Document:

Exhibit 10.3

FAVRILLE,
INC.

STOCK OPTION GRANT NOTICE

 

INITIAL GRANT

(2005
Non-Employee Directors’ Stock Option Plan)

FAVRILLE, INC. (the “Company”), pursuant to its 2005 Non-Employee
Directors’ Stock Option Plan (the “Plan”), hereby grants to Optionholder an
option to purchase the number of shares of the Company’s Common Stock set forth
below.  This option is subject to all of
the terms and conditions as set forth herein and in the Stock Option Agreement,
the Plan and the Notice of Exercise, all of which are attached hereto and
incorporated herein in their entirety.

	
  Optionholder:

  	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  	
   

  
	
  Number of Shares
  Subject to Option:

  	
   

  	
   

  	
   

  
	
  Exercise Price
  (Per Share):

  	
   

  	
   

  	
   

  
	
  Total Exercise
  Price:

  	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
  The day before
  the 10th anniversary of the Date of Grant

  

 

	
  Type of
  Grant:

  	
   

  	
  Nonstatutory
  Stock Option

  
	
   

  	
   

  	
   

  
	
  Exercise
  Schedule:

  	
   

  	
  Same as Vesting
  Schedule

  
	
   

  	
   

  	
   

  
	
  Vesting
  Schedule:

  	
   

  	
  1/36th of
  the shares vest each month following the Date of Grant.

  
	
   

  	
   

  	
   

  
	
  Payment:

  	
   

  	
  By one or a
  combination of the following items (described in the Stock Option Agreement)
  and/or the Plan:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  By cash or check

  
	
   

  	
   

  	
  o

  	
  Pursuant to a
  Regulation T Program if the Shares are publicly traded

  
	
   

  	
   

  	
  o

  	
  By delivery of
  already-owned shares if the Shares are publicly traded

  
	
   

  	
   

  	
  o

  	
  Net exercise if
  the Company has adopted FAS 123, as revised, and has established procedures
  for net exercise at the time of such exercise

  

 

Additional
Terms/Acknowledgements:  The undersigned Optionholder
acknowledges receipt of, and understands and agrees to, this Grant Notice, the
Stock Option Agreement and the Plan. 
Optionholder further acknowledges that as of the Date of Grant, this
Grant Notice, the Stock Option Agreement and the Plan set forth the entire
understanding between Optionholder and the Company regarding the acquisition of
stock in the Company and supersede all prior oral and written agreements on
that subject with the exception of (i) options previously granted and delivered
to Optionholder under the Plan, and (ii) the following agreements only:

	
  OTHER AGREEMENTS:

  	
   

  
	
   

  	
   

  

 

	
  FAVRILLE, INC.

  	
  OPTIONHOLDER:

  
	
   

  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  	
   

  	
  Signature

  	
   

  
	
   

  Title:

  	
   

  	
   

  	
   

  Date:

  	
   

  	
   

  
	
   

  Date:

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

ATTACHMENTS:                         Stock Option Agreement, 2005 Non-Employee Directors’
Stock Option Plan and Notice of ExerciseExhibit 10.4

FAVRILLE,
INC.

STOCK OPTION GRANT NOTICE

 

ANNUAL GRANT

(2005
Non-Employee Directors’ Stock Option Plan)

FAVRILLE, INC. (the “Company”), pursuant to its 2005 Non-Employee
Directors’ Stock Option Plan (the “Plan”), hereby grants to Optionholder an
option to purchase the number of shares of the Company’s Common Stock set forth
below.  This option is subject to all of
the terms and conditions as set forth herein and in the Stock Option Agreement,
the Plan and the Notice of Exercise, all of which are attached hereto and
incorporated herein in their entirety.

	
  Optionholder:

  	
   

  	
   

  	
   

  
	
  Date of Grant:

  	
   

  	
   

  	
   

  
	
  Number of Shares
  Subject to Option:

  	
   

  	
   

  	
   

  
	
  Exercise Price
  (Per Share):

  	
   

  	
   

  	
   

  
	
  Total Exercise
  Price:

  	
   

  	
   

  	
   

  
	
  Expiration Date:

  	
   

  	
  The day before
  the 10th anniversary of the Date of Grant

  

 

	
  Type of
  Grant:

  	
   

  	
  Nonstatutory
  Stock Option

  
	
   

  	
   

  	
   

  
	
  Exercise
  Schedule:

  	
   

  	
  Same as Vesting
  Schedule

  
	
   

  	
   

  	
   

  
	
  Vesting
  Schedule:

  	
   

  	
  1/12th of
  the shares vest at the end of each month following the Date of Grant.

  
	
   

  	
   

  	
   

  
	
  Payment:

  	
   

  	
  By one or a
  combination of the following items (described in the Stock Option Agreement):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  By cash or check

  
	
   

  	
   

  	
  o

  	
  Pursuant to a
  Regulation T Program if the Shares are publicly traded

  
	
   

  	
   

  	
  o

  	
  By delivery of
  already-owned shares if the Shares are publicly traded

  
	
   

  	
   

  	
  o

  	
  Net exercise if
  the Company has adopted FAS 123, as revised, and has established procedures
  for net exercise at the time of such exercise

  

 

Additional
Terms/Acknowledgements:  The undersigned Optionholder
acknowledges receipt of, and understands and agrees to, this Grant Notice, the
Stock Option Agreement and the Plan. 
Optionholder further acknowledges that as of the Date of Grant, this
Grant Notice, the Stock Option Agreement and the Plan set forth the entire
understanding between Optionholder and the Company regarding the acquisition of
stock in the Company and supersede all prior oral and written agreements on
that subject with the exception of (i) options previously granted and delivered
to Optionholder under the Plan, and (ii) the following agreements only:

	
  OTHER AGREEMENTS:

  	
   

  
	
   

  	
   

  

 

	
  FAVRILLE, INC.

  	
  OPTIONHOLDER:

  
	
   

  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature

  	
   

  	
   

  	
  Signature

  	
   

  
	
   

  Title:

  	
   

  	
   

  	
   

  Date:

  	
   

  	
   

  
	
   

  Date:

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

ATTACHMENTS:                         Stock Option Agreement, 2005 Non-Employee Directors’
Stock Option Plan and Notice of ExerciseExhibit 10.5

 

AMENDED
AND RESTATED OFFICE LEASE

 

KILROY
REALTY

 

PACIFIC
CORPORATE CENTER 

 

 

KILROY
REALTY, L.P.,

 

a Delaware limited partnership,

 

as Landlord,

 

and

 

FAVRILLE,
INC.,

 

a Delaware corporation,

 

as Tenant.

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1

  	
  PREMISES, BUILDING, PROJECT, AND COMMON AREAS

  	
  6

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  LEASE TERM; OPTION TERM(S)

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  BASE RENT

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  ADDITIONAL
  RENT

  	
  12

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  USE
  OF PREMISES

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  SERVICES AND UTILITIES

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  REPAIRS

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  ADDITIONS AND ALTERATIONS

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  COVENANT AGAINST LIENS

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  INSURANCE

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
  DAMAGE AND DESTRUCTION

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
  NONWAIVER

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
  CONDEMNATION

  	
  36

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14

  	
  ASSIGNMENT AND SUBLETTING

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15

  	
  SURRENDER OF PREMISES; OWNERSHIP AND
  REMOVAL OF TRADE FIXTURES

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE 16

  	
  HOLDING OVER

  	
  42

  
	
   

  	
   

  	
   

  
	
  ARTICLE 17

  	
  ESTOPPEL CERTIFICATES

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE 18

  	
  SUBORDINATION

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE 19

  	
  DEFAULTS; REMEDIES

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE 20

  	
  COVENANT OF QUIET ENJOYMENT

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE 21

  	
  SECURITY DEPOSIT; LETTER OF CREDIT

  	
  48

  
	
   

  	
   

  	
   

  
	
  ARTICLE 22

  	
  TELECOMMUNICATIONS EQUIPMENT

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE 23

  	
  SIGNS

  	
  53

  

 

ii

 

	
  ARTICLE 24

  	
  COMPLIANCE WITH LAW

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE 25

  	
  LATE CHARGES

  	
  56

  
	
   

  	
   

  	
   

  
	
  ARTICLE 26

  	
  LANDLORD’S RIGHT TO CURE DEFAULT; PAYMENTS
  BY TENANT

  	
  56

  
	
   

  	
   

  	
   

  
	
  ARTICLE 27

  	
  ENTRY BY LANDLORD

  	
  57

  
	
   

  	
   

  	
   

  
	
  ARTICLE 28

  	
  TENANT PARKING

  	
  57

  
	
   

  	
   

  	
   

  
	
  ARTICLE 29

  	
  MISCELLANEOUS PROVISIONS

  	
  58

  

 

iii

 

INDEX

 

	
   

  	
  Page(s)

  
	
   

  	
   

  
	
  Accountant

  	
  20

  	
   

  
	
  Additional Notice

  	
  25

  	
   

  
	
  Additional Rent

  	
  12

  	
   

  
	
  Affiliate

  	
  41

  	
   

  
	
  Alterations

  	
  26

  	
   

  
	
  Applicable Laws

  	
  55

  	
   

  
	
  Award

  	
  11

  	
   

  
	
  Bank Prime Loan

  	
  56

  	
   

  
	
  Base Building

  	
  27

  	
   

  
	
  Base Rent

  	
  11

  	
   

  
	
  Brokers

  	
  63

  	
   

  
	
  BS Exception

  	
  25

  	
   

  
	
  Building Monument Sign

  	
  53

  	
   

  
	
  Building Structure

  	
  25

  	
   

  
	
  Building System

  	
  22

  	
   

  
	
  Building Systems

  	
  22

  	
   

  
	
  Building Top Sign

  	
  53

  	
   

  
	
  CC&Rs

  	
  21

  	
   

  
	
  CGCC

  	
  41

  	
   

  
	
  cGMP Standard

  	
  3

  	
   

  
	
  Comparable Area

  	
  10

  	
   

  
	
  Comparable Buildings

  	
  9

  	
   

  
	
  Comparable Deals

  	
  9

  	
   

  
	
  Comparable Term

  	
  9

  	
   

  
	
  Cosmetic Alterations

  	
  27

  	
   

  
	
  Damage Termination Date

  	
  35

  	
   

  
	
  Damage Termination Notice

  	
  35

  	
   

  
	
  Direct Expenses

  	
  12

  	
   

  
	
  Eligibility Period

  	
  25

  	
   

  
	
  Environmental
  Laws

  	
  65

  	
   

  
	
  Estimate

  	
  19

  	
   

  
	
  Estimate Statement

  	
  19

  	
   

  
	
  Estimated Direct Expenses

  	
  19

  	
   

  
	
  Excess

  	
  18

  	
   

  
	
  Exercise Notice

  	
  10

  	
   

  
	
  Existing Tenant

  	
  6

  	
   

  
	
  Expense Year

  	
  13

  	
   

  
	
  Force Majeure

  	
  61

  	
   

  
	
  Hazardous Material(s)

  	
  65

  	
   

  
	
  HVAC

  	
  22

  	
   

  
	
  Initial Notice

  	
  25

  	
   

  
	
  Landlord

  	
  1

  	
   

  
	
  Landlord Default

  	
  25

  	
   

  
	
  Landlord Parties

  	
  29

  	
   

  

 

i

 

	
   

  	
  Page(s)

  
	
   

  	
   

  
	
  Landlord Response Date

  	
  10

  	
   

  
	
  Landlord Response Notice

  	
  10

  	
   

  
	
  Landlord’s Option Rent Calculation

  	
  10

  	
   

  
	
  L-C

  	
  48

  	
   

  
	
  L-C Amount

  	
  48

  	
   

  
	
  L-C Security Deposit

  	
  51

  	
   

  
	
  Lease

  	
  1

  	
   

  
	
  Lease Commencement Date

  	
  8

  	
   

  
	
  Lease Expiration Date

  	
  8

  	
   

  
	
  Lease Term

  	
  8

  	
   

  
	
  Lease Year

  	
  8

  	
   

  
	
  Lines

  	
  65

  	
   

  
	
  Mail

  	
  61

  	
   

  
	
  Market Rent

  	
  8

  	
   

  
	
  Neutral Arbitrator

  	
  11

  	
   

  
	
  Nondisturbance Agreement

  	
  44

  	
   

  
	
  Notices

  	
  61

  	
   

  
	
  Objectionable Name

  	
  54

  	
   

  
	
  Operating Expenses

  	
  13

  	
   

  
	
  Option Rent

  	
  8

  	
   

  
	
  Option Term

  	
  8

  	
   

  
	
  Option Term TI Allowance

  	
  9

  	
   

  
	
  Original Improvements

  	
  32

  	
   

  
	
  Other Improvements

  	
  68

  	
   

  
	
  Outside Agreement Date

  	
  10

  	
   

  
	
  Permitted Assignee

  	
  8

  	
   

  
	
  Permitted Use

  	
  3

  	
   

  
	
  Premises

  	
  6

  	
   

  
	
  Proposition 13

  	
  17

  	
   

  
	
  Reestablishment Notice

  	
  49

  	
   

  
	
  Renovations

  	
  64

  	
   

  
	
  Rent Concessions

  	
  9

  	
   

  
	
  Rent.

  	
  12

  	
   

  
	
  Required L-C Amount

  	
  49

  	
   

  
	
  Required Thresholds

  	
  50

  	
   

  
	
  Sign Specifications

  	
  54

  	
   

  
	
  Statement

  	
  18

  	
   

  
	
  Subject Space

  	
  37

  	
   

  
	
  Summary

  	
  1

  	
   

  
	
  Tax Expenses

  	
  16

  	
   

  
	
  Telecommunications Equipment

  	
  52

  	
   

  
	
  Tenant

  	
  1

  	
   

  
	
  Tenant Parties

  	
  30

  	
   

  
	
  Tenant Work Letter

  	
  6

  	
   

  
	
  Tenant’s Maintenance Obligations

  	
  22

  	
   

  

 

ii

 

	
   

  	
  Page(s)

  
	
   

  	
   

  
	
  Tenant’s Option Rent Calculation

  	
  10

  	
   

  
	
  Tenant’s Share

  	
  18

  	
   

  
	
  Tenant’s Signage

  	
  53

  	
   

  
	
  Transfer

  	
  40

  	
   

  
	
  Transfer Notice

  	
  37

  	
   

  
	
  Transfer Premium

  	
  39

  	
   

  
	
  Transferee

  	
  37

  	
   

  
	
  Transfers

  	
  37

  	
   

  
	
  Working Capital

  	
  50

  	
   

  

 

iii

 

PACIFIC
CORPORATE CENTER

 

AMENDED
AND RESTATED OFFICE LEASE

 

This Amended and Restated Office Lease (the “Lease”), dated as of the date set forth in Section 1
of the Summary of Basic Lease Information (the “Summary”), below, is made by and between KILROY REALTY, L.P.,
a Delaware limited partnership (“Landlord”),
and FAVRILLE, INC., a Delaware corporation (“Tenant”).

 

SUMMARY
OF BASIC LEASE INFORMATION

 

	
  TERMS OF LEASE

  	
   

  	
  DESCRIPTION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Date of Lease:

  	
   

  	
  October 31, 2005.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  Effective Date:

  	
   

  	
  November 1, 2005.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Premises:

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Building:

  	
   

  	
  That certain building located at 10421
  Pacific Center Court in the “Project” in Sorrento Mesa, which Building
  contains 79,871 rentable square feet of space.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Premises:

  	
   

  	
  All of the leasable area within the
  Building, as more particularly identified in Exhibit A to the Office Lease.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Project:

  	
   

  	
  The Building is part of a multi-building
  project known as the “Pacific Corporate
  Center”, as further set forth in Section 1.1.2 of this
  Lease.

  
	
  3.

  	
  Lease Term

  	
   

  	
   

  
	
   

  	
  (Article 2):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Length of Term:

  	
   

  	
  Nineteen (19) years and eight (8) months.

  
	
   

  	
  3.2

  	
  Lease Commencement Date:

  	
   

  	
  November 1, 2005

  
	
   

  	
  3.3

  	
  Lease Expiration Date:

  	
   

  	
  June 30, 2025.

  

 

 

	
   

  	
  4.

  	
  Base Rent (Article 3):

  	
   

  	
   

  

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Approximate Monthly

  	
   

  
	
  Period

  	
   

  	
   

  	
   

  	
  Monthly

  	
   

  	
  Rental Rate

  	
   

  
	
  During

  	
   

  	
  Annualized

  	
   

  	
  Installment

  	
   

  	
  per Rentable

  	
   

  
	
  Lease Term

  	
   

  	
  Base Rent

  	
   

  	
  of Base Rent

  	
   

  	
  Square Foot

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  November 1, 2005 – January 31,
  2007

  	
   

  	
  See Exhibit I

  	
   

  	
  See Exhibit I

  	
   

  	
  See Exhibit I

  	
   

  
	
  February 1, 2007 – January 31,
  2008

  	
   

  	
  $

  	
  3,450,427.20

  	
   

  	
  $

  	
  287,535.60

  	
   

  	
  $

  	
  3.6000

  	
   

  
	
  February 1, 2008 – January 31,
  2009

  	
   

  	
  $

  	
  3,571,192.15

  	
   

  	
  $

  	
  297,599.35

  	
   

  	
  $

  	
  3.7260

  	
   

  
	
  February 1, 2009 – January 31,
  2010

  	
   

  	
  $

  	
  3,696,183.88

  	
   

  	
  $

  	
  308,015.32

  	
   

  	
  $

  	
  3.8564

  	
   

  
	
  February 1, 2010 – January 31,
  2011

  	
   

  	
  $

  	
  3,825,550.31

  	
   

  	
  $

  	
  318,795.86

  	
   

  	
  $

  	
  3.9914

  	
   

  
	
  February 1, 2011 – January 31,
  2012

  	
   

  	
  $

  	
  3,959,444.57

  	
   

  	
  $

  	
  329,953.71

  	
   

  	
  $

  	
  4.1311

  	
   

  
	
  February 1, 20012 – January 31,
  20013

  	
   

  	
  $

  	
  4,098,025.13

  	
   

  	
  $

  	
  341,502.09

  	
   

  	
  $

  	
  4.2757

  	
   

  
	
  February 1, 2013 – January 31,
  2014

  	
   

  	
  $

  	
  4,241,456.01

  	
   

  	
  $

  	
  353,454.67

  	
   

  	
  $

  	
  4.4253

  	
   

  
	
  February 1, 2014 – January 31,
  2015

  	
   

  	
  $

  	
  4,389,906.97

  	
   

  	
  $

  	
  365,825.58

  	
   

  	
  $

  	
  4.5802

  	
   

  
	
  February 1, 2015 – January 31,
  2016

  	
   

  	
  $

  	
  4,543,553.72

  	
   

  	
  $

  	
  378,629.48

  	
   

  	
  $

  	
  4.7405

  	
   

  
	
  February 1, 2016 – January 31,
  2017

  	
   

  	
  $

  	
  4,702,578.10

  	
   

  	
  $

  	
  391,881.51

  	
   

  	
  $

  	
  4.9064

  	
   

  
	
  February 1, 2017 – January 31,
  2018

  	
   

  	
  $

  	
  4,867,168.33

  	
   

  	
  $

  	
  405,597.36

  	
   

  	
  $

  	
  5.0782

  	
   

  
	
  February 1, 2018 – January 31,
  2019

  	
   

  	
  $

  	
  5,037,519.22

  	
   

  	
  $

  	
  419,793.27

  	
   

  	
  $

  	
  5.2559

  	
   

  
	
  February 1, 2019 – January 31,
  2020

  	
   

  	
  $

  	
  5,213,832.40

  	
   

  	
  $

  	
  434,486.03

  	
   

  	
  $

  	
  5.4398

  	
   

  
	
  February 1, 2020 – January 31,
  2021

  	
   

  	
  $

  	
  5,396,316.53

  	
   

  	
  $

  	
  449,693.04

  	
   

  	
  $

  	
  5.6302

  	
   

  
	
  February 1, 2021 – January 31,
  2022

  	
   

  	
  $

  	
  5,585,187.61

  	
   

  	
  $

  	
  465,432.30

  	
   

  	
  $

  	
  5.8273

  	
   

  

 

2

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Approximate Monthly

  	
   

  
	
  Period

  	
   

  	
   

  	
   

  	
  Monthly

  	
   

  	
  Rental Rate

  	
   

  
	
  During

  	
   

  	
  Annualized

  	
   

  	
  Installment

  	
   

  	
  per Rentable

  	
   

  
	
  Lease Term

  	
   

  	
  Base Rent

  	
   

  	
  of Base Rent

  	
   

  	
  Square Foot

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  February 1, 2022 – January 31,
  2023

  	
   

  	
  $

  	
  5,780,669.18

  	
   

  	
  $

  	
  481,722.43

  	
   

  	
  $

  	
  6.0313

  	
   

  
	
  February 1, 2023 – January 31,
  2024

  	
   

  	
  $

  	
  5,982,992.60

  	
   

  	
  $

  	
  498,582.72

  	
   

  	
  $

  	
  6.2423

  	
   

  
	
  February 1, 2024 – January 31,
  2025

  	
   

  	
  $

  	
  6,192,397.34

  	
   

  	
  $

  	
  516,033.11

  	
   

  	
  $

  	
  6.4608

  	
   

  
	
  February 1, 2005 – June 30, 2025

  	
   

  	
  $

  	
  6,409,131.25

  	
   

  	
  $

  	
  534,094.27

  	
   

  	
  $

  	
  6.6869

  	
   

  

 

	
  5.

