAC. 
Except as expressly provided in the foregoing section, Landlord shall
not be obligated to furnish any services to the Premises.  Landlord shall only be obligated to provide
heating, ventilation and air conditioning (“HVAC”)
systems serving the Premises, during the “Normal Business Hours” of 8:00 A.M.
until 6:00 P.M., Saturday 9:00 a.m. to 1:00 p.m. (Sundays and
holidays excepted), unless Tenant requests such additional services as
hereinafter provided.

 

14.1.2                  After-Hours HVAC. 
As part of the Tenant Improvements, Landlord shall install an
HVAC override timer with an hourly counter attachment on each floor of the
Premises. Tenant’s activating said override timer to obtain HVAC services after
Normal Business Hours will engage the Building’s package, condensing and fan
coil units. Each quarter, Landlord shall determine the operating hours that
Tenant and/or other tenants has/have obtained HVAC services in excess of the
Building’s Normal Business Hours (“Excess Operating Hours”).
The total number of Excess Operating Hours derived will be multiplied by the
hourly Excess Operating Hours usage rate, which rate shall reflect no profit to
Landlord, and said resulting amount will reasonably reflect the HVAC utilities
usage for the applicable quarter and will be billed by Landlord to Tenant
proportionately to Tenant and/or other tenants who have obtained such excess
HVAC services, and shall be promptly paid by Tenant and/or such other tenants
to Landlord as Additional Rent and such costs paid by Tenant and/or other
tenants for Excess Operating Hours shall not be included in Operating Expenses.
The Landlord’s actual cost of providing such excess HVAC services shall be
based on the cost of electricity associated therewith and reasonably-estimated
additional wear and tear on the HVAC systems resulting from such excess
use.  Any dispute regarding determination
of this actual after-hours costs shall be resolved by a mutually-acceptable,
independent HVAC engineer.

 

14.1.3                  Excess HVAC Loads. 
If  Tenant’s concentration of
personnel or equipment adversely affects the temperature or humidity in the
Premises or the Building, Landlord may (after providing Tenant with advance
notice and ten (10) days to correct such adverse concentration of
personnel or equipment) install supplementary air conditioning units in the
Premises; and Tenant shall pay for the cost of installation and maintenance,
repair and replacement thereof (and all electrical and chilled water
consumption used thereby) within thirty (30) days after Tenant’s receipt of
Landlord’s bill therefor.

 

14.1.4                  Supplementary HVAC Loads. 
In addition to Landlord’s right to install supplementary air
conditioning units during the Term, if the Tenant Improvements or any
subsequent Alterations include supplementary air-conditioning units, Tenant
shall, in addition to the cost of all electricity and chilled water consumption
associated with such units, separately maintain, at Tenant’s sole cost and
expense, a service contract, in a form and with a contractor acceptable to
Landlord, on such units, include the cost of repair and replacement of

 

19

 

such units within the
coverage of Tenant’s insurance policies, and Tenant shall directly pay for all
maintenance, repair and replacement costs not covered by insurance or Tenant’s
service contract for such units.

 

14.2                           Tenant Obligations.  Tenant shall be responsible for arranging for, and the direct payment
of the costs of, telephone, cable and digital services to the Premises.  Landlord shall cooperate with Tenant’s
efforts to arrange all such services. 
Tenant shall bear the cost of replacement of all lamps, tubes, light
bulbs, ballasts and starters for lighting fixtures.

 

14.3                           Building Electricity and Metering.  As part of the Tenant Improvements, Landlord
shall arrange for a separate electrical meter to be installed.  Landlord shall provide adequate electrical
service to the Premises for standard building lighting and for Tenant’s
incidental uses, all of the costs of which shall be directly to the electrical
utility provider by Tenant.  With respect
to such incidental uses, adequate electrical service will be furnished by
Landlord to the electrical supply panel servicing the Premises, provided that
such electricity will be used only for equipment and accessories normal to
office and electronics lab usage.  
Tenant shall, prior to the Commencement Date, make arrangements with the
utility company supplying electricity to the Premises for separate
billing.  In the event that for any
reason Tenant cannot be billed directly, Landlord shall forward each bill
received by it with respect to the Premises to Tenant and Tenant shall pay it
promptly in accordance with its terms.  Notwithstanding, the foregoing, Tenant hereby
acknowledges that Landlord’s agreement to allow Tenant to use the existing 800
amp distribution panel plus an additional 800 amp distribution panel (the “Premises Supply Panels”) for its anticipated demand
electrical loads in the Premises may result in the inability to provide other
tenants of the Building with their pro rata share of the aggregate Building
electrical demand loads, and therefore, Tenant agrees to cooperate with  Landlord in providing other tenants of the
Building with their pro rata share of the Building demand loads, including, but
not limited to the right of Landlord to submeter Tenants second 800 amp
distribution panel temporarily for other tenants, and to install a new 1,000
amp distribution panel in the Building for use by the Building tenants, in which
case Tenant agrees to reimburse Landlord for twenty-five percent (25%) of the
cost of acquiring and installing such additional distribution panel within
thirty (30) days following Landlord’s delivery of an invoice of such costs and
written request therefor as additional rent.

 

14.4                           Excess Electrical Loads. 
If Tenant installs (i) any equipment in the Premises that uses more
electricity than standard office desktop equipment and copy machines, (ii) a
computer room, (iii) supplemental heating, ventilation and air
conditioning units, (iv) a fan coil unit, or (v) a microwave station
(collectively, “Supplemental Equipment”), all
electricity, water and BTU’s supplied to such Supplemental Equipment shall be
either sub-metered or separately metered. 
Any such meters shall be installed by Landlord (or by Landlord’s
preferred vendors) in compliance with the metering system designed for the
Project.  Any and all costs associated
with such sub-meters or separate meters (including, without limitation, the
acquisition, installation, operation, maintenance and repair thereof) shall be
paid by Tenant.  If the electricity
supplied to the Supplemental Equipment results in the electrical demand load in
excess of the supply capacity of the Premises Supply Panels, then in addition
to Landlord’s rights under Section 14.3 above, Landlord may, at
Tenant’s expense, install an additional electrical distribution panel in the
Building along with conduits, wiring and other equipment necessary to supply
electricity to the other tenants their respective pro rata shares of the
aggregate Building electrical distribution demand loads.  Any dispute regarding determination of the
excess electrical loads of the Supplemental Equipment shall be resolved by a
mutually-acceptable, independent electrical engineer.

 

14.5                           Conservation Programs.  Notwithstanding anything to the contrary in
this Article 14 or elsewhere in this Lease, Landlord shall have the
right to institute such policies, programs and measures as may be necessary or
desirable, in Landlord’s discretion, for the conservation and preservation of
energy or energy related services, or as may be required to comply with any
applicable laws, whether mandatory or voluntary.  If Landlord determines that Tenant’s use or
occupancy of the Premises will, in Landlord’s reasonable judgment, cause the
design loads for the Building or the Building Systems providing HVAC, exhaust,
electrical, life safety, water, sewer or other utility or safety services to
the Building to be exceeded or will adversely affect the Building or the
operation of said systems in the Premises or the Building or cause
deterioration or damages to the Building or to such systems, then Landlord
shall deliver written notice thereof to Tenant and Tenant shall temper such
excess loads and correct, repair and restore the portion of the Building so
affected and such systems in a timely and expeditious manner by installing
supplementary structural support, HVAC, exhaust, electrical, life safety,
water, sewer or other utility or safety systems in the Premises or elsewhere in
the Building where necessary at the sole cost of Tenant, payable to Landlord
from time to time as the work progresses as additional Rent within ten (10) days
after Landlord’s written

 

20

 

demand therefor, from
time to time.  In the event of an
emergency, Landlord may, but it shall not be required to, without notice to
Tenant, correct, repair and restore the portion of the Building so effected.  Any expense to Landlord resulting from the
operation, repair, maintenance, replacement and removal of any such
supplementary structural support, exhaust, HVAC, electrical, life safety,
water, sewer or other utility or safety systems, including rent for space
occupied by any such supplementary structural support, exhaust, HVAC,
electrical, life safety, water, sewer or other utility or safety systems
installed outside the Premises shall be borne exclusively by Tenant and shall
be paid by Tenant to Landlord as additional Rent at rates fixed by Landlord
from time to time.

 

14.6                           Interruption of Services.  Landlord shall not be in default
hereunder, nor be deemed to have evicted Tenant, nor be liable for any damages
directly or indirectly resulting from, nor shall the rental herein reserved be abated,
except as expressly provided for in the last sentence of this section, by
reason of (i) the installation, use or interruption of use of any
equipment in connection with the foregoing utilities and services; (ii) failure
to furnish or delay in furnishing any services to be provided by Landlord when
such failure or delay is caused by Acts of God or the elements, labor
disturbances of any character, any other accidents or other conditions beyond
the reasonable control of Landlord, or by the making of repairs or improvements
to the Premises or to the Building (except in the case of Landlord’s gross
negligence or willful misconduct); or (iii) the limitation, curtailment,
rationing or restriction on use of water or electricity, gas or any other form
of energy or any other service or utility whatsoever serving the Premises or
the Project.  Furthermore, Landlord shall
be entitled to cooperate with the mandatory requirements of national, state or
local governmental agencies or utilities suppliers in connection with reducing
energy or other resources consumption. 
If the Premises become unsuitable for Tenant’s use as a consequence of
cessation of gas and electric utilities or other services provided to the
Premises resulting from a casualty covered by Landlord’s insurance, then Tenant’s
Monthly Base Rent and Additional Charges shall abate during the period of time
in which Tenant cannot occupy the Premises for the Permitted Uses, but only to
the extent of rental abatement insurance proceeds received by Landlord.

 

15.                               ESTOPPEL CERTIFICATES.  Each
party (the “Responding Party”), at any time
and from time to time, within ten (10) days from receipt of  written notice from the other party (the “Requesting Party”), will execute, acknowledge and deliver to
the Requesting Party  and at the
Requesting Party’s request, to any prospective lender, tenant, purchaser,
ground or underlying lessor or mortgagee of any part of the Project, any other
party acquiring an interest in Landlord or Tenant, an estoppel certificate
containing such information as may reasonably be required by any of such
persons.  It is intended that any such
estoppel certificate delivered pursuant to this Article 15 may be
relied upon by the Requesting Party and any party to whom it is directed buy
the Requesting Party to be given .

 

16.                               HOLDING OVER.  If
Tenant (directly or through any successor-in-interest of Tenant) remains in
possession of all or any portion of the Premises after the expiration or
termination of this Lease, such continued possession shall not constitute a
renewal or extension of this Lease but shall be construed to be a tenancy from
month-to-month commencing on the first (1st) day following the termination or
expiration of this Lease at the greater of the then-fair market rent for the
Premises (as reasonably determined by Landlord) or two hundred percent (200%)
of the Monthly Base Rent payable in the last full month prior to such
termination or expiration (and shall be increased in accordance with Section 4.1,
together with an amount estimated by Landlord for the monthly Additional
Charges for Expenses and Real Estate Taxes payable under this Lease, and shall
otherwise be on the terms and conditions herein specified so far as
applicable.  In addition to Rent, Tenant
shall pay Landlord for all damages proximately caused by reason of the Tenant’s
retention of possession.  Landlord’s
acceptance of Rent after the termination of this Lease shall not constitute a
renewal of this Lease, and nothing contained in this provision shall be deemed
to waive Landlord’s right of re-entry or any other right hereunder or at
law.  Tenant acknowledges that, in
Landlord’s marketing and re-leasing efforts for the Premises, Landlord is
relying on Tenant’s vacation of the Premises on the Expiration Date.  Accordingly, Tenant shall indemnify, defend
and hold Landlord harmless from and against all claims, liabilities, losses,
costs, expenses and damages arising or resulting directly or indirectly from
Tenant’s failure to timely surrender the Premises, including (i) any loss,
cost or damages suffered by any prospective tenant of all or any part of the
Premises, and (ii) Landlord’s damages as a result of such prospective
tenant rescinding or refusing to enter into the prospective lease of all or any
portion of the Premises by reason of such failure of Tenant to timely surrender
the Premises.  The foregoing provisions
of this Article 16 are in addition to and do not affect Landlord’s
right of re-entry or any other rights of Landlord under this Lease or at law or
in equity.

 

21

 

17.                               SUBORDINATION.  Without the necessity of any additional
document being executed by Tenant for the purpose of effecting a subordination,
this Lease shall be subject and subordinate at all times to:  (i) all ground leases or underlying
leases which may now exist or hereafter be executed affecting all or any
portion of the Project, (ii) any CC&Rs, and (iii) the lien of any
mortgage or deed of trust which may now exist or hereafter be executed in any
amount for which all or any portion of the Project, ground leases or underlying
leases, or Landlord’s interest or estate in any of said items, is specified as
security (any of the foregoing, a “Mortgage”,
and the beneficiary or mortgagee under any of the foregoing, a “Mortgagee”).  Notwithstanding the foregoing, Landlord shall
have the right to subordinate or cause to be subordinated any such ground
leases or underlying leases or any such Mortgages to this Lease.  In the event that any ground lease or
underlying lease terminates for any reason or any Mortgage is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the Tenant of the
successor in interest to Landlord at the option of such successor in interest.  Notwithstanding anything to the contrary
contained herein, this Lease shall not be subject or subordinate to any ground
or underlying lease or to any Mortgage, unless the ground lessor or Mortgagee
executes a reasonable recognition and non-disturbance agreement which provides
that Tenant shall be entitled to continue in possession of the Premises on the
terms and conditions of this Lease if and for so long as Tenant fully performs
all of its obligations hereunder.  Tenant
covenants and agrees to execute and deliver upon demand by Landlord, and in the
form reasonably requested by Landlord, any customary additional documents
evidencing the priority or subordination of this Lease with respect to any such
ground leases or underlying leases or the lien of any such Mortgage.   Tenant
shall execute, deliver and record any such documents  within ten (10) days after Landlord’s
written request.

 

18.                               RULES
AND REGULATIONS.  Tenant shall
faithfully observe and comply with the rules and regulations attached to
this Lease as Exhibit D and all reasonable modifications thereof
and additions thereto from time to time put into effect by Landlord.  Landlord shall not be responsible for the
nonperformance by any other Tenant or occupant of the Building or the Project
of any said rules and regulations. 
In the event of an express and direct conflict between the terms,
covenants, agreements and conditions of this Lease and those set forth in the rules and
regulations, as modified and amended from time to time by Landlord, this Lease
shall control.  Landlord shall not be
liable for failure of any person to obey such rules and regulations.  Landlord shall  not be obligated to enforce such rules and
regulations against any person, and the failure of Landlord to enforce any such
rules and regulations shall not constitute a waiver thereof or relieve
Tenant from compliance therewith.  Any
violation of such rules and regulations by, or Landlord’s failure to
enforce the same against, any other tenant, its subtenants, assignors and
occupants and their respective agents, employees, invitees, guests or licensees
shall not be deemed, constitute or construed to (i) be a disturbance of
Tenant’s quiet and peaceable possession of the Premises or of any of Tenant’s
rights under this Lease, or (ii) be an eviction, in whole or in part,
constructive or actual, of Tenant or affect Tenant’s covenants or obligations
hereunder. 

 

19.                               RE-ENTRY
BY LANDLORD.  Landlord reserves
and shall at all reasonable times, upon reasonable prior written or oral notice
at least twenty four (24) hours in advance (except in the case of an emergency,
when no notice shall be required), and subject to Tenant’s reasonable security
precautions and the right of Tenant to accompany Landlord at all times, have
the right to re-enter the Premises to inspect the same, to supply janitor
service and any other service to be provided by Landlord to Tenant hereunder
(unless Tenant is supplying such service), to show the Premises to prospective
purchasers, Mortgagees or tenants (as to prospective tenants, only during the
last twelve (12) months of the Term), to post notices of nonresponsibility or
as otherwise required or allowed by this Lease or by law, and to alter, improve
or repair the Premises and any portion of the Building and may for that purpose
erect, use, and maintain scaffolding, pipes, conduits, and other necessary
structures in and through the Premises where reasonably required by the
character of the work to be performed. 
Landlord shall not be liable in any manner for any inconvenience,
disturbance, loss of business, nuisance or other damage arising from Landlord’s
entry and acts pursuant to this section and Tenant shall not be entitled
to an abatement or reduction of Monthly Base Rent or Additional Charges if
Landlord exercises any rights reserved in this section, so long as Landlord
uses commercially reasonable efforts to minimize interference with Tenant’s use
of the Premises.  Tenant hereby waives
any claim for damages for any injury or inconvenience to or interference with
Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises,
and any other loss occasioned thereby, except for Landlord’s gross negligence
or willful misconduct.  For each of the
aforesaid purposes, Landlord shall at all times have and retain a key with
which to unlock all of the doors in, upon and about the Premises, excluding
Tenant’s vaults and safes, or special security areas (designated in advance),
and Landlord shall have the right to use any and all means which Landlord may
deem necessary or proper to open said doors in an emergency, in order to obtain
entry to any

 

22

 

portion of the Premises, and
any entry to the Premises, or portion thereof obtained by Landlord by any of
said means, or otherwise, shall not under any emergency circumstances be
construed or deemed to be a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction, actual or constructive, of Tenant from the
Premises or any portions thereof. 
Landlord shall use commercially reasonable efforts during re-entry to
not unreasonably interfere with Tenant’s use of the Premises or its business
conducted therein. 

 

20.                               DEFAULT.

 

20.1                           Definition of Default.  Except as otherwise provided in Article 21, the following
events shall be deemed to be a Default under this Lease:

 

20.1.1                  Failure to Pay.  Tenant shall fail to pay when due any sum of money becoming due to be
paid to Landlord under this Lease, whether such sum be any installment of the
rent required by this Lease, any other amount treated as additional rent under
this Lease, or any other payment or reimbursement to Landlord required by this
Lease, whether or not treated as additional rent under this Lease, and such
failure shall continue for a period of five (5) days after written notice
that such payment was not made when due shall be a Default; provided that upon
the second such failure in any twelve (12) month period, Landlord shall only be
required to provide the statutory notice required under California Code of
Civil Procedure Section 1161 or any similar or successor statute, if any.

 

20.1.2                  Failure to Comply.  Tenant
shall fail to comply with any term, provision or covenant of this Lease which
is not provided for in another Section of this Article and shall not
cure such failure within thirty (30) days (forthwith, if the failure involves a
hazardous condition) after written notice of such failure to Tenant provided,
however, that such failure shall not be a Default if such failure could not
reasonably be cured during such thirty (30) day period, Tenant has commenced
the cure within such thirty (30) day period and thereafter is diligently
pursuing such cure to completion, but the total aggregate cure period shall not
exceed one hundred twenty (120) days.

 

20.1.3                  Holding Over.  Tenant
shall fail to vacate the Premises immediately upon termination of this Lease,
by lapse of time or otherwise, or upon termination of Tenant’s right to
possession only.

 

20.1.4                  Insolvency.  Tenant
shall become insolvent, admit in writing its inability to pay its debts
generally as they become due, file a petition in bankruptcy or a petition to
take advantage of any insolvency statute, make an assignment for the benefit of
creditors, make a transfer in fraud of creditors, apply for or consent to the
appointment of a receiver of itself or of the whole or any substantial part of
its property, or file a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws, as now in effect or hereafter
amended, or any other applicable law or statute of the United States or any
state thereof.

 

20.1.5                  Bankruptcy.  A court
of competent jurisdiction shall enter an order, judgment or decree adjudicating
Tenant bankrupt, or appointing a receiver of Tenant, or of the whole or any
substantial part of its property, without the consent of Tenant, or approving a
petition filed against Tenant seeking reorganization or arrangement of Tenant
under the bankruptcy laws of the United States, as now in effect or hereafter
amended, or any state thereof, and such order, judgment or decree shall not be
vacated or set aside or stayed within sixty (60) days from the date of entry
thereof.