  	
  Intentionally Omitted:

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Tenant’s Share

  (Article 4):

  	
  100%.

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Permitted Use

  (Article 5):

  	
  Tenant shall use the Premises solely for
  biotechnology labs and pharmaceutical manufacturing (in accordance with the
  Federal Drug Administration’s current Good Manufacturing Practices (“cGMP Standard”)), together with related
  offices uses (collectively, the “Permitted
  Use”); provided, however, that notwithstanding anything to the
  contrary set forth hereinabove, and as more particularly set forth in the
  Lease, Tenant shall be responsible for operating and maintaining the Premises
  pursuant to, and in no event may such Permitted Use violate, (A) Landlord’s
  “Rules and Regulations,” as that term is set forth in Section 5.2
  of this Lease, (B) all “Applicable Laws,” as that term is set forth in Article 24
  of this Lease, (C) all applicable zoning, building codes, the “CC&Rs,”
  as that term is set forth in Section 5.3 of this Lease, and the
  Pacific Corporate Center P.I.D., and (D) the character of the Project as
  a first-class Project.

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Security Deposit

  (Article 21):

  	
  $355,727.60. In addition to the Security
  Deposit, Tenant shall have additional security obligations, in the form more
  particularly set forth in Section 21.2, which shall be subject to
  increases, reductions and reinstatements pursuant to the TCCs of Section 21.2.

  

 

3

 

	
  9.

  	
  Parking Spaces

  (Article 28):

  	
  A total of one hundred fifty-nine (159)
  parking spaces (i.e., two (2) unreserved parking spaces for every 1,000
  rentable square feet of the Premises).

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Address of Tenant

  (Section 29.18):

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Favrille, Inc.

  
	
   

  	
   

  	
  10421 Pacific Center Court

  
	
   

  	
   

  	
  Suite 150

  
	
   

  	
   

  	
  San Diego, California 92121

  
	
   

  	
   

  	
  Attention: Chief Financial Officer

  
	
   

  	
   

  	
  (Prior to and after Lease
  Commencement Date)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cooley Godward LLP

  
	
   

  	
   

  	
  101 California Street, 5th Floor

  
	
   

  	
   

  	
  San Francisco, California 94111

  
	
   

  	
   

  	
  Attention: Helen Sedwick, Esq.

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Address of Landlord

  (Section 29.18):

  	
  See Section 29.18 of the Lease.

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Broker(s)

  (Section 29.24):

  	
  For Tenant:

  
	
   

  	
   

  	
  Colliers International

  
	
   

  	
   

  	
  4660 La Jolla Village Drive, Suite 200

  
	
   

  	
   

  	
  San Diego, California 92122

  
	
   

  	
   

  	
  Attention:

  	
  Kevin Craven

  
	
   

  	
   

  	
   

  	
  Thomas Mercer

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Improvement Allowance

  (Section 2 of Exhibit B):

  	
  $10,000,000.00.

  

 

4

 

PACIFIC
CORPORATE CENTER

 

AMENDED
AND RESTATED OFFICE LEASE

 

R
E  C  I  T  A  L  S :

 

A.                                   This Amended and
Restated Office Lease (“Office Lease”),
which includes the preceding Summary of Basic Lease Information (the “Summary”) attached hereto and incorporated
herein by this reference (the Office Lease and Summary are sometimes
collectively referred to herein as the “Lease”),
dated as of the date set forth in Section 1 of the Summary is made
by and between KILROY REALTY, L.P., a Delaware limited partnership (“Landlord”), and FAVRILLE, INC., a Delaware
corporation (“Tenant”).

 

B.                                     Landlord, and
Tenant previously entered into that certain Office Lease dated January 31,
2004 (the “Original Office Lease”),
as amended by that certain First Amendment to Lease dated July 2004 (the “First Amendment”), that certain Second
Amendment to Lease dated October 11, 2004 (the “Second Amendment”), that certain Third Amendment to Lease
dated July 8, 2005 (the “Third Amendment”),
and that certain Fourth Amendment to Lease dated October 31, 2005 (the “Fourth Amendment”), whereby Landlord leased
to Tenant and Tenant leased from Landlord the entire building located at 10421
Pacific Center Court, San Diego, California (the “10421 Building”) comprised (i) those certain premises
(the “Original Premises”)
consisting of 48,502 rentable square feet of space located on the first (1st)
and second (2nd) floors of the Building, (ii) those
certain premises (the “First Expansion
Premises”) consisting of 13,987 rentable square feet of space
located on the second (2nd) floor of the Building, and (iii) those
certain premises (the “Third Expansion
Premises”) consisting of approximately 17,382 rentable square feet
located on the first (1st) floor of the Building (the Original
Premises, the First Expansion Premises and the Third Expansion Premises are,
collectively, (x) initially referred to herein as the “Premises,” and (x) alternatively, and
throughout the Lease Term, referred to herein as the “10421 Premises”).  The Office Lease, the First Amendment, the
Second Amendment, the Third Amendment and the Fourth Amendment are,
collectively, the “Original Lease.”

 

C.                                     The Original
Office Lease was initially entered into by Landlord and Tenant with respect to
the Original Premises only, and because such Original Premises did not comprise
the entire Building, the rights and obligations of both Landlord and Tenant
under the terms of the Original Office Lease were structured so as to be a part
of, and integrated with, a larger, multi-tenant building.  Following the execution of the Third
Amendment and Tenant’s lease of the Third Expansion Premises, Landlord leases
to Tenant and Tenant leases from Landlord the entire Building.  As a result thereof, the parties acknowledge
and agree that certain of the terms and conditions relating directly to a
multi-tenant building which are set forth in the Original Lease are no longer
applicable.

 

D.                                    Landlord and Tenant
desire to amend and restate the terms of the Original Lease in their entirety,
effective as of the Effective Date, as set forth herein.

 

5

 

E.                                      Following the
date of this Lease, Landlord and Tenant desire to expand the 10421 Premises to
include the entire building (the “10445
Premises”) located at 10445 Pacific Center Court, San Diego,
California (the “10445 Building”).  However, as such 10445 Premises is currently
occupied by a third party (“Nuera”)
pursuant to an existing lease between Landlord and Nuera (the “Nuera Lease”), Landlord and Tenant
acknowledge that such expansion, and Landlord’s ability to deliver the 10445
Building to Tenant, is expressly conditioned upon the termination or expiration
of the Nuera Lease as set forth more particularly in Section 29.37 of this
Lease.  In the event that the Nuera Lease is so terminated, or upon the
expiration thereof, then Landlord and Tenant shall immediately thereafter enter
into that certain First Amendment to Amended and Restated Office Lease (which
shall amend this Lease) in the form attached hereto as Exhibit H (the “First Amendment to Amended and Restated Office Lease”).  All of the terms and conditions of this
Lease, as amended by the terms of such First Amendment to Amended and Restated
Office Lease, shall be effective immediately upon the full execution and
delivery of such First Amendment to Amended and Restated Office Lease by and
between Landlord and Tenant (the “10445
Premises Effective Date”).

 

F.                                      Upon the date set
forth in Section 1.2 of the Summary (the “Effective Date”),  this
Lease shall amend and restate the Original Lease in its entirety and shall
thereafter supersede the Original Lease. 
The provisions of the Original Lease shall remain in effect as to all
periods prior to the Effective Date.

 

A
G  R  E  E  M  E  N  T :

 

ARTICLE 1

 

PREMISES, BUILDING, PROJECT, AND
COMMON AREAS

 

1.1                                 Premises, Building, Project and Common Areas.

 

1.1.1                        The Premises. 
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
the premises set forth in Section 2.2 of the Summary (the “Premises”). 
The outline of the Premises is set forth in Exhibit A attached hereto and
comprises all of the leasable area with in the Building.  The parties hereto agree that the lease of
the Premises is upon and subject to the terms, covenants and conditions (the “TCCs”) herein
set forth, and Tenant covenants as a material part of the consideration for
this Lease to keep and perform each and all of such TCCs by it to be kept and
performed and that this Lease is made upon the condition of such
performance.  The parties hereto hereby
acknowledge that the purpose of Exhibit A
is to show the approximate location of the Premises in the “Building,” as that term is defined in Section 1.1.2,
below, only, and such Exhibit is not meant to constitute an agreement,
representation or warranty as to the construction of the Premises, the precise
area thereof or the specific location of the “Common
Areas,” as that term is defined in Section 1.1.3, below,
or the elements thereof or of the accessways to the Premises or the “Project,” as that term is defined in Section 1.1.2,
below.  Landlord and Tenant acknowledge
that Tenant has been occupying the entire Premises pursuant to the Original
Lease, and therefore except as specifically set forth in this Lease and in the
Tenant Work Letter attached hereto as Exhibit B
(the “Tenant Work

 

6

 

Letter”), Landlord shall not be obligated to
provide or pay for any improvement work or services related to the improvement
of the Premises and Tenant shall continue to accept the Premises in its
presently existing, “as is” condition, subject only to Landlord’s ongoing
obligations set forth in Article 7 of this Lease, including,
without limitation, Landlord’s ongoing obligation to maintain the “Building
Structure,” as that term is defined in, and pursuant to the TCCs of, Section 7.1.  Tenant also acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty
regarding the condition of the Premises, the Building or the Project or with
respect to the suitability of any of the foregoing for the conduct of Tenant’s
business, except as specifically set forth in this Lease and the Tenant Work
Letter.

 

1.1.2                        The Building and The Project.  The Premises initially constitutes all of the
building set forth in Section 2.1 of the Summary (the “Building”). 
The Building is part of a project known as “Pacific Corporate Center.” 
The term “Project,” as used
in this Lease, shall mean (i) the Building and the Common Areas, (ii) the
land (which is improved with landscaping, parking facilities and other
improvements) upon which the Building and the Common Areas are located, and (iii) the
10445 Building located immediately adjacent to the Building and the land upon
which such 10445 Building is located.

 

1.1.3                        Common Areas. 
Tenant shall have the non-exclusive right to use in common with other
tenants in the Project, and subject to the rules and regulations referred
to in Article 5 of this Lease, those portions of the Project which
are provided, from time to time, for use in common by Landlord, Tenant and any
other tenants of the Project (such areas, together with such other portions of
the Project designated by Landlord, in its discretion, including certain areas
designated for the exclusive use of certain tenants, or to be shared by
Landlord and certain tenants, are collectively referred to herein as the “Common Areas”).  The manner in which the Common Areas are
maintained and operated shall be at the reasonable discretion of Landlord and
the use thereof shall be subject to such rules, regulations and restrictions as
Landlord may make from time to time as provided in Section 5.2 of
this Lease, provided that Landlord shall at all times maintain and operate the
Common Areas in a first-class manner consistent with the “Comparable Buildings,”
as such term is defined in Section 2.2.2 of this Lease.  Landlord reserves the right to close
temporarily, make alterations or additions to, or change the location of
elements of the Project and the Common Areas as long as such changes do not (i) change
the nature of the Project to something other than a first-class project (ii) materially,
adversely effect Tenant’s use of the Premises for the Permitted Use, as granted
under Section 7 of the Summary, (iii) materially, adversely
reduce Tenant’s ingress to or egress from the Project, Building, the Premises
or the parking areas servicing the same, or (iv) materially reduce the
parking area available for use by Tenant. 
Except when and where Tenant’s right of access is specifically excluded
as a result of (x) an emergency, (y) a requirement by law, or
(z) a specific provision set forth in this Lease, Tenant shall have the
right of access to the Premises, the Building, and the Project parking facility
twenty-four (24) hours per day, seven (7) days per week during the “Lease
Term,” as that term is defined in Section 2.1, below and any “Option Term,” as that term is defined in Section 2.2,
below.

 

1.2                                 Stipulation of Rentable Square Feet of Premises and Building.  For purposes of this Lease, “rentable square
feet” of the initial Premises and 10421 Building shall be deemed as set forth
in Section 2.1 of the Summary.

 

7

 

ARTICLE 2

 

LEASE TERM; OPTION TERM(S)

 

2.1                                 Initial Lease Term.  The TCCs and provisions of this Lease shall
be effective as of the date of this Lease. 
The term of this Lease (the “Lease
Term”) shall be as set forth in Section 3.1 of the
Summary, shall commence on the date set forth in Section 3.2 of the
Summary (the “Lease Commencement Date”),
and shall terminate on the date set forth in Section 3.3 of the
Summary (the “Lease Expiration Date”)
unless this Lease is sooner terminated as hereinafter provided.  For purposes of this Lease, the term “Lease Year” shall mean each consecutive
twelve (12) month period during the Lease Term; provided, however, that the
first Lease Year shall commence on the Lease Commencement Date and end on the
last day of the eleventh month thereafter and the second and each succeeding
Lease Year shall commence on the first day of the next calendar month; and
further provided that the last Lease Year shall end on the Lease Expiration
Date.  At any time during the Lease Term,
Landlord may deliver to Tenant a notice in the form as set forth in Exhibit C, attached hereto, as a
confirmation only of the information set forth therein, which Tenant shall
execute and return to Landlord within five (5) days of receipt thereof.

 

2.2                                 Option Term(s).

 

2.2.1                        Option Right. 
Landlord hereby grants the Tenant originally named herein (the “Original Tenant”), its “Affiliates” (as
that term is defined in Section 14.8, below) and any permitted assignee of
the Original Tenant’s interest in this Lease pursuant to Article 14
of this Lease (a “Permitted Assignee”),
two (2) options to extend the Lease Term for the entire 10421
Premises each by a period of five (5) years
(each, an “Option Term”).  Such options shall be exercisable only by
Notice delivered by Tenant to Landlord as provided below, provided that, as of
the date of delivery of such Notice, Tenant is not in default under this Lease
(beyond any applicable notice and cure periods).  Upon the proper exercise of an option to extend,
and provided that, as of the end of the then applicable Lease term, Tenant is
not in default under this Lease (beyond any applicable notice and cure
periods), the Lease Term, as it applies to the entire 10421 Premises, shall be
extended for a period of five (5) years. 
The rights contained in this Section 2.2 shall only be
exercised by the Original Tenant, its Affiliate or a Permitted Assignee (and
not any other assignee, sublessee or other transferee of the Original Tenant’s
interest in this Lease) if Original Tenant, its Affiliate and/or a Permitted
Assignee is in possession of the entire then-existing 10421 Premises.  In the event the 10445 Premises is leased by
Tenant, Tenant’s right to extend the Lease Term with respect to such 10445
Premises shall be as expressly set forth in the First Amendment to Amended and
Restated Office Lease, and which right shall be independent of the right to
extend the Lease Term with respect to the 10421 Premises as set forth in this Section 2.2.
Accordingly, Tenant shall have the right to exercise the applicable option
rights with respect to the 10421 Premises, the 10445 Premises, or both, in
Tenant’s sole discretion.

 

2.2.2                        Option Rent.  The
Rent payable by Tenant during the Option Term (the “Option Rent”) shall be equal to the Market Rent as set forth
below.  For purposes of this Lease, the
term “Market Rent” shall mean rent
(including additional rent and considering any “base year” or “expense stop”
applicable thereto), including all escalations, at which tenants, as of the

 

8

 

commencement
of the applicable term are, pursuant to transactions completed within the
twenty-four (24) months prior to the date Tenant delivers to Landlord the “Exercise
Notice,” as that term is set forth below, leasing non-sublease, non-encumbered,
non-synthetic, non-equity space (unless such space was leased pursuant to a
definition of “fair market” comparable to the definition of Market Rent)
comparable in size, location and quality to the Premises for a “Comparable
Term,” as that term is defined in this Section 2.2.2 (the “Comparable Deals”), which comparable space
is located in the “Comparable Buildings,” as that term is defined in this Section 2.2.2,
giving appropriate consideration to the annual rental rates per rentable square
foot (adjusting the base rent component of such rate to reflect a net value
after accounting for whether or not utility expenses are directly paid by the
tenant such as Tenant’s direct utility payments provided for in Section 6.1
of this Lease), the standard of measurement by which the rentable square
footage is measured, parking ratios, general access to such Comparable
Buildings, the general visibility of such Comparable Buildings, and taking into
consideration only, and granting only, the following concessions (provided that
the rent payable in Comparable Deals in which the terms of such Comparable
Deals are determined by use of a discounted fair market rate formula shall be
equitably increased in order that such Comparable Deals will not reflect a
discounted rate) (collectively, the “Rent
Concessions”):  (a) rental
abatement concessions or build-out periods, if any, being granted such tenants
in connection with such comparable spaces; (b) tenant improvements or
allowances provided or to be provided for such comparable space, taking into
account the value of the existing improvements in the Premises, such value to
be based upon the age, quality and layout of the improvements and the extent to
which the same can be utilized by this particular Tenant, (c) Proposition
13 protection, and (d) all other monetary concessions, if any, being
granted such tenants in connection with such comparable space; provided,
however, that notwithstanding anything to the contrary herein, no consideration
shall be given to the fact that Landlord is or is not required to pay a real
estate brokerage commission in connection with the applicable term or the fact
that the Comparable Deals do or do not involve the payment of real estate
brokerage commissions.  The term “Comparable Term” shall refer to the length
of the lease term, without consideration of options to extend such term, for
the space in question.  In addition, the
determination of the Market Rent shall include a determination as to whether,
and if so to what extent, Tenant must provide Landlord with financial security,
such as a letter of credit or guaranty, for Tenant’s rent obligations during
any Option Term.  Such determination
shall be made by reviewing the extent of financial security then generally
being imposed in Comparable Transactions upon tenants of comparable financial
condition and credit history to the then existing financial condition and
credit history of Tenant (with appropriate adjustments to account for
differences in the then-existing financial condition of Tenant and such other
tenants).  If in determining the Market
Rent, Tenant would, pursuant to the Comparable Deals and the Rent Concessions
set forth therein, otherwise be entitled to a tenant improvement or comparable allowance
for the improvement of the Premises (the “Option
Term TI Allowance”), Tenant shall not be entitled, and shall not be
compelled, to receive such Option Term TI Allowance and Landlord shall reduce
the rental rate component of the Market Rent to be an effective rental rate
which takes into consideration that Tenant will not receive any Option Term TI
Allowance.  The term “Comparable Buildings” shall mean the
Building and other first-class “cGMP/lab buildings” which are comparable to the
Building in terms of age (based upon the date of completion of construction or
major renovation as to the building containing the portion of the Premises in
question), quality of construction, level of services and amenities, size

 

9

 

and
appearance, and are located in the Sorrento Mesa, University Towne Center and
Torrey Pines area of San Diego, California (the “Comparable Area”).