 

21.                               REMEDIES.

 

21.1                           Landlord’s Remedies.  Upon
the occurrence of a Default under this Lease, whether enumerated in Article 20
or not, Landlord shall have the option to pursue any one or more of the
following remedies without any additional notice (except as expressly provided
in Article 20) or demand whatsoever (subject, however, to any
statutory notice required under California Code of Civil Procedure Section 1161
or any similar or successor statute, if any, provided that such statutory
notice shall be deemed satisfied by any longer notice and cure period provided
under Article 20 to the fullest extent permitted by applicable
laws):

 

23

 

21.1.1                  Terminate this Lease and Tenant’s right to
possession of the Premises and recover from Tenant an award of damages equal to
the sum of the following:

 

(i)                                     The Worth at the Time of Award of the unpaid
rent which had been earned at the time of termination;

 

(ii)                                  The
Worth at the Time of Award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount
of such rent loss that Tenant affirmatively proves could have been reasonably
avoided;

 

(iii)                               The
Worth at the Time of Award of the amount by which the unpaid rent for the
balance of the Term after the time of award exceeds the amount of such rent
loss that Tenant affirmatively proves could be reasonably avoided;

 

(iv)                              Any
other amount necessary to compensate Landlord for all the detriment either
proximately caused by Tenant’s failure to perform Tenant’s obligations under
this Lease or which in the ordinary course of things would be likely to result
therefrom; and

 

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

 

The “Worth at the Time of
Award” of the amounts referred to in parts 21.1.1.1 and 21.1.1.2 above, shall
be computed by allowing interest at the lesser of a per annum rate equal to: (i) the
greatest per annum rate of interest permitted from time to time under
applicable law, or (ii) the Prime Rate plus 2%.  For purposes hereof, the “Prime Rate” shall
be the per annum interest rate publicly announced as its prime or base rate by
a federally insured bank selected by Landlord in the State of California.  The “Worth at the Time of Award” of the
amount referred to in part 21.1.1.3, above, 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 1%;

 

21.1.2                  Employ the remedy described in California
Civil Code § 1951.4 (Landlord may continue this Lease in effect after Tenant’s
breach and abandonment and recover rent as it becomes due, if Tenant has the
right to sublet or assign, subject only to reasonable limitations); or

 

21.1.3                  Notwithstanding
Landlord’s exercise of the remedy described in California Civil Code § 1951.4
in respect of a Default, at such time thereafter as Landlord may elect in
writing, to terminate this Lease and Tenant’s right to possession of the
Premises and recover an award of damages as provided above in Section 21.1.1.

 

21.2                           No Waiver.  The subsequent acceptance of rent hereunder by Landlord shall not be
deemed to be a waiver of any preceding breach by Tenant of any term, covenant
or condition of this Lease, other than the failure of Tenant to pay the
particular rent so accepted, regardless of Landlord’s knowledge of such
preceding breach at the time of acceptance of such rent.  No waiver by Landlord of any breach hereof
shall be effective unless such waiver is in writing and signed by Landlord.

 

21.3                           Waiver of 3275, 1174 ( c) and 1179. 
TENANT HEREBY WAIVES ANY AND ALL RIGHTS CONFERRED BY SECTION 3275
OF THE CIVIL CODE OF CALIFORNIA AND BY SECTIONS 1174 (c) AND 1179 OF THE
CODE OF CIVIL PROCEDURE OF CALIFORNIA AND ANY AND ALL OTHER REGULATIONS AND
RULES OF LAW FROM TIME TO TIME IN EFFECT DURING THE TERM PROVIDING THAT TENANT
SHALL HAVE ANY RIGHT TO REDEEM, REINSTATE OR RESTORE THIS LEASE FOLLOWING ITS
TERMINATION BY REASON OF TENANT’S BREACH. 
TENANT ALSO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING OUT OF OR RELATING TO THIS
LEASE.

 

21.4                           Remedies Non-exclusive.  No
right or remedy herein conferred upon or reserved to Landlord is intended to be
exclusive of any other right or remedy, and each and every right and remedy
shall be

 

24

 

cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing by agreement, applicable law or in equity.  In addition to other remedies provided in
this Lease, Landlord shall be entitled, to the extent permitted by applicable
law, to injunctive relief, or to a decree compelling performance of any of the
covenants, agreements, conditions or provisions of this Lease, or to any other
remedy allowed to Landlord at law or in equity. 
Forbearance by Landlord to enforce one or more of the remedies herein
provided upon a Default shall not be deemed or construed to constitute a waiver
of such Default.

 

21.5                           Enforceability.  This Article 21
shall be enforceable to the maximum extent such enforcement is not prohibited
by applicable law, and the unenforceability of any portion thereof shall not
thereby render unenforceable any other portion.

 

21.6                           Effect on Options. 
Tenant hereby acknowledges that any and all option rights granted
pursuant to this Lease are in consideration of Tenant’s full and timely
performance of its obligations throughout the Lease Term, and if more than one (1) Default
occurs during the Lease Term, Tenant’s remaining renewal options, expansion
options, purchase options and rights of first offer and/or refusal, if any are
provide in this Lease, shall thereafter be null and void.  

 

21.7                           Landlord’s Default.  It
shall be a default and breach of this Lease by Landlord if it shall fail to
perform or observe any term, condition, covenant, or obligation required to be
performed or observed by it under this Lease for a period of thirty (30) days
after written notice thereof from Tenant; provided, however, that if the term,
condition, covenant, or obligation to be performed by Landlord is of such
nature that the same cannot reasonably be performed within such thirty (30) day
period, such default shall be deemed to have been cured if Landlord commences
such performance within said thirty (30) day period and thereafter diligently
undertakes to complete the same.  Tenant
shall not have the right based upon a default of Landlord to terminate this
Lease or to withhold, offset, or abate rent, Tenant’s sole recourse for
Landlord’s default being an action for damages against Landlord for diminution
in the rental value of the Premises for the period of Landlord’s default, which
is proximately caused by Landlord’s default. 
Tenant shall not have the right to terminate this Lease or to withhold,
offset, or abate the payment of rent based upon the unreasonable or arbitrary
withholding by Landlord of its consent or approval of any matter requiring
Landlord’s consent or approval, including but not limited to any proposed
assignment or subletting, Tenant’s remedies in such instance being limited to a
declaratory relief action, specific performance, or injunctive relief.  Tenant shall not in any case be entitled to
any consequential or punitive damages based upon any Landlord default or
withholding of consent or approval.. 
Notwithstanding anything to the contrary contained in this Lease, if a
Landlord’s failure to perform involves a risk to the safety or security of
persons or property, Landlord shall immediately commence curing such
failure.  

 

22.                               INSOLVENCY
OR BANKRUPTCY.  The appointment
of a receiver to take possession of all or substantially all of the assets of
Tenant, or an assignment of Tenant for the benefit of creditors, or any action
taken or suffered by Tenant under any insolvency, bankruptcy, reorganization or
other debtor relief proceedings, whether now existing or hereafter amended or
enacted, shall at Landlord’s option constitute a breach of this Lease by Tenant
(provided that, with respect to a petition in bankruptcy, or receiver
attachment, or other remedy pursued by a third party, such event shall not
constitute a breach of this Lease so long as it is discharged within sixty (60)
days).  Upon the happening of any such
event or at any time thereafter, this Lease shall terminate five (5) days
after written notice of termination from Landlord to Tenant.  In no event shall this Lease be assigned or
assignable by operation of law or by voluntary or involuntary bankruptcy
proceedings or otherwise and in no event shall this Lease or any rights or
privileges hereunder be an asset of Tenant under any bankruptcy, insolvency,
reorganization or other debtor relief proceedings.

 

23.                               DAMAGE
BY FIRE, ETC.

 

23.1                           Restoration or Termination.  If
the Premises or the Building (including the Tenant Improvements) are damaged by
fire or other casualty, Landlord shall forthwith repair the same, provided that
such repairs can be made within two hundred ten (210) days after the date of
such damage under the laws and regulations of the federal, state and local
governmental authorities having jurisdiction thereof.  In such event, this Lease shall remain in
full force and effect except that Tenant shall be entitled to a proportionate
reduction of Monthly Base Rent and Additional Charges while such repairs to be
made hereunder by Landlord are being made. 
Such reduction of Monthly Base Rent and Additional Charges, if any,
shall be based upon the greater of (i) the proportion that the area

 

25

 

of
the Premises rendered untenantable by such damage bears to the total area of
the Premises; or (ii) the extent to which such damage and the making of
such repairs by Landlord shall interfere with the business carried on by Tenant
in the Premises, and shall be limited to the extent of rental abatement
insurance proceeds actually received by Landlord under Landlord’s
casualty insurance policy, with Tenant’s business interruption insurance to be
primary in the event Landlord is unable to collect such insurance proceeds to
cover any period of repair.  Within
thirty (30) days after the date of such damage, Landlord shall notify Tenant whether or not in Landlord’s reasonable
opinion such repairs can be made within two hundred ten (210) days after the
date of such damage and Landlord’s reasonable estimate of the time needed for
such repairs.  If such repairs cannot be
made within two hundred ten (210) days from the date of such damage, Landlord may
within thirty (30) days after the date of such damage elect either to terminate
this Lease as of a date specified in such notice, which date shall not be less
than thirty (30) days nor more than sixty (60) days after such notice is given
and this Lease shall terminate on the date specified in such notice; and if
such repairs cannot be made within two hundred seventy (270) days from the date
of such damage, Tenant may within fifteen (15) days after the date of receiving
Landlord’s estimate elect either to terminate this Lease as of a date specified
in Tenant’s termination notice, which date shall not be less than thirty (30)
days nor more than sixty (60) days after such notice is given by Tenant and
this Lease shall terminate on the date specified in such notice.  In case of termination by either party, the
Monthly Base Rent and Additional Charges shall be reduced by a proportionate
amount based upon the extent to which such damage interfered with the business
carried on by Tenant in the Premises, and Tenant shall pay such reduced Monthly
Base Rent and Additional Charges up to the date of termination.  Landlord agrees to refund to Tenant any
Monthly Base Rent and Additional Charges previously paid for any period of time
subsequent to such date of termination. 
If neither party terminates then this Lease shall remain in full force
and effect, except for a proportionate reduction if Monthly Base Rent and Additional
Charges and Landlord shall commence and complete the restoration or repair of
the Premises. The repairs to be made hereunder by Landlord shall not include,
and Landlord shall not be required to repair, any damage by fire or other cause
to the property of Tenant or any repairs or replacements of any paneling,
decorations, railings, floor coverings or any alterations, additions, fixtures
or improvements installed on the Premises by or at the expense of Tenant other
than Tenant Improvements to the extent they are covered by Landlord’s insurance
policies; provided, however, that to the extent Landlord’s insurance policies,
if any, cover any Alterations pursuant to Article 12, Landlord
shall make available to Tenant any available insurance proceeds with respect to
any damage or destruction that affects such Alterations, after deducting
therefrom the cost, if any, to Landlord for the recovery of such proceeds
and/or of any repair to the Building or Premises or Project for which Landlord
is responsible hereunder, in order for Tenant to repair and restore such
Alterations, pursuant to disbursement procedures established by Landlord and/or
any Mortgagee.  Notwithstanding anything
contained herein to the contrary, if a Major Casualty (as defined below) occurs
with respect to any portion of the Building, and the net insurance proceeds
obtained as a result of such casualty are ninety percent (90%) or a lesser
percentage of the cost of restoration, rebuilding or replacement, then Landlord
shall not be obligated to undertake such restoration, rebuilding or replacement
unless Landlord elects to do so in writing, provided that Landlord’s election
not to restore shall be deemed Landlord’s election to terminate.  For the purpose of this Lease, a “Major Casualty” shall mean a casualty that renders unusable twenty-five
percent (25%) or more of the Rentable Area of the Building or which materially
adversely affects the use of such Building.

 

23.2                           Casualty at End of Term.  Notwithstanding anything to the contrary
contained in this Lease, if during the six (6) months prior to the
expiration of the Term, either of the Premises or a substantial portion thereof
are damaged or destroyed by fire or other casualty, either Tenant or Landlord
shall have the option to terminate this Lease as of the date of such damage or
destruction by written notice to the other party given within thirty (30) days
after such damage or destruction, in which event Landlord shall make a
proportionate refund to Tenant of such Rent as may have been paid in advance.  For purposes of this section, a “substantial
portion” shall mean fifty percent (50%) of the Premises.

 

23.3                           Uninsured Casualty.  Notwithstanding Section 23.1 and
subject to the termination right in Section 23.2, in the event of a
total or partial destruction of the Premises (i) by a casualty of a type
not required to be insured against by Landlord under the terms of this Lease,
or (ii) under circumstances where Landlord has been required by any
Mortgagee to utilize substantially all of the insurance proceeds to pay down
the Mortgage, which destruction exceeds five percent (5%) of the replacement
cost of the Building, this Lease shall automatically terminate, unless (x)
Landlord elects to reconstruct the Building (not including the Tenant
Improvements), and (y) the damage can be reconstructed within two hundred
seventy (270) days after the date of such damage.  If Landlord elects to reconstruct, the cost
incurred by Landlord for such reconstruction shall be amortized over the useful
life of the Building and such amortization shall be reimbursed by Tenant to
Landlord as an Additional Charge

 

26

 

together with interest at
the Default Rate;  provided, however,
that Tenant shall not be obligated to pay for any portion of the useful life of
the Building which extends beyond the Expiration Date.  If Landlord reconstructs the Building
pursuant to this Section 23.3, Tenant shall be obligated to
reconstruct the Tenant Improvements, at Tenant’s cost.

 

23.4                           Waiver. 
Tenant hereby waives any and all rights under and benefits of  Sections 1932(2) and 1933(4) of the
California Civil Code, or any similar or successor Regulations or other laws
now or hereinafter in effect.

 

24.                               EMINENT
DOMAIN.  If any part over fifteen percent (15%) of the
Premises shall be taken or appropriated under the power of eminent domain
or conveyed in lieu thereof, Tenant shall have the right to
terminate this Lease at its option. In such event, Landlord shall receive (and
Tenant shall assign to Landlord upon demand from Landlord) any income, rent,
award or any interest therein which may be paid in connection with the exercise
of such power of eminent domain, and Tenant shall have no claim against
Landlord for any part of sum paid by virtue of such proceedings,  whether or not attributable to the value of
the unexpired term of this Lease except that Tenant shall be entitled to
petition the condemning authority for the following, without reducing Landlord’s
award:  (i) the then unamortized
cost of any Alterations or Tenant Improvements paid for by Tenant from its own
funds (as opposed to any allowance, including the Tenant Allowance, provided by
Landlord); (ii) the value of Tenant’s trade fixtures taken by the
condemning authority; (iii) Tenant’s relocation costs; and (iv) Tenant’s
goodwill.  If a part of the Premises
shall be so taken or appropriated or conveyed and neither party hereto shall
elect to terminate this Lease and the Premises have been damaged as a
consequence of such partial taking or appropriation or conveyance, Landlord
shall restore the Premises continuing under this Lease at Landlord’s cost and
expense; provided, however, that Landlord shall not be required to repair or
restore any injury or damage to the property of Tenant or to make any repairs
or restoration of any Alterations or any Tenant Improvements installed on the
Premises by or at the expense of Tenant. 
Thereafter, the Monthly Base Rent and Additional Charges to be paid
under this Lease for the remainder of the Term shall be proportionately
reduced, such that thereafter the amounts to be paid by Tenant shall be in the
ratio that they are of the portion of the Premises not so taken bears to the
total area of the Premises prior to such taking.  Notwithstanding anything to the contrary
contained in this Article 24, if the temporary use or occupancy of
any part of the Premises shall be taken or appropriated under power of eminent
domain during the Term, this Lease shall be and remain unaffected by such
taking or appropriation and Tenant shall continue to pay in full all Monthly
Base Rent and Additional Charges payable hereunder by Tenant during the
Term.  In the event of any such temporary
appropriation or taking, Tenant shall be entitled to receive that portion of
any award which represents compensation for the use of or occupancy of the
Premises during the Term, and Landlord shall be entitled to receive that
portion of any award which represents the cost of restoration of the Premises
and the use and occupancy of the Premises after the end of the Term.  If such temporary taking is for a period
longer than two hundred and seventy (270) days and unreasonably interferes with
Tenant’s use of the Premises or the Common Area, then Tenant shall have the
right to terminate the Lease.  In the event
there shall be a taking of the parking area such that Landlord can no longer
provide sufficient parking to comply with this Lease, Landlord may substitute
reasonably equivalent parking in a location reasonably close to the Building.  Landlord and Tenant understand and agree that
the provisions of this Article 24 are intended to govern fully the
rights and obligations of the parties in the event of a Taking of all or any
portion of the Premises.  Tenant hereby
waives any and all rights under and benefits of Section 1265.130 of the
California Code of Civil Procedure, or any similar or successor Regulations or
other laws now or hereinafter in effect.

 

25.                               LIABILITY
OF LANDLORD.  To the extent not
prohibited by Law or caused by the Landlord’s breach of this Lease, the gross
negligence or willful misconduct of Landlord or Landlord’s Indemnitees (as
defined below), and except as provided below, Tenant hereby expressly releases
Landlord, its property manager and their respective officers, agents,
directors, representatives, shareholders, members, subsidiaries, affiliates,
related entities, partners, employees and lenders (collectively, “Landlord’s  Indemnitees”) from, and waives all claims for, damage or
injury to person, theft, loss of use of or damage to property and loss of
business sustained by Tenant and resulting from the Building or the Premises or
any part thereof or any equipment therein or appurtenances thereto becoming in
disrepair, or resulting from any damage, accident or event in or about the Building
or any negligent act or omission of any of Landlord’s Indemnitees or any other
tenant of the Building.  Without limiting
the generality of the foregoing, this section shall apply particularly,
but not exclusively, to flooding, damage caused by Building equipment and
apparatus, water, snow, frost, steam, excessive heat or cold, broken glass,
sewage, gas, odors, excessive noise or vibration, death, loss, conversion,
theft, robbery, assault, battery, murder, or the bursting or

 

27

 

leaking of pipes, plumbing
fixtures or sprinkler devices.  Without
limiting the generality of the foregoing, Tenant waives all claims and rights
of recovery against Landlord, and Landlord’s Indemnitees for any loss or damage
to any property of Tenant, which loss or damage is insured against, or required
to be insured against, by Tenant pursuant to Article 12 of this
Lease, whether or not such loss or damage is due to the fault or negligence of
Landlord, or Landlord’s Indemnitees, and regardless of the amount of insurance
proceeds collected or collectible under any insurance policies in effect, and
Tenant further agrees that all such property of Tenant shall be at the risk of
Tenant only and Landlord and Landlord’s Indemnitees shall not be liable for any
loss or damage thereto or theft or conversion thereof and Tenant completely
releases and exculpates Landlord and Landlord’s Indemnitees therefrom.  If Landlord sells or otherwise conveys its
interest in the Premises, Landlord shall be relieved of its obligations under
the Lease from and after the date of sale or conveyance, only when the
successor assumes in writing the obligations to be performed by Landlord on and
after the effective date of the transfer, whereupon Tenant shall attorn to such
successor.  Redress for any claim against
Landlord under this Lease shall be limited solely to and enforceable only
against the lesser of (i) Five Million Dollars ($5,000,000) or (ii) 
Landlord’s equity interest, if any, in the Building.  

 

26.                               RIGHT
OF LANDLORD TO PERFORM.  All
covenants and agreements to be performed by Tenant under any of the terms of
this Lease shall be performed by Tenant at Tenant’s sole cost and expense and
without any abatement of Monthly Base Rent or Additional Charges, except as
expressly set forth to the contrary in this Lease.  If Tenant shall  default in the payment of any sum of money,
other than Monthly Base Rent or Additional Charges, required to be paid by it
hereunder or shall fail to perform any other act on its part to be performed
hereunder (including, without limitation, Tenant’s obligation to maintain and
repair the Premises and Building Systems pursuant to Section 9.2),
and either (i) such failure continues, and Tenant does not commence cure
of such failure, for ten (10) days after notice thereof by Landlord as
provided in Section 20.1.2 (except in the event of emergency, when
no cure period shall be required but Landlord shall make reasonable good faith
efforts to notify Tenant prior to commencing such emergency cure), or (ii) having
commenced such cure Tenant does not diligently prosecute the curing thereof, or
(iii) if Landlord is, in Landlord’s reasonable business judgment, in a
better position to accomplish such cure or can accomplish such cure in a more
efficient or cost-effective manner than Tenant, or (iv) if a default under
any Mortgage is, in Landlord’s reasonable judgment, likely to occur due to
Tenant’s  failure to cure such failure in
a timely manner, then in any such situation Landlord may, but shall not be
obligated so to do, and without waiving or releasing Tenant from any
obligations of Tenant, make any such payment or perform any such act on Tenant’s
part to be made or performed as provided in this Lease.  All sums so paid and costs so incurred by Landlord,
together with interest thereon at the Default Rate from the date Landlord makes
such payment or incurs such cost, shall be payable as Additional Charges to
Landlord within thirty (30) days after receipt by Tenant of a bill or statement
therefor.

 

27.                               SURRENDER
OF PREMISES.

 

27.1                           End of Term Obligations.  At
the end of the Term or any renewal thereof or other sooner termination of this
Lease, Tenant will peaceably deliver to Landlord possession of the Premises,
together with all improvements or additions upon or belonging to Landlord , by
whomsoever made, in substantially the same condition as received, or first
installed, subject to the terms of Articles 8, 24, and 41,
subject to normal wear and tear and the rights and obligations of Tenant
concerning casualty damage pursuant to Article 23.   Tenant may, upon the termination of this
Lease, remove all movable furniture and equipment belonging to Tenant, at
Tenant’s sole cost, provided that Tenant repairs any damage caused by such
removal.  Property not so removed by the
Expiration Date (or in the event of an earlier termination, within five (5) days
of such earlier termination date) shall be deemed abandoned by Tenant, and
title to the same shall thereupon pass to Landlord.  Upon such expiration or sooner termination of
the Term, Tenant shall upon demand by Landlord at Tenant’s sole cost and
expense, forthwith and with all due diligence remove any Tenant Improvements or
Alterations made by or for the account of Tenant, designated by Landlord to be
removed provided that prior to installation of such Alterations, Landlord
advised Tenant in writing at that time whether or not such Alterations must be
removed upon the expiration or sooner termination of this Lease), and restore
the Premises to its original condition as of the Delivery Date, subject to the
foregoing.  If any property of Tenant,
Tenant Improvements and/or Alterations required to be removed as a condition to
Tenant’s effective surrender of the Premises under this Section 27.1
are not removed by Tenant prior to the expiration of the Lease Term (or within
forty-eight (48) hours after a termination of this Lease for any other reason),
Landlord shall be permitted to take the following actions:  (a) remove any or all of items of
property deemed abandoned and dispose of the same in any manner or store the
same in a public warehouse or elsewhere for the account and at the expense and
risk of Tenant, and if Tenant shall fail to pay the cost of storing any such

 

28

 

property
after it has been stored for a period of ninety (90) days or more, Landlord may
sell any or all of such property at public or private sale, in such manner and
at such times and places as Landlord, in its sole discretion, may deem proper, without
notice or to demand upon Tenant, for the payment of all or any part of such
charges or the removal of any such property, and shall apply the proceeds of
such sale:  first, to the cost and
expense of such sale, including reasonable attorneys’ fees for services
rendered; second, to the payment of the cost of or charges for storing any such
property; third, to the payment of any other sums of money which may then or
thereafter be due to Landlord from Tenant under any of the terms hereof; and
fourth, the balance, if any, to Tenant; and (b) remove any or all of those
Tenant Improvements and Alterations required to be removed by tenant in
accordance with this Section 27.1 and dispose of the same in any
manner at the expense and risk of Tenant.

 

27.2                           No Merger. 
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, terminate all or any existing subleases or subtenancies, or may, at
the option of Landlord, operate as an assignment to it of any or all such
subleases or subtenancies.

 

28.                               WAIVER.  If either Landlord or Tenant waives the
performance of any term, covenant or condition contained in this Lease, such
waiver shall not be deemed to be a waiver of any subsequent breach of the same
or any other term, covenant or condition contained herein.  Furthermore, the acceptance of Rent or
Additional Charges by Landlord shall not constitute a waiver of any preceding
breach by Tenant of any term, covenant or condition of this Lease, regardless
of Landlord’s knowledge of such preceding breach at the time Landlord accepted
such Monthly Base Rent or Additional Charges. 
Failure by Landlord to enforce any of the terms, covenants or conditions
of this Lease for any length of time shall not be deemed to waive or to
decrease the right of Landlord to insist thereafter upon strict performance by
Tenant.  Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord.

 

29.                               NOTICES.  Tenant shall immediately furnish Landlord
with a copy of any written notice received, or a written summary of an oral
notice received, from any governmental or quasi-governmental authority,
insurance company, inspection bureau or any other third party as it relates to
the Building and/or Premises.  Except as
otherwise expressly provided in this Lease, any bills, statements, notices,
demands, requests or other communications given or required to be given under
this Lease shall be effective only if rendered or given in writing, sent by
certified mail, return receipt requested, reputable overnight carrier, or
delivered personally, (i) to Tenant (A) at
Tenant’s address set forth in the Basic Lease Information, if sent prior to
Tenant’s taking possession of the Premises, or (B) at the Premises if sent
subsequent to Tenant’s taking possession of the Premises, or (C) at any
place where Tenant may be found if sent subsequent to Tenant’s vacating,
deserting, abandoning or surrendering the Premises; or (ii) to Landlord at
Landlord’s address set forth in the Basic Lease Information;
or (iii) to such other address as either Landlord or Tenant may designate
as its new address for such purpose by notice given to the other in accordance
with the provisions of this Article 29.  Any such bill, statement, notice, demand,
request or other communication shall be deemed to have been rendered or given
on the date the return receipt indicates delivery of or refusal of delivery if
sent by certified mail, the day upon which recipient accepts and signs for
delivery from a reputable overnight carrier, or on the date a reputable
overnight carrier indicates refusal of delivery,  or upon the date personal delivery is made.  If Tenant is notified in writing of the identity
and address of any Mortgagee or ground or underlying lessor, Tenant shall give
to such Mortgagee or ground or underlying lessor notice of any Default by
Landlord under the terms of this Lease in writing sent by registered or
certified mail, and such Mortgagee or ground or underlying lessor shall be
given  the opportunity to cure such
Default (as defined in Article 20) prior to Tenant exercising any
remedy available to it.  

 

30.                               TAXES
PAYABLE BY TENANT.   Prior to
delinquency Tenant shall pay all taxes levied or assessed upon Tenant’s
equipment, furniture, fixtures and other personal property located in or about
the Premises.  If the assessed value of
Landlord’s property is increased by the inclusion therein of a value placed
upon Tenant’s equipment, furniture, fixtures or other personal property, Tenant
shall pay to Landlord, upon written demand, the taxes so levied against
Landlord, or the proportion thereof resulting from said increase in assessment.

 

31.                               ABANDONMENT.  Tenant shall not abandon the Premises and
cease performing its financial and maintenance obligations under this Lease at
any time during the Term, and if Tenant shall abandon and cease performing its
financial and maintenance obligations under this Lease, or surrender the
Premises or be dispossessed by process of law or pursuant to the terms of this
Lease, any personal property belonging to Tenant and left on the

 

29

 

Premises shall, at the option
of Landlord, be deemed to be abandoned and title thereto shall thereupon pass
to Landlord.  Notwithstanding anything to
the contrary contained herein, Tenant shall not be allowed to vacate the
Premises for any period of time unless either (a) such vacation would not
result in a termination of, limitation on, or other adverse effect on, Landlord’s
insurance policies, or (b) Tenant pays the incremental premium costs, and
assumes responsibility for any increased deductible amounts, to the extent
required to cause Landlord’s insurance policies to not be terminated, limited
or adversely affected as a result of such vacation.  For purposes of this Article 31,
the Tenant shall not be deemed to have abandoned the Premises solely because
the Tenant is not occupying the Premises.

 

32.                               SUCCESSORS
AND ASSIGNS.  Subject to the
provisions of Article 11, the terms, covenants and conditions
contained herein shall be binding upon and inure to the benefit of the parties
hereto and their respective legal and personal representatives, successors and
assigns.

 

33.                               ATTORNEY’S
FEES.  If Tenant or Landlord
brings any action for any relief against the other, declaratory or otherwise,
arising out of this Lease, including any suit by Landlord for the recovery of
Rent or possession of the Premises, the losing party shall pay to the
prevailing party a reasonable sum for attorney’s fees and costs, which shall be
deemed to have accrued on the commencement of such action and shall be paid
whether or not the action is prosecuted to judgment.

 

34.                               LIGHT
AND AIR.  Tenant covenants and agrees
that no diminution of light, air or view by any structure which may hereafter
be lawfully erected (whether or not by Landlord) shall entitle Tenant to any
reduction of rent under this Lease, result in any liability of Landlord to
Tenant, or in any other way affect this Lease or Tenant’s obligations
hereunder.  Landlord has informed Tenant
that it has no intention of constructing additional facilities at the Project
except those facilities needed to service the Project.

 

35.                               CORPORATE
AUTHORITY; FINANCIAL INFORMATION.  If Tenant signs as a corporation each of the
persons executing this Lease on behalf of Tenant does hereby covenant and
warrant that Tenant is a duly authorized and existing corporation, that Tenant
has and is qualified to do business in California, that the corporation has
full right and authority to enter into this Lease, and that each and both of
the persons signing on behalf of the corporation were authorized to do so. If
Tenant signs as a partnership or limited liability company, each of the persons
executing this Lease on behalf of Tenant does hereby covenant and warrant that
Tenant is a duly authorized and existing partnership or limited liability
company, as applicable, that Tenant has and is qualified to do business in
California, that Tenant has full right and authority to enter into this Lease,
and that each and both of the persons signing on behalf of the Tenant were
authorized to do so and by their signatures bind the Tenant.  Upon Landlord’s request, Tenant shall provide
Landlord with evidence reasonably satisfactory to Landlord confirming the
foregoing covenants and warranties.  Upon Landlord’s request, Tenant shall provide
Landlord with evidence reasonably satisfactory to Landlord confirming the
foregoing covenants and warranties. 
Tenant, for the reliance of Landlord, any lender holding or anticipated
to acquire a lien upon the Premises or any prospective purchaser of the
Building, prior to the execution of this Lease and thereafter within thirty
(30) days after Landlord’s request therefor, shall deliver to Landlord the then
current audited financial statements of Tenant (including interim periods
following the end of the last fiscal year for which annual statements are
available) which statements shall be prepared or compiled by a certified public
accountant and shall present fairly the financial condition of Tenant at such
dates and the result of its operations and changes in its financial positions
for the periods ended on such dates.  If
an audited financial statement has not been prepared, Tenant shall provide
Landlord with an unaudited financial statement and/or such other information,
the type and form of which are acceptable to Landlord in Landlord’s reasonable
discretion, which reflects the financial condition of Tenant.  If Tenant’s stock is not publicly-traded on a
national domestic exchange of the United States, or if so traded and Tenant’s audited
financial statements are not made publicly available at the SEC Edgar website,
then no more than once in any twelve-month period, within fifteen (15) days
following Landlord’s request, Tenant shall deliver to Landlord Tenant’s audited
financial statements, certified by a certified public accountant acceptable to
Landlord, including a balance sheet and profit and loss statement for the most
recent prior year, all prepared in accordance with generally accepted
accounting principles consistently applied. 
 Tenant hereby further covenants
and warrants to Landlord that all financial information and other descriptive
information regarding Tenant’s business, which has been or shall be furnished
to Landlord, is and shall be accurate and complete at the time of delivery to
Landlord.  

 

30

 

36.                               PARKING.  Tenant shall have the right to use, at no
additional rent during the initial Lease Term (and during any renewal term at
the parking rental rate from time to time established by Landlord for the
Project, if any), a license to use the number of undesignated and nonexclusive
parking passes set forth in the Basic Lease Information for the non-exclusive
use of unreserved spaces as specified therein, on those portions of the Common
Area designated by Landlord for parking. 
In the event Tenant elects to designate any reserved parking spaces as
set forth in the Basic Lease Information, then Tenant’s use of such reserved
parking spaces designated for Tenant’s exclusive use shall be subject to Tenant’s
payment of parking rent, payable to Landlord as an Additional Charge, at the
parking rental rate for reserved parking spaces charged from time to time by
Landlord to other tenants of the Project. 
Landlord shall exercise reasonable efforts to insure that the spaces
associated with such passes are available to Tenant for its use, but Landlord
shall not be required to enforce Tenant’s right to use the same.  Landlord agrees that so long as not required
by an applicable governmental entity, there shall be no additional Monthly Base
Rent charged for parking (not to be confused with the Expenses charged pursuant
to Section 4.1).  Except as
caused by the gross negligence or willful misconduct of Landlord, Landlord
shall not be liable for any loss, injury or damage to persons using the Project
parking areas or automobiles or other property therein, it being agreed that,
to the fullest extent permitted by law, the use of such parking areas shall be
at the sole risk of Tenant, its employees and invitees.  Landlord shall have the right to establish,
and from time to time amend, and to enforce against all users all reasonable rules and
regulations (including the designation of areas for employee parking) that
Landlord may deem necessary and advisable for the proper and efficient
operation and maintenance of parking within the Common Areas.  In enforcing such rules and regulations,
Landlord shall have the right, without notice, in addition to such other rights
and remedies that Landlord may have, to remove or tow away the vehicle involved
and charge the costs to Tenant, only after providing advance notice to Tenant
and an opportunity to cause the vehicle to be moved.  Tenant shall not assign or sublease any of
the Tenant’s parking spaces without the consent of Landlord, which may be
withheld in Landlord’s sole discretion, except in connection with an assignment
of this Lease or sublease of the Premises that is approved by Landlord in
accordance with this Lease.  Tenant shall
be liable for any damage to the parking areas caused by Tenant or Tenant’s
employees, suppliers, shippers, customers or invitees, including without limitation
damage from excess oil leakage.  

 

37.                               MISCELLANEOUS.

 

37.1                           Definitions.  The term “Premises”
wherever it appears herein includes and shall be deemed or taken to include
(except where such meaning would be clearly repugnant to the context) the
office space demised and improvements now or at any time hereafter comprising
or built in the space hereby demised. 
The section headings herein are for convenience of reference and
shall in no way define, increase, limit or describe the scope or intent of any
provision of this Lease.  The term “Landlord” shall include Landlord and its
successors and assigns.  If Tenant is
comprised of more than one party, each such party shall be jointly and
severally liable for Tenant’s obligations under this Lease.  The term “Tenant”
or any pronoun used in place thereof shall indicate and include the masculine
or feminine, the singular or plural number, individuals, firms or corporations,
and their and each of their respective successors, executors, administrators,
and permitted assigns, according to the context hereof.  This Lease shall be given a fair and
reasonable interpretation of the words contained in it without any weight being
given to whether a provision was drafted by one party or its counsel.

 

37.2                           Time of the Essence.  Time
is of the essence of this Lease and all of its provisions.  

 

37.3                           Governing Law.  This
Lease shall in all respects be governed and interpreted in accordance with the
laws of the State of California.  Tenant
irrevocably consents to the service of process of any action or proceeding at
the address of the Premises, as long as a copy is sent to the address for
notice set forth herein contemporaneously with such service.  Nothing in this paragraph shall affect the
right to serve process in any other manner permitted by law.

 

37.4                           Entire Agreement.  This
Lease, together with its exhibits, contains all the agreements of the parties
hereto and supersedes any previous negotiations, oral agreements,
understandings and/or practices, except those contained in this Lease.  Tenant waives its rights to rely on any
representations or promises made by Landlord or others which are not contained
in this Lease.  No verbal agreement or
implied covenant shall be held to modify the provisions of this Lease, any
statute, law, or custom to the contrary notwithstanding.  There have been no representations made by
the Landlord or Tenant or understandings made between the parties other than
those set

 

31

 

forth in this Lease and its
exhibits.  This Lease may not be modified
except by a written instrument by the parties hereto.

 

37.5                           Partial Invalidity.  Any
provision of this Lease which is contrary to a law, which the parties cannot
legally waive or contract against (such, for example, as labor laws and
anti-trust laws) is and shall be void and not binding on either party hereto;
provided, however, that the invalidity or unenforceability of any provision of
this Lease shall not affect or impair any other provision of this Lease.

 

37.6                           Quiet Enjoyment.  Upon
Tenant paying the Monthly Base Rent and Additional Charges and performing all
of Tenant’s obligations under this Lease, Tenant shall have quiet and peaceful
enjoyment of the Premises during the Term as against all persons or entities
lawfully claiming by, through or under Landlord; subject, however, to the
provisions of this Lease.

 

37.7                           Survival of Covenants.  All
covenants of Landlord or Tenant which reasonably would be intended to survive
the expiration or sooner termination of this Lease, including without
limitation any warranty or indemnity hereunder, shall so survive and continue
to be binding upon and inure to the benefit of the respective parties and their
successors and assigns.

 

37.8                           No Recordation.  Tenant
shall not record this Lease without the prior written consent of Landlord.  Tenant, upon the request of Landlord, shall
execute and acknowledge a “short form” memorandum of this Lease for recording
purposes.

 

37.9                           Intentionally Deleted.

 

37.10                     Force Majeure.  In the
event that Landlord shall be delayed, hindered in or prevented from the
performance of any act or obligation required under this Lease by reason of
acts of God, strikes, lockouts, labor troubles or disputes, inability to
procure or shortage of materials or labor, failure of power or utilities, delay
in transportation, fire, vandalism, accident, flood, severe weather, other
casualty, changes in zoning and other governmental requirements, riot,
insurrection, civil commotion, sabotage, explosion, war, natural or local
emergency, acts or omissions of others, including Tenant, or other reasons of a
similar or dissimilar nature not solely the fault of, or under the exclusive
control of, Landlord, then performance of such act or obligation shall be
excused for the period of the delay and the period for the performance of any
such act or obligation shall be extended for the period equivalent to the
period of such delay.

 

37.11                     Partial Payment.  No
payment by Tenant or receipt by Landlord of an amount less than the Base Rent
or Additional Rent or any other sum due and payable under this Lease shall be
deemed to be other than a payment on account of the Base Rent, Additional Rent
or other such sum, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and satisfaction,
nor preclude Landlord’s right to recover the balance of any amount payable or
Landlord’s right to pursue any other remedy provided in this Lease or at law.

 

37.12                     WAIVER OF JURY TRIAL. 
LANDLORD AND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD
THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY
JURY, AND EACH PARTY DOES HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL
SUCH RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT
BY EITHER PARTY HERETO AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY
MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE,
TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM OF INJURY OR
DAMAGE.

 

	
   

  	
  /s/RCS

  	
   

  	
  /s/ PSR

  	
   

  
	
   

  	
  Landlord’s Initials

  	
  Tenant’s Initials

  

 

32

 

38.                               REAL
ESTATE BROKERS.  Each party
represents that it has not had dealings with any real estate broker, finder or
other person with respect to this Lease in any manner, except for any broker
named in the Basic Lease Information, whose fees or commission, if earned,
shall be paid as provided in the Basic Lease Information.  Each party shall hold harmless the other
party from all damages resulting from any claims that may be asserted against
the other party by any other broker, finder or other person with whom the other
party has or purportedly has dealt.  The
foregoing agreement shall survive the termination of this Lease.  If Tenant fails to take possession of the
Premises or if this Lease otherwise terminates prior to the Expiration Date as
the result of failure of performance by Tenant, Landlord shall be entitled to
recover from Tenant, in addition to Landlord’s other remedies at law or in
equity, the unamortized portion of any brokerage commission funded by Landlord
in addition to any other damages to which Landlord may be entitled.

 

39.                               LEASE
EFFECTIVE DATE.  Submission of
this instrument for examination or signature by Tenant does not constitute a
reservation of or option for lease, and it is not effective as a lease or
otherwise until execution and delivery by both Landlord and Tenant.  Execution and delivery of this Lease by
Tenant to Landlord shall constitute an irrevocable offer by Tenant to lease the
Premises on the terms and conditions set forth herein, which offer may not be
revoked for thirty (30) days after such delivery. 