 

2.2.3                        Exercise of Option.  The option contained in this Section 2.2
shall be exercised by Tenant, if at all, only in the manner set forth in this Section 2.2.3.  Tenant shall deliver notice (the “Exercise Notice”) to Landlord not more than
fifteen (15) months nor less than nine (9) months prior to the expiration
of the then Lease Term, stating that Tenant is exercising its option.  Concurrently with such Exercise Notice,
Tenant shall deliver to Landlord Tenant’s calculation of the Market Rent (the “Tenant’s Option Rent Calculation”).  Landlord shall deliver notice (the “Landlord Response Notice”) to Tenant on or
before the later to occur of (i) the date which is thirty (30) days after
Landlord’s receipt of the Exercise Notice and Tenant’s Option Rent Calculation,
and (ii) the date which is nine (9) months prior to the expiration of
the then Lease Term (the “Landlord Response
Date”), stating that (A) Landlord is accepting Tenant’s Option
Rent Calculation as the Market Rent, or (B) rejecting Tenant’s Option Rent
Calculation and setting forth Landlord’s calculation of the Market Rent (the “Landlord’s Option Rent Calculation”).  Within ten (10) business days of its
receipt of the Landlord Response Notice, Tenant may, at its option, accept the
Market Rent contained in the Landlord’s Option Rent Calculation.  If Tenant does not affirmatively accept or
Tenant rejects the Market Rent specified in the Landlord’s Option Rent
Calculation, the parties shall follow the procedure, and the Market Rent shall
be determined as set forth in Section 2.2.5.

 

2.2.4                        No Defaults; Required Financial Condition of Tenant.  The rights contained in this Section 2.2
shall be personal to the Original Tenant, its Affiliates and any Permitted
Assignee and may only be exercised by such Original Tenant, Affiliate or
Permitted Assignee (and not any other assignee, sublessee or other transferee
of the Original Tenant’s interest in this Lease) if the Original Tenant,
Affiliate and/or Permitted Assignee occupies not less than one hundred percent
(100%) of the then existing Premises. 
The right to extend the Lease Term as provided in this Section 2.2
may not be exercised if, as of the date of the attempted exercise of the
extension option by Tenant, or as of the commencement date of such Option Term,
(A) Tenant is in economic or material default pursuant to the terms of
this Lease (beyond any applicable notice and cure periods), or (B) Tenant
has previously been in economic or material default under this Lease (beyond
any applicable notice and cure periods) during the previous twenty-four (24)
month period.

 

2.2.5                        Determination of Market Rent.  In the event Tenant objects or is deemed to
have objected to the Market Rent, Landlord and Tenant shall attempt to agree
upon the Market Rent using reasonable good-faith efforts.  If Landlord and Tenant fail to reach
agreement within sixty (60) days following Tenant’s objection or deemed objection
to the Landlord’s Option Rent Calculation (the (the “Outside Agreement Date”), then (i) in connection with the
Option Rent, Landlord’s Option Rent Calculation and Tenant’s Option Rent
Calculation, each as previously delivered to the other party, shall be
submitted to the arbitrators pursuant to the TCCs of this Section 2.2.4,
and (ii) in connection with any other contested calculation of market
Rent, the parties shall each make a separate determination of the Market Rent
and shall submit the same to the arbitrators pursuant to the TCCs of this Section 2.2.5.  The submittals shall be made concurrently
with the selection of the arbitrators pursuant to this Section 2.2.5
and shall be submitted to arbitration in accordance with Section 2.2.5.1
through 2.2.5.5 of this Lease, but subject to the conditions, when
appropriate, of Section 2.2.3.

 

10

 

2.2.5.1               Landlord and
Tenant shall mutually and reasonably select and appoint one arbitrator who
shall by profession be a real estate broker, appraiser or attorney (the “Neutral Arbitrator”) who shall have been
active over the five (5) year period ending on the date of such
appointment in the leasing (or appraisal, as the case may be) of first-class
office/lab/manufacturing properties in the Comparable Area.  The determination of the Neutral Arbitrator
shall be limited solely to the issue of whether Landlord’s or Tenant’s
submitted Market Rent, is the closest to the actual Market Rent as determined
by the Neutral Arbitrator, taking into account the requirements of Section 2.2.2
of this Lease.  Such Neutral Arbitrator
shall be appointed within thirty (30) days after the applicable Outside
Agreement Date.  Neither the Landlord nor
Tenant may, directly or indirectly, consult with the Neutral Arbitrator prior
to subsequent to his or her appearance. 
The Neutral Arbitrator shall be retained via an engagement letter
jointly prepared by Landlord’s counsel and Tenant’s counsel.

 

2.2.4.2               Within thirty
(30) days of the appointment of the Neutral Arbitrator, such Neutral Arbitrator
shall reach a decision as to Market Rent and determine whether the Landlord’s
or Tenant’s determination of Market Rent as submitted pursuant to Section 2.2.5.1
and Section 2.2.3 of this Lease is closest to Market Rent as
determined by such Neutral Arbitrator and simultaneously publish a ruling (“Award”) indicating whether Landlord’s or
Tenant’s submitted Market Rent is closest to the Market Rent as determined by
the Neutral Arbitrator.  Following
notification of the Award, the Landlord’s or Tenant’s submitted Market Rent
determination, whichever is selected by the Neutral Arbitrator as being closest
to Market rent shall become the then applicable Market Rent.

 

2.2.4.3               The Award
issued by the Neutral Arbitrator shall be binding upon Landlord and Tenant.

 

2.2.4.4               If Landlord and
Tenant fail to agree upon and appoint the Neutral Arbitrator, then either party
may petition Judicial Arbitration & Mediation Services, Inc. (“JAMS”) to designate an independent third
party to appoint the Neutral Arbitrator, subject to criteria in Section 2.2.5.1
of this Lease.

 

2.2.4.5               The cost of
arbitration shall be paid by the party (either Landlord or Tenant) whose Market
Rent is not selected by the Neutral Arbitrator.

 

ARTICLE 3

 

BASE RENT

 

Tenant shall pay, without prior notice or
demand, to Landlord or Landlord’s agent at the management office of the
Project, or, at Landlord’s option, at such other place as Landlord may from
time to time designate in writing, by a check for currency which, at the time
of payment, is legal tender for private or public debts in the United States of
America, base rent (“Base Rent”)
as set forth in Section 4 of the Summary, payable in equal monthly
installments as set forth in Section 4 of the Summary in advance on
or before the first day of each and every calendar month during the Lease Term,
without any setoff or deduction whatsoever. 
The Base Rent for the first full month of the Lease Term shall be paid
at the time of Tenant’s execution of this Lease.  If any Rent payment date (including the Lease
Commencement Date) falls on a day of the month other

 

11

 

than the first day of such month or if any payment of Rent is for a
period which is shorter than one month, the Rent for any fractional month shall
accrue on a daily basis for the period from the date such payment is due to the
end of such calendar month or to the end of the Lease Term at a rate per day
which is equal to 1/365 of the applicable annual Rent.  All other payments or adjustments required to
be made under the TCCs of this Lease that require proration on a time basis
shall be prorated on the same basis.

 

ARTICLE 4

 

ADDITIONAL RENT

 

4.1                                 General Terms.

 

4.1.1                        “Triple-Net” Lease.  Landlord and Tenant understand and agree that
this Lease is a “Triple Net” Lease. 
Tenant recognizes and acknowledges, without limiting the generality of
any other TCCs of this Lease, that it is the intent of the parties hereto that
the Base Rent provided to be paid by Tenant to Landlord shall be net to
Landlord, and any and all expenses incurred in connection with the Premises,
the Building and an applicable portion of the Common Areas, or in connection
with the operations thereof, include any and all taxes, assessments, general or
special license fees, insurance premiums, public utility bills and costs of
repair, maintenance and operation of the Premises and the Project and all
buildings, structures, permanent fixtures and other improvements comprised
therein, together with the appurtenances thereto, shall be paid by Tenant in
addition to the Base Rent specified in this Lease, except as otherwise
specifically set forth herein.

 

4.1.2                        Direct Payments; Additional Rent.  In addition to paying the Base Rent specified
in Article 3 of this Lease, Tenant shall, prior to and throughout
the Lease Term, directly pay for (i) all utilities service charges
accruing with regard to the Premises during the Lease Term, and (ii) all
other costs required to be paid directly by Tenant pursuant to the TCCs of this
Lease.  Additionally, Tenant shall pay to
Landlord “Tenant’s Share” of the
annual “Direct Expenses,” as those
terms are defined in Sections 4.2.6 and 4.2.2,
respectively, of this Lease.  Such
payments of Tenant’s Share of Direct Expenses by Tenant, together with any and
all other amounts payable by Tenant to Landlord pursuant to the TCCs of this
Lease, are hereinafter collectively referred to as the “Additional Rent,” and the Base Rent and the
Additional Rent are herein collectively referred to as “Rent.” 
All amounts due under this Article 4 as Additional Rent
shall be payable for the same periods and in the same manner as the Base
Rent.  Without limitation on other
obligations of Tenant which survive the expiration of the Lease Term, the obligations
of Tenant to pay the Additional Rent accruing during the Lease Term provided
for in this Article 4 shall survive the expiration of the Lease
Term.

 

4.2                                 Definitions of Key Terms Relating to Additional Rent.  As used in this Article 4, the
following terms shall have the meanings hereinafter set forth:

 

4.2.1                        Intentionally
Deleted.

 

4.2.2                        “Direct Expenses” shall mean “Operating
Expenses” and “Tax Expenses.”

 

12

 

4.2.3                        “Expense Year” shall mean each calendar year
in which any portion of the Lease Term falls, through and including the
calendar year in which the Lease Term expires, 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 Direct Expenses shall be equitably adjusted for any Expense
Year involved in any such change.

 

4.2.4                        “Operating Expenses” shall mean all
expenses, costs and amounts of every kind and nature which Landlord pays or
accrues during any Expense Year because of or in connection with the ownership,
management, maintenance, security, repair, replacement, restoration or
operation of the Project, or any portion thereof, except as specifically set
forth hereinbelow to the contrary. 
Without limiting the generality of the foregoing, Operating Expenses
shall specifically include any and all of the following:  (i) the cost of supplying all utilities
to the Common Areas (as opposed to the cost of utilities to the Premises, which
are to be directly paid by Tenant, or to the premises of third-party tenants in
the Project), the cost of operating, repairing, maintaining, and renovating the
utility, telephone, mechanical, sanitary, storm drainage, and elevator systems,
and the cost of maintenance and service contracts in connection therewith; (ii) the
cost of licenses, certificates, permits and inspections and the cost of
contesting any governmental enactments which may affect Operating Expenses, and
the costs incurred in connection with a governmentally mandated transportation
system management program or similar program; (iii) the cost of all
insurance carried by Landlord in connection with the Project; (iv) the
cost of landscaping, relamping, and all supplies, tools, equipment and
materials used in the operation, repair and maintenance of the Project, or any
portion thereof; (v) costs incurred in connection with the parking areas
servicing the Project; (vi) fees and other costs, including management
fees (which management fee shall equal two and one-quarter percent (21⁄4%) of the
Base Rent due under this Lease, unless increased pursuant to the terms of Section 6.5
of this Lease), consulting fees, legal fees and accounting fees, of all
contractors and consultants in connection with the management, operation,
maintenance and repair of the Project; (vii) the fair rental value of any
management office space reasonably attributable to the Project (as opposed to
being attributable to Landlord’s non-Project activities); (viii) wages,
salaries and other compensation and benefits, including taxes levied thereon,
of all persons (other than persons generally considered to be higher in rank
than the position of Project manager) engaged in the operation, maintenance and
security of the Project; (ix) costs under any recorded instrument
pertaining to the sharing of costs by the Project; (x) operation, repair,
maintenance and replacement of all systems and equipment and components thereof
of the Building; (xi) the cost of janitorial, alarm, security and other
services, replacement of wall and floor coverings, ceiling tiles and fixtures
in common areas, maintenance and replacement of curbs and walkways, repair to
the Building’s roof membrane; (xii) amortization (including interest on
the unamortized cost) of the cost of acquiring or the rental expense of
personal property used in the maintenance, operation and repair of the Project,
or any portion thereof, to the extent of cost savings reasonably anticipated by
Landlord at the time of such expenditure to be incurred in connection
therewith; (xiii) the cost of capital improvements or other costs incurred
in connection with the Project (A) which are intended to effect economies
in the operation or maintenance of the Project, or any portion thereof, (B) that
are required to comply with present or anticipated conservation programs, (C) which
are replacements or modifications of nonstructural items located in the Common
Areas required to keep the Common Areas in good order or condition, or (D) that
are required under any governmental law or regulation by a federal, state or
local

 

13

 

governmental
agency, except for capital repairs, replacements or other improvements to
remedy a condition existing prior to the Lease Commencement Date which an
applicable governmental authority, if it had knowledge of such condition prior
to the Lease Commencement Date, would have then required to be remedied
pursuant to then-current governmental laws or regulations in their form
existing as of the Lease Commencement Date and pursuant to the then-current
interpretation of such governmental laws or regulations by the applicable
governmental authority as of the Lease Commencement Date; provided, however,
that any capital expenditure shall be amortized with interest over its useful
life, as reasonably determined by Landlord pursuant to sound real estate
accounting and management principles, consistently applied; (xiv) costs, fees,
charges or assessments imposed by, or resulting from any mandate imposed on
Landlord by, any federal, state or local government for fire and police
protection, trash removal, community services, or other services which do not
constitute “Tax Expenses” as that term is defined in Section 4.2.5,
below; and (xv) payments under any easement, license, operating agreement,
declaration, restrictive covenant, or instrument pertaining to the sharing of
costs by the Building.  Notwithstanding
the foregoing, for purposes of this Lease, Operating Expenses shall not,
however, include:

 

(a)                                  all costs
relating to the maintenance and repair of the following structural items:  (i) the foundation slab structure under
the Building (ii) exterior wall structure of the Building, and (iii) the
roof structure of the Building (excluding the membrane), except to the extent
such repairs are required due to the negligence or willful misconduct of
Tenant;

 

(b)                                 costs,
including marketing costs, legal fees, space planners’ fees, advertising and
promotional expenses, and brokerage fees incurred in connection with the
original construction or development, or original or future leasing of the
Project, and costs, including permit, license and inspection costs, incurred
with respect to the installation of tenant improvements made for other tenants
or incurred in renovating or otherwise improving, decorating, painting or
redecorating vacant space for tenants or other occupants of the Project
(excluding, however, such costs relating to any common areas of the Project or
parking facilities);

 

(c)                                  except as set
forth in items (xii), (xiii), and (xiv) above, depreciation, interest and
principal payments on mortgages and other debt costs, if any, penalties and
interest, costs of capital repairs and alterations, and costs of capital improvements
and equipment;

 

(d)                                 except as
otherwise specifically provided in item (xiii) above, costs incurred by
Landlord in the repairs, capital additions, alterations or replacements made or
incurred to rectify or correct defects in original design, materials or
workmanship in connection with the “Base Building,” as that term is defined in Section 8.2,
portions of the Project (as so excluded, the “Non-Reimbursable
Capital Improvements”);

 

(e)                                  costs for which
the Landlord is reimbursed by any tenant or occupant of the Project or by
insurance by its carrier or any tenant’s carrier or by anyone else, and
electric power costs for which any tenant directly contracts with the local
public service company;

 

14

 

(f)                                    any bad debt
loss, rent loss, or reserves for bad debts or rent loss;

 

(g)                                 costs
associated with the operation of the business of the partnership or entity
which constitutes the Landlord, as the same are distinguished from the costs of
operation of the Project (which shall specifically include, but not be limited
to, accounting costs associated with the operation of the Project).  Costs associated with the operation of the
business of the partnership or entity which constitutes the Landlord include
costs of partnership accounting and legal matters, costs of defending any
lawsuits with any mortgagee (except as the actions of the Tenant may be in
issue), costs of selling, syndicating, financing, mortgaging or hypothecating
any of the Landlord’s interest in the Project, and costs incurred in connection
with any disputes between Landlord and its employees, between Landlord and
Project management, or between Landlord and other tenants or occupants, and
Landlord’s general corporate overhead and general and administrative expenses;

 

(h)                                 the wages and
benefits of any employee who does not devote substantially all of his or her
employed time to the Project unless such wages and benefits are prorated to
reflect time spent on operating and managing the Project vis-a-vis time spent
on matters unrelated to operating and managing the Project; provided, that in
no event shall Operating Expenses for purposes of this Lease include wages
and/or benefits attributable to personnel above the level of Project manager;

 

(i)                                     interest, charges
and fees incurred on debt, payments on mortgages and/or amount paid as ground
rental for the Project by the Landlord;

 

(j)                                     interest, late
charges and tax penalties incurred as a result of Landlord’s gross negligence,
inability or unwillingness to make payments or file returns when due;

 

(k)                                  overhead and
profit increment paid to the Landlord or to subsidiaries or affiliates of the
Landlord for services in the Project to the extent the same exceeds the costs
of such services rendered by qualified, first-class unaffiliated third parties
on a competitive basis;

 

(l)                                     any
compensation paid to clerks, attendants or other persons in commercial
concessions operated by the Landlord, provided that any compensation paid to
any concierge at the Project shall be includable as an Operating Expense;

 

(m)                               rentals and
other related expenses incurred in leasing air conditioning systems, elevators
or other equipment which if purchased the cost of which would be excluded from
Operating Expenses as a capital cost, except equipment not affixed to the
Project which is used in providing janitorial or similar services and, further
excepting from this exclusion such equipment rented or leased to remedy or
ameliorate an emergency condition in the Project;

 

(n)                                 all items and
services for which Tenant or any other tenant in the Project reimburses
Landlord or which Landlord provides selectively to one or more tenants (other
than Tenant) without reimbursement;

 

15

 

(o)                                 costs, other
than those incurred in ordinary maintenance and repair, for sculpture,
paintings, fountains or other objects of art;

 

(p)                                 any costs
expressly excluded from Operating Expenses elsewhere in this Lease;

 

(q)                                 any costs
expressly included as  Tax Expenses
pursuant to Section 4.2.5, below;

 

(r)                                    rent for any
office space occupied by Project management personnel to the extent the size or
rental rate of such office space exceeds the size or fair market rental value
of office space occupied by management personnel of the Comparable Buildings in
the vicinity of the Building, with adjustment where appropriate for the size of
the applicable project;

 

(s)                                  reserves for
depreciation, amortization and other expenses;

 

(t)                                    costs arising
from the active negligence or willful misconduct of Landlord or its agents,
employees, vendors, contractors, or providers of materials or services; and

 

(u)                                 costs incurred
to comply with laws relating to the removal of hazardous material (as defined
under applicable law) which was in existence in the Building or on the Project
prior to the Commencement date of the Original Office Lease, and was of such a
nature that a federal, State or municipal governmental authority, if it had
then had knowledge of the presence of such hazardous material, in the state,
and under the conditions that it then existed in the Building or on the
Project, would have then required the removal of such hazardous material or
other remedial or containment action with respect thereto; and costs incurred
to remove, remedy, contain, or treat hazardous material, which hazardous
material is brought into the Building or onto the Project after the date hereof
by Landlord or any other tenant of the Project and is of such a nature, at that
time, that a federal, State or municipal governmental authority, if it had then
had knowledge of the presence of such hazardous material, in the state, and
under the conditions, that it then exists in the Building or on the Project,
would have then required the removal of such hazardous material or other remedial
or containment action with respect thereto.