 

40.                               SIGNAGE.  Tenant shall not erect or maintain any
temporary or permanent sign on or about the Premises, the Building, or the
Project, or visible from the Common Areas or exterior, without obtaining prior
written approval from Landlord, which may be granted or withheld in Landlord’s
reasonable discretion.  Any request for
approval of a sign shall be made in such detail as Landlord shall reasonably
request.  Subject to the terms of this Article and
provided that Tenant continues to lease and occupy the entire Premises, Tenant
shall be entitled to, at Tenant’s sole cost and expense, (i) place
identification of Tenant’s business name at one (1) location on the
existing parking lot monument sign for the Building, with Tenant to have one (1) slot
at such location as determined by Landlord, (ii) display Tenant’s business
name on one (1) “eyebrow” sign above the Premises affixed to the exterior
of the south elevation of the west side of the Building facing Faraday Avenue
with a total square footage not to exceed Tenant’s Share of the total square
footage of “eyebrow” signage permitted by the applicable laws, ordinances,
rules, regulations, permits, covenants, conditions, restrictions, and easements
pertaining to signs, including, but not limited to, the City of Carlsbad
approved plan, which right shall be subject to the existing rights of tenants
in the Project and (iii) identify Tenant’s business name at the interior
suite entrance to the Premises and on the directory board for the
Building.  The monument signage and
Building signage described in clauses (i) and (ii) above are to be
provided in a location designated by Landlord at its sole discretion, subject,
however, to reasonable visibility from Faraday Avenue.  All Tenant signage shall be designed,
fabricated, constructed, installed, maintained, and removed at Tenant’s sole
cost and expense, and the lettering, design, color and size of Tenant’s
business name for the monument sign shall be consistent with the design of such
monument sign.  Tenant’s rights under
this Article 40 shall be transferable to an assignee or subtenant
pursuant to an Assignment of this Lease or a Sublease of the entire Premises
which is approved or permitted under Article 11.  All signs, whether erected by Landlord or
Tenant, shall conform to Landlord’s building standard signage and comply with
all laws, ordinances, rules, regulations, permits, covenants, conditions,
restrictions, and easements pertaining to signs, including, but not limited to,
the City of Carlsbad approved plan.  In
the event of a violation of the foregoing by Tenant, Landlord may remove same
without any liability, and may charge the expense incurred in such removal to
Tenant.  Tenant shall remove all approved
signs which it has erected upon the termination of the Lease and repair all
damage caused by such removal.

 

41.                               HAZARDOUS
SUBSTANCE LIABILITY.

 

41.1                           Definition.  For the purpose of this Lease, “Hazardous
Substances” shall be defined, collectively, as oil, flammable
explosives, asbestos, radioactive materials, hazardous wastes, toxic or
contaminated substances or similar materials, including, without limitation,
any substances which are “hazardous substances,” “hazardous wastes,” “hazardous
materials” or “toxic substances” under applicable environmental laws, ordinance
or regulation.  Except for incidental
amounts of toxic materials typically used in connection with normal office use,
Tenant shall not be entitled to use nor store any Hazardous Substances on, in,
or about the Premises, the Building, the Common Areas and the Project, or any
portion of the foregoing, without, in each instance, obtaining Landlord’s prior
written consent thereto; provided, however, that Landlord acknowledges that
Tenant may request the right to use and store small amounts of solvents and
soldering materials associated with Tenant’s electronics lab in the Premises,
which may contain Hazardous Substances; provided, however, that prior to
introducing any such materials

 

33

 

into
the Premises, such materials shall be subject to Landlord’s prior written
approval as disclosed to Landlord on a hazardous material list stating the
identity, amount and storage location of such materials (the “Hazardous Materials List”), and such materials shall only be
used and disposed of in accordance with applicable Laws.  If Landlord so consents to any such usage or
storage, then Tenant shall be permitted to use and/or store only those
Hazardous Substances that are necessary for Tenant’s business and expressly
approved by Landlord in writing, and only to the extent of the quantities of
Hazardous Substances expressly approved by Landlord in writing, and provided
further that such usage and storage is in full compliance with any and all
applicable Laws, 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.  Tenant agrees that any
changes to the type and/or quantities of Hazardous Substances expressly
approved by Landlord in writing may be implemented only with the prior written
consent of Landlord, which consent may be given or withheld in Landlord’s sole
discretion.  Tenant shall not be entitled
nor permitted to install any tanks under, on or about the Premises for the
storage of Hazardous Substances without the express written consent of
Landlord, which may be given or withheld in Landlord’s sole discretion.  Landlord shall have the right at all times
during the Term of this Lease, upon reasonable advance notice to Tenant, to (i) inspect
the Premises, (ii) conduct tests and investigations to determine whether
Tenant is in compliance with the provisions of this Article 41, and
(iii) request lists of all Hazardous Substances used, stored or otherwise
located on, under or about the Premises, the Common Areas and/or the
Project.  The cost of all such
inspections, tests and investigations shall be borne solely by Landlord, unless
Tenant is directly or indirectly responsible in any manner for any
contamination revealed by such inspections, tests and investigations.  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 with respect to Hazardous Substances, including
without limitation, Tenant’s operations, use and any remediation efforts
related thereto, or (b) liability on the part of Landlord and its
representatives for Tenant’s use, storage, disposal or remediation of Hazardous
Substances used by Tenant, it being understood that Tenant shall be solely
responsible for all liability in connection therewith.  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 Substances arising from or related to the intentional or negligent
acts or omissions of Tenant such that the affected portions of the Project and
any adjacent property are returned to the condition required by applicable
law.  Any such investigation, clean up,
removal, restoration and other remediation shall only be performed after Tenant
has obtained Landlord’s prior written consent. 
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 reasonable costs and expenses
to Landlord of performing investigation, clean up, removal, restoration,
closure and remediation work.  

 

41.2                           Release.  Tenant
releases Landlord from any liability for, waives all claims against Landlord
and shall indemnify, defend and hold harmless Landlord, its employees,
partners, agents, subsidiaries and affiliate organizations against any and all
claims, suits, loss, costs (including costs of investigation, clean up,
monitoring, restoration and reasonably attorney fees), damage or liability,
whether foreseeable or unforeseeable, by reason of property damage (including
diminution in the value of the property of Landlord, 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 Buildings and/or Project),
suits, administrative proceedings and costs (including, but not limited to,
reasonable attorneys’ and consultant fees and court costs), personal injury or
death 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
Substances on, in or about the Premises, or in any Common Areas or any other
portion of the Project as a result (directly or indirectly) of the intentional
or negligent acts or omissions of Tenant or its employees, partners, agents,
subsidiaries and affiliate organizations, licensees, vendors, contractors and
invitees (collectively, “Tenant’s
Representatives”).  Neither
the written consent of Landlord to the presence, use or storage of Hazardous
Substances in, on, under or about any portion of the Premises, the Building,
the Common Areas and the Project, nor the strict compliance by Tenant with 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 41.2
as a result of Landlord’s status as either an “owner” or “operator” under any
applicable Laws.  The provisions of this Section 41.2
regarding Tenant’s indemnity relating to Hazardous Substances shall survive the
termination of the Lease. 

 

34

 

41.3                           Landlord’s Representation and Warranty. 
Landlord hereby represents and warrants to Tenant that to the
best of Landlord’s knowledge, based solely on those environmental reports for
the Project in Seller’s possession or within Seller’s control as of the
Effective Date, there are no Hazardous Materials currently in, on or under the
Project that are required to be remediated by any applicable law or that pose a
hazard to human health or safety.

 

41.4                           Tenant Certificate. 
In addition to the Hazardous Materials List, Tenant shall deliver to
Landlord, within thirty (30) days after Tenant’s receipt of Landlord’s written
request, a certificate stating (i) that the Hazardous Substances set forth
on the Hazardous Materials List are the only Hazardous Substances (other than
those contained in typical office supplies) that Tenant has permitted to be
located in the Premises within the last twelve (12) month period; (ii) the
use or purpose of each such Hazardous Substance; (ii) the approximate
quantity of each such Hazardous Substance; (iii) such other information as
Landlord may reasonably require; and (iv) Tenant’s written certification
that neither Tenant nor any of its agents or employees has released, discharged
or disposed of any Hazardous Substances in or about the Project, or transported
any Hazardous Substances to or from the Project, in violation of any applicable
Hazardous Materials Laws.

 

42.                               TELECOMMUNICATIONS.

 

42.1                           Certain Definitions.  The following definitions are applicable
to this Article 42:

 

(a)                                  “Telecom Equipment” means telephone, internet and any other
communications equipment and any technological evolution or replacement
thereof.  

 

(b)                                 “Connections” means any wires, cables, fiber optic lines,
antennas, switches and other equipment or infrastructure located in the
Building, but outside the Premises, that are installed by or on behalf of
Tenant for, or related to, the operation of other Telecom Equipment.  All Connections are also Telecom Equipment.

 

(c)                                  “Telecom Provider” means a provider of Telecom Equipment or
services using Telecom Equipment.

 

(d)                                 “Telecom Services” means services provided by a Telecom
Provider using Telecom Equipment.

 

42.2                           New Provider Installations.

 

42.2.1                  Consent Required.  Tenant may not utilize the services of a Telecom Provider whose
equipment is not then servicing the Building, nor may Tenant require or request
that a Telecom Provider materially expand the Telecom Services or Connections
it currently provides or has provided in or to the Building, without first
securing the prior written approval of Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed by Landlord as long as the
Telecom Provider executes and delivers to Landlord, Landlord’s standard Landlord’s
Telecommunications License Agreement as required pursuant to Section 42.2.2.  

 

42.2.2                  Landlord’s License Agreement.  Tenant’s
Telecom Provider must execute and deliver Landlord’s form license agreement
regarding the installation and/or operation of the Telecom Provider’s Telecom
Equipment in the Building in the form
attached hereto as Exhibit G, and outside the Premises prior
to such Telecom Provider commencing any installation or other work in the
Building.  Landlord will bear no
responsibility for (and the Commencement Date will not be affected by) delays
in installing Telecom Equipment resulting from failure of Tenant’s Telecom
Provider to execute and deliver such agreement to Landlord prior to the
commencement of any installation or other work in the Building; and

 

42.2.3                  Guidelines.  Both
Tenant and its Telecom Provider(s) will comply with the Telecommunications
Guidelines attached hereto as Exhibit F, together with any other of
Landlord’s requirements regarding use of the existing Building conduits and
pipes or use of contractors.  Wireless
access points for internal

 

35

 

use within the Premises
as long as such equipment does not interfere with the telecommunications
equipment of any other tenant of the Building.

 

42.3                           Consent to Equipment
Required.  Tenant will not utilize any Telecom Equipment
(other than usual and customary cellular telephones and wire-based telephone
and internet technology or similar telephones), including antennae and
satellite dishes, within the Premises and/or within or on the Building without
Landlord’s prior written consent.  Such
consent may be granted, conditioned or withheld in Landlord’s sole discretion,
and may be conditioned in such a manner so as to protect Landlord’s financial
interests and the interests of the Building. 
In addition, Landlord may require that Tenant execute a written
agreement concerning any such Telecom Equipment, in form and substance
acceptable to Landlord, in its sole discretion.

 

42.4                           No Reservation of Space Without Consent.  Until Tenant’s Telecom Provider or
Tenant, as the case may be, executes the Telecommunications License Agreement
in the for attached hereto as Exhibit G, Landlord shall have no
obligation to reserve space for Tenant for Telecom Equipment anywhere in the
common areas or common conduits, risers or overhead areas of the Building.

 

42.5                           Plans and Specifications.  Upon
Tenant’s vacating or surrender of the Premises, either Tenant or Tenant’s
Telecom Provider will provide Landlord with as-built plans and specifications
of any Telecom Equipment of Tenant or Tenant’s Telecom Provider that remains in
the Building.

 

42.6                           Responsibility for Installation, Maintenance and Removal, etc.  Tenant acknowledges and agrees
that all Telecom Equipment will be obtained, installed, maintained, repaired,
replaced and removed at the sole expense of Tenant.  Unless Landlord otherwise requests or
consents in writing, all of Tenant’s Telecom Equipment (other than any
Connections) will be and remain solely in Tenant’s Premises, in accordance with
the Telecommunications Guidelines attached hereto on Exhibit F,
together with any other rules and regulations adopted by Landlord from
time to time.  Landlord will have no
responsibility for the operation, maintenance, repair, replacement or removal
of Tenant’s Telecom Equipment, including, without limitation, Tenant’s
Connections.  Tenant agrees that, to the
extent any Telecom Services are interrupted, curtailed or discontinued,
Landlord will have no obligation or liability with respect thereto, and it will
be the sole obligation of Tenant at its expense to obtain substitute Telecom
Services.  No approval by Landlord under
this Article 42 will be deemed any kind of warranty or representation by
Landlord, including, without limitation, any warranty or representation as to
the suitability, competence or financial strength of any Telecom Provider or
the quality or fitness for any particular purpose of any Telecom Equipment or
Telecom Services.  Landlord does not
make, and expressly disclaims, any representation, warranty or endorsement
regarding or relating to any Telecom Provider, Telecom Services or Telecom
Equipment.

 

42.7                           Interruption.  Landlord
will have the right to interrupt Tenant’s Telecom Services or disable Tenant’s
Telecom Equipment in the event of emergency or as necessary in connection with
repairs to the Building or installation of Telecom Equipment for other tenants
or occupants of the Building.  Landlord
will provide Tenant with reasonable prior notice of any such interruption or
disabling, except in the event of an emergency, in which case Landlord will
provide Tenant as much advance notice as reasonably possible.  Landlord will exercise commercially
reasonable efforts to perform any scheduled interruptions during non-business
hours.

 

42.8                           Indemnity.  In the
event that Telecom Equipment, including, without limitation, wiring, cabling or
satellite and antenna equipment of any type installed by or at the request of
Tenant within the Premises, on the roof or elsewhere within or on the Building
causes interference to equipment (including Telecom Equipment) used by another
party, Tenant will be responsible for, and will protect, indemnify, defend and
hold harmless Landlord, its partners, managers, members, officers, directors,
subsidiaries, affiliates, lenders, employees and agents and Property Manager,
from and against all liability related to such interference.  Tenant will use its best efforts, and will
cooperate with Landlord and other parties, to immediately eliminate such
interference.  In the event that Tenant
is unable to eliminate such interference within twenty-four (24) hours, Tenant
will promptly substitute alternative equipment. 
If such interference persists after such alternative equipment is
installed, Tenant will discontinue the use of its Telecom Equipment as
necessary to discontinue such interference, and, at Landlord’s discretion,
remove such Telecom Equipment according to specifications required by Landlord.

 

42.9                           Removal.  Prior to the
expiration or earlier termination of the Term, Tenant will remove any and all
Telecom Equipment installed in the Premises or elsewhere in the Building by or
on behalf of Tenant,

 

36

 

including all
Connections, at Tenant’s sole cost; provided, however, that Landlord will have
the right, upon at written notice to Tenant given at least ninety (90) days
prior to the expiration of the Term, to require Tenant to abandon and leave in
place, without additional payment to Tenant or credit against Rent, any and all
Connections or selected components thereof, whether located in the Premises or
elsewhere in the Building, and to the extent Landlord suffers or permits any such
Connections or any other Telecom Equipment to remain in the Premises, Tenant
shall provide Landlord with the as-built plans required by Section 42.5
above.  The terms and conditions of this Section 42.9
will survive expiration or earlier termination of the Lease.

 

42.10                     No Third Party Beneficiaries. Notwithstanding any provision
of the preceding paragraphs to the contrary, the provisions of this Lease,
including this Article 42, may be enforced solely by Tenant and Landlord,
are not for the benefit of any other party (including any subtenant), and
specifically, but without limitation, no Telecom Provider will be deemed a
third party beneficiary of this Lease or this Article 42.

 

43.                               EXTENSION
OPTION.  

 

43.1                           Extension Term;  Extension Exercise Date.  Tenant shall have two (2) options to extend the Term of this
Lease, each for an additional period of five (5) years, which will
commence, if at all, on the day following the last day of the Term or the first
Extension Term, as applicable (each an “Extension Term”).  The option for each Extension Term may be
exercised by Tenant only by written notice given to Landlord not earlier than
the date which is fifteen (15) months prior and not later than the date which
is twelve (12) months prior to the expiration of the initial Term or the first
Extensions Term, as applicable (the “Extension
Exercise Date”).  Except as
stated below in this Article 43, all of the terms and conditions of
this Lease in effect immediately prior to the commencement of an Extension Term
shall equally pertain in all respects to that Extension Term.

 

43.2                           Personal.  The option
to extend granted to Tenant in this Lease is personal to the original Tenant
and any Permitted Transferee and may be exercised only by the original Tenant
or Permitted Transferee while occupying the Premises who does so without the
intent of thereafter assigning this Lease or subletting the Premises or any
portion thereof, and may not be exercised or be assigned, voluntarily or
involuntarily, by or to any person or entity other than Tenant or Permitted
Transferee.  The options to extend 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.

 

43.3                           Market Rental Value. 
The Monthly Base Rent during each Extension Term will be the Market
Rental Value of the Premises (as defined and determined pursuant to Section 43.5)
for that period.

 

43.4                           Landlord’s Notice.  Landlord’s estimate of the Market Rental Value
will be designated by notice to Tenant (“Landlord’s
Notice”) pursuant and subject to Section 43.6 no later
than five (5) months prior to expiration of the period of the initial Term
or first Extension Term, as applicable.

 

43.5                           Method of Determination; Outside Agreement Date.  The Market Rental Value of the
Premises will be the market rent and all additional charges and additional rent
for the Premises determined as of the date of Landlord’s Notice equal to the
rental rates then being obtained by landlords of comparable space in Carlsbad,
California of the same approximate age, quality, condition and level of
amenities, as adjusted on account of pertinent differences such as the heights
of the floors in question, incentives for initial occupancy such as free rent,
existing lease takeover and assumption costs, brokerage commissions and
demolition and improvement costs (or the inapplicability of such incentives in
the case of renewals or extensions), size of space, length of term and
anticipated commencement date with respect to such renewal and any other
economic concessions.  If Landlord and
Tenant fail to reach agreement within thirty (30) days following Tenant’s
receipt of Landlord’s Notice (the “Outside
Agreement Date”), then the Market Rental Value shall be determined
as set forth in Section 43.6 below.

 

43.6                           Submittal to Arbitration.  Each
party shall make a separate determination of the Market Rental Value within
five (5) business days after the Outside Agreement Date, concurrently
exchange such determinations and such determinations shall be submitted to
arbitration in accordance with this Section. 
Landlord and Tenant shall each appoint one arbitrator who shall by
profession be a real estate broker who shall have been active over the five (5) year
period ending on the date of such appointment in the leasing of comparable
commercial projects in the Carlsbad, California area.  The determination of the arbitrators shall be
limited solely to the issue of

 

37

 

whether Landlord’s or
Tenant’s submitted Market Rental Value is the closest to the actual Market
Rental Value, as determined by the arbitrators taking into account the
requirements in this Article 43 (i.e., the arbitrators may only
select Landlord’s or Tenant’s determination and shall not be entitled to make a
compromise determination).  Each such
arbitrator shall be appointed within fifteen (15) business days after the
applicable Outside Agreement Date.  The
two (2) arbitrators so appointed shall within five (5) days of the
date of the appointment of the last appointed arbitrator agree upon and appoint
a third arbitrator who shall be qualified under the same criteria set forth
hereinabove for qualification of the initial two (2) arbitrators.  The three (3) arbitrators shall within
five (5) days of the appointment of the third arbitrator reach a decision
as to whether the parties shall use Landlord’s or Tenant’s submitted Market
Rental Value and shall notify Landlord and Tenant thereof.  The decision of the majority of the three (3) arbitrators
shall be binding upon Landlord and Tenant. 
If either Landlord or Tenant fails to appoint an arbitrator within
fifteen (15) business days after the applicable Outside Agreement Date, the
arbitrator appointed by one of them shall reach a decision, notify Landlord and
Tenant thereof, and such arbitrator’s decision shall be binding upon Landlord
and Tenant.  If the two (2) arbitrators
fail to agree upon and appoint a third arbitrator, or both parties fail to
appoint an arbitrator, then the appointment of the third arbitrator or any
arbitrator shall be dismissed and the Market Rental Value to be decided shall
be forthwith submitted to arbitration under the provisions of the American
Arbitration Association, but subject to the instruction set forth in this Section 43.6.  The cost of the third arbitrator shall be
split equally by Landlord and Tenant, and Landlord and Tenant shall each be
responsible for the fees and costs of the arbitrator which it appoints.  If the Monthly Base Rent shall not have been
determined by the commencement date of the Extension Term, then until it is
determined, Tenant shall pay Monthly Base Rent in effect at the end of the initial
Term or the first Extension Term, as applicable, and when the actual adjusted
Monthly Base Rent is determined, Tenant shall pay to Landlord any additional
rent due for the months which have elapsed in the Extension Term, or Landlord
shall credit any excess payment for the elapsed months to the next Monthly Base
Rent becoming due.