 

4.2.5                        Taxes.

 

4.2.5.1               “Tax Expenses” shall mean all federal,
state, county, or local governmental or municipal taxes, fees, charges or other
impositions of every kind and nature, whether general, special, ordinary or
extraordinary, (including, without limitation, real estate taxes, general and
special assessments, transit taxes, leasehold taxes or taxes based upon the
receipt of rent, including gross receipts or sales taxes applicable to the
receipt of rent, unless required to be paid by Tenant, personal property taxes
imposed upon the fixtures, machinery, equipment, apparatus, systems and
equipment, appurtenances, furniture and other personal property used in
connection with the Project, or any portion thereof), which shall be paid or
accrued during any Expense Year (without regard to any different fiscal year
used by such governmental or municipal authority) because of or in connection
with the ownership, leasing

 

16

 

and
operation of the Project, or any portion thereof.  Notwithstanding anything to the contrary set
forth in this Section 4.2.5, Tax Expenses shall specifically
exclude bonds and/or assessments which have been or, subsequent to the date
hereof are, levied for the purpose of funding the costs of construction of all
or any portion of the Project or capital improvements constructed therein or
about, or on-or off-site improvements with respect thereto, to the extent such
improvements are the sole responsibility of Landlord under the TCCs of this
Lease.

 

4.2.5.2               Tax Expenses
shall include, without limitation:  (i) Any
tax on the rent, right to rent or other income from the Project, or any portion
thereof, or as against the business of leasing the Project, or any portion
thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or
in substitution, partially or totally, of any assessment, tax, fee, levy or
charge previously included within the definition of real property tax, it being
acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June 1978 election (“Proposition 13”) and that assessments,
taxes, fees, levies and charges may be imposed by governmental agencies for
such services as fire protection, street, sidewalk and road maintenance, refuse
removal and for other governmental services formerly provided without charge to
property owners or occupants, and, in further recognition of the decrease in
the level and quality of governmental services and amenities as a result of
Proposition 13, Tax Expenses shall also include any governmental or private
assessments or the Project’s contribution towards a governmental or private
cost-sharing agreement for the purpose of augmenting or improving the quality
of services and amenities normally provided by governmental agencies; (iii) Any
assessment, tax, fee, levy, or charge allocable to or measured by the area of
the Premises or the Rent payable hereunder, including, without limitation, any
business or gross income tax or excise tax with respect to the receipt of such
rent, or upon or with respect to the possession, leasing, operating,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises, or any portion thereof; and (iv) Any assessment, tax, fee, levy
or charge, upon this transaction or any document to which Tenant is a party,
creating or transferring an interest or an estate in the Premises.

 

4.2.5.3               Any costs and
expenses (including, without limitation, reasonable attorneys’ fees) incurred
in attempting to protest, reduce or minimize Tax Expenses shall be included in
Tax Expenses in the Expense Year such expenses are paid.  Except as set forth in Section 4.2.5.4,
below, refunds of Tax Expenses shall be credited against Tax Expenses and
refunded to Tenant regardless of when received, based on the Expense Year to
which the refund is applicable, provided that in no event shall the amount to
be refunded to Tenant for any such Expense Year exceed the total amount paid by
Tenant as Additional Rent under this Article 4 for such Expense
Year.  If Tax Expenses for any period
during the Lease Term or any extension thereof are increased after payment
thereof for any reason, including, without limitation, error or reassessment by
applicable governmental or municipal authorities, Tenant shall pay Landlord
upon demand Tenant’s Share of any such increased Tax Expenses included by
Landlord as Building Tax Expenses pursuant to the TCCs of this Lease.  Notwithstanding anything to the contrary
contained in this Section 4.2.8 (except as set forth in Section 4.2.8.1,
above), there shall be excluded from Tax Expenses (i) all excess profits
taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and
succession taxes, estate taxes, federal and state income taxes, and other taxes
to the extent applicable to Landlord’s general or net income from all sources, (ii) any
items included as Operating Expenses, (iii) any items paid by Tenant under
Section 4.5 of this

 

17

 

Lease,
and (iv) transfer taxes associated with the sale or other transfer by
Landlord of its interest in the Project.

 

4.2.6                        “Tenant’s Share” shall mean the percentage
set forth in Section 6 of the Summary.

 

4.3                                 Allocation of Direct Expenses.

 

4.3.1                        Method of Allocation.  The parties acknowledge that the Building is
a part of a multi-building project and that the costs and expenses incurred in
connection with the Project (i.e. the Direct Expenses) should be shared
between the tenants of the Building and the tenants of the other buildings in
the Project.  Accordingly, as set forth
in Section 4.2 above, Direct Expenses (which consists of Operating
Expenses and Tax Expenses) are determined annually for the Project as a whole,
and a portion of the Direct Expenses, which portion shall be determined by
Landlord on an equitable basis, shall be allocated to the Building (as opposed
to any other buildings in the Project) and such portion shall be the Direct
Expenses for purposes of this Lease. 
Such portion of Direct Expenses allocated to the Building shall include
all Direct Expenses attributable solely to the Building and an equitable
portion of the Direct Expenses attributable to the Project as a whole.

 

4.4                                 Calculation and Payment of Additional Rent.  Tenant shall pay to Landlord, in the manner
set forth in Section 4.4.1, below, and as Additional Rent, Tenant’s
Share of Direct Expenses for each Expense Year.

 

4.4.1                        Statement of Actual Building Direct Expenses and Payment by Tenant.  Landlord
shall give to Tenant following the end of each Expense Year, a statement (the “Statement”) which shall state the Building
Direct Expenses incurred or accrued for such preceding Expense Year, and which
shall indicate the amount of Tenant’s Share of Direct Expenses.  Landlord shall use commercially reasonable
efforts to deliver such Statement to Tenant on or before May 1 following
the end of the Expense Year to which such Statement relates.  Upon receipt of the Statement for each
Expense Year commencing or ending during the Lease Term, Tenant shall pay,
within thirty (30) days after receipt of the Statement, the full amount of
Tenant’s Share of Direct Expenses for such Expense Year, less the amounts, if
any, paid during such Expense Year as “Estimated Direct Expenses,” as that term
is defined in Section 4.4.2, below, and if Tenant paid more as
Estimated Direct Expenses than the actual Tenant’s Share of Direct Expenses (an
“Excess”), Tenant shall receive a
credit in the amount of such Excess against Rent next due under this
Lease.  The failure of Landlord to timely
furnish the Statement for any Expense Year shall not prejudice Landlord or
Tenant from enforcing its rights under this Article 4.  Even though the Lease Term has expired and
Tenant has vacated the Premises, when the final determination is made of Tenant’s
Share of Direct Expenses for the Expense Year in which this Lease terminates,
if Tenant’s Share of Direct Expenses is greater than the amount of Estimated
Direct Expenses previously paid by Tenant to Landlord, Tenant shall, within
thirty (30) days after receipt of the Statement, pay to Landlord such amount,
and if Tenant paid more as Estimated Direct Expenses than the actual Tenant’s
Share of Direct Expenses (again, an Excess), Landlord shall, within thirty (30)
days, deliver a check payable to Tenant in the amount of such Excess.  The provisions of this Section 4.4.1
shall survive the expiration or earlier termination of the Lease Term.  Notwithstanding the immediately preceding
sentence,

 

18

 

Tenant
shall not be responsible for Tenant’s Share of any Building Direct Expenses
attributable to any Expense Year which are first billed to Tenant more than two
(2) calendar years after the Lease Expiration Date, provided that in any
event Tenant shall be responsible for Tenant’s Share of Direct Expenses levied
by any governmental authority or by any public utility companies at any time
following the Lease Expiration Date which are attributable to any Expense Year.

 

4.4.2                        Statement of Estimated Building Direct Expenses.  In
addition, Landlord shall give Tenant a yearly expense estimate statement (the “Estimate Statement”) which shall set forth
in general major categories Landlord’s reasonable estimate (the “Estimate”) of what the total amount of
Direct Expenses for the then-current Expense Year shall be and the estimated
Tenant’s Share of Direct Expenses (the “Estimated
Direct Expenses”).  Landlord
shall use commercially reasonable efforts to deliver such Estimate Statement to
Tenant on or before April 1 following the end of the Expense Year to which
such Estimate Statement relates.  The
failure of Landlord to timely furnish the Estimate Statement for any Expense
Year shall not preclude Landlord from enforcing its rights to collect any
Estimated Direct Expenses under this Article 4, nor shall Landlord
be prohibited from revising any Estimate Statement or Estimated Direct Expenses
theretofore delivered to the extent necessary. 
Thereafter, Tenant shall pay, within thirty (30) days after receipt of
the Estimate Statement, a fraction of the Estimated Direct Expenses for the
then-current Expense Year (reduced by any amounts paid pursuant to the second
to last sentence of this Section 4.4.2).  Such fraction shall have as its numerator the
number of months which have elapsed in such current Expense Year, including the
month of such payment, and twelve (12) as its denominator.  Until a new Estimate Statement is furnished
(which Landlord shall have the right to deliver to Tenant at any time), Tenant
shall pay monthly, with the monthly Base Rent installments, an amount equal to
one-twelfth (1/12) of the total Estimated Direct Expenses set forth in the
previous Estimate Statement delivered by Landlord to Tenant.  Throughout the Lease Term Landlord shall
maintain books and records with respect to Building Direct Expenses in
accordance with generally accepted real estate accounting and management
practices, consistently applied.

 

4.5                                 Taxes and Other Charges for Which Tenant Is Directly Responsible.

 

4.5.1                        Tenant shall be
liable for and shall pay ten (10) days before delinquency, taxes levied
against Tenant’s equipment, furniture, fixtures and any other personal property
located in or about the Premises.  If any
such taxes on Tenant’s equipment, furniture, fixtures and any other personal
property are levied against Landlord or Landlord’s property or if the assessed
value of Landlord’s property is increased by the inclusion therein of a value
placed upon such equipment, furniture, fixtures or any other personal property
and if Landlord pays the taxes based upon such increased assessment, which
Landlord shall have the right to do regardless of the validity thereof but only
under proper protest if requested by Tenant, Tenant shall upon demand repay to
Landlord the taxes so levied against Landlord or the proportion of such taxes
resulting from such increase in the assessment, as the case may be.

 

4.5.2                        If the tenant
improvements in the Premises, whether installed and/or paid for by Landlord or
Tenant and whether or not affixed to the real property so as to become a part
thereof, are assessed for real property tax purposes at a valuation higher than
the valuation at which tenant improvements conforming to Landlord’s “building
standard” in other space in the Building are assessed, then the Tax Expenses
levied against Landlord or the property by reason

 

19

 

of
such excess assessed valuation shall be deemed to be taxes levied against personal
property of Tenant and shall be governed by the provisions of Section 4.5.1,
above.

 

4.5.3                        Notwithstanding
any contrary provision herein, Tenant shall pay prior to delinquency any (i) rent
tax or sales tax, service tax, transfer tax or value added tax, or any other
applicable tax on the rent or services herein or otherwise respecting this
Lease, (ii) taxes assessed upon or with respect to the possession,
leasing, operation, management, maintenance, alteration, repair, use or
occupancy by Tenant of the Premises or any portion of the Project, including
the Project parking facility; or (iii) taxes assessed upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or an estate in the Premises.

 

4.5.4                        Tenant shall be
liable for and shall pay directly to Landlord within thirty (30) days of being
invoiced therefor, the actual cost, if any, incurred by Landlord’s for
carrying, pursuant to the terms and conditions of Section 10.2,
below, “Pollution Legal Liability Environmental Insurance.”

 

4.6                                 Landlord’s Books and Records.  Within two (2) years after receipt of a
Statement by Tenant, if Tenant disputes the amount of Additional Rent set forth
in the Statement, a determination as to the proper amount shall be made, at
Tenant’s expense, by an independent certified public accountant (the “Accountant”) selected by Landlord and
subject to Tenant’s reasonable approval, by inspecting Landlord’s records with
respect to the Statement at Landlord’s offices, provided that Tenant is not
then in default under this Lease (beyond any applicable notice and cure
periods) and Tenant has paid all amounts required to be paid under the
applicable Estimate Statement and Statement, as the case may be.  In connection with such inspection, the Accountant
must agree in advance to follow Landlord’s reasonable rules and procedures
regarding inspections of Landlord’s records, and shall execute a commercially
reasonable confidentiality agreement regarding such inspection.  If such determination by the Accountant
proves that Direct Expenses were overstated by more than five percent (5%),
then the cost of the Accountant and the cost of such determination shall be
paid for by Landlord.  Tenant’s failure
to dispute the amount of Additional Rent set forth in any Statement within two (2) years
of Tenant’s receipt of such Statement shall be deemed to be Tenant’s approval
of such Statement and Tenant, thereafter, waives the right or ability to
dispute the amounts set forth in such Statement.  Tenant hereby acknowledges that Tenant’s sole
right to inspect Landlord’s books and records and to contest the amount of
Direct Expenses payable by Tenant shall be as set forth in this Section 4.6,
and Tenant hereby waives any and all other rights pursuant to Applicable Law to
inspect such books and records and/or to contest the amount of Direct Expenses
payable by Tenant.  

 

ARTICLE 5

 

USE OF PREMISES

 

5.1                                 Permitted Use. 
Tenant shall use the Premises solely for the Permitted Use set forth in Section 7
of the Summary and Tenant shall not use or permit the Premises or the Project
to be used for any other purpose or purposes whatsoever without the prior
written consent of Landlord, which may be withheld in Landlord’s reasonable
discretion.

 

20

 

5.2                                 Prohibited Uses.  The
uses prohibited under this Lease shall include, without limitation, use of the
Premises or a portion thereof for (i) offices of any agency or bureau of
the United States or any state or political subdivision thereof; (ii) offices
or agencies of any foreign governmental or political subdivision thereof; (iii) medical/operational
offices (as opposed to general offices) of any health care professionals; (iv) schools
or other training facilities which are not ancillary to corporate, executive or
professional office use; (v) retail or restaurant uses; or (vi) communications
firms such as radio and/or television stations. 
Tenant further covenants and agrees that Tenant shall not use, or suffer
or permit any person or persons to use, the Premises or any part thereof for
any use or purpose contrary to the provisions of the Rules and Regulations
set forth in Exhibit D,
attached hereto, or in violation of the laws of the United States of America,
the State of California, or the ordinances, regulations or requirements of the
local municipal or county governing body or other lawful authorities having
jurisdiction over the Project) including, without limitation, any such laws,
ordinances, regulations or requirements relating to hazardous materials or
substances, as those terms are defined by applicable laws now or hereafter in
effect; provided, however, Landlord shall not enforce, change or modify the Rules and
Regulations in a discriminatory manner and Landlord agrees that the Rules and
Regulations shall not be unreasonably modified or enforced in a manner which
will unreasonably interfere with the normal and customary conduct of Tenant’s
business.  Tenant shall not do or permit
anything to be done in or about the Premises which will in any way damage the
reputation of the Project or obstruct or interfere with the rights of other
tenants or occupants of the Building, or injure or annoy them or use or allow
the Premises to be used for any improper, unlawful or objectionable purpose, nor
shall Tenant cause, maintain or permit any nuisance in, on or about the
Premises.

 

5.3                                 CC&Rs.  Tenant
shall comply with all recorded covenants, conditions, and restrictions
currently affecting the Project. 
Additionally, Tenant acknowledges that the Project may be subject to any
future covenants, conditions, and restrictions (the “CC&Rs”) which Landlord, in Landlord’s discretion, deems
reasonably necessary or desirable (provided, however, such amendments and/or
modifications do not prohibit the Permitted Use in the Project and do not
materially adversely interfere with Tenant’s use and enjoyment of the
Premises), and Tenant agrees that this Lease shall be subject and subordinate
to such CC&Rs.  Landlord shall have
the right to require Tenant to execute and acknowledge, within fifteen (15)
business days of a request by Landlord, a “Recognition of Covenants,
Conditions, and Restriction,” in a form substantially similar to that attached
hereto as Exhibit F,
agreeing to and acknowledging the CC&Rs.

 

ARTICLE 6

 

SERVICES AND UTILITIES;

TENANT’S MAINTENANCE AND REPAIR OBLIGATIONS

 

6.1                                 Providing Services and Utilities.  Tenant hereby acknowledges that Landlord has
previously provided, and shall maintain pursuant to the TCCs of Article 7
of this Lease, the currently existing facilities for the provision of utilities
to the exterior areas of the Project and to the point of entry in the Building
(i.e., to the main utility distribution systems located therein), and Tenant
shall provide and maintain the facilities for the distribution of such
utilities from such entry point to the interior of the Premises.  Landlord shall not be responsible for, and
Tenant

 

21

 

shall
be solely responsible for, paying all third party utility service charges for
all utilities consumed within the Building on and after the Lease Commencement
Date, and within the Project from and after the 10445 Premises Effective Date,
as are necessary for Tenant’s use of the Premises, including, without
limitation, if applicable, electricity, potable water, natural gas, sewage
disposal, and solid waste disposal.  In
addition Tenant shall be solely responsible for providing any security and
janitorial service required by Tenant. 
Landlord shall reasonably cooperate with Tenant, in connection with
Tenant’s application for and renewal of any permits or agreements with utility
companies in connection with the providing of utility services to the Building
on and after the Lease Commencement Date, and within the Project from and after
the 10445 Premises Effective Date.  In
connection with the foregoing, Tenant shall directly pay one hundred percent
(100%) of the third-party charges of all such utilities and services (e.g.,
electricity, gas, sewer and water utilities) attributable to its use of the
Building on and after the Lease Commencement Date, and within the Project from
and after the 10445 Premises Effective Date, which payments shall be made on or
prior to the date on which the same are due to the applicable utility and
service providers.

 

6.2                                 Tenant Maintained Building Systems; HVAC.  Except with regard to the Building Structure
and exterior portions of the Project which shall be maintained by Landlord
pursuant to the TCCs of Section 7.1, below, Tenant shall maintain,
repair and replace all Premises improvements. 
The improvements to be so maintained, repaired, improved and/or replaced
by Tenant include, without limitation, the interior portion of the Premises, (i) the
interior utility systems (specifically including, without limitation, all
plumbing and sewer systems and any “Alterations” (as that term is defined in Section 8.1,
below) thereof), (ii) the roof membrane and mechanical, electrical, life
safety, plumbing, fire-sprinkler systems serving the Building, (iii) any
improvements or equipment installed by Tenant, specifically including any
Tenant improvements constructed pursuant to the Tenant Work Letter or any “Alterations”
constructed pursuant to the TCCs of Article 8, (iv) the main heating,
ventilating, air conditioning (“HVAC”),and
the electrical, plumbing and lifesafety infrastructure distribution systems
located within the Building, (v) the “Central Plant Area,” as that term is
set forth in Section 29.35, and (vi) any other element of the
Project not expressly the responsibility of Landlord pursuant to the TCCs of Section 7.1
(individually, a “Building System”
and collectively, the “Building Systems”).  Tenant shall perform its maintenance and
repair obligations set forth in this Section 6.2 (“Tenant’s Maintenance Obligations”), at
Tenant’s sole, direct cost.

 

6.3                                 Tenant Maintained Security.  Tenant hereby acknowledges that Landlord
shall have no obligation to provide guard service or other security measures
for the benefit of the Premises, the Building or the Project.  Any security measures desired by Tenant for
the benefit of the Premises, the Building or the Project shall be provided by
Tenant, at Tenant’s sole cost and expense. 
Tenant hereby assumes all responsibility for the protection of Tenant
and its agents, employees, contractors, invitees and guests, and the property
thereof, from acts of third parties, including keeping doors locked and other
means of entry to the Premises closed.