 

43.7                           Effect of Default.  If
Tenant is in default beyond any applicable grace period when it may otherwise
exercise the option, then any attempt to exercise the option shall be null,
void, and of no force or effect.  If
Tenant exercises the option and if Tenant is in default beyond any applicable
grace period at any time after exercise of the option or on the first day for
commencement of the Extension Term, then the exercise of the option by Tenant
shall be null, void, and of no force or effect. 
No condition of the Premises, including, without limitation, any
alteration or improvement made by Tenant, oral intention expressed by Tenant or
detrimental reliance by Tenant on any statement, act, or omission by Landlord
shall vest any rights in Tenant for exercise of the option set forth herein or
to possess the Premises during any period set for extension of the Term in such
option, or stop Landlord from eviction of Tenant after the end of the Term of
this Lease then in effect, or give rise to any equitable defense to such
eviction.  Tenant hereby waives any and
all equitable remedies with respect to the option set forth herein unless
Tenant has complied in all respect with the written notice requirements set
forth herein. The sole and exclusive method for exercise of the option set
forth herein shall be delivery of the written notice called for herein by
Tenant to Landlord on a timely basis. 
Landlord and Tenant hereby agree that time is of the essence with
respect to delivery of any notice of exercise by Tenant to Landlord.  The date for delivery of any notice required
or permitted in the option set forth herein shall be determined by the
provisions for delivery of notice contained in this Lease.

 

 

[Remainder of Page Intentionally
Blank; Signature Page Follows]

 

38

 

[Signature Page to
Lease Agreement dated September 1, 2005; 2200 Faraday Avenue, Carlsbad,
CA]

 

 

IN WITNESS
WHEREOF, the parties
hereto have executed this Lease as of the date first above written. 

 

	
  TENANT:

  	
  LANDLORD:

  
	
   

  	
   

  
	
  DOT HILL SYSTEMS
  CORPORATION,

  a Delaware corporation

  	
  EQUASTONE 2200 FARADAY,
  LLC,

  a Delaware limited liability company

  
	
   

  	
   

  
	
  By:

  	
  /s/ James L. Lambert

  	
   

  	
  By:

  	
  Equastone Faraday, LLC,

  
	
  Name:

  	
  James L. Lambert

  	
   

  	
   

  	
  a Delaware limited
  liability company,

  
	
  Its:

  	
  Chief Executive Officer

  	
   

  	
   

  	
  its Manager

  
	
   

  	
   

  
	
  By:

  	
  /s/ Preston S. Romm

  	
   

  	
   

  	
  By:

  	
  Equastone Manager, LLC,

  
	
  Name:

  	
  Preston S. Romm

  	
   

  	
   

  	
   

  	
  a Delaware limited
  liability

  
	
  Its: 

  	
  Chief Financial Officer

  	
   

  	
   

  	
   

  	
  company, its Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Chad M. Carpenter

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Chad M. Carpenter

  	
   

  
	
   

  	
   

  	
  Its:

  	
  President and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Roger C. Simsiman

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Roger C. Simsiman

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Chief Operating Officer

  	
   

  
																

 

39

 

EXHIBIT “A”

 

PREMISES

 

 

 

 

EXHIBIT “B”

 

PROJECT

 

 

 

 

EXHIBIT “C”

 

TENANT IMPROVEMENT
AGREEMENT

 

CONSTRUCTION BY TENANT

 

THIS TENANT IMPROVEMENT AGREEMENT (the “Work Letter
Agreement”) forms a part of the Lease Agreement (the “Lease”) made and entered into on September 1, 2005, by
and between EQUASTONE 2200 FARADAY, LLC, a
Delaware limited liability company (“Landlord”) and DOT HILL SYSTEMS CORPORATION, a Delaware corporation (“Tenant”).  Terms which
are used herein as defined terms but which are not otherwise defined shall have
the same meanings which are given to such terms in the Lease. For the
considerations set forth in the Lease and the mutual covenants hereinafter
contained, Landlord and Tenant covenant and agree as follows:

 

SECTION 1

 

GENERAL CONSTRUCTION OF THE
PREMISES

 

Landlord
shall deliver the Building shell and core (i) of the Premises and (ii) of
the floor of the Building on which the Premises is located (collectively, the “Base, Shell, and Core”) on or before the
Entry Date set forth in Section 2.4 of the Lease.  Landlord covenants to Tenant that, as of the Entry
Date:  (a) the roof of the Building
shall be watertight and in good condition, and the existing HVAC, plumbing and
electrical systems of the Base, Shell, and Core shall be in good working order;
and (b) the Base, Shell, and Core and the common areas of the Project shall
comply with all applicable laws, codes, ordinances and regulations, including
the Americans with Disabilities Act.  If
the foregoing covenants are not true and correct as of the Entry Date, Landlord
shall correct such item(s) at Landlord’s own cost and not as an Operating
Expense nor as part of the T.I. Allowance within thirty (30) days after
Landlord receives notice of such defect from Tenant; provided, however, that
such notice shall be delivered to Landlord, if at all, within thirty (30) days
following the Entry Date, and if by the nature of such correction more than
thirty (30) days is required to effect such correction, Landlord shall not be
in default hereunder if such correction is commenced within such thirty (30) day
period and is diligently pursued to completion. 
If Landlord has not performed the replacement or repair of defective
elements within the thirty (30) day period provided for in this Section 1,
above, then Tenant may provide Landlord with an additional written notice
stating that Tenant intends to perform such work following an additional ten (10) day
Landlord cure period, and if Landlord does not commence such replacement or
repair within such additional ten (10) day period, Tenant shall have the
right to replace or repair such defective element and Tenant shall be entitled
to prompt reimbursement by Landlord of Tenant’s actual, reasonable costs in
taking such action, including Tenant’s reasonable out-of-pocket supervisory and
administrative costs, provided that (i) Tenant will pursue, to the extent
Landlord’s cooperation is not required (or if Landlord’s cooperation is
required, then to the extent such cooperation is provided), any applicable
construction warranties and guaranties prior to retaining any other contractor
to perform such work, and (ii) if such contractors are unwilling or are
unable to perform, or timely perform, such work, Tenant may utilize the
services of any other qualified contractor which normally and regularly
performs similar work in first-class office buildings in the Faraday Business
Park.  Notwithstanding the foregoing, if
Landlord disputes an item in question, any reimbursement shall be subject to
reconciliation following the final determination of the disputed item.

 

SECTION 2

 

CONSTRUCTION DRAWINGS

 

2.1                                 Selection
of Architect and Engineer.  Tenant’s
architect shall be Dan Pittman, and Tenant’s engineers shall be Michael Wall
Engineering (electrical engineer ) and Walsh Engineering (mechanical
engineering).  Landlord hereby approves
such architect and engineers for the design of the Tenant Improvements.  Notwithstanding the foregoing, Tenant may, at
its option, retain an architect or engineer other than those listed above, subject
to Landlord’s reasonable approval, which approval shall not be unreasonably
withheld.  All

 

 

mechanical, electrical and plumbing
engineering plans, specifications and documents shall be prepared at Tenant’s
cost, subject to reimbursement from the T.I. Allowance.

 

2.2                                 Preliminary
Construction Documents.  Tenant shall
prepare, at Tenant’s sole cost and expense, preliminary drafts of construction
drawings and specifications including complete sets of detailed architectural,
structural, mechanical, electrical and plumbing working drawings (the “Preliminary Construction Documents”) for all Tenant
Improvements desired by Tenant in the Premises, including, without limitation,
communications and data cabling, roof-mounted antennae and/or satellite dishes,
millwork, cabinetry, woodwork, interior and exterior signage, and customized
fixtures. Tenant shall deliver the Preliminary Construction Documents to
Landlord as such documentation is prepared by Tenant’s architect, through the
schematic, design development and final construction drawings phases of the
Preliminary Construction Documents. 
Landlord acknowledges that the Preliminary Construction Documents may be
delivered to Landlord in partial packages relating to certain components of the
Tenant Improvements to be installed in the Premises (a “Subphase”);
provided, however that Landlord shall not be required to approve any partial
package of Preliminary Construction Documents if such package does not contain
sufficient information to allow Landlord to approve the portion of the Tenant
Improvements identified in such partial package.  The Preliminary Construction Documents shall (i) include
architectural drawings and specifications for Tenant’s partition layout,
reflected ceiling, telephone and electrical outlets, and finish schedule; and (ii) mechanical
plans and specifications where necessary for installation of the
air-conditioning system and ductwork and heating and electrical
facilities.  Tenant’s architect and
engineer shall be responsible for designing the Tenant Improvements at Tenant’s
sole cost and expense, subject, however, to reimbursement of such costs and
expenses from the T.I. Allowance. 

 

2.3                                 Landlord’s
Approval.  The Preliminary
Construction Documents shall be subject to Landlord’s approval, which shall not
be unreasonably withheld, provided, however, that Landlord’s approval rights as
to the Preliminary Construction Documents shall be limited to a review of the
Preliminary Construction Documents to confirm that: (i) the Tenant
Improvements are reasonably compatible with (and not damaging to) the structural,
mechanical, electrical, plumbing and other systems of the Building, (ii) the
Tenant Improvements do not materially adversely impact (in Landlord’s
reasonable judgment) either the exterior appearance or operations of the
Building or the appearance or operations of the public areas of the Building
and (iii) the Tenant Improvements comply with all any law, statute,
ordinance, order, rule, regulation or requirement of any governmental or
quasi-governmental authority (collectively, “Legal
Requirements”).  Within ten (10) Business
Days after delivery of a complete set of the Preliminary Construction Documents
for any Subphase to Landlord, Landlord shall either approve such Preliminary
Construction Documents or notify Tenant of the specific item(s) of such Preliminary
Construction Documents of which Landlord disapproves and a detailed description
of the reason(s) for such disapproval. 
If Landlord disapproves any of the Preliminary Construction Documents
for any Subphase, within ten (10) business days after receipt of Landlord’s
disapproval notice, Tenant shall revise and resubmit same to Landlord for
approval, which approval shall not be unreasonably withheld (the “Revised Construction Documents”). If Landlord does not
respond to the Preliminary Construction Documents or the Revised Construction
Documents within ten (10) Business Days after receipt of same, such
drawings shall be deemed approved as most recently submitted. The above process
shall be repeated until such time as Landlord has approved or is deemed to have
approved the Revised Construction Documents. Both parties agree to use their
best efforts to conclude final preparation and approval of the Revised
Construction Documents for each Subphase within thirty (30) days after the date
on which the Preliminary Construction documents for such Subphase are initially
submitted by Tenant to Landlord.

 

2.4                                 Final
Construction Documents and Other Information.  The Preliminary Construction Documents or the
Revised Construction Documents, as approved (or deemed approved) by Landlord,
are hereinafter referred to as the “Final Construction
Documents.” Tenant may request changes to the Final Construction
Documents.  Any changes shall be subject
to Landlord’s approval, to the extent Landlord’s approval was originally required
with respect thereto pursuant to this Section 2.4.  Upon approval (or deemed approval) of the
Preliminary Construction Documents or the Revised Construction Documents for
any Subphase, Landlord shall not be entitled to subsequently disapprove any changes
therein unless such changes results in a material change to, material deviation
or material addition to the Tenant Improvements identified in the Preliminary
Construction Documents and/or the Revised Construction Documents previously
approved or deemed approved by Landlord.  Additionally, Tenant shall submit to Landlord
in writing the following information at least seven (7) days prior to the
commencement of construction of the Tenant Improvements:

 

 

(i)                                     The name and
address of Tenant’s General Contractor if other than White Construction (who is
hereby approved by Landlord as the General Contractor) and the names of the
plumbing, mechanical and electrical subcontractors, if any, which General Contractor
intends to engage in the construction of the Tenant Improvements.  All such subcontractors shall be subject to
Landlord’s reasonable prior written approval;

 

(ii)                                  The actual
commencement date of construction and estimated date of completion of Tenant’s
Work (as defined below); and

 

(iii)                               Evidence of insurance
required under Section 2.7 of this Work Letter Agreement.

 

If Landlord requires the purchase of payment
or performance bonds in connection with the construction of the Tenant
Improvements, Landlord will pay the costs associated therewith and will not
charge any portion of such costs to Tenant or against the Improvement
Allowance.

 

2.5                                 Tenant’s
Covenants.  Tenant, at its sole cost
and expense, shall perform all work required to complete the Tenant
Improvements substantially in accordance with the Final Construction Documents
(the “Tenant’s Work”) to a finished condition
ready for the conduct of business.  All
of the Tenant’s Work shall comply in all material respects with applicable
federal, state, county municipal statutes, ordinances, regulations, laws, codes
and requirements. Landlord’s review and approval of the Final Construction
Documents shall not render Landlord liable to Tenant for any defects therein,
or constitute a representation or warranty by Landlord that the Tenant
Improvements as described in the Final Construction Documents are in compliance
with all Legal Requirements or will be suitable for Tenant’s use. Tenant shall
be solely responsible for ensuring that the Tenant Improvements as set forth in
the Final Construction Documents comply with all Legal Requirements and are
suitable for Tenant’s use. All required building and other permits in
connection with the construction and completion of the Tenant Improvements
shall be obtained and paid for by Tenant. 

 

2.6                                 Landlord’s
Covenants.  Tenant and Tenant’s
General Contractor, at the expense of Tenant or Tenant’s General Contractor,
shall be allowed to utilize power, water and other existing utility facilities
as necessary and required in connection with the Tenant’s Work in the Premises.  Landlord shall repair any damage to the
Building caused by Tenant or Tenant’s General Contractor which has a material
adverse effect on the structural or watertight integrity, or the physical
appearance, of the Building, which repairs shall be at the sole cost and
expense of Tenant (to the extent not covered by any insurance maintained by
Landlord as an Expense subject to reimbursement by Tenant during Tenant’s construction
of the Tenant Improvements) and Tenant agrees to pay to Landlord within thirty
(30) days following presentation of a statement therefor all costs incurred by
Landlord in connection with any such repairs.

 

2.7                                 Insurance.  Tenant shall provide, or shall cause Tenant’s
General Contractor to provide, insurance with companies authorized to do business
in the State of California which satisfy the requirements of Section 9.5
of the Lease, which include a waiver of subrogation in favor of Landlord as
provided in Article 13 of the Lease, and shall insure Landlord,
Landlord’s mortgagee and property manager and Tenant, as their respective
interests may appear, and shall also provide insurance during the course of
construction with respect to the following:

 

2.7.1                        Liability
Insurance.  Liability insurance as
required by Section 12.3.2 of the Lease shall be in an aggregate
amount, which may include umbrellas, of not less than $3,000,000, and shall
name Landlord and Landlord’s mortgagee and property manager as additional
insureds;

 

2.7.2                        Worker’s
Compensation Insurance.  Worker’s
Compensation insurance as required by Section 12.3.1 of the Lease, covering
all persons employed in connection with the Tenant’s Work and with respect to
whom death or bodily injury claims could be asserted against Landlord; and

 

2.7.3                        Automobile
Liability coverage.  Automobile Liability
coverage with bodily injury limits of at least $1,000,000.00 per accident.

 

 

2.8                                 Indemnification.  EXCEPT TO THE EXTENT SUCH COSTS, LOSSES,
LIABILITIES OR ACTIONS RESULT FROM LANDLORD’S GROSS NEGLIGENCE AND/OR WILLFUL
MISCONDUCT, TENANT SHALL INDEMNIFY AND HOLD LANDLORD HARMLESS FROM AND AGAINST
ALL COSTS (INCLUDING REASONABLE ATTORNEY’S FEES AND COSTS OF SUIT), LOSSES,
LIABILITIES OR CAUSES OF ACTION ARISING OUT OF OR RELATING TO TENANT’S
CONSTRUCTION OF THE TENANT IMPROVEMENTS, INCLUDING, BUT NOT LIMITED TO, ANY
MECHANIC’S OR MATERIALMEN’S LIENS ASSERTED IN CONNECTION THEREWITH.

 

2.9                                 Project
Schedule.  The schedule of the
design, construction, and completion of the Tenant’s Work shall be governed by
the Work Letter Agreement and the Project Schedule attached as Schedule 1
(the “Project Schedule”).  Each party shall perform its obligations in
accordance with the Project Schedule, subject to the Force Majeure provisions
of Section 37.10 of the Lease.

 

2.10                           Cooperation.  During the entire course of the construction
process, Tenant and Landlord each shall respond to requests for information or
decisions with reasonable dispatch. 
Without limiting the foregoing, each party shall cooperate with the
other to facilitate and expedite the efficient design and construction of the
Tenant Improvements.  Tenant agrees to
take all action necessary to cause the Tenant’s General Contractor to
construction the Tenant Improvements in a good and workmanlike manner in
accordance with the Final Construction Documents and with all any law, statute,
ordinance, order, rule, regulation or requirement of any governmental or
quasi-governmental authority (collectively, “Legal
Requirements”).

 

2.11                           Landlord
Delays.  If completion of
construction of the Tenant Improvements or delivery of possession of the Leased
Premises is delayed by a Landlord Delay, the Commencement Date shall be
extended by each day that there is a Landlord Delay on a day-for-day
basis.  A “Landlord
Delay” means delay in Substantial Completion of the Tenant Improvements
to the extent solely attributable to:  (a) Landlord’s
failure to comply with its obligations under the Project Schedule in a
timely manner; or (b) Landlord’s failure to respond within five (5) business
days to any Tenant or Contractor request for information or decision reasonably
required in connection with the construction of the Tenant Improvements
pursuant to the Final Construction Documents initially approved by Landlord and
not provided for on the Project Schedule or in this Work Letter Agreement,
unless Landlord’s failure to respond is due to delay in obtaining the opinion
or advice of any applicable design professional or the approval of Landlord’s
construction lender, in which case the period allowed for Landlord’s response
shall be extended accordingly.

 

2.12                           Substantial
Completion.  Within ten (10) days
after Substantial Completion (as defined below) of the Tenant Improvements,
Landlord and Tenant shall acknowledge in writing that the Tenant Improvements
were constructed in accordance with the “as built” plans provided by Tenant (or
indicate any known discrepancies).  “Substantial Completion” means that construction has been
sufficiently completed such that the Premises can be occupied and used to
conduct Tenant’s business without material interference.

 

SECTION 3

 

TENANT IMPROVEMENT ALLOWANCE

 

3.1                                 Allocation
of Costs.  Tenant shall be entitled
to a one-time tenant improvement allowance (the “T.I. Allowance”) in the amount of up to, but not exceeding
Twenty Two Dollars ($22.00) per usable square foot of the Premises, for the
costs relating to the initial design and construction of Tenant’s improvements
which are permanently affixed to the Premises (the “Tenant Improvements”), including the cost of all labor and
materials for the construction and installation of the Tenant Improvements; the
cost of all permits, licenses, and fees; all amounts paid to Tenant’s
contractors under and pursuant to contracts for the construction and
installation of the Tenant Improvements; all architectural, engineering, space
planning, and other consultant’s fees; all amounts paid for mechanical
drawings, plans, specifications, shop drawings, designs, and layouts, a
construction management fee to Landlord in the amount of Seventeen Thousand
Five Hundred Dollars ($17,500.00) and reasonable incidental costs related to
the foregoing.  In no event shall
Landlord be obligated to make disbursements to Tenant for the cost of the
Tenant Improvements pursuant to this Tenant Work Letter in a total amount which
exceeds the T.I. Allowance.  Within ten (10) business
days after Tenant delivers to Landlord written notice requesting payment from
Landlord for one-half of the actual costs to construct the structural elements
of the demising wall (i.e., the demising wall studs)

 

 

separating the
Premises from the remainder of the first floor (which costs shall expressly not
include, without limitation, dry walling cost, finish cost, or costs related to
the installation of electrical systems, unless required by code) (the “Demising Wall Costs”) and a detailed line item budget for
the such actual costs, Landlord agrees that it shall reimburse Tenant for
one-half of the Demising Wall Costs.