 

6.4                                 Tenant Maintenance Standards.  All Building Systems, including HVAC, shall
be maintained, repaired and replaced by Tenant (i) in a commercially
reasonable first-class condition, (ii) in accordance with any applicable
manufacturer specifications relating to any particular component of such
Building Systems, (iii) in accordance with Applicable Laws, and (iv) in
accordance with any requirements of the cGMP Standard.

 

22

 

6.4.1                        Maintenance Meetings.  At the written request of Landlord (a “MM Request”), Tenant shall arrange to meet
and confer with Landlord (at a mutually reasonable and convenient time and
location), as to the status of the maintenance, repair, replacement and other
work required to be performed by each of them under this Lease (each, a “Maintenance Meeting”); provided, however,
in no event shall Tenant be required to participate in more than one such
Maintenance Meeting in any calendar quarter throughout the Lease Term, unless
such a Maintenance Meeting is required in connection with an emergency
situation or event.

 

6.4.2                        Service Contracts; Books and Records.  To the extent Tenant contracts with third
parties to perform its maintenance, repair and replacement obligations
hereunder, or any portion thereof (each, a “Service
Contract”), Tenant shall deliver full and complete copies of all
such Service Contracts entered into by Tenant for the Building Systems to
Landlord within thirty (30) days after the effective date of such Service
Contract.  In addition, Tenant shall
regularly, in accordance with commercially reasonable standards, generate and
maintain preventive maintenance records relating to the Building’s mechanical
and main electrical systems, including life safety, elevators and the central
plant (“Books and Records”).

 

6.4.3                        M&R Reports.  In connection with, and in
advance of, any such Maintenance Meeting, Tenant shall promptly deliver any
Books and Records, together with any maintenance, repair and replacement
reports, documents and back-up materials related to any major repair or
replacement work performed or then scheduled to be performed by Tenant under
the Lease (collectively, the “M&R Reports”).

 

6.4.4                        Tenant’s Responsibilities Upon Termination of Management of the Project.  Upon the expiration or earlier termination of
this Lease for any reason, or upon Landlord’s recapture of Tenant’s maintenance
and repair obligations pursuant to the TCCs of Section 6.5, below, Tenant
shall forthwith, without necessity of demand or notice, deliver the following
to Landlord, or Landlord’s appointed agent on the effective date of expiration
or termination (except to the extent that any such item has already been
delivered to Landlord).

 

(i)                                     Copies of the
Books and Records for the most recent full calendar year and any subsequent
partial calendar year.

 

(ii)                                  Any third party
warranties, guaranties and operating manuals in Tenant’s possession relating to
the improvements in the Project and any Building Systems being maintained by
Tenant (copies thereof where reasonably acceptable).

 

(iii)                               All keys
related to the telephone closets, janitorial closets, electrical closets,
storage rooms, storage areas, SDG&E rooms or areas, rooftop access points,
and other areas which would traditionally be characterized as Common Areas.

 

(iv)                              A certification
that Tenant has maintained those portions of the Project, Building and Premises
required to be maintained by Tenant in accordance with the TCCs of this Article 6.

 

The
obligation of Tenant to deliver the foregoing shall survive the termination of
the Lease.

 

23

 

6.4.5                        Assignment of Warranties.  As of the Effective Date, Landlord assigns to
Tenant all of Landlord’s rights under any and all warranties and service
contracts, to the extent existing, which relate to any Building System or other
maintenance obligations of Tenant under the terms of this Lease.

 

6.5                                 Landlord’s Assumption Of Maintenance.  Landlord shall have the right, after
twenty-four (24) hours notice to Tenant, to inspect the Building, Building
Systems, the Central Plant Area, and/or Tenant’s Books and Records, in order to
ensure compliance with this Article 6.  In the event Tenant fails, in the reasonable
judgment of Landlord, to provide the maintenance services (or cause the same to
be provided) in accordance with the obligations set forth in this Article 6,
Landlord shall deliver a written notice (a “Maintenance
Failure Notice”) to Tenant stating with particularity the nature of
such failure (such failure by Tenant to be known as a “Tenant Maintenance Failure”).  If such Tenant Maintenance Failure continues
at the end of the fifth (5th) business day
following the date of delivery of such Maintenance Failure Notice, then
Landlord shall have the right to provide such maintenance and Tenant shall pay
Landlord the cost thereof promptly upon being billed for same (including a
percentage of the cost thereof sufficient to reimburse Landlord for all
overhead, general conditions, fees and other costs or expenses arising from
Landlord’s involvement with such maintenance); provided, however, in the event
of an emergency, Landlord may take such remedial action immediately following
the delivery of the Maintenance Failure Notice. 
In the event more than two (2) Tenant Maintenance Failures occur
during any calendar year during the Lease Term, Landlord may, but need not,
assume such repair and maintenance obligations on behalf of Tenant for the
remainder of the Lease Term, in which case (i) Tenant shall pay Landlord
the cost thereof promptly upon being billed for same, and (ii) Landlord’s
management fee for the Project shall, notwithstanding the management fee set
forth in Section 4.2.4(vi), be increased to five percent (5%).

 

6.6                                 Interruption of Use.  Except as otherwise
provided in this Lease, Tenant agrees that Landlord shall not be liable for
damages, by abatement of Rent or otherwise, for failure to furnish or delay in
furnishing any service (including telephone and telecommunication services), or
for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by breakage, repairs,
replacements, or improvements, by any strike, lockout or other labor trouble,
by inability to secure electricity, gas, water, or other fuel at the Building
or Project after reasonable effort to do so, by any riot or other dangerous
condition, emergency, accident or casualty whatsoever, by act or default of
Tenant or other parties, or by any other cause beyond Landlord’s reasonable
control; and such failures or delays or diminution shall never be deemed to
constitute an eviction or disturbance of Tenant’s use and possession of the
Premises or relieve Tenant from paying Rent or performing any of its
obligations under this Lease, except as otherwise provided in this Lease.  Furthermore, Landlord shall not be liable
under any circumstances for consequential damages relating to the loss of, or
injury to, property or for injury to, or interference with, Tenant’s business,
including, without limitation, loss of profits, however occurring, through or
in connection with or incidental to a failure to furnish any of the services or
utilities as set forth in this Article 6.

 

6.7                                 Rent Abatement.  If
Landlord fails to perform the obligations required of Landlord under the TCCs
of this Lease and such failure causes all or a portion of the Premises to be
untenantable and unusable by Tenant and such failure relates to the
nonfunctioning of the heat, ventilation, and air conditioning system in the
Premises, the electricity in the Premises, the

 

24

 

nonfunctioning
of the elevator service to the Premises, or a failure to provide access to the
Premises, Tenant shall give Landlord notice (the “Initial Notice”), specifying such failure to perform by
Landlord (the “Landlord Default”).  If Landlord has not cured such Landlord
Default within five (5) business days after the receipt of the Initial
Notice (the “Eligibility Period”),
Tenant may deliver an additional notice to Landlord (the “Additional Notice”), specifying such
Landlord Default and Tenant’s intention to abate the payment of Rent under this
Lease.  If Landlord does not cure such
Landlord Default within five (5) business days of receipt of the
Additional Notice, Tenant may, upon written notice to Landlord, immediately
abate Rent payable under this Lease for that portion of the Premises rendered
untenantable and not used by Tenant, for the period beginning on the date five (5) business
days after the Initial Notice to the earlier of the date Landlord cures such
Landlord Default or the date Tenant recommences the use of such portion of the
Premises.  Such right to abate Rent shall
be Tenant’s sole and exclusive remedy at law or in equity for a Landlord
Default.  Except as provided in this Section 6.4,
nothing contained herein shall be interpreted to mean that Tenant is excused
from paying Rent due hereunder.

 

ARTICLE 7

 

BUILDING STRUCTURE &
PROJECT EXTERIOR REPAIRS

 

7.1                                 Landlord’s Maintenance Obligations.  Landlord shall repair,
replace and maintain in a first-class condition and operating order the
structural portions of the Building, including, without limitation, the
foundation, floor slabs, Building skin and roof (not including the roof
membrane), curtain wall (including gaskets and seals), exterior glass and
mullions, columns, beams, shafts and stairwells (collectively, “Building Structure”), and all portions of
the Project existing outside of the Building including, without limitation, the
parking facilities, sidewalks, gutters, and landscaping and hardscaping;
provided, however, for the purposes of this Article 7, the Building
Structure shall not apply to the extent of any Alteration or other improvements
thereto made by or on behalf of Tenant under the terms of this Lease or the
Original Lease.  Notwithstanding anything
in this Lease to the contrary, Tenant shall be required to repair the Building
Structure to the extent caused due to Tenant’s use of the Premises for other
than normal and customary implementation of the Permitted Use, unless and to
the extent such damage is covered by insurance carried or required to be
carried by Landlord pursuant to Article 10 and to which the waiver
of subrogation is applicable (such obligation to the extent applicable to
Tenant as qualified and conditioned will hereinafter be defined as the “BS Exception”).  While Landlord shall perform all of such work
allocated to Landlord under this Section 7.1 (collectively, the “LL Maintenance Obligations”), the
reasonable, actual costs related to Landlord’s performance of reasonably
required maintenance included with such LL Maintenance Obligations shall be
included in Operating Expenses (except to the extent such costs are incurred
for Non-Reimbursable Capital Improvements). 
Any entry of the Premises by Landlord in connection with the foregoing
shall be done consistent with the terms of Article 27 of this
Lease.  Tenant acknowledges that, Tenant
shall, at Tenant’s own expense, pursuant to the TCCs of this Lease, including,
without limitation Article 6 and Article 8 hereof,
remain responsible for the maintenance, repair and replacement of all of the
remaining portions of the Building (i.e., the Building Structure).Except as
specifically set forth in Section 7.2 of this Lease, below, Tenant
hereby waives any and all rights under and benefits of subsection 1 of Section

 

25

 

1932
and Sections 1941 and 1942 of the California Civil Code or under any similar
law, statute, or ordinance now or hereafter in effect.

 

7.2                                 Tenant’s Right to Make Repairs.  Notwithstanding the provisions of Section 7.1,
above, if Tenant provides notice to Landlord of an event or circumstance which
requires the action of Landlord with respect to repair and/or maintenance as
set forth in Section 7.1, above and Landlord fails to provide such
action within (30) days after receipt of such notice, then Tenant may proceed
to take the required action upon delivery of an additional ten (10) days
notice to Landlord specifying that Tenant is taking such required action, and
if such action was required under the TCCs of this Lease to be taken by
Landlord, then Tenant shall be entitled to prompt reimbursement by Landlord of
Tenant’s reasonable costs and expenses in taking such action; provided,
however, notwithstanding such thirty (30) day period, Landlord shall use
commercially reasonable efforts to expedite such repairs to ensure completion
as soon as reasonably practicable.  In
the event Tenant takes such action, Tenant shall use only those contractors
used by Landlord in the Building for similar work unless such contractors are
unwilling or unable to perform such work, in which event Tenant may utilize the
services of any other qualified contractor which normally and regularly
performs similar work in the Comparable Buildings.  If Landlord delivers to Tenant within thirty
(30) days after receipt of Tenant’s invoice, a written objection to the payment
of such invoice, setting forth with reasonable particularity Landlord’s reasons
for its claim that such action did not have to be taken by Landlord pursuant to
the TCCs of this Lease or that the charges are excessive (in which case
Landlord shall pay the amount it contends would not have been excessive), then,
as Tenant’s sole remedy, Tenant may proceed to institute legal proceedings
against Landlord to collect the amount set forth in the subject invoice;
provided that under no circumstances shall Tenant be allowed to (i) deduct
such disputed amount from Rent, or (ii) terminate this Lease.  If Tenant receives a non-appealable final
judgment against Landlord in connection with such legal proceedings, Tenant may
deduct the amount of the judgment, not to exceed the amount of the unpaid
portion of the relevant invoice, from the Base Rent next due and owing under
this Lease; provided, however, Tenant may not deduct the amount of the judgment
against more than fifty percent (50%) of Base Rent next due and owing (until
such time as the entire amount of such judgment is deducted) to the extent
following a foreclosure or a deed-in-lieu of foreclosure.

 

ARTICLE 8

 

ADDITIONS AND ALTERATIONS

 

8.1                                 Landlord’s Consent to Alterations.  Tenant may not make any
improvements, alterations, additions, repairs or changes to the Premises or any
mechanical, plumbing or HVAC facilities or systems pertaining to the Premises
(collectively, the “Alterations”)
without first procuring the prior written consent of Landlord to such
Alterations, which consent shall be requested by Tenant not less than fifteen
(15) business days prior to the commencement thereof, and which consent shall
not be unreasonably withheld by Landlord, provided it shall be deemed
reasonable for Landlord to withhold its consent to any Alteration which
adversely affects the structural portions or the systems or equipment of the
Building or is visible from the exterior of the Building.  Notwithstanding the foregoing, Tenant shall
be permitted to make Alterations following fifteen (15) days notice to
Landlord, but without Landlord’s prior consent, to the extent that such
Alterations do not (i) involve the expenditure of more than $100,000.00 in
the

 

26

 

aggregate
in any Lease Year; (ii) adversely affect the systems and equipment of the
Building or the Building Structure, or (iii) adversely affect the exterior
appearance of the Building (the “Cosmetic
Alterations”).  The
construction of the initial improvements to the Premises shall be governed by
the terms of the Tenant Work Letter and not the terms of this Article 8.

 

8.2                                 Manner of Construction.  Landlord may impose, as
a condition of its consent to any and all Alterations or repairs of the
Premises or about the Premises, such requirements as Landlord in its reasonable
discretion may deem desirable; provided, however, such requirement shall at a
minimum include, but not limited to, the following:  (i) the requirement that Tenant utilize
for such purposes only contractors reasonably approved by Landlord, (ii) the
requirement that upon Landlord’s request made at the time such consent is
granted, Tenant shall, at Tenant’s expense, remove such Alterations upon the
expiration or any early termination of the Lease Term and return the affected
portion of the Premises to a building standard general laboratory improved
condition consistent with the cGMP Standard and otherwise as reasonably
determined by Landlord; (iii) the requirement that a copy of Tenant’s
contract(s) with its contractors be delivered to Landlord prior to the
commencement of any such construction (which contracts shall state that all
change orders must be approved, in writing, by Landlord prior to
implementation); (iv) Landlord’s review and approval of the final budget
(contractor’s cost proposal) for such Alterations or repairs; and (v) the
requirement that Tenant shall meet with Landlord, prior to the commencement of
any construction, to discuss Landlord’s design parameters and code compliance
issues.  Tenant shall construct such
Alterations and perform such repairs in a good and workmanlike manner, in
conformance with any and all applicable federal, state, county or municipal
laws, rules and regulations and pursuant to a valid building permit,
issued by the City of San Diego, all in conformance with Landlord’s
construction rules and regulations. 
In the event Tenant performs any Alterations in the Premises which
require or give rise to governmentally required changes to the “Base Building,”
as that term is defined below, then Landlord shall, at Tenant’s expense, make
such changes to the Base Building.  The “Base Building” shall consist of the
Building Structure.  In performing the
work of any such Alterations, Tenant shall have the work performed in such
manner so as not to obstruct access to the Project or any portion thereof, by
any other tenant of the Project, and so as not to obstruct the business of
Landlord or other tenants in the 
Project.  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 Common
Areas.  In addition to Tenant’s
obligations under Article 9 of this Lease, upon completion of any
Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the
office of the Recorder of the County of San Diego in accordance with Section 3093
of the Civil Code of the State of California or any successor statute, and
Tenant shall deliver to the Project construction manager a reproducible copy of
the “as built” drawings of the Alterations, to the extent applicable, as well
as all permits, approvals and other documents issued by any governmental agency
in connection with the Alterations.

 

8.3                                 Payment for Improvements.  Tenant shall sign
Landlord’s standard contractor’s rules and regulations to the extent the
same are commercially reasonable.  Except
with regard to Cosmetic Alterations for which there shall be no such charge,
whether or not Tenant orders any work directly from Landlord, Tenant shall pay
to Landlord an amount equal to one percent (1%)

 

27

 

of
the cost of such work to compensate Landlord for all overhead, general
conditions, fees and other costs and expenses arising from Landlord’s
involvement with such work.

 

8.4                                 Construction Insurance.  In addition to the
requirements of Article 10 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 reasonably approved by Landlord covering the
construction of such Alterations, and such other insurance as Landlord may
reasonably require, it being understood and agreed that all of such Alterations
shall be insured by Tenant pursuant to Article 10 of this Lease
immediately upon completion thereof.  In
addition, for any Alterations with an aggregate cost equal to or greater than
$100,000.00 in any Lease Year, Tenant shall obtain a lien and completion bond
or some alternate form of security reasonably satisfactory to Landlord in an
amount sufficient to ensure the lien-free completion of such Alterations and
naming Landlord as a co-obligee (“Alteration
Security”); provided, however, if Tenant meets or exceeds one or both
of the financial thresholds set forth in Sections 21.2.2.2(ii) and (iii) of
this Lease, then Tenant shall not be required to obtain such Alteration
Security.

 

8.5                                 Landlord’s Property.  Landlord and Tenant hereby acknowledges and
agree that (i) all Alterations, improvements, fixtures, affixed equipment
and/or appurtenances which may be installed or placed in or about the Premises,
from time to time, shall be at the sole cost of Tenant and shall be and become
the property of Landlord, except as more particularly set forth below, and (ii) the
Tenant Improvements to be constructed in the Premises pursuant to the TCCs of
the Tenant Work Letter shall, upon completion of the same, be and become a part
of the Premises and the property of Landlord. 
Notwithstanding the foregoing, and provided that (A) the same are
not Tenant Improvements constructed pursuant to the terms of the Tenant Work
Letter, and (B) Landlord has not previously identified the same as “must-remain”
items pursuant to the procedure set forth below, Tenant may remove any other
Alterations, improvements, fixtures and/or equipment which Tenant can
substantiate to Landlord have not been paid for (in whole or in part) with any
improvement allowance funds provided to Tenant by Landlord, provided Tenant repairs
any damage to the Premises and Building caused by such removal and returns the
affected portion of the Premises to a building standard general laboratory
improved condition as reasonably determined by Landlord.  Furthermore, Landlord may, by written notice
to Tenant prior to the end of the Lease Term, or given following any earlier
termination of this Lease, require Tenant, at Tenant’s expense, to (i) remove
any Alterations or improvements in the Premises installed pursuant to this Article 8,
and/or (ii) remove any “Above Building Standard Tenant Improvements,” as
that term is defined in Section 2.4 of the Tenant Work Letter,
located within the Premises and replace the same with then existing “Building
Standard Tenant Improvements,” as that term is defined in Section 2.3
of the Tenant Work Letter, and to repair any damage to the Premises and
Building caused by such removal and returns the affected portion of the
Premises to a building standard tenant improved condition as reasonably
determined by Landlord; provided, however, if in connection with its request
for Landlord’s approval for particular Alterations, (1) Tenant requests
Landlord’s decision with regard to the removal of such Alterations, and (2) Landlord
thereafter agrees in writing to waive the removal requirement when approving
such Alterations, then Tenant shall not be required to so remove such
Alterations; provided further, however, that Landlord may, in connection with
Landlord’s approval for particular Alterations (or, in Landlord’s approval is
not required or sought, then within thirty (30) days of Landlord being notified
of such Alterations), identify particular

 

28

 

Alterations
as those which must-remain in the Premises and become the property of
Landlord.  If Tenant fails to complete
such removal and/or to repair any damage caused by the removal of any
Alterations or improvements in the Premises, and returns the affected portion
of the Premises to a building standard tenant improved condition as determined
by Landlord, then at Landlord’s option, either (X) Tenant shall be deemed
to be holding over in the Premises and Rent shall continue to accrue in
accordance with the terms of Article 16, below, until such work
shall be completed, or (Y) Landlord may do so and may charge the cost
thereof to Tenant.  Tenant hereby
protects, defends, indemnifies and holds Landlord harmless from any liability,
cost, obligation, expense or claim of lien in any manner relating to the
violation of the foregoing provisions, which obligations of Tenant shall
survive the expiration or earlier termination of this Lease.

 

ARTICLE 9

 

COVENANT AGAINST LIENS

 

Tenant shall keep the Project and Premises
free from any liens or encumbrances arising out of the work performed, materials
furnished or obligations incurred by or on behalf of Tenant, and shall protect,
defend, indemnify and hold Landlord harmless from and against any claims,
liabilities, judgments or costs (including, without limitation, reasonable
attorneys’ fees and costs) arising out of same or in connection therewith.  Tenant shall give Landlord notice at least
twenty (20) days prior to the commencement of any such work on the Premises (or
such additional time as may be necessary under applicable laws) to afford Landlord
the opportunity of posting and recording appropriate notices of
non-responsibility.  Tenant shall remove
any such lien or encumbrance by bond or otherwise within ten (10) days
after notice by Landlord, and if Tenant shall fail to do so, Landlord may pay
the amount necessary to remove such lien or encumbrance, without being
responsible for investigating the validity thereof.  The amount so paid shall be deemed Additional
Rent under this Lease payable upon demand, without limitation as to other remedies
available to Landlord under this Lease. 
Nothing contained in this Lease shall authorize Tenant to do any act
which shall subject Landlord’s title to the Building or Premises to any liens
or encumbrances whether claimed by operation of law or express or implied
contract.  Any claim to a lien or
encumbrance upon the Building or Premises arising in connection with any such
work or respecting the Premises not performed by or at the request of Landlord
shall be null and void, or at Landlord’s option shall attach only against
Tenant’s interest in the Premises and shall in all respects be subordinate to
Landlord’s title to the Project, Building and Premises.  Notwithstanding anything in this Article 9
to the contrary, Landlord hereby acknowledges and agrees that Tenant may grant
a security interest to Tenant’s construction lender pursuant to the express
terms and conditions of Section 5.5 of the Tenant Work Letter.

 

ARTICLE 10

 

INSURANCE

 

10.1                           Indemnification and Waiver.  Tenant hereby releases Landlord from all risk
of damage to property or injury to persons in, upon or about the Premises from
any cause whatsoever (other than Landlord’s and Landlord Parties’ negligence or
willful misconduct) and agrees that Landlord, its partners, subpartners and
their respective officers, agents, servants, employees, and independent
contractors (collectively, “Landlord Parties”)
shall not be liable to

 

29

 

Tenant
for, and are hereby released from any responsibility to Tenant for, any damage
either to person or property or resulting from the loss of use thereof, which
damage is sustained by Tenant or by other persons claiming through Tenant
(other than damage arising due to Landlord’s and Landlord Parties’ negligence
or willful misconduct).  Tenant shall
indemnify, defend, protect, and hold harmless the Landlord Parties from any and
all loss, cost, damage, expense and liability (including without limitation
court costs and reasonable attorneys’ fees) incurred in connection with or arising
from any cause in or on the Premises (other than Landlord’s and Landlord
Parties’ negligence or willful misconduct), any acts, omissions or negligence
of Tenant or of any person claiming by, through or under Tenant, or of the
contractors, agents, servants, employees, or licensees of Tenant (collectively,
the “Tenant Parties”), in, on or
about the Project or any breach of the TCCs of this Lease, either prior to,
during, or after the expiration of the Lease Term, provided that the terms of
the foregoing indemnity shall not apply to the negligence or willful misconduct
of Landlord or any Landlord Party. 
Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant’s occupancy of the Premises
and subject to the indemnification provision hereinabove, Tenant shall pay to
Landlord its costs and expenses incurred in such suit, including without
limitation, its actual professional fees such as appraisers’, accountants’ and
attorneys’ fees.  Further, Tenant’s
agreement to indemnify Landlord pursuant to this Section 10.1 is
not intended and shall not relieve any insurance carrier of its obligations
under policies required to be carried by Tenant or Landlord pursuant to the
provisions of this Lease, to the extent such policies cover the matters subject
to Tenant’s indemnification obligations; nor shall they supersede any
inconsistent agreement of the parties set forth in any other provision of this
Lease.  The provisions of this Section 10.1
shall survive the expiration or sooner termination of this Lease with respect
to any claims or liability arising in connection with any event occurring prior
to such expiration or termination. 
Notwithstanding anything to the contrary contained in this Lease,
nothing in this Lease shall impose any obligations on Tenant or Landlord to be
responsible or liable for, and each hereby releases the other from all
liability for, consequential damages other than those consequential damages
incurred by Landlord in connection with a holdover of the Premises by Tenant
after the expiration or earlier termination of this Lease.

 

10.2                           Landlord’s Fire, Casualty and Liability Insurance.  Landlord
shall carry commercial general liability insurance with respect to the Project
and Building during the Lease Term, shall further insure the Project and
Building Structure during the Lease Term against loss or damage due to fire and
other casualties covered within the classification of fire and extended
coverage, vandalism coverage and malicious mischief, sprinkler leakage, water
damage and special extended coverage, as well as flood damage and additional
hazards, and shall further carry rental interruption coverage for a period of
one year.  Such coverage shall be in such
amounts, from such companies, and on such other terms and conditions, as
Landlord may from time to time reasonably determine; provided, however, such
coverage shall be for the full replacement value of the Building Structure and
the Project in compliance with all then-existing Applicable Laws.  Additionally, at the option of Landlord, such
insurance coverage may include the risks of (i) earthquakes, (ii) one
or more loss payee endorsements in favor of the holders of any mortgages or
deeds of trust encumbering the interest of Landlord in the Building or the
ground or underlying lessors of the Building, or any portion thereof, and (iii) ”Pollution
Legal Liability Environmental Insurance,” as that term is set forth below;
provided, however, that to the extent Tenant is not in default of this Lease
(beyond any applicable notice and cure periods), Tenant shall have the option,
upon thirty (30) days written notice to Landlord, to itself carry such

 

30

 

Pollution
Legal Liability Environmental Insurance in lieu of Landlord carrying such
insurance; provided further, however, to the extent Tenant elects to carry such
Pollution Legal Liability Environment Insurance pursuant to the foregoing
option, Tenant shall comply with the express coverage requirements set forth
hereinbelow and such insurance coverage shall otherwise comply with the TCCs of
Section 10.4, below. 
Notwithstanding the foregoing provisions of this Section 10.2,
the coverage and amounts of insurance carried by Landlord in connection with the
Building shall, at a minimum, be comparable to the coverage and amounts of
insurance which are carried by reasonably prudent landlords of Comparable
Buildings, and Worker’s Compensation and Employer’s Liability coverage as
required by applicable law.  Tenant
shall, at Tenant’s expense, comply with all commercially reasonable insurance
company requirements pertaining to the use of the Premises.  If Tenant’s conduct or use of the Premises
causes any increase in the premium for such insurance policies then Tenant
shall reimburse Landlord for any such increase. Tenant, at Tenant’s expense,
shall comply with all rules, orders, regulations or requirements of the
American Insurance Association (formerly the National Board of Fire
Underwriters) and with any similar body. 
For purposes of this Lease, the “Pollution
Legal Liability Environmental Insurance” (aka an “Owner’s Policy” of
environmental insurance) shall mean insurance (1) from an insurance
carrier with a credit rating of no less than AAA, it being acknowledged and
agreed by Landlord that, as of the date of this Lease, Kemper, AIG, Chubb,
Zurich and the XL Insurance Company currently satisfy such credit rating, and (2) providing,
at a minimum, the following:  (a) an
initial 5-year policy term (with successive 1-year terms renewable on a rolling
annual basis, until such time as the policy term equals or exceeds the Lease
Expiration Date), (b) $2,000,000 coverage per incident or occurrence, (c) $2,000,000
aggregate coverage, (d) a deductible or self-insured retention of no more
than $25,000, and (e) coverage for: (A) known and unknown
pre-existing conditions; (B) unknown and later discovered conditions; (C) on-site
and off-site third-party claims for bodily injury or property damage; and (D) legal
defense expenses.  Furthermore, the
policy of insurance must include an automatic extended reporting period that
provides the Insured a period of no less than sixty (60) days following the
effective date of termination of coverage in which to provide written notice to
the insurance carrier of claims first made and reported within the automatic
extended reporting period.  All other
terms, coverage, exclusions, or conditions of the policy shall be at Landlord’s
sole and complete discretion.

 

10.3                           Tenant’s Insurance.  Tenant shall maintain the following coverages
in the following amounts.

 

10.3.1                  Commercial
General Liability Insurance covering the insured against claims of bodily
injury, personal injury and property damage (including loss of use thereof)
arising out of Tenant’s operations, and contractual liabilities (covering the
performance by Tenant of its indemnity agreements) including a Broad Form endorsement
covering the insuring provisions of this Lease and, to the extent consistent
with commercially standard policies of such insurance coverage, the performance
by Tenant of the indemnity agreements set forth in Section 10.1 of
this Lease, for limits of liability not less than:

 

	
  Bodily Injury and

  	
   

  	
  $5,000,000 each occurrence

  
	
  Property Damage Liability

  	
   

  	
  $5,000,000 annual aggregate

  

 

31

 

	
  Personal Injury Liability

  	
   

  	
  $5,000,000 each occurrence 

  
	
   

  	
   

  	
  $5,000,000 annual aggregate

  
	
   

  	
   

  	
  0% Insured’s participation

  

 

10.3.2                  Physical Damage
Insurance covering (i) all office furniture, business and trade fixtures,
office equipment, free-standing cabinet work, movable partitions, merchandise
and all other items of Tenant’s property on the Premises installed by, for, or
at the expense of Tenant, (ii) the Building Systems, the “Tenant Improvements,”
as that term is defined in Section 2.1 of the Tenant Work Letter,
and any other improvements which exist in the Premises as of the Lease
Commencement Date (excluding the Base Building) (the “Original Improvements”), and (iii) all
other improvements, alterations and additions to the Premises made by
Tenant.  Such insurance shall be written
on a “special cause of loss” physical loss or damage basis, for the full
replacement cost value (subject to reasonable deductible amounts) new without
deduction for depreciation of the covered items and in amounts that meet any
co-insurance clauses of the policies of insurance and shall include coverage
for damage or other loss caused by fire or other peril including, but not
limited to, vandalism and malicious mischief, theft, water damage of any type
(provided the following shall not require Tenant to carry flood insurance,
which flood insurance may instead be carried by Landlord pursuant to Section 10.2,
above), including sprinkler leakage, bursting or stoppage of pipes, and
explosion.

 

10.3.3                  Worker’s
Compensation and Employer’s Liability or other similar insurance pursuant to
all applicable state and local statutes and regulations.

 

10.4                           Form of Policies.  The minimum limits of
policies of insurance required of Tenant under this Lease shall in no event
limit the liability of Tenant under this Lease. 
Such insurance shall (i) name Landlord, and any other party the
Landlord so specifies that has a material financial interest in the Project, as
an additional insured, including Landlord’s managing agent, if any; (ii) specifically
cover the liability assumed by Tenant under this Lease, including, but not
limited to, Tenant’s obligations under Section 10.1 of this Lease
to the extent consistent with commercially standard policies of such insurance
coverage; (iii) be issued by an insurance company having a rating of not
less than A-X in Best’s Insurance Guide or which is otherwise acceptable to
Landlord and licensed to do business in the State of California; (iv) be
primary insurance as to all claims thereunder and provide that any insurance
carried by Landlord is excess and is non-contributing with any insurance
requirement of Tenant; (v) be in form and content reasonably acceptable to
Landlord; and (vi) provide that said insurance shall not be canceled or
coverage materially changed unless ten (10) days’ prior written notice
shall have been given to Landlord and any mortgagee of Landlord, the identity
of whom has been provided to Tenant in writing. 
Tenant shall deliver said policy or policies or certificates thereof to
Landlord on or before the Lease Commencement Date and at least thirty (30) days
before the expiration dates thereof.  In
the event Tenant shall fail to procure such insurance, or to deliver such
policies or certificate, Landlord may, at its option, after written notice to
Tenant and Tenant’s failure to obtain such insurance within five (5) days
thereafter, procure such policies for the account of Tenant, and the cost
thereof shall be paid to Landlord within thirty (30) days after delivery to
Tenant of bills therefor.

 

32

 

10.5                           Subrogation. 
Landlord and Tenant intend that their respective property loss risks
shall be borne by reasonable insurance carriers to the extent above provided,
and, notwithstanding any provisions to the contrary set forth in this Lease,
Landlord and Tenant hereby agree to look solely to, and seek recovery only
from, their respective insurance carriers in the event of a property loss to
the extent that such coverage is agreed to be provided hereunder.  The parties each hereby waive all rights and
claims against each other for such losses, and waive all rights of subrogation
of their respective insurers, provided such waiver of subrogation shall not
affect the right to the insured to recover thereunder.  The parties agree that their respective
insurance policies are now, or shall be, endorsed such that the waiver of
subrogation shall not affect the right of the insured to recover thereunder, so
long as no material additional premium is charged therefor (unless the other
party agrees to pay such additional premium).

 

10.6                           Additional Insurance Obligations.  Tenant shall carry and
maintain during the entire Lease Term, at Tenant’s sole cost and expense,
increased amounts of the insurance required to be carried by Tenant pursuant to
this Article 10 and such other reasonable types of insurance
coverage and in such reasonable amounts covering the Premises and Tenant’s
operations therein, as may be reasonably requested by Landlord, but in no event
in excess of the amounts and types of insurance then being required by
landlords of other Comparable Buildings.

 

10.7                           Risk Management Obligations.  Landlord and Tenant shall promptly advise
each other as to (i) any alleged accidents or casualty known by the
reporting party which are substantially likely to result in the assertion of a
claim against the other party, and (ii) the occurrence of any substantial
casualty damage to the Project known to the reporting party.  Landlord and Tenant shall notify each other
promptly of any threatened or pending condemnation, rezoning or other
governmental orders, proceedings or lawsuits involving the Project.

 

ARTICLE 11

 

DAMAGE AND DESTRUCTION

 

11.1                           Repair of Damage to Premises by Landlord.  If
the Building Structure or any portions of the Project existing outside of the
Building serving or providing access to the Premises shall be damaged by fire
or other casualty, Landlord shall promptly and diligently, subject to
reasonable delays for insurance adjustment or other matters beyond Landlord’s
reasonable control (specifically including, without limitation, any requirement
to obtain any license, clearance or other authorization of any kind required to
enter into and restore the Premises issued by any governmental or
quasi-governmental agency having jurisdiction over the use, storage, release or
removal of “Hazardous Materials,” as that term is set forth in Section 29.33
of this Lease, below, in, on or about the Premises (collectively, the “Hazardous Materials Clearances”), which
Hazardous Materials Clearances shall be obtained by Tenant), and subject to all
other terms of this Article 11, restore the Building Structure and
all such portions of the Project existing outside of the Building.  Such restoration shall be to substantially
the same condition of the Building Structure and exterior Project components
prior to the casualty, except for modifications required by zoning and building
codes and other laws or by the holder of a mortgage on the Building or Project
or any other modifications to the exterior Project components deemed desirable
by Landlord, which are consistent with the character of the

 

33

 

Project,
provided that access to the Premises and any common restrooms serving the
Premises shall not be materially impaired. 
Upon the occurrence of any damage to the Premises, Tenant shall, at its
sole cost and expense, repair any injury or damage to the Building Systems,
Tenant Improvements and the Original Improvements installed in the Premises and
shall return such Building Systems, Tenant Improvements and Original
Improvements to the condition existing immediately prior to such casualty
(provided such Building Systems, Tenant Improvements and Original Improvements
were properly maintained pursuant to the TCCs of this Lease prior to such
casualty), except for modifications required by “Applicable Laws,” as that term
is set forth in Article 24 of this Lease.  Prior to the commencement of construction,
Tenant shall submit to Landlord, for Landlord’s review and approval, all plans,
specifications and working drawings relating thereto, and Tenant shall select
the contractors, subject to Landlord’s reasonable approval, to perform such
improvement work.  Landlord shall not be
liable for any inconvenience or annoyance to Tenant or its visitors, or injury
to Tenant’s business resulting in any way from such damage or the repair
thereof; provided however, that if such fire or other casualty shall have
damaged the Premises or Common Areas necessary to Tenant’s occupancy, and the
Premises are not occupied by Tenant as a result thereof, then during the time
and to the extent the Premises are unfit for occupancy, the Rent shall be
abated in proportion to the ratio that the amount of rentable square feet of
the Premises which is unfit for occupancy for the purposes permitted under this
Lease bears to the total rentable square feet of the Premises; provided
further, however, that if any Hazardous Materials Clearances are required to be
obtained by Tenant before such restoration can begin, such abatement of Rent
shall continue for only so long as Tenant, in Landlord’s reasonable judgment,
diligently pursues obtaining such required Hazardous Materials Clearances.  Tenant’s right to rent abatement pursuant to
the preceding sentence shall terminate as of the date which is reasonably
determined by Landlord to be the date Tenant should have completed repairs to
the Premises assuming Tenant used reasonable due diligence in connection
therewith.

 

11.2                           Landlord’s Option to Repair.  Notwithstanding the
terms of Section 11.1 of this Lease, Landlord may elect not to
rebuild and/or restore the Building Structure and/or exterior Project
components, and instead terminate this Lease, by notifying Tenant in writing of
such termination within sixty (60) days after the date of discovery of the
damage, such notice to include a termination date giving Tenant sixty (60) days
to vacate the Premises, but Landlord may so elect only if the Building
Structure or exterior Project components shall be damaged by fire or other
casualty or cause, whether or not the Premises are affected, and one or more of
the following conditions is present: (i) in Landlord’s reasonable
judgment, repairs cannot reasonably be completed within one hundred eighty
(180) days after the date of discovery of the damage (when such repairs are
made without the payment of overtime or other premiums); (ii) the holder
of any mortgage on the Building or Project or ground lessor with respect to the
Building or Project shall require that the insurance proceeds or any portion
thereof be used to retire the mortgage debt, or shall terminate the ground
lease, as the case may be; (iii) the damage is not fully covered by the
insurance policies Landlord is required to carry pursuant to the TCCs of this
Lease; (iv) Landlord cannot, pursuant to the applicable laws then in
effect, rebuild the Building Structure or exterior Project components so that
they will be substantially the same structurally or architecturally; or (v) the
damage occurs during the last twelve (12) months of the Lease Term; provided,
however, that if Landlord does not elect to terminate this Lease pursuant to
Landlord’s termination right as provided above, and the repairs cannot, in the
reasonable opinion of Landlord, be completed within one hundred eighty (180)
days after being commenced, Tenant

 

34

 

may
elect, no earlier than sixty (60) days after the date of the damage and not
later than ninety (90) days after the date of such damage, to terminate this
Lease by written notice to Landlord effective as of the date specified in the
notice, which date shall not be less than thirty (30) days nor more than sixty
(60) days after the date such notice is given by Tenant.  Furthermore, if neither Landlord nor Tenant
has terminated this Lease, and the repairs are not actually completed within
such 180-day period, Tenant shall have the right to terminate this Lease during
the first five (5) business days of each calendar month following the end
of such period until such time as the repairs are complete, by notice to
Landlord (the “Damage Termination Notice”),
effective as of a date set forth in the Damage Termination Notice (the “Damage Termination Date”), which Damage
Termination Date shall not be less than ten (10) business days following
the end of each such month. 
Notwithstanding the foregoing, if Tenant delivers a Damage Termination
Notice to Landlord, then Landlord shall have the right to suspend the
occurrence of the Damage Termination Date for a period ending thirty (30) days
after the Damage Termination Date set forth in the Damage Termination Notice by
delivering to Tenant, within five (5) business days of Landlord’s receipt
of the Damage Termination Notice, a certificate of Landlord’s contractor
responsible for the repair of the damage certifying that it is such contractor’s
good faith judgment that the repairs shall be substantially completed within
thirty (30) days after the Damage Termination Date.  If repairs shall be substantially completed
prior to the expiration of such thirty-day period, then the Damage Termination
Notice shall be of no force or effect, but if the repairs shall not be
substantially completed within such thirty-day period, then this Lease shall
terminate upon the expiration of such thirty-day period.  At any time, from time to time, after the
date occurring sixty (60) days after the date of the damage, Tenant may request
that Landlord inform Tenant of Landlord’s reasonable opinion of the date of
completion of the repairs and Landlord shall respond to such request within
five (5) business days. 
Notwithstanding the provisions of this Section 11.2, Tenant
shall have the right to terminate this Lease under this Section 11.2
only if each of the following conditions is satisfied: (a) the damage to
the Project by fire or other casualty was not caused by the gross negligence or
intentional act of Tenant or its partners or subpartners and their respective
officers, agents, servants, employees, and independent contractors; (b) as
a result of the damage, Tenant cannot reasonably conduct business from the
Premises; and, (c) as a result of the damage to the Project, Tenant does
not occupy or use the Premises at all. 
In the event this Lease is terminated in accordance with the terms of
this Section 11.2, Tenant shall assign to Landlord (or to any party
designated by Landlord) all insurance proceeds payable to Tenant under Tenant’s
insurance required under Section 10.3.2 of this Lease; provided,
however, that notwithstanding anything to the contrary set forth above, Tenant
shall be entitled to retain a portion of such proceeds equal to the
then-remaining unamortized amount (based on a straight-line amortization over the
initial Lease Term) of the “Initial TI Disbursement” and the “Over-Allowance
Amount,” as those terms are set forth in Sections 2.2.2.1 and 4.2.1,
respectively, of the Tenant Work Letter.