 

3.2                                 Tenant
Cost Proposal; Excess Costs.  After
the Final Construction Documents are approved and signed by Landlord and
Tenant, Tenant shall provide Tenant with the “Cost
Proposal.”  For purposes of
this Tenant Work Letter, the “Cost Proposal” shall consist of (i) the GMP
bid from the General Contractor, and (ii) as nearly as possible, the cost
of all Tenant Improvements to be constructed by Tenant.  As part of the Cost Proposal, Tenant and
shall identify the amount (the “Over-Allowance Amount”)
equal to the difference between (i) the amount of the Cost Proposal and (ii) the
amount of the remaining T.I. Allowance as of the date of delivery of the Cost
Proposal .  Unless Tenant elects to
provide a completion bond to Landlord for the completion of the Tenant
Improvements, the Over-Allowance Amount shall be delivered to Landlord prior to
commencement of construction of the Tenant Improvements.  In the event that any revisions, changes, or
substitutions shall be made to the Final Construction Documents or the Tenant
Improvements, any additional costs which arise in connection with such
revisions, changes or substitutions or any other additional costs shall be paid
by Tenant to Landlord immediately upon Landlord’s request as an addition to the
Over-Allowance Amount.  In addition, if
the Final Construction Documents or any amendment thereof or supplement thereto
shall require alterations in the Base, Shell and Core (as contrasted with the
Tenant Improvements), and if Landlord in its sole and exclusive discretion
agrees to any such alterations, and notifies Tenant of the need and cost for
such alterations, then Tenant shall pay the cost of such required changes upon
receipt of bills therefor.  The
Over-Allowance Amount shall reflect the reduction of the remaining T.I.
Allowance by previous payments made by Landlord and the amount of the Landlord’s
supervision fee set forth in Section 3.1 above.

 

3.3                                 Disbursement
of T.I. Allowance.  The Tenant
Improvements will be constructed in accordance with the Final Construction Documents.  Landlord will disburse the T.I. Allowance
following disbursement of the Over-Allowance Amount funds, if deposited by
Tenant with Landlord, or if not deposited after Tenant provides Landlord with
evidence that such amount has been expended by Tenant.  Landlord shall have no obligation to disburse
any portion of the T.I. Allowance after the Commencement Date.  After the T.I. Allowance has been exhausted,
Landlord shall have no further obligation to expend Landlord’s funds on Tenant
Improvements.  Landlord shall perform the
services of fund control with respect to the construction costs and shall disburse
the costs of the Tenant Improvements monthly upon Landlord’s receipt of a
certified invoice from Tenant’s contractor for such costs.  When all the Tenant Improvements are
substantially complete, if the cost of the Tenant Improvements is less than the
sum of the T.I. Allowance plus Over-Allowance Amount deposited by Tenant with Landlord,
then Landlord shall refund to Tenant the amount by which the actual Tenant
Improvement costs exceeds the amount expended by Landlord from the fund control.  All items of Tenant Improvements shall be the
property of Tenant during the Term of this Lease and shall remain on the
Premises at all times during the Term of this Lease, except as otherwise
provided in the Lease and upon termination shall become the property of Landlord;
provided, however, that Tenant shall replace or dispose of (after giving
Landlord a reasonable opportunity to remove such improvements from the
Premises) any such improvements which become obsolete for Tenant’s business
operations, or which become inoperable or inefficient due to normal wear and
tear.

 

3.4                                 Landlord
Audit Right.  At Landlord’s request,
Tenant shall deliver to Landlord a detailed statement of the costs of construction
of the Tenant Improvements within thirty (30) days after the Substantial
Completion of the tenant Improvements. 
Upon request, Tenant shall furnish to Landlord any further information,
documents or materials related to the work or the cost thereof in Tenant’s
possession or control.  Tenant shall
maintain records of all costs of construction of the Tenant Improvements.  Landlord shall have the right to inspect all
such records upon reasonable prior notice within thirty (30) business days
after Tenant’s statement is received.  Tenant
shall cooperate in good faith with Landlord and the Landlord’s accountant to
provide the information upon which the Landlord’s certification of the costs of
construction is to be based.  If such
certification of the actual costs of construction of the Tenant Improvements
discloses that such costs of construction were overstated, such overstated
amount shall be promptly refunded to Landlord, and if overstated by more than
five percent (5%), then Landlord’s reasonable out-of-pocket costs for the
performance of the review of Tenant’s books and records shall be paid for by Tenant.

 

 

3.5                                 Unused
Allowances.  In the event Tenant does
not utilize all of the T.I Allowance or the Relocation Allowance, such amounts
shall be forfeited by Tenant without any reduction or credit against Tenant’s Lease
payment obligations.

 

SECTION 4

 

MISCELLANEOUS

 

4.1                                 Representatives.
 Landlord hereby appoints Roger Simsiman
of Equus Realty Advisors, Inc. (“Landlord’s Representative”)
to act as the Landlord’s Representative in all matters covered by this
Agreement.  Tenant hereby appoints Kirt
Gilliland of Irving Hughes (“Tenant’s Representative”)
to act as Tenant’s Representative in all matters covered by this Agreement. All
inquiries, requests, instructions, authorizations and other communications with
respect to the matters covered by this Agreement will be made to Landlord’s
Representative or Tenant’s Representative, as the case may be. Either party may
change its representative under this Agreement at any time by giving ten (10) days
written notice to the other party delivered in accordance with the notice
provisions of the Lease..

 

4.2                                 Contractor’s
Warranties and Guaranties.  Tenant
hereby assigns to Landlord all warranties and guaranties by General Contractor
relating to the Tenant Improvements and shall cause Landlord to be named a
third-party beneficiary under the construction agreement with the General
Contractor, and Tenant hereby waives all claims against Landlord relating to,
or arising out of the construction of, the Tenant Improvements.

 

4.3                                 Tenant’s
Covenants.  Tenant hereby indemnifies
Landlord for any loss, claims, damages or delays arising from the actions of
Architect or General Contractor, and their respective employees, agents,
vendors and sub-contractors, on the Premises or in the Building.  Within ten (10) days after completion of
construction of the Tenant Improvements, Tenant shall cause Contractor and
Architect to cause a Notice of Completion to be recorded in the office of the
County Recorder of the San Diego County in accordance with Section 3093 of
the Civil Code of the State of California or any successor statute and furnish
a copy thereof to Landlord upon recordation, failing which, Landlord may itself
execute and file the same on behalf of Tenant as Tenant’s agent for such
purpose.  In addition, immediately after
the Substantial Completion of the Premises, Tenant shall have prepared and
delivered to the Building a copy of the “as built” plans and specifications
(including all working drawings) for the Tenant Improvements.

 

4.4                                 Meetings.  Tenant’s and Landlord’s Representatives shall
hold regular meetings at a reasonable time (but in no event to be required more
often than weekly), with the Architect and the General Contractor regarding the
progress of construction of the Tenant Improvements, which meetings shall be
held at a location designated by Tenant on the Project site, or as otherwise
mutually agreed by Landlord and Tenant, and Landlord and/or its agents shall
receive prior notice of, and shall have the right to attend, all such meetings.  In addition, minutes shall be taken at all
such meetings, a copy of which minutes shall be promptly delivered to
Landlord.  One such meeting each month
shall include the review of General Contractor’s current request for payment.

 

4.5                                 Labor
Harmony.  Tenant shall not use (and
upon notice from Landlord shall cease using) contractors, services, workmen,
labor, materials or equipment that, in Landlord’s reasonable judgment, would
disturb labor harmony with the workforce or trades engaged in performing other
work, labor or services in or about the Building or the Project common areas.

 

4.6                                 Time
of the Essence in This Tenant Work Letter. 
Unless otherwise indicated, all references herein to a “number of days”
shall mean and refer to calendar days.

 

4.7                                 Tenant’s
Lease Default.  Notwithstanding any
provision to the contrary contained in this Lease, if an event of an economic
default as described in the Lease, or an economic default by Tenant under this
Tenant Work Letter, has occurred at any time on or before the Substantial Completion
of the Premises, then (i) in addition to all other rights and remedies
granted to Landlord pursuant to the Lease, Landlord shall have the right to
withhold payment of all or any portion of the T.I. Allowance and/or Landlord
may cause the General Contractor to cease the construction of the Tenant
Improvements (in which case, Tenant shall be responsible for any delay in the
Substantial

 

 

Completion of the Premises caused by such
work stoppage and such stoppage shall not be a Landlord Delay), and (ii) all
other obligations of Landlord under the terms of this Tenant Work Letter shall
be forgiven until such time as such default is cured pursuant to the terms of
the Lease.

 

IN WITNESS
WHEREOF, the parties
hereto have executed this Work Letter Areement to be effective as of the
Effective Date of the Lease.

 

	
  TENANT:

  	
  LANDLORD:

  
	
   

  	
   

  
	
  DOT HILL SYSTEMS
  CORPORATION,

  a Delaware corporation

  	
  EQUASTONE 2200 FARADAY,
  LLC,

  A Delaware limited liability company

  
	
   

  	
   

  
	
  By:

  	
  /s/ James L. Lambert

  	
   

  	
  By:

  	
  Equastone Faraday, LLC,

  
	
  Name:

  	
  James L. Lambert

  	
   

  	
   

  	
  a Delaware limited
  liability company,

  
	
  Its:

  	
  Chief Executive Officer

  	
   

  	
   

  	
  its Manager

  
	
   

  	
   

  
	
  By:

  	
  /s/ Preston S. Romm

  	
   

  	
   

  	
  By:

  	
  Equastone Manager, LLC,

  
	
  Name:

  	
  Preston S. Romm

  	
   

  	
   

  	
   

  	
  a Delaware limited
  liability

  
	
  Its:

  	
  Chief Financial Officer

  	
   

  	
   

  	
   

  	
  company, its Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Chad M. Carpenter

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Chad M. Carpenter

  	
   

  
	
   

  	
   

  	
  Its:

  	
  President and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Roger C. Simsiman

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Roger C. Simsiman

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Chief Operating Officer

  	
   

  
															

 

 

SCHEDULE 1

 

PROJECT SCHEDULE

 

1.                                       Tenant
agrees that Landlord (and its contractor, as appropriate) may participate in
periodic project meetings with Tenant’s representatives and the architect as
the Plans are developed in order to keep informed with respect to progress of
the design and to contribute information in aid of the design.

 

2.                                       Tenant
shall provide Landlord with a final set (including final mechanical, electrical
and plumbing plans) of Preliminary Construction Documents on or before
forty-five (45) days after Landlord and Tenant execute this Lease.  Landlord shall approve or disapprove the Preliminary
Construction Documents within ten (10) business days after receipt.  If Landlord disapproves of the Preliminary
Construction Documents, Landlord shall specify the matters to which it objects.

 

3.                                       Tenant
shall submit an application to the City of Carlsbad for a building permit
within five (5) days after Tenant’s receipt of Final Construction
Documents approved by both parties.

 

4.                                       Tenant
shall commence construction of the Tenant Improvements within ten (10) days
after the City of Carlsbad issues the building permit.

 

 

EXHIBIT “D”

 

COMMENCEMENT DATE
MEMORANDUM

 

THIS MEMORANDUM, made as of                        ,
20   , by and between EQUASTONE 2200 FARADAY, LLC (herein called
“Landlord”), and DOT HILL SYSTEMS
CORPORATION (herein called “Tenant”).

 

Recitals:

 

A.                                   Landlord
and Tenant are parties to that certain Lease, dated for reference September 1,
2005 (the “Lease”) for certain
premises (the “Premises”)
consisting of approximately 58,452 square feet at the building located at 2200
Faraday Avenue, Carlsbad, California.

 

B.                                     Tenant
is in possession of the Premises and the Term of the Lease has commenced.

 

C.                                     Landlord
and Tenant desire to enter into this Memorandum confirming the Commencement
Date, the Expiration Date and other matters under the Lease.

 

NOW, THEREFORE, Landlord and Tenant agree as follows:

 

1.                                       The
actual Commencement Date is                                  .

 

2.                                       The
actual Expiration Date is                                  .

 

3.                                       Capitalized
terms not defined herein shall have the same meaning as set forth in the Lease.

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as of the date and
year first above written. **

 

	
  TENANT:

  	
  LANDLORD:

  
	
   

  	
   

  
	
  DOT HILL SYSTEMS CORPORATION,

  a Delaware corporation

  	
  EQUASTONE 2200 FARADAY,
  LLC,

  a Delaware limited liability company

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
  Equastone Faraday, LLC,

  
	
  Name:

  	
   

  	
   

  	
   

  	
  a Delaware limited
  liability company,

  
	
  Its:

  	
   

  	
   

  	
   

  	
  its Manager

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
  Equastone Manager, LLC,

  
	
  Name:

  	
   

  	
   

  	
   

  	
  a Delaware limited
  liability

  
	
  Its:

  	
   

  	
   

  	
   

  	
  company, its Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
														

 

 

EXHIBIT “E”

 

RULES AND
REGULATIONS

 

1.                                       No
sign, placard, picture, advertisement, name or notice (collectively referred to
as “Signs”) shall be installed or
displayed on any part of the outside of the Building without the prior written
consent of the Landlord which consent shall be in Landlord’s sole
discretion.  All signs or lettering on
doors shall conform to Landlord’s sign criteria for the Building.  All approved Signs shall be printed, painted,
affixed or inscribed at Tenant’s expense by a person or vendor approved by
Landlord and shall be removed by Tenant at Tenant’s expense upon vacating the
Premises. Landlord shall have the right to remove any Sign installed or
displayed in violation of this rule at Tenant’s expense and without
notice.

 

2.                                       If
Landlord objects in writing to any curtains, blinds, shades or screens attached
to or hung in or used in connection with any window or door of the Premises or
Building, Tenant shall immediately discontinue such use.  No awning shall be permitted on any part of
the Premises.  Tenant shall not place
anything or allow anything to be placed against or near any glass partitions or
doors or windows which may appear unsightly, in the opinion of Landlord, from
outside the Premises.

 

3.                                       Tenant
shall not alter any lock or other access device or install a new or additional
lock or access device or bolt on any door of its Premises without the prior written
consent of Landlord.  Tenant, upon the
termination of its tenancy, shall deliver to Landlord the keys or other means
of access to all doors.

 

4.                                       If
Tenant requires telephone, data, burglar alarm or similar service, the cost of
purchasing, installing and maintaining such service shall be borne solely by
Tenant.  No boring or cutting for wires
will be allowed without the prior written consent of Landlord.  Landlord shall direct electricians as to
where and how telephone, data, and electrical wires are to be introduced or
installed.  The location of burglar
alarms, telephones, call boxes or other office equipment affixed to the
Premises shall be subject to the prior written approval of Landlord.

 

5.                                       Tenant
shall not place a load upon any floor of its Premises, including mezzanine
area, if any, which exceeds the load per square foot that such floor was
designed to carry and that is allowed by law. Heavy objects shall stand on such
platforms as determined by Landlord to be necessary to properly distribute the
weight. Landlord will not be responsible for loss of or damage to any such
equipment or other property from any cause, and all damage done to the Building
by maintaining or moving such equipment or other property shall be repaired at
the expense of Tenant.

 

6.                                       Tenant
shall not install any radio or television antenna, satellite dish, loudspeaker
or other device on the roof or exterior walls of the Building or in any other
area of the Project without Landlord’s prior written consent which consent
shall be in Landlord’s sole discretion.

 

7.                                       Tenant
shall not mark, drive nails, screw or drill into the partitions, woodwork,
plaster or drywall (except for pictures and general office uses) or in any way
deface the Premises or any part thereof. 
Tenant shall not affix any floor covering to the floor of the Premises
or paint or seal any floors in any manner except as approved by Landlord.  Tenant shall repair any damage resulting from
noncompliance with this rule.

 

8.                                       No
cooking shall be done or permitted on the Premises, except that Underwriters’
Laboratory approved microwave ovens or equipment for brewing coffee, tea, hot
chocolate and similar beverages shall be permitted, provided that such
equipment and use is in accordance with all applicable federal, state and city
laws, codes, ordinances, rules and regulations.

 

9.                                       Tenant
shall not use any hand trucks except those equipped with the rubber tires and
side guards, and may use such other material-handling equipment as Landlord may
approve.  Tenant shall not bring any
other

 

 

vehicles of any kind into
the Building. Forklifts which operate on asphalt areas shall only use tires
that do not damage the asphalt.

 

10.                                 Tenant
shall not use the name of the Building or the Project or any photograph or
other likeness of the Building or the Project in connection with or in
promoting or advertising Tenant’s business except that Tenant may include the
Building or the Project name in Tenant’s address. Landlord shall have the
right, exercisable without notice and without liability to any tenant, to
change the name and address of the Building or the Project.

 

11.                                 All
trash and refuse shall be contained in suitable receptacles at locations
approved by Landlord. Tenant shall not place in the trash receptacles any
personal trash or material that cannot be disposed of in the ordinary and
customary manner of removing such trash without violation of any law or
ordinance governing such disposal.

 

12.                                 Tenant
shall comply with all safety, fire protection and evacuation procedures and
regulations established by Landlord or any governing authority.

 

13.                                 Tenant
assumes all responsibility for securing and protecting its Premises and its
contents including keeping doors locked and other means of entry to the
Premises closed.

 

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

 

15.                                 No
person shall go on the roof without Landlord’s permission.

 

16.                                 Tenant
shall not permit any animals, other than seeing-eye dogs, to be brought or kept
in or about the Premises or any common area of the property.

 

17.                                 Tenant
shall not permit any motor vehicles to be washed or mechanical work or
maintenance of motor vehicles to be performed on any portion of the Premises or
parking lot.

 

18.                                 These
Rules and Regulations are in addition to, and shall not be construed to in
any way modify or amend, in whole or in part, the terms, covenants, agreements
and conditions of any lease of any premises in the Building or the Project.  Landlord may waive any one or more of these Rules and
Regulations for the benefit of any tenant or tenants, and any such waiver by
Landlord shall not be construed as a waiver of such Rules and Regulations
for any or all tenants.

 

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

 

20.                                 Any
toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown into them.  The expense of any breakage, stoppage or
damage resulting from the violation of this rule shall be borne by the
Tenant who, or whose employees or invitees, shall have caused it.

 

21.                                 Tenant
shall not permit smoking or carrying of lighted cigarettes or cigars in areas
reasonably designated by Landlord or any applicable governmental agencies as
non-smoking areas.

 

22.                                 Any
directory of the Building or the Project, if provided, will be exclusively for
the display of the name and location of tenants only and Landlord reserves the
right to charge for the use thereof and to exclude any other names.

 

 

23.                                 Canvassing,
soliciting, distribution of handbills or any other written material in the
Building or the Project is prohibited and each tenant shall cooperate to
prevent the same. No tenant shall solicit business from other tenants or permit
the sale of any goods or merchandise in the Building or the Project without the
written consent of Landlord.

 

24.                                 Any
equipment belonging to Tenant which causes noise or vibration that may be
transmitted to the structure of the Building or to any space therein to such a
degree as to be objectionable to Landlord or to any tenants in the Building or
the Project shall be placed and maintained by Tenant, at Tenant’s expense, on
vibration eliminators or other devices sufficient to eliminate the noise or
vibration.

 

25.                                 Driveways,
sidewalks, halls, passages, exits, entrances and stairways (“Access Areas”)
shall not be obstructed by tenants or used by tenants for any purpose other
than for ingress to and egress from their respective premises. Access areas are
not for the use of the general public and Landlord shall in all cases retain
the right to control and prevent access thereto by all persons whose presence,
in the judgment of Landlord, shall be prejudicial to the safety, character,
reputation and interests of the Building, the Project or its tenants.