 

11.3                           Waiver of Statutory Provisions.  The provisions of this Lease, including this Article 11,
constitute an express agreement between Landlord and Tenant with respect to any
and all damage to, or destruction of, all or any part of the Premises, the
Building or the Project, and any statute or regulation of the State of California,
including, without limitation, Sections 1932(2) and 1933(4) of the
California Civil Code, with respect to any rights or obligations concerning
damage or destruction in the absence of an express agreement between the
parties, and any other statute or regulation, now or hereafter in effect, shall
have no application to this Lease or any damage or destruction to all or any
part of the Premises, the Building or the Project.

 

35

 

 

ARTICLE 12

 

NONWAIVER

 

No provision of this Lease shall be deemed waived by
either party hereto unless expressly waived in a writing signed thereby.  The waiver by either party hereto of any
breach of any term, covenant or condition herein contained shall not be deemed
to be a waiver of any subsequent breach of same or any other term, covenant or
condition herein contained.  The
subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a
waiver of any preceding breach by Tenant of any term, covenant or condition of
this Lease, other than the failure of Tenant to pay the particular Rent so
accepted, regardless of Landlord’s knowledge of such preceding breach at the
time of acceptance of such Rent.  No
acceptance of a lesser amount than the Rent herein stipulated shall be deemed a
waiver of Landlord’s right to receive the full amount due, nor shall any
endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord’s right to recover
the full amount due.  No receipt of
monies by Landlord from Tenant after the termination of this Lease shall in any
way alter the length of the Lease Term or of Tenant’s right of possession
hereunder, or after the giving of any notice shall reinstate, continue or
extend the Lease Term or affect any notice given Tenant prior to the receipt of
such monies, it being agreed that after the service of notice or the commencement
of a suit, or after final judgment for possession of the Premises, Landlord may
receive and collect any Rent due, and the payment of said Rent shall not waive
or affect said notice, suit or judgment.

 

ARTICLE 13

 

CONDEMNATION

 

If the whole or any part of the Premises or the
Building shall be taken by power of eminent domain or condemned by any
competent authority for any public or quasi-public use or purpose, or if any
adjacent property or street shall be so taken or condemned, or reconfigured or
vacated by such authority in such manner as to require the use, reconstruction
or remodeling of any part of the Premises or Building, or if Landlord shall
grant a deed or other instrument in lieu of such taking by eminent domain or
condemnation, Landlord shall have the option to terminate this Lease effective
as of the date possession is required to be surrendered to the authority.  If more than fifty percent (50%) of the
rentable square feet of the Premises is taken, or if access to the Premises is
substantially impaired, in each case for a period in excess of one hundred
eighty (180) days, Tenant shall have the option to terminate this Lease
effective as of the date possession is required to be surrendered to the
authority.  Tenant shall not because of
such taking assert any claim against Landlord or the authority for any
compensation because of such taking and Landlord shall be entitled to the
entire award or payment in connection therewith, except that Tenant shall have
the right to file any separate claim available to Tenant for any taking of (i) Tenant’s
personal property, and (ii) improvements and fixtures belonging to Tenant
and removable by Tenant upon expiration of the Lease Term pursuant to the TCCs
of this Lease, and for moving expenses, so long as such claims do not diminish
the award available to Landlord, its ground lessor with respect to the Building
or Project or its mortgagee, and such claim is payable separately to
Tenant.  All Rent shall be apportioned as
of the date of such termination.  If any

 

36

 

part of the Premises shall be taken, and this Lease
shall not be so terminated, the Rent shall be proportionately abated.  Tenant hereby waives any and all rights it
might otherwise have pursuant to Section 1265.130 of The California Code
of Civil Procedure.  Notwithstanding
anything to the contrary contained in this Article 13, in the event
of a temporary taking of all or any portion of the Premises for a period of one
hundred and eighty (180) days or less, then this Lease shall not terminate but
the Base Rent and the Additional Rent shall be abated for the period of such
taking in proportion to the ratio that the amount of rentable square feet of
the Premises taken bears to the total rentable square feet of the
Premises.  Landlord shall be entitled to
receive the entire award made in connection with any such temporary taking.

 

ARTICLE 14

 

ASSIGNMENT
AND SUBLETTING

 

14.1                           Transfers. 
Tenant shall not, without the prior written consent of Landlord as set
forth more particularly in Section 14.2, below, assign, mortgage, pledge,
hypothecate, encumber, or permit any lien to attach to, or otherwise transfer,
this Lease or any interest hereunder, permit any assignment, or other transfer
of this Lease or any interest hereunder by operation of law, sublet the
Premises or any part thereof, or enter into any license or concession
agreements or otherwise permit the occupancy or use of the Premises or any part
thereof by any persons other than Tenant and its employees and contractors (all
of the foregoing are hereinafter sometimes referred to collectively as “Transfers” and any person to whom any Transfer is made or
sought to be made is hereinafter sometimes referred to as a “Transferee”).  If
Tenant desires Landlord’s consent to any Transfer, Tenant shall notify Landlord
in writing, which notice (the “Transfer Notice”)
shall include (i) the proposed effective date of the Transfer, which shall
not be less than thirty (30) days nor more than one hundred eighty (180) days
after the date of delivery of the Transfer Notice, (ii) a description of
the portion of the Premises to be transferred (the “Subject
Space”), (iii) all of the terms of the proposed Transfer and
the consideration therefor, including calculation of the “Transfer Premium”, as that term is defined
in Section 14.3 below, in connection with such Transfer, the name
and address of the proposed Transferee, and a copy of all existing executed
and/or proposed documentation pertaining to the proposed Transfer, including
all existing operative documents to be executed to evidence such Transfer or
the agreements incidental or related to such Transfer, (iv) current
financial statements of the proposed Transferee certified by an officer,
partner or owner thereof, business credit and personal references and history
of the proposed Transferee and any other information required by Landlord which
will enable Landlord to determine the financial responsibility, character, and
reputation of the proposed Transferee, nature of such Transferee’s business and
proposed use of the Subject Space and (v) an executed estoppel certificate
from Tenant in the form attached hereto as Exhibit E.  Any Transfer made without Landlord’s prior
written consent shall, at Landlord’s option, be null, void and of no effect,
and shall, at Landlord’s option, constitute a default by Tenant under this
Lease.  Whether or not Landlord consents
to any proposed Transfer, Tenant shall, within thirty (30) days after written
request by Landlord, reimburse Landlord for all reasonable and actual
out-of-pocket third-party costs and expenses incurred by Landlord in connection
with its review of a proposed Transfer; provided that such costs and expenses
shall not exceed One Thousand Five Hundred and No/100 Dollars ($1,500.00) for a
Transfer in the ordinary course of business. 
Landlord and Tenant hereby agree that a proposed Transfer shall not be
considered “in the ordinary course of business” if such Transfer involves the
review of

 

37

 

documentation
by Landlord on more than two (2) occasions with regard to a single
proposed Transfer.

 

14.2                           Landlord’s Consent.  Landlord shall not unreasonably withhold its
consent to any proposed Transfer of the Subject Space to the Transferee on the
terms specified in the Transfer Notice. 
Without limitation as to other reasonable grounds for withholding
consent, the parties hereby agree that it shall be reasonable under this Lease
and under any applicable law for Landlord to withhold consent to any proposed
Transfer where one or more of the following apply:

 

14.2.1                  The
Transferee is of a character or reputation or engaged in a business which is
not consistent with the quality of the Building or the Project;

 

14.2.2                  The
Transferee intends to use the Subject Space for purposes which are not
permitted under this Lease;

 

14.2.3                  The Transferee is either a
governmental agency or instrumentality thereof;

 

14.2.4                  The
Transferee is not a party of reasonable financial worth and/or financial
stability in light of the responsibilities to be undertaken in connection with
the Transfer on the date consent is requested;

 

14.2.5                  The proposed
Transfer would cause a violation of another lease for space in the Project, or
would give an occupant of the Project a right to cancel its lease;

 

14.2.6                  The terms of
the proposed Transfer will allow the Transferee to exercise a right of renewal,
right of expansion, right of first offer, or other similar right held by Tenant
(or will allow the Transferee to occupy space leased by Tenant pursuant to any
such right);

 

14.2.7                  Either the
proposed Transferee, or any person or entity which directly or indirectly,
controls, is controlled by, or is under common control with, the proposed
Transferee, (i) occupies space in the Project at the time of the request
for consent, or (ii) is negotiating with Landlord to lease space in the
Project at such time, or (iii) has negotiated with Landlord during the six
(6)-month period immediately preceding the Transfer Notice, and Landlord has
available space in the Project suitable for such proposed Transferee; or

 

14.2.8                  The
Transferee does not intend to occupy the entire Premises and conduct its
business therefrom for a substantial portion of the term of the Transfer.

 

If Landlord consents to any Transfer pursuant to the
terms of this Section 14.2 (and does not exercise any recapture
rights Landlord may have under Section 14.4 of this Lease), Tenant
may within six (6) months after Landlord’s consent, but not later than the
expiration of said six-month period, enter into such Transfer of the Premises
or portion thereof, upon substantially the same terms and conditions as are set
forth in the Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1
of this Lease, provided that if there are any changes in the terms and
conditions from those specified in the Transfer Notice (i) such that
Landlord would initially have been entitled to refuse its consent to such
Transfer under this Section 14.2, or (ii) which would cause
the proposed Transfer to be more favorable to the Transferee than the

 

38

 

terms set forth in Tenant’s original Transfer Notice,
Tenant shall again submit the Transfer to Landlord for its approval and other
action under this Article 14 (including Landlord’s right of
recapture, if any, under Section 14.4 of this Lease).  Notwithstanding anything to the contrary in
this Lease, if Tenant or any proposed Transferee claims that Landlord has
unreasonably withheld or delayed its consent under Section 14.2 or
otherwise has breached or acted unreasonably under this Article 14,
their sole remedies shall be a declaratory judgment and an injunction for the
relief sought without any monetary damages, and Tenant hereby waives all other
remedies, including, without limitation, any right at law or equity to
terminate this Lease, on its own behalf and, to the extent permitted under all
applicable laws, on behalf of the proposed Transferee.  Tenant shall indemnify, defend and hold
harmless Landlord from any and all liability, losses, claims, damages, costs,
expenses, causes of action and proceedings involving any third party or parties
(including without limitation Tenant’s proposed subtenant or assignee) who
claim they were damaged by Landlord’s wrongful withholding or conditioning of
Landlord’s consent, unless a court of competent jurisdiction determines that
Landlord was wrongful in its withholding or conditioning of its consent.

 

14.3                           Transfer Premium.  If Landlord consents to a Transfer, as a condition
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any “Transfer Premium,” as that term is defined
in this Section 14.3, received by Tenant from such Transferee.  “Transfer Premium”
shall mean all rent, additional rent or other consideration payable by such
Transferee in connection with the Transfer in excess of the Rent and Additional
Rent payable by Tenant under this Lease during the term of the Transfer on a
per rentable square foot basis if less than all of the Premises is transferred,
after deducting the reasonable expenses incurred by Tenant for (i) any
changes, alterations and improvements to the Premises in connection with the
Transfer, (ii) any free base rent reasonably provided to the Transferee,
and (iii) any commercially reasonable brokerage commissions and legal fees
in connection with the Transfer.  “Transfer
Premium” shall also include, but not be limited to, key money, bonus money or
other cash consideration paid by Transferee to Tenant in connection with such
Transfer, and any payment in excess of fair market value for services rendered
by Tenant to Transferee or for assets, fixtures, inventory, equipment, or
furniture transferred by Tenant to Transferee in connection with such Transfer.  In the calculations of the Rent (as it
relates to the Transfer Premium calculated under this Section 14.3),
and the Transferee’s Rent and Quoted Rent under Section 14.2 of
this Lease, the Rent paid during each annual period for the Subject Space, and
the Transferee’s Rent and the Quoted Rent, shall be computed after adjusting
such rent to the actual effective rent to be paid,  taking into consideration any and all
leasehold concessions granted in connection therewith, including, but not
limited to, any rent credit and improvement allowance.  For purposes of calculating any such
effective rent all such concessions shall be amortized on a straight-line basis
over the relevant term.

 

14.4                           Landlord’s Option as to Subject Space.  In the event that a
proposed Transfer, if consented to, would cause fifty percent (50%) or more of
the Premises to be subleased or assigned to a party other than Original Tenant
and/or its Affiliates, then notwithstanding anything to the contrary contained in
this Article 14, Notwithstanding anything to the contrary contained
in this Article 14, Landlord shall have the option, by giving
written notice to Tenant within thirty (30) days after receipt of any Transfer
Notice, to recapture the Subject Space. 
Such recapture notice shall cancel and terminate this Lease with respect
to the Subject Space as of the date stated in the Transfer Notice as the
effective date of the proposed Transfer until the last day

 

39

 

of the
term of the Transfer as set forth in the Transfer Notice (or at Landlord’s
option, shall cause the Transfer to be made to Landlord or its agent, in which
case the parties shall execute the Transfer documentation promptly
thereafter).  In the event of a recapture
by Landlord, if this Lease shall be canceled with respect to less than the
entire Premises, the Rent reserved herein shall be prorated on the basis of the
number of rentable square feet retained by Tenant in proportion to the number
of rentable square feet contained in the Premises, and this Lease as so amended
shall continue thereafter in full force and effect, and upon request of either
party, the parties shall execute written confirmation of the same.  If Landlord declines, or fails to elect in a
timely manner to recapture the Subject Space under this Section 14.4,
then, provided Landlord has consented to the proposed Transfer, Tenant shall be
entitled to proceed to transfer the Subject Space to the proposed Transferee,
subject to provisions of this Article 14.

 

14.5                           Effect of Transfer.  If Landlord consents to a Transfer, (i) the
TCCs of this Lease shall in no way be deemed to have been waived or modified, (ii) such
consent shall not be deemed consent to any further Transfer by either Tenant or
a Transferee, (iii) Tenant shall deliver to Landlord, promptly after
execution, an original executed copy of all documentation pertaining to the
Transfer in form reasonably acceptable to Landlord, (iv) Tenant shall
furnish upon Landlord’s request a complete statement, certified by Tenant’s
chief financial officer, setting forth in detail the computation of any
Transfer Premium Tenant has derived and shall derive from such Transfer, and (v) no
Transfer relating to this Lease or agreement entered into with respect thereto,
whether with or without Landlord’s consent, shall relieve Tenant or any
guarantor of the Lease from any liability under this Lease, including, without
limitation, in connection with the Subject Space.  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 Transfer, and shall have the right to make
copies thereof.  If the Transfer Premium
respecting any Transfer shall be found understated, Tenant shall, within thirty
(30) days after demand, pay the deficiency, and if understated by more than
five percent (5%), Tenant shall pay Landlord’s costs of such audit.

 

14.6                           Additional Transfers.  For purposes of this Lease, the term “Transfer” shall also include (i) if Tenant is a
partnership, the withdrawal or change, voluntary, involuntary or by operation
of law, or transfer of fifty percent (50%) or more of partnership interests,
within a twelve (12)-month period, or the dissolution of the partnership
without immediate reconstitution thereof, and (ii) if Tenant is a closely
held corporation (i.e., whose stock is not publicly
held and not traded through a nationally recognized exchange or over the
counter), (A) the merger, consolidation or other reorganization of Tenant
in which the holders of Tenant’s outstanding voting stock immediately prior to
such transaction own, immediately after such transaction, securities
representing less than fifty percent (50%) of the voting power of the
corporation or other entity surviving such transaction, (B) the sale or
other transfer by the Tenant of an aggregate of fifty percent (50%) or more of
the voting shares of Tenant in a single transaction or series of transactions,
within any twelve (12)-month period (other than in connection with a capital
raising transaction involving the sale of capital stock of Tenant to bona fide
third-party investors), or (C) the sale, mortgage, exclusive license,
hypothecation or pledge of all or substantially all of the value of the
unencumbered assets of Tenant in a single transaction or series of transactions
within a twelve (12)-month period. 
Notwithstanding anything to the contrary set forth in this Article 14
to the contrary, in no event shall an offering of stock to (1) third
parties by means of a public offering (either an initial public offering or a
subsequent public

 

40

 

offering)
through a recognized stock market, or (2) in connection with research and
development partnerships or collaborative agreements, constitute a “Transfer.”

 

14.7                           Occurrence of Default.  Any Transfer hereunder shall be subordinate
and subject to the provisions of this Lease, and if this Lease shall be
terminated during the term of any Transfer, Landlord shall have the right to:  (i) treat such Transfer as canceled and
repossess the Subject Space by any lawful means, or (ii) require that such
Transferee attorn to and recognize Landlord as its landlord under any such
Transfer.  If Tenant shall be in default
under this Lease, Landlord is hereby irrevocably authorized, as Tenant’s agent
and attorney-in-fact, to direct any Transferee to make all payments under or in
connection with the Transfer directly to Landlord (which Landlord shall apply
towards Tenant’s obligations under this Lease) until such default is
cured.  Such Transferee 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 Transferee shall be deemed a waiver of
any provision of this Article 14 or the approval of any Transferee
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 Transferee 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 Transfer shall not be effective unless the guarantor also
consents to such Transfer.

 

14.8                           Non-Transfers.  Notwithstanding
anything to the contrary contained in this Article 14, to the
extent the Original Tenant in not then in default under this Lease (beyond any
applicable notice and cure periods), an assignment or subletting of all
or a portion of the Premises to (i) an affiliate of Tenant (an entity
which is controlled by, controls or is under common control, as such term is
defined in California General Corporations Code (“CGCC”) Sections 160 and 5045, with, Tenant), (ii) an
entity which merges with or acquires or is acquired by, Tenant or a parent of
Tenant, as defined in CGCC Sections 175 and 5064, or a subsidiary, as defined
in CGCC Sections 189 and 5073, of Tenant’s parent or Affiliate, or (iii) a
transferee of substantially all of the assets of Tenant (collectively, an “Affiliate”) along with any other entity
which will qualify as an “affiliate” under CGCC 150 and 5031, shall not be
deemed a Transfer under this Article 14, provided that Tenant
notifies Landlord of any such assignment or sublease and promptly supplies
Landlord with any documents or information reasonably requested by Landlord
regarding such assignment or sublease or such Affiliate, and such
assignment or sublease is not a subterfuge by Tenant to avoid its obligations
under this Lease, or otherwise “releases” the Original Tenant from such
obligations.