 

26.                                 Landlord
reserves the right to designate the use of parking areas and spaces.  Tenant shall not park in visitor, reserved,
or unauthorized parking areas. Tenant and Tenant’s guests shall park between
designated parking lines only and shall not park motor vehicles in those areas
designated by Landlord for loading and unloading. Vehicles in violation of the
above shall be subject to being towed at the vehicle owner’s expense. Vehicles
parked overnight without prior written consent of the Landlord shall be deemed
abandoned and shall be subject to being towed at vehicle owner’s expense.
Tenant will from time to time, upon the request of Landlord, supply Landlord
with a list of license plate numbers of vehicles owned or operated by its
employees or agents.

 

27.                                 No
trucks, tractors or similar vehicles can be parked anywhere other than in
Tenant’s own truck dock area. Tractor-trailers which must be unhooked or parked
with dolly wheels beyond the concrete loading areas must use steel plates or
wood blocks under the dolly wheels to prevent damage to the asphalt paving
surfaces. No parking or storing of such trailers will be permitted in the
parking areas or on streets adjacent thereto.

 

28.                                 During
periods of loading and unloading, Tenant shall not unreasonably interfere with
traffic flow and loading and unloading areas of other tenants.  All products, materials or goods must be
stored within the Tenant’s Premises and not in any exterior areas, including,
but not limited to, exterior dock platforms, against the exterior of the
Building, parking areas and driveway areas. Tenant agrees to keep the exterior
of the Premises clean and free of nails, wood, pallets, packing materials,
barrels and any other debris produced from their operation.

 

29.                                 Tenant
shall comply with all documents, instruments and covenants recorded against the
Project at any time.

 

30.                                 Subject
to compliance with the rules and regulations set forth below so long as
the Lease to which this Exhibit is attached remains in effect, Tenant or
persons designated by Tenant shall be entitled to non-exclusive use of One
Hundred Seventy Five (175) unreserved surface parking areas located at the
Project.  All persons utilizing the
Project parking facilities shall comply with the rules and regulations set
forth below.  Landlord reserves the right
to modify and/or adopt such other reasonable and non-discriminatory rules and
regulations for the Project parking as it deems necessary.  Landlord may refuse to permit any person who
violates the rules and regulations to park in the Project parking
facilities.  Any violation of this
Parking Agreement shall subject the violator’s car to removal from the Project
parking facilities at the violator’s expense.

 

(a)                                  Cars
must be parked entirely within the stall lines painted on the floor.

 

(b)                                 All directional signs and arrows must
be observed.

 

(c)                                  The
speed limit shall be 5 miles per hour.

 

(d)                                 Parking
is prohibited:

 

 

(1)                                  In
areas not striped for parking;

 

(2)                                  In
fire lanes;

 

(3)                                  Where
“no parking” signs are posted;

 

(4)                                  In
cross-hatched areas; and

 

(5)                                  In
such other areas as may be designated by Landlord.

 

(e)                                  Every
parker is required to park and lock his or her own car.  All responsibility for theft and/or damage to
cars, other personal property or persons is assumed by the parker.

 

(f)                                    No
more than one vehicle may be parked in any one parking space.   Washing, waxing, cleaning or servicing of
any vehicle by a parker and/or his agents is prohibited.

 

 

EXHIBIT F

 

TELECOMMUNICATIONS RULES

 

These Telecommunications Rules apply
to Tenant’s use of the Building outside of the Premises, including, without
limitation, the telecommunications closets (each, a “TC”) on each floor of the
Building.  Any questions about what is
allowed in the Building should be directed to Landlord’s property manager.

 

A.                                    WRITTEN
AGREEMENT REQUIRED.

 

1.                                       Tenant
will be required to secure Landlord’s property manager’s approval in writing
before installing any cable or wire outside the Premises.

 

2.                                       Before
any new installations are commenced, even if Tenant has existing facilities in
the Building, either Tenant or Tenant’s telecommunications provider must execute
the Telecommunications License Agreement in the form attached to the Lease as Exhibit I.  Wires or cable installed without such
agreement are subject to removal by Landlord’s property manager, at Tenant’s
sole cost.

 

3.                                       Neither
Landlord, its property manager nor any of their respective employees,
contractors or agents will be responsible for any damage or theft to Tenant
equipment.

 

B.                                    INSTALLATION
AND OTHER WORK.

 

1.                                       Tenant
shall give Landlord’s property manager prior notice, in writing or by email, of
all times that Tenant will work in or will have work done in the TC or outside
the Premises.  Such notice shall include
the purpose and detail of the work to be done, as well as the day and time the
work will be performed.

 

2.                                       All
welding and/or core drilling or installation of equipment on the roof must be
approved by Landlord’s property manager in writing prior to any of the work
being started.  Landlord’s property
manager will require drawing(s) and detailed information on any welding and/or
core drilling or installation of equipment on the roof.  Landlord’s property manager requires a
minimum of one (1) week for this review process.  All floors requiring core drilling must be
x-rayed to determine placement of core drill locations.  Landlord’s property manager reserves the right,
in its sole and absolute discretion, to deny approval of any requested core
drilling or welding, and the Landlord’s property manager will have the right to
supervise any and all such drilling and/or welding.

 

C.                                    LOCATION
OF EQUIPMENT.

 

1.                                       No
Tenant-owned or leased telecommunications equipment (i.e., PBXs key service
units, hubs, bridges, amplifiers/paging equipment, routers, cable TV, security
systems, patch panel or storage of any kind) shall be located in a TC.  The TC’s are not designed to handle the
operation of electronic computing or communication equipment, but only to allow
Tenant’s to connect to carrier or provider service.

 

2.                                       All
telecommunications equipment (including blocks and brackets) owned and
controlled by Tenant shall be located in the Premises, and Tenant will be
solely responsible for control of access to, security of and maintenance of
such equipment.  Notwithstanding the
foregoing, if Tenant has already installed its equipment in a TC, it will not
be required to remove it, but if Tenant relocates or expands its Premises
within the Building, it will be required to move its telecommunications
equipment into the Premises.

 

3.                                       All
station wiring for individual telephones, fax machines, modems, Local Area
Networks (each a “LAN”) and similar equipment will be terminated within the
Premises.  No LAN equipment, such as
concentrators and patch panels, will be installed in a TC.

 

4.                                       Any
equipment to be placed on the roof must be approved in writing by Landlord’s
property manager as to weight, specification, placement, mounting assembly and
any other pertinent features.  Any roof

 

 

penetrations require the written approval of Landlord’s
property manager with the work to be performed by Landlord’s property manager’s
designated roofing contractor, and supervised by the Building’s chief engineer,
all at Tenant’s expense.

 

D.                                    SPECIFICATIONS.

 

1.                                       If
Tenant has not yet occupied the Premises, Tenant will install, or cause to be
installed, at Tenant’s sole cost, a minimum of 3/4” non-combustible plywood
back board for mounting wiring blocks, telephone system and other peripheral
equipment.  The backboard is required to
be painted with two coats of fire retardant paint matching the Tenant’s room
decor.  A wall-to-floor mounted rack
designed for this purpose may be substituted for the back board.  Tenant will be responsible for all costs.

 

2.                                       Tenant
shall provide a minimum of one plenum-rated 25-pair cable for connecting its
equipment room to the floor TC.  For
building housekeeping reasons and management of the Premises, only cables with
25-pair or more cables will be permitted to connect the Premises and a floor
TC.  Each such cable (a) shall be
supported and attached in an approved manner and meet all requirements for
firewall penetration, (b) be equipped with a “male” 50-pin connector at
the TC end and (c) be plugged into a standard RJ21X block with an
orange-hinged cover.  This block shall be
labeled with Tenant’s name and suite number(s), and each circuit shall be
properly labeled.

 

3.                                       All
Tenant horizontal cabling installed within the Premises shall be installed as
per TIA/EIA 568-A standards unless otherwise approved in writing by the
Landlord’s property manager.

 

4.                                       All
wire and cable installed above ceilings shall be plenum-rated, be properly
supported or attached to the Building on their own hangers designed
specifically for low voltage wire support, and be labeled with Tenant’s name,
contact person and telephone number. 
Tenant will install, or cause to be installed, all wires, cables and
their connections installed in compliance with all applicable governmental
codes, rules, regulations and laws.

 

5.                                       Tenant
will cause all new installations in common areas of the Building to be
contained in raceway (EMT or rigid conduit) with the outside of the raceway
properly located in accordance with the aforementioned standards.  Tenant can be exempt from using raceway if
and only if such exemption is specifically contained in a written license
agreement referred to above in Section A.2 of this Exhibit F.

 

6.                                       If
a pull box is required because of distances or bends, a locking pull box must
be installed.  The pull box must identify
Tenant, the pull box’s contents and a contact person.

 

E.                                      PLANS
AND DIAGRAMS.

 

1.                                       In
accordance with Section 42.5 of the Lease, if Landlord suffers or
permits any of Tenant’s or its Telecom Provider’s telecommunications wiring to
remain in the Building upon the expiration or earlier termination of the Lease,
Tenant shall provide Landlord’s property manager with a wiring diagram
(including a riser diagram) of the Premises showing all cable numbers and
locations of any such remaining cable systems, and with a set of as-built
drawings of such cable systems equipment and other non-wiring improvements.

 

2.                                       Tenant
shall provide to the Landlord’s property manager with a diagram of any existing
cabling in the Premises, showing locations and numbers, prior to the space
being vacated.

 

F.                                      REMOVAL.

 

1.                                       Wires
and cables installed by or for Tenant shall be removed at the expense of Tenant
at the end of the Term, unless Landlord agrees otherwise in writing.

 

 

2.                                       Any
unidentified or terminated cable and/or equipment located in the Building and
outside of a tenant’s premises, including in a TC or on the roof, becomes the
property of Landlord and, as such, can be removed and disposed by Landlord’s
property manager at its sole discretion.

 

G.                                    GENERALLY.

 

1.                                       Tenant
and its employees, contractors and agents will comply with the Landlord’s
property manager ‘s sign-out/sign-in system for access to the TC’s and/or the
roof.

 

2.                                       All
capitalized terms not defined herein have the meanings given them in the
Lease.  In the event of any conflict or
ambiguity between the terms of these Rules and the Lease, the terms of the
Lease will govern.

 

3.                                       These
Rules may be updated, amended or otherwise modified from time to time in
the discretion of Landlord.

 

4.                                       All
contractors will comply with the Building contractor’s rules and
regulations.

 

 

EXHIBIT I

 

TELECOMMUNICATIONS
LICENSE AGREEMENT

 

This License
Agreement (the “Agreement”) made as of                            ,
        , between EQUASTONE 2200
FARADAY, LLC, a Delaware limited liability company, with a management office at
Equus Realty Advisors, LLC, 800 Silverado Street, Suite 300, La Jolla,
California 92037 (“Licensor”), and                                        ,
a                            ,
with an office at                                                                                  
(“Licensee”).

 

WHEREAS,
Licensor recognizes that Licensee is authorized to provide public utility
telecommunications services in the building owned by Licensor located at 2200
Faraday Avenue, Carlsbad, California (the “Building”) under the conditions
described herein;

 

WHEREAS, the
parties hereto wish to provide for the terms and conditions relating to the
provision of such services.

 

NOW,
THEREFORE, in consideration of the mutual covenants herein expressed and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Licensee and Licensor agree as follows:

 

1.                                      Grant.

 

1.1.1                        Licensor
hereby grants to Licensee a non-exclusive license (the “License”) to install,
operate, maintain, repair and replace fiber optic cable and associated
equipment (the “Facilities”) within portions of the Building, limited to
location of the equipment and cable as described herein within the
Building.  Notwithstanding the foregoing
or any other term of this Agreement, if the Facilities are not completely
installed in the Building by no later than six (6) months after the date
of this Agreement, the license granted herein shall terminate automatically and
Licensee shall promptly remove any and all equipment located in the Building
and have no further rights hereunder.

 

1.1.2                        Licensor
shall provide approximately       square feet of floor
space located in the Building in a vacant location reasonably acceptable to
Licensor and Licensee.  Said floor space,
together with all other locations wherein the Facilities are located within the
Building are referred to herein as the “Equipment Space.”  The rental charge for the Equipment Space
shall be $         per month during the
Initial Term (defined below in Section 9), payable on the first day of
each month.  The Equipment Space will be
used by Licensee as the Building service site.

 

1.1.3                        The
Equipment Space shall include reasonable access to vertical and horizontal
shafts within the Building to enable Licensee to provide Licensee’s public
utility telecommunications services to occupants of the Building, provided,
however, that Licensee agrees not to interrupt or interfere with any existing
tenants’ business or other telecommunications provider operating within the
Building.

 

1.1.4                        Following
notice to and approval of Licensor, as set forth in Section 4 herein,
Licensee shall have reasonable right of access to the Building and the right to
construct, where necessary and at its expense, building point of entry and
conduit facilities associated with installing the Facilities in the Building.

 

1.1.5                        Licensee
shall have the right to permit tenants of the Building to locate such tenant’s
telecommunications equipment in the Equipment Space, with all such access
controlled by and the responsibility of Licensee.

 

1.1.6                        The
License granted herein is not exclusive and is subject to termination as
provided herein.  Licensor hereby
reserves the right to grant, renew or extend similar licenses to others on such
terms and conditions as Licensor desires.

 

1

 

1.1.7                        Nothing
contained herein shall be construed as granting to Licensee any property or
ownership rights in the Building or to create a partnership or joint venture
between Licensor and Licensee.

 

2.                                      Use.  Licensee shall use the Facilities installed
within the Building solely to provide public utility telecommunications
services to or for the benefit of tenants of the Building and to no other party
or parties (with such restriction being deemed to include but not limited to
other telecommunication companies), and for no other use or purpose.

 

3.                                      Electric
Utilities.  At the request of the
Licensor, Licensee shall pay the cost associated with the installation of a
separate electrical panel and meter for the Facilities in the Equipment Space
and shall be responsible for the electrical and any HVAC costs attributable to
such Facilities in excess of that typically provided to tenants in the
Building.

 

4.                                      Construction.  Prior to the commencement of any work,
Licensee shall, at its sole cost and expense, prepare and deliver to Licensor
working drawings, plans and specifications (the “Plans”), detailing the
location and size of the Facilities and specifically describing the proposed
construction and work including the route from the fiber optic network in the
street to the Building.  No work shall
commence until Licensor has approved the Plans, which approval will not be
unreasonably withheld or unduly delayed. 
Upon receipt, Licensor shall have fifteen (15) days to review and
approve the Plans.  Subject to all
governmental laws, rules and regulations, Licensee shall:

 

4.1.1                        perform
such construction in a safe manner consistent with the Plans and generally
accepted construction standards;

 

4.1.2                        perform
such construction and work in such a way as to not cause interference with the
operation of the Building;

 

4.1.3                        obtain,
prior to the commencement of any construction and work, necessary federal,
state and municipal permits, licenses and approvals; and

 

4.1.4                        provide
insurance certificates as required by Licensor providing for the insurance
coverages as required herein and naming Licensor and parties designated by
Licensor as additional insureds under Licensee’s insurance.

 

5.                                      Licensee’s
Covenants.  Licensee hereby covenants and
agrees:

 

5.1.1                        to keep
the Facilities in good order, repair and condition throughout the Term (as
hereinafter defined) and promptly and adequately repair all damage to the
Building caused by Licensee, other than ordinary wear and tear;

 

5.1.2                        to comply
with federal, state and municipal laws, orders, rules and regulations
applicable to the Facilities;

 

5.1.3                        not to
disrupt, adversely affect or interfere with other providers of services in the
Building or with any occupant’s use and enjoyment of his leased premises or the
common areas of the Building;

 

5.1.4                        Upon
expiration of the Term, or upon earlier termination of this Agreement, Licensee
shall quit and surrender possession of the Equipment Space to Licensor in as
good order and condition as when Licensee took possession and as thereafter
improved by Licensee, reasonable wear and tear excepted.  Upon such expiration or termination, Licensee
shall, without expense to Licensor, promptly remove or cause to be removed all
Facilities and personal property of Licensee and repair any damage caused thereby
and remove all debris and rubbish as directed by Licensor.  Any Facilities not so removed within
sixty (60) days after termination shall, at Licensor’s option, become
property of Licensor.

 

2

 

6.                                      Facilities.  The Facilities, and any other personal
property in the Building which belongs to Licensee, shall be there at the sole
risk of Licensee, and Licensor shall not be liable for damage thereto or theft,
misappropriation or loss thereof, unless caused solely by Licensor’s negligence
or wilful misconduct and such damage or loss is not covered by Licensee’s
insurance required to be maintained under the terms of this Agreement.

 

7.                                      Condition
of Equipment Space and Building. 
Licensor makes no warranty or representation that the Building is
suitable for the use described in Section 2 of this Agreement, it being
assumed that Licensee has satisfied itself thereof.  Licensee has inspected the Building, accepts
the same “as is” and agrees that Licensor is under no obligation to perform any
work or provide any materials to prepare the Building for Licensee.

 

8.                                      Access.  Licensor shall provide Licensee reasonable
access to the Building, twenty-four (24) hours a day, seven (7) days
a week, three hundred sixty-five (365) days a year, so that Licensee may
perform installation, operation, maintenance, replacement and repair functions
all in accordance with Licensor’s rules and regulations.  Licensee will check in with Building security
personnel prior to any inspection or commencement of any such work.

 

9.                                      Term.  Commencing on the date first written above,
this Agreement shall have a term of                      
(  ) years.  The License
granted hereby may not be revoked during the Term, except as provided in Section 15
and in the Addendum (as described below).

 

10.                               Relocation
of Equipment.  Licensor reserves
the right to cause Licensee to relocate the Facilities of Licensee contained
within the Equipment Space to other areas during the Term of this Agreement at
Licensor’s discretion provided that (i) Licensor shall supervise the
relocation, (ii) any and all costs of such relocation shall be borne by
Licensor and (iii) Licensor acknowledges that Licensee needs to provide
telecommunication services to its customers and Licensor agrees that any such
relocation shall be made in conjunction with Licensee and in a manner so as to
avoid any material, adverse interruption in the services provided by Licensee.

 

11.                               Insurance.

 

11.1                           Licensee
shall during the entire Term maintain, at Licensee’s expense, the following
insurance coverage:

 

11.1.1                  Commercial
General Liability Insurance for personal injury and property damage claims
arising out of Licensee’s occupation or use of the Equipment Space and from its
business operations, and including liability arising under any indemnity set
forth in this Agreement in amounts of not less than $5 million for each
occurrence and $5 million for all occurrences each year.

 

11.1.2                  The Licensee
will maintain in force all required workers’ compensation or other similar
insurance pursuant to all applicable state and local statutes.

 

If Licensee at
any time fails to maintain the insurance as required herein, Licensor shall
have right and option, but not the obligation, to maintain any or all of the
insurance which is required in this Section 11.1 at Licensee’s expense.

 

11.2                           The
minimum insurance requirements set forth in this Agreement shall not limit the
liability of Licensee under this Agreement. 
The Licensor, and any parties specified by the Licensor, shall be named
as additional insured under the Licensee’s insurance.  All insurance companies providing insurance
pursuant to this Section 11 shall be rated at least A-XII in the Best’s
Key Rating Guide and shall be otherwise reasonably acceptable to Licensor and
licensed and qualified to do business in the State of California.  Insurance provided by the Licensee shall be
primary as to all covered claims and any insurance carried by Licensor is not
excess and is non-contributing.  Licensee’s
insurance policies must not be cancelable or modifiable except upon
thirty (30) days prior written notice to Licensor and any specified
mortgagee of Licensor.  Copies of the
original certificates, as well as endorsements, of insurance with respect to
each policy shall be delivered to the Licensor or its agent upon execution of
this Agreement, and thereafter, at least thirty (30) days before the
expiration of each existing policy.

 

3

 

11.3                           Licensor
has the right at any time, but not the obligation, to change, cancel, decrease
or increase any insurance required or specified under this Agreement, but in no
event shall any such increased amounts of insurance or such other reasonable
types of insurance be in excess of that required by comparable landlords in
Southern California.  Licensor at its
option may obtain any of the required insurance directly or through umbrella
policies covering the Building and other assets owned by Licensor.

 

11.4                           Licensee
releases Licensor and its agents and employees from all liability, or anyone
claiming through or under them, by way of subrogation or otherwise, for any
loss or damage to property caused by or resulting from risks insured against
this Agreement, pursuant to insurance policies carried by the parties which are
in force at the time of the loss or damage or required to be carried
hereunder.  Licensee will request its
insurance carrier to include in policies provided pursuant to this Agreement an
endorsement recognizing this waiver of subrogation.

 

12.                               Liens.  Licensee shall be responsible for the
satisfaction or payment of any liens for any provider of work, labor, material
or services claiming by, through or under Licensee.  Licensee shall also indemnify, hold harmless,
defend and protect Licensor against any such liens, including the reasonable
fees of Licensor’s attorneys.  Such liens
shall be discharged by Licensee within thirty (30) days after notice of
filing thereof by bonding, payment or otherwise, provided that Licensee may
contest, in good faith and by appropriate proceedings, any such liens, so long
as there is no cloud on the Building’s title during and/or as a result of such
contest.

 

13.                               Performance
at Work.  Licensee may contract
or subcontract any portion of construction and/or installation work within the
Building contemplated by this Agreement to any person or entity competent to
perform such work; provided, however, that Licensor has reasonable approval
rights regarding such contractors and subcontractors, and if Licensor objects
to any such person or entity, Licensee shall contract or subcontract with
another person or entity approved by Licensor. 
In no event shall such subcontract relieve Licensee of any of its
obligations under this Agreement.

 

14.                               Events
of Default.  Each of the
following occurrences shall constitute an “Event of Default” under this
Agreement:

 

14.1.1                  Failure of
Licensee to pay any monetary or other obligation within five (5) days of
when due.

 

14.1.2                  If Licensee
abandons or deserts the Facilities after written notice from Licensor during
the Term hereof for a period of more than ten (10) consecutive days
or Licensee removes from the Building (and does not immediately replace or
substitute equipment for) all of the Facilities.

 

14.1.3                  Interference
caused to pre-existing telecommunications facilities of Building systems by the
installation, operation, maintenance, replacement or repair of Licensee’s
Facilities, or interference caused by any changes made by Licensee in its
Facilities, where not cured within five (5) days after written notice
to Licensee.

 

14.1.4                  Failure of
Licensee to comply with any other provision herein within fifteen (15)
days after written notice from Licensor.

 

15.                               Termination:
Remedies.  If the Licensee shall
have failed to cure the Event of Default within the applicable cure period, if
any, Licensor may elect to terminate this Agreement, whereupon Licensee shall
forthwith remove its Facilities from the Equipment Space and elsewhere in the
Building in a neat and orderly manner and as of the date of such removal
neither party shall have any claim against the other, except for claims that
may have arisen prior to such termination, or provisions of this Agreement
which survive termination and this Agreement shall be deemed terminated and of
no further force and effect.

 

16.                               Assignment.  Licensee shall not assign or transfer this
Agreement without the written consent of Licensor, which consent will not be
unreasonably withheld or unduly delayed; except that, upon fifteen (15)
days prior written notice to the Licensor, Licensee may, without obtaining
Licensor’s prior consent, make such

 

4

 

assignment to: (a) any firm or corporation which Licensee
controls, is controlled by or is under common control with; (b) any
partnership in which Licensee has controlling interest; or (c) to any
entity which succeeds to all or substantially all of Licensee’s assets whether
by merger, sale or otherwise; provided that the assignee assumes in full the
obligation of Licensee under this Agreement and further provided that Licensee
shall not be released and shall remain liable for the full performance of all
of the terms and conditions of the Agreement by any such assignee.

 

17.                               Notice.  Every notice required or permitted hereunder
shall be in writing and shall be deemed to have been duly given (i) if
mailed, three (3) business days after mailed by certified or registered
mail, returned receipt requested, or (ii) upon receipt if by personal
delivery or telecopy or (iii) the next business day if sent by overnight service,
to the party’s address set forth in the introductory paragraph of the
Agreement.  Either party may change its
address for the purpose of notice hereunder by providing the other party with
notice of the new address in writing.

 

18.                               Governing
Law.  This Agreement shall be
governed by and construed under the laws of the State of California.

 

19.                               Interference.  Licensee warrants and represents that neither
its equipment nor the installation thereof will interfere with the computer,
software, communication, information or other electronic equipment or systems
of any other tenant or telecommunications provider or occupant of the
Building.  If Licensor demonstrates that
Licensee is the source of the interference, Licensee shall immediately stop the
operation of its equipment and systems until such interference is cured, and if
necessary, pay any and all cost incurred by the interference with the affected
party(ies).

 

20.                               Insurance
Rates.  If any equipment,
installation or activity of Licensee within the Building shall increase
Licensor’s insurance rates Licensee shall upon demand promptly pay to the
Licensor the amount of such increase for each insurance policy term during the
Term of this Agreement.

 

21.                               Addendum
to License Agreement.  The
Addendum to License Agreement (“Addendum”) attached hereto is incorporated
herein and made a part hereof by this reference.  In the event of any inconsistency between the
terms and provisions of this Agreement and the Addendum, the Addendum shall
control.

 

IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of the date and
year first above written.

 

	
   

  	
  Licensor:

  
	
   

  	
   

  
	
   

  	
  EQUASTONE
  2200 FARADAY, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Equastone Faraday, LLC,

  
	
   

  	
   

  	
  a Delaware limited
  liability company,

  
	
   

  	
   

  	
  its Manager

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Licensee:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
								

 

5

 

ADDENDUM TO
TELECOMMUNICATIONS LICENSE AGREEMENT

 

This Addendum
to Telecommunications License Agreement (“Addendum”) is attached to and made a
part of that certain Telecommunications License Agreement dated as of                           ,
             by and
between EQUASTONE 2200 FARADAY, LLC, a Delaware limited liability company(“Licensor”),
and                           ,
a                           ,
(“Licensee”) (the “Agreement”).  In
addition to the terms and conditions of the Agreement, Licensor and Licensee
agree as follows:

 

1.                                      Interference.  If any third party or any other licensee
shall interfere with the enjoyment by Licensee of the rights granted under this
Agreement, Licensee shall have the right to take appropriate action against
such interfering party or to terminate this Agreement upon thirty (30) days
prior written notice to Licensor provided, however, that Licensor shall not be
liable in any manner to Licensee for any expenses or damages which it may
suffer as a result of such interference and/or termination of this Agreement by
Licensee.

 

2.                                      Indemnification
and Exculpation.  To the fullest
extent permitted by law, Licensee hereby agrees to indemnify, defend and
protect Licensor and Licensor’s partners, officers, affiliates, agents and
employees (collectively the “Licensor Parties”) against and hold Licensor and
Licensor Parties harmless from any and all costs (including reasonable
attorneys’ fees and costs both incurred in connection with the matters
described herein and incurred in enforcing Licensee’s obligations and
agreements in this Section 2), claims, losses, proceedings, liabilities,
expenses or causes of action (collectively “Liabilities and Costs”) which
allegedly result from or arise out of or are in connection with (i) any
act, or omission or negligence of Licensee or any of Licensee’s contractors,
licensees, agents or employees wheresoever the same may occur, or (ii) any
use of any areas of the Building or adjacent areas by Licensee including, but
not limited to, Liabilities and Costs which result from or arise out of or are
in connection with Licensee’s conduct of its business and related matters, or (iii) any
accident, injury, death or damage to any person or property occurring in, on or
about the Building that is allegedly caused by Licensee or Licensee’s
contractors, agents or employees or Licensee’s equipment, or the operation of
Licensee’s business, or (iv) any default by Licensee under this
Agreement.  In no event shall Licensor be
responsible to Licensee for any loss or interruption of use of Licensee’s
business operations as a result of interruption of utilities, or otherwise,
Licensee acknowledging and agreeing that Licensee, will maintain business
interruption insurance to protect itself against such events.  To the fullest extent permitted by law,
Licensee waives all claims in law, equity or otherwise against Licensor and
Licensor Parties arising out of, and knowingly and voluntarily assumes the risk
of, and agrees that Licensor and Licensor Parties shall not be liable to
Licensee for any injury or death of any person or loss of, injury or damage to
or destruction of any property of Licensee, including the resulting loss of
use, economic losses and consequential damages of any kind from any cause,
providing that the foregoing exculpation shall not apply to claims against
Licensor or Licensor Parties to the extent that a final judgment of a court of
competent jurisdiction establishes that the injury, loss, damage or destruction
was approximately caused by Licensors’ or Licensor Parties’ negligence or
willful injury, subject to the other provisions of this Agreement.

 

3.                                      Licensor
Right to Terminate.  In addition
to any termination rights of Licensor in Section 15 of the Agreement,
Licensor shall also have the right to terminate this Agreement in the event (i) of
any damage or destruction to the Building or project of which the Building is a
part, where Licensor elects not to rebuild or where it is not feasible in
Licensor’s judgment to continue this Agreement, (ii) of any condemnation
including the Building or project of which the Building is a part, where it is
not feasible, in Licensor’s judgment, to continue this Agreement.

 

4.                                      Rules and
Regulations.  Licensee will
comply with all rules and regulations of the Building as reasonably
enacted by Licensor from time to time.

 

5.                                      Alterations
by Licensee.  Licensee agrees
that Licensee will not make any alterations to the raceways or equipment space
without the prior written consent of Licensor. 
Licensee shall not place signs in any of the doors or corridors leading
to the raceways or equipment space or elsewhere in the Building without first obtaining
the prior consent of Licensor.  Licensor
shall have the right at its option, at Licensee’s costs, to remove such signs
placed by Licensee without Licensor’s prior written consent.

 

1

 

6.                                      Protection
of Equipment.  Licensee
acknowledges that interruptions in utility services are not uncommon in
facilities such as the Building and that any sensitive electronic equipment
which may be used in the raceways or equipment space will be protected by
Licensee from utility service interruptions through use of backup power
supplies, surge protectors and other appropriate safety systems.  Licensee acknowledges that it has taken all
precautionary steps that it deems necessary to protect such equipment in the
Building.

 

7.                                      Security.  Licensee understands that the equipment
space, if any, must be kept locked and secured at all times and that the
electrical or telephone rooms must not be available or open to the public.  If Licensor maintains limited access to the
Building at any time, Licensee shall be provided with means of access (such as
by way of keys, or card entry system). 
Licensor may charge a reasonable deposit for each key or entry card.  Licensor shall have no liability to Licensee,
its employees, agents or invitees due to theft or burglary or for damages done
by unauthorized persons in the equipment or mechanical rooms of the
Building.  Licensee shall fully cooperate
with Licensor’s efforts to maintain security in the Building and shall follow
all regulations promulgated by Licensor with respect thereto.  Licensee further agrees to surrender all keys
or entry cards upon expiration or earlier termination of this Agreement.

 

8.                                      Connections
to Public Streets, Utilities or Other Buildings.  Licensee acknowledges that Licensor has no
obligation to ensure or guarantee Licensee necessary connections to public
streets, utilities, or adjacent buildings that may be necessary for the
operation of Licensee’s telecommunications equipment in the Building.  It is solely the responsibility of Licensee
to negotiate agreements with public utilities or third parties for these
connections.  Notwithstanding the above,
in areas owned, controlled or managed by Licensor within the immediate area of
the Building, Licensor shall provide Licensee access necessary for operation of
Licensee’s telecommunications equipment.

 

9.                                      Hazardous
Substances.

 

9.1                                 Prohibition
of Use.  Licensee shall not cause or
permit any Hazardous Substance to be used, stored, generated, or disposed of on
or in the Building by Licensee, Licensee’s agents, employees, contractors, or
invitees without first obtaining Licensor’s written consent.  If Hazardous Substances are used, stored,
generated, or disposed of on or in the Building except as permitted above, or
if the Building becomes contaminated in any manner for which Licensee is
legally liable, Licensee shall protect, indemnify, defend and hold harmless the
Licensor and Licensor Parties from any and all claims, damages, protect, fines,
judgments, penalties, costs, liabilities, or losses (including, without
limitation, a decrease in value of the Building, damages caused by loss or
restriction of rentable or usable space, or any damages caused by adverse
impact on marketing of the space, and any and all sums paid for settlement of
claims, litigation expenses, attorneys’ fees, consultant, and expert fees) of
whatever kind or nature, known or unknown, contingent or otherwise, arising
during or after the Term of this Agreement and arising as a result of that
contamination by Licensee.  This
indemnification includes, without limitation, any and all costs incurred
because of any investigation of the site or any cleanup, removal, or
restoration mandated by a federal, state, or local agency or political
subdivision.  Without limitation of the
foregoing, if Licensee causes or permits the presence of any Hazardous
Substance on the Building and that results in contamination, Licensee shall
promptly, at its sole expense, take any and all necessary actions to return the
Building to the condition existing prior to the presence of any such Hazardous
Substance in the Building.  Licensee
shall first obtain Licensor’s approval for any such remedial action.  The provisions of this Paragraph shall be in
addition to any other obligations and liabilities Licensee may have to Licensor
at law or equity and shall survive the transactions contemplated herein and
shall survive the termination of this Agreement.

 

9.2                                 Definition.  As used herein, “Hazardous Substance” means
any substance that is toxic, ignitable, reactive, or corrosive and that is now
or hereafter regulated by any local government, the State of California, or the
United States Government.  “Hazardous
Substance” includes any and all material or substances that are defined as “hazardous
waste,”  “extremely hazardous waste,” or
a “hazardous substance” pursuant to state, federal, or local governmental
law.  “Hazardous Substance” includes, but
is not restricted to, asbestos, polychlorobiphenyls (“PCB’s”), and petroleum.

 

9.3                                 Containers.  Any Hazardous Substance permitted as provided
in Paragraph 10.1 and all containers therefor, shall be used, kept, stored, and
disposed of in a manner that complies with all federal, state, and local laws
or regulations applicable to Hazardous Substance.

 

2

 

9.4                                 Releases.  Licensee shall not discharge, leak, or emit,
or permit to be discharged, leaked, or emitted, any material into the
atmosphere, ground, sewer system, or any body of water, if that material (as is
reasonably determined by the Licensor, or any governmental authority) does or
may pollute or contaminate the same, or may adversely affect (a) the
health, welfare, or safety of persons, whether located in the Building or
elsewhere, or (b) the condition, use or enjoyment of the Building or any
other real or personal property.

 

9.5                                 Hazardous
Substance List.  At the commencement
of each year, Licensee shall disclose to Licensor the names and approximate
amounts of all Hazardous Substance that Licensee intends to store, use, or
dispose of in the Building in the coming year, if any.  In addition, at the commencement of each
year, beginning with the second year, Licensee shall disclose to Licensor the
names and amounts of all Hazardous Substances that were actually used, stored,
or disposed of in the Building if those materials were not previously
identified to Licensor at the commencement of the previous year.

 

10.                               Estoppel
Certificates.  Within ten (10) days
following a request by Licensor, Licensee shall execute and deliver to Licensor
an estoppel certificate containing such information as reasonably requested by
Licensor, Licensor’s mortgagee or prospective mortgagee or any prospective
investor or purchaser of the Building. 
The failure of Licensee to timely execute and deliver such estoppel
certificate shall constitute a default under this Agreement.

 

11.                               Subordination.  As this Agreement is a license, the License
granted herein shall be subject and subordinate to any and all matters whether
or not of record, including but not limited to, any covenants, conditions and
restrictions or the lien of any mortgage or deed of trust now existing or
hereafter executed in any amount for which the Building or any portion of the
project of which the Building is a part. 
At the election of any party which constitutes a successor in interest
to Licensor, Licensee shall, notwithstanding any subordination, attorn to and
become the Licensee of such successor in interest.  In addition to the foregoing, Licensee
covenants and agrees to execute and deliver within five (5) days after
request by Licensor, in the form requested by Licensor, any additional
documents evidencing the subordination of this Agreement to any such
items.  The failure of Licensee to
execute such documents within this time frame shall constitute a default
hereunder.

 

12.                               General
Provisions.

 

12.1                           Exculpation.  The obligations of Licensor under this
Agreement do not constitute personal obligations of Licensor, or its partners,
directors, officers, shareholders or agents and Licensee shall look solely to
the Building and to no other assets of Licensor for satisfaction of any
liability with respect to this Agreement and will not seek recourse against the
partners, directors, officers, shareholders, or agents of Licensor herein, nor
against any of their personal assets for such satisfaction.  In addition (i) no partner or officer or
agent of Licensor shall be sued or named as a party in any suit or action
(except as may be necessary to secure jurisdiction over Licensor), (ii) no
service of process shall be made against any partner or officer or agent of
Licensor (except as may be necessary to secure jurisdiction over Licensor), (iii) no
partner or officer or agent of Licensor shall be required to answer or
otherwise plead to any service of process and no judgment will be taken against
any partner or officer or agent of Licensor, (iv) no writ of execution
will ever be levied against the assets of any partner or officer or agent of
Licensor and (v) these covenants and agreements are enforceable both by
Licensor and also by any partner or officer or agent of Licensor.

 

12.2                           Sale
of Building.  Any conveyance by
Licensor of its interest in the Building shall release and discharge Licensor
from all obligations hereunder, and Licensee agrees to look solely to such
transferee for all obligations of Licensor and agrees to attorn to such
successor in interest.

 

12.3                           Attorneys’
Fees.  If either party commences
litigation against the other for the specific performance of this Agreement,
for damages for the breach hereof or otherwise for enforcement of any remedy
hereunder, the parties hereto agree to and hereby do waive any right to a trial
by jury and, in the event of any such commencement of litigation, the
prevailing party shall be entitled to recover from the other party such costs
and reasonable attorneys’ fees as may have been incurred.

 

12.4                           Lender
Modification.  If, in connection with
obtaining any loans or refinancing for the Building, a lender shall request
reasonable modifications to this Agreement as a condition to such financing,

 

3

 

Licensee will not
unreasonably withhold, delay or defer its consent thereto, provided that such
modifications do not increase the obligations of Licensee hereunder or
materially adversely affect Licensee’s rights hereunder.

 

12.5                           Brokers.  Licensor and Licensee hereby warrant to each
other that they have had no dealings with any real estate broker or agent in
connection with the negotiation of this Agreement, and that they know of no
real estate broker or agent who is entitled to a commission in connection with
this Agreement.  Each party agrees to
indemnify and defend the other party against and hold the other party harmless
from any and all claims, demands, losses, liabilities, lawsuits, judgments, and
costs and expenses (including, without limitation, reasonable attorneys’ fees)
with respect to any leasing commission or equivalent compensation alleged to be
owing on account of the indemnifying party’s dealings with any real estate
broker or agent.

 

12.6                           Entire
Agreement.  The Agreement together
with this Addendum contain the entire agreement of the parties as to the
License as described herein, and may only be amended in writing, executed by
both parties.

 

12.7                           Licensor
Right to Cure Licensee Default.  If
Licensee defaults in any obligation hereunder, Licensor shall have the right,
but not the obligation, to cure such default without waiving its right based
upon such default and without releasing Licensee from any obligations
hereunder.  Upon such cure, Licensee
shall pay to Licensor within five (5) days after delivery by Licensor to
Licensee of a statement therefor:  (i) sums
equal to expenditures reasonably made and obligations incurred by Licensor in
connection with the remedying by Licensor of Licensee’s defaults; and (ii) sums
equal to all losses, costs, liabilities, damages and expenses relating thereto.

 

12.8                           Authority.  If Licensee is a corporation or partnership,
or if any general partner(s) of Licensee is a corporation, then each individual
executing this Agreement on behalf of Licensee hereby represents and warrants
that Licensee (or such corporate partner, as the case may be) is a duly formed
and existing entity qualified to do business in California and that Licensee
(or such corporate partner, as the case may be) has full right and authority to
execute and deliver this Agreement and that each person signing on behalf of
Licensee (or such corporate partner, as the case may be) is authorized to do
so.

 

IN WITNESS
WHEREOF, Licensor and Licensee have executed this Addendum concurrently with
executing the Agreement to which this Addendum is attached.

 

	
   

  	
  Licensor:

  
	
   

  	
   

  
	
   

  	
  EQUASTONE
  2200 FARADAY, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Equastone Faraday, LLC,
  

  
	
   

  	
   

  	
  a Delaware limited
  liability company,

  
	
   

  	
   

  	
  its Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Licensee:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
											

 

4

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