 

ARTICLE 15

 

SURRENDER
OF PREMISES; OWNERSHIP AND

REMOVAL
OF TRADE FIXTURES

 

15.1                           Surrender of Premises.  No act or thing done by Landlord or any agent
or employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in

 

41

 

writing
by Landlord.  The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute
a surrender of the Premises or effect a termination of this Lease, whether or
not the keys are thereafter retained by Landlord, and notwithstanding such
delivery Tenant shall be entitled to the return of such keys at any reasonable
time upon request until this Lease shall have been properly terminated.  The voluntary or other surrender of this
Lease by Tenant, whether accepted by Landlord or not, or a mutual termination
hereof, shall not work a merger, and at the option of Landlord shall operate as
an assignment to Landlord of all subleases or subtenancies affecting the
Premises or terminate any or all such sublessees or subtenancies.

 

15.2                           Removal of Tenant Property by Tenant.  Upon the expiration of the Lease Term, or
upon any earlier termination of this Lease, Tenant shall, subject to the
provisions of Section 8.5, this Article 15 and Section 29.33,
quit and surrender possession of the Premises to Landlord in as good order and
condition as when Tenant took possession and as thereafter improved by Landlord
and/or Tenant, reasonable wear and tear and repairs which are specifically made
the responsibility of Landlord hereunder excepted.  Upon such expiration or termination, Tenant
shall, without expense to Landlord, remove or cause to be removed from the
Premises all debris and rubbish, and such items of furniture, equipment,
business and trade fixtures, free-standing cabinet work, movable partitions and
other articles of personal property owned by Tenant or installed or placed by
Tenant at its expense in the Premises, and such similar articles of any other
persons claiming under Tenant, as Landlord may, in its sole discretion, require
to be removed, and Tenant shall repair at its own expense all damage to the
Premises and Building resulting from such removal.

 

ARTICLE 16

 

HOLDING
OVER

 

If Tenant holds over after the expiration of the Lease
Term or earlier termination thereof, with or without the express or implied
consent of Landlord, such tenancy shall be from month-to-month only, and shall
not constitute a renewal hereof or an extension for any further term, and in
such case Rent shall be payable at a monthly rate equal to the product of (i) the
Rent applicable during the last rental period of the Lease Term under this Lease,
and (ii) a percentage equal to one hundred fifty percent (150%) during the
first two (2) months immediately following the expiration or earlier
termination of the Lease Term, and two hundred percent (200%) thereafter.  Such month-to-month tenancy shall be subject
to every other applicable term, covenant and agreement contained herein.  Nothing contained in this Article 16
shall be construed as consent by Landlord to any holding over by Tenant, and
Landlord expressly reserves the right to require Tenant to surrender possession
of the Premises to Landlord as provided in this Lease upon the expiration or
other termination of this Lease.  The
provisions of this Article 16 shall not be deemed to limit or
constitute a waiver of any other rights or remedies of Landlord provided herein
or at law.  If Tenant fails to surrender
the Premises upon the termination or expiration of this Lease, in addition to
any other liabilities to Landlord accruing therefrom, Tenant shall protect,
defend, indemnify and hold Landlord harmless from all loss, costs (including
reasonable attorneys’ fees) and liability resulting from such failure,
including, without limiting the generality of the foregoing, any claims made by
any succeeding tenant founded upon such failure to surrender and any lost
profits to Landlord resulting therefrom.

 

42

 

ARTICLE 17

 

ESTOPPEL
CERTIFICATES

 

Within ten (10) days following a request in
writing by Landlord, Tenant shall execute, acknowledge and deliver to Landlord
an estoppel certificate, which, as submitted by Landlord, shall be
substantially in the form of Exhibit E,
attached hereto (or such other form as may be reasonably required by any
prospective mortgagee or purchaser of the Project, or any portion thereof),
indicating therein any exceptions thereto that may exist at that time, and
shall also contain any other information reasonably requested by Landlord or
Landlord’s mortgagee or prospective mortgagee. 
Any such certificate may be relied upon by any prospective mortgagee or
purchaser of all or any portion of the Project. 
Tenant shall execute and deliver whatever other commercially reasonable
instruments may be reasonably required for such purposes.  At any time during the Lease Term, Landlord
may require Tenant to provide Landlord with its most recently prepared
financial statement and financial statements of the two (2) years prior to
the most recently prepared financial statement year.  Such statements shall be prepared in
accordance with generally accepted accounting principles and, if such is the
normal practice of Tenant, shall be audited by an independent certified public
accountant.  Failure of Tenant to timely
execute, acknowledge and deliver such estoppel certificate or other
commercially reasonable instruments shall constitute an acceptance of the
Premises and an acknowledgment by Tenant that statements included in the
estoppel certificate are true and correct, without exception.  Any such financial statement or other
information which is marked “confidential” or “company secret(s)” (or is
otherwise similarly marked by Tenant) shall be confidential and shall not be
disclosed by Landlord to any third party (other than its partners,
administrators, consultants, financial, legal and a prospective or current
purchaser, mortgagee, or ground or underlying lessor of the Building or the
Project, a prospective Transferee, and except as required by applicable law or
in connection with a dispute or litigation hereunder or as required by a
subpoena) except as specifically provided in this Article 17 and
then only if the person to whom disclosure is made first agrees to be bound by
the requirements of this Article 17.

 

ARTICLE 18

 

SUBORDINATION

 

Subject to Tenant’s receipt of an appropriate
non-disturbance agreement(s) as set forth below, this Lease shall be subject
and subordinate to all present and future ground or underlying leases of the
Building or Project and to the lien of any mortgage, trust deed or other
encumbrances now or hereafter in force against the Building or Project or any
part thereof, if any, and to all renewals, extensions, modifications,
consolidations and replacements thereof, and to all advances made or hereafter
to be made upon the security of such mortgages or trust deeds, unless the holders
of such mortgages, trust deeds or other encumbrances, or the lessors under such
ground lease or underlying leases, require in writing that this Lease be
superior thereto.  Tenant covenants and
agrees in the event any proceedings are brought for the foreclosure of any such
mortgage or deed in lieu thereof (or if any ground lease is terminated), to
attorn, without any deductions or set-offs whatsoever, to the lienholder or
purchaser or any successors thereto upon any such foreclosure sale or deed in lieu
thereof (or to the ground lessor), if so requested to do so by such purchaser
or lienholder or ground lessor, and to recognize such purchaser or

 

43

 

lienholder or ground lessor as the lessor under this
Lease, provided such lienholder or purchaser or ground lessor shall agree to
accept this Lease and not disturb Tenant’s occupancy, so long as Tenant timely
pays the rent and observes and performs the TCCs of this Lease to be observed
and performed by Tenant.  Landlord’s
delivery to Tenant of a fully executed commercially reasonable non-disturbance
agreement(s) (the “Nondisturbance Agreement”) in favor of Tenant from any such
ground lessor, mortgage holders or lien holders of Landlord who later come into
existence at any time prior to the expiration of the Lease Term shall be in
consideration of, and a condition precedent to, Tenant’s agreement to be bound
by the terms and conditions of this Article 18; provided Tenant
shall execute and return such Nondisturbance Agreement to Landlord within ten (10) days
of its receipt thereof.  Nothing
contained herein shall require Tenant to waive any of Landlord’s obligations
under this Lease, including, without limitation, Landlord’s obligation to fund
the Improvement Allowance (and Tenant’s offset rights for such failure).  Landlord’s interest herein may be assigned as
security at any time to any lienholder. 
Tenant shall, within four (4) days of request by Landlord, execute
such further instruments or assurances as Landlord may reasonably deem
necessary to evidence or confirm the subordination or superiority of this Lease
to any such mortgages, trust deeds, ground leases or underlying leases.  Tenant waives the provisions of any current
or future statute, rule or law which may give or purport to give Tenant
any right or election to terminate or otherwise adversely affect this Lease and
the obligations of the Tenant hereunder in the event of any foreclosure
proceeding or sale.

 

ARTICLE 19

 

DEFAULTS;
REMEDIES

 

19.1                           Events of Default.  The occurrence of any of the following shall
constitute a default of this Lease by Tenant:

 

19.1.1                  Any failure
by Tenant to pay any Rent or any other charge required to be paid under this
Lease, or any part thereof, within five (5) business days after Tenant’s
receipt from Landlord of written notice that the same was not paid when due; or

 

19.1.2                  Except where
a specific time period is otherwise set forth for Tenant’s performance in this
Lease, in which event the failure to perform by Tenant within such time period
shall be a default by Tenant under this Section 19.1.2, any failure
by Tenant to observe or perform any other provision, covenant or condition of
this Lease to be observed or performed by Tenant where such failure continues
for thirty (30) days after written notice thereof from Landlord to Tenant;
provided that if the nature of such default is such that the same cannot
reasonably be cured within a thirty (30) day period, Tenant shall not be deemed
to be in default if it diligently commences such cure within such period and
thereafter diligently proceeds to rectify and cure such default, but in no
event exceeding a period of time in excess of sixty (60) days after written
notice thereof from Landlord to Tenant; or

 

19.1.3                  To the extent
permitted by law, a general assignment by Tenant or any guarantor of this Lease
for the benefit of creditors, or the taking of any corporate action in
furtherance of bankruptcy or dissolution whether or not there exists any
proceeding under an insolvency or bankruptcy law, or the filing by or against
Tenant or any guarantor of any

 

44

 

proceeding
under an insolvency or bankruptcy law, unless in the case of a proceeding filed
against Tenant or any guarantor the same is dismissed within sixty (60) days,
or the appointment of a trustee or receiver to take possession of all or
substantially all of the assets of Tenant or any guarantor, unless possession
is restored to Tenant or such guarantor within thirty (30) days, or any
execution or other judicially authorized seizure of all or substantially all of
Tenant’s assets located upon the Premises or of Tenant’s interest in this
Lease, unless such seizure is discharged within thirty (30) days; or

 

19.1.4                  Intentionally
Omitted; or

 

19.1.5                  The failure
by Tenant to observe or perform according to the provisions of Section 5.2,
or 8.4 of this Lease, or Articles 14, 17 or 18
of this Lease where such failure continues for more than five (5) business
days after notice from Landlord.

 

The notice periods provided herein are in lieu of, and
not in addition to, any notice periods provided by law.

 

19.2                           Remedies Upon Default.  Upon the occurrence of any event of default
by Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following
remedies, each and all of which shall be cumulative and nonexclusive, without
any notice or demand whatsoever.

 

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

 

(a)                                  The worth at
the time of award of any unpaid rent which has been earned at the time of such
termination; plus

 

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

 

(c)                                  The worth at
the time of award of the amount by which the unpaid rent for the balance of the
Lease Term after the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided; plus

 

(d)                                 Any other
amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant’s failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result therefrom,
specifically including but not limited to, brokerage commissions and
advertising expenses incurred, expenses of remodeling the Premises or any
portion thereof for a new tenant, whether for the same or a different use, and
any special concessions made to obtain a new tenant; and

 

45

 

(e)                                  At Landlord’s
election, such other amounts in addition to or in lieu of the foregoing as may
be permitted from time to time by applicable law.

 

The term “rent”
as used in this Section 19.2 shall be deemed to be and to mean all
sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. 
As used in Sections 19.2.1(a) and (b), above, the “worth
at the time of award” shall be computed by allowing interest at the rate set
forth in Article 25 of this Lease, but in no case greater than the
maximum amount of such interest permitted by law.  As used in Section 19.2.1(c),
above, the “worth at the time of award” shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%).

 

19.2.2                  Landlord
shall have the remedy described in California Civil Code Section 1951.4
(lessor may continue lease in effect after lessee’s breach and abandonment and
recover rent as it becomes due, if lessee has the right to sublet or assign,
subject only to reasonable limitations). 
Accordingly, if Landlord does not elect to terminate this Lease on
account of any default by Tenant, Landlord may, from time to time, without
terminating this Lease, enforce all of its rights and remedies under this
Lease, including the right to recover all rent as it becomes due.

 

19.2.3                  Landlord
shall at all times have the rights and remedies (which shall be cumulative with
each other and cumulative and in addition to those rights and remedies
available under Sections 19.2.1 and 19.2.2, above, or any law
or other provision of this Lease), without prior demand or notice except as
required by applicable law, to seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease, or restrain or enjoin a
violation or breach of any provision hereof.

 

19.3                           Subleases of Tenant.  Whether or not Landlord elects to terminate
this Lease on account of any default by Tenant, as set forth in this Article 19,
Landlord shall have the right to terminate any and all subleases, licenses,
concessions or other consensual arrangements for possession entered into by
Tenant and affecting the Premises or may, in Landlord’s sole discretion,
succeed to Tenant’s interest in such subleases, licenses, concessions or
arrangements.  In the event of Landlord’s
election to succeed to Tenant’s interest in any such subleases, licenses,
concessions or arrangements, Tenant shall, as of the date of notice by Landlord
of such election, have no further right to or interest in the rent or other
consideration receivable thereunder.

 

19.4                           Form of Payment After Default.  Following the occurrence of an event of
default by Tenant, Landlord shall have the right to require that any or all
subsequent amounts paid by Tenant to Landlord hereunder, whether to cure the
default in question or otherwise, be paid in the form of cash, money order,
cashier’s or certified check drawn on an institution acceptable to Landlord, or
by other means approved by Landlord, notwithstanding any prior practice of
accepting payments in any different form.

 

19.5                           Efforts to Relet.  No re-entry or repossession, repairs,
maintenance, changes, alterations and additions, reletting, appointment of a
receiver to protect Landlord’s interests hereunder, or any other action or
omission by Landlord shall be construed as an election by Landlord to terminate
this Lease or Tenant’s right to possession, or to accept a surrender of the

 

46

 

Premises,
nor shall same operate to release Tenant in whole or in part from any of Tenant’s
obligations hereunder, unless express written notice of such intention is sent
by Landlord to Tenant.  Tenant hereby
irrevocably waives any right otherwise available under any law to redeem or
reinstate this Lease.

 

19.6                           Landlord Default.  Notwithstanding anything to the contrary set
forth in this Lease, Landlord shall be in default in the performance of the
obligations required to be performed by Landlord pursuant to this Lease (i) if
Landlord fails to timely fulfill its obligation to fund any portion of the
Improvement Allowance pursuant to the terms set forth in the Tenant Work Letter
or in the First Amendment Work Letter (which is to be attached to the First
Amendment to Amended and Restated Office Lease), but only to the extent
Landlord does not (A) subsequently cure such failure within twenty (20)
business days following its receipt of written notice of such failure from
Tenant (a “Payment Failure Notice”),
or (B) deliver notice (a “Refusal Notice”)
to Tenant within such twenty (20) business day period explaining (with
reasonable specificity) Landlord’s reasons supporting Landlord’s position that
the amounts described in the Payment Failure Notice are not, in fact, then due
and payable by Landlord (in which case Landlord shall
promptly fund the amount of the Improvement Allowance, if any, that Landlord
does not contest is then due and payable by Landlord), or (ii) if Landlord
fails to perform any other such obligation within thirty (30) days after the
receipt of notice from Tenant specifying in detail Landlord’s failure to
perform; provided, however, if the nature of Landlord’s obligation is such that
more than thirty (30) days are required for its performance, then Landlord
shall not be in default under this Lease if it shall commence such performance
within such thirty (30) day period and thereafter diligently pursues the same
to completion.  Upon any such default by
Landlord under this Lease, Tenant may, except as otherwise specifically
provided in this Lease to the contrary, exercise any of its rights provided at
law or in equity.  Any award from a court
or arbitrator in favor of Tenant requiring payment by Landlord which is not
paid by Landlord within the time period directed by such award, may be offset
by Tenant from Rent next due and payable under this Lease;
provided, however, Tenant may not deduct the amount of the award against more
than fifty percent (50%) of Base Rent next due and owing (until such time as
the entire amount of such judgment is deducted).

 

ARTICLE 20

 

COVENANT
OF QUIET ENJOYMENT

 

Landlord covenants that Tenant, on paying the Rent,
charges for services and other payments herein reserved and on keeping,
observing and performing all the other TCCs, provisions and agreements herein
contained on the part of Tenant to be kept, observed and performed, shall,
during the Lease Term, peaceably and quietly have, hold and enjoy the Premises
subject to the TCCs, provisions and agreements hereof without interference by
any persons lawfully claiming by or through Landlord.  The foregoing covenant is in lieu of any
other covenant express or implied.

 

47

 

ARTICLE 21

 

SECURITY
DEPOSIT; LETTER OF CREDIT

 

21.1                           Security Deposit.  The amount of the Security Deposit shall
equal Three Hundred Fifty-Five Thousand Seven Hundred Twenty-Seven and 60/100
Dollars ($355,727.60), as set forth in Section 8 of the
Summary.  Landlord and Tenant acknowledge
that, in accordance with the Original Lease, Tenant has previously delivered
the sum of One Hundred Sixty-Six Thousand Eighteen and 27/100 Dollars
($166,018.27) to Landlord as security for the faithful performance by Tenant of
the terms, covenants and conditions of the Lease.  Concurrently with Tenant’s execution of this
Lease, Tenant shall deposit with Landlord an additional amount equal to One
Hundred Eighty-Nine Thousand Seven Hundred Nine and 33/100 Dollars
($189,709.33), and the resulting total amount shall be held by Landlord as
security for the faithful performance by Tenant of all of its obligations under
this Lease.  If Tenant defaults with
respect to any provisions of this Lease, including, but not limited to, the
provisions relating to the payment of Rent, the removal of property and the
repair of resultant damage, Landlord may, without notice to Tenant, but shall
not be required to apply all or any part of the Security Deposit for the
payment of any Rent or any other sum in default and Tenant shall, upon demand
therefor, restore the Security Deposit to its original amount.  Any unapplied portion of the Security Deposit
shall be returned to Tenant, or, at Landlord’s option, to the last assignee of
Tenant’s interest hereunder, within sixty (60) days following the expiration of
the Lease Term.  Tenant shall not be
entitled to any interest on the Security Deposit.  Tenant hereby waives the provisions of Section 1950.7
of the California Civil Code, or any successor statute.

 

21.2                           Letter of Credit.

 

21.2.1                  Delivery of Letter of Credit.  As additional security for Tenant’s
obligations under this Lease, Tenant shall deliver to Landlord, as set forth
below, an unconditional, clean, irrevocable letter of credit (the “L-C”) in an amount as set forth in Section 21.2.2,
below (the “L-C Amount”), which
L-C shall be issued by a money-center bank (a bank which accepts deposits, maintains
accounts, has a local Southern California office which will negotiate a letter
of credit, and whose deposits are insured by the FDIC) reasonably acceptable to
Landlord, and which L-C shall be in the form of Exhibit G, attached hereto.  Tenant shall pay all expenses, points and/or
fees incurred by Tenant in obtaining the L-C. 
Landlord and Tenant acknowledge that, in accordance
with Article 21 of the Original Office Lease, Tenant has previously
delivered an L-C in the amount of $1,549,613.56 (the “Existing L-C”) to Landlord as security for
the faithful performance by Tenant of the terms, covenants and conditions of
the Original Lease.  On or before the
earlier to occur of (i) January 1, 2007, and (ii) the date of
the first distribution of any portion of the Improvement Allowance pursuant to Section 2
of the Tenant Work Letter attached hereto as Exhibit B, Tenant shall amend the Existing L-C to increase the
amount available thereunder to $3,450,427.20 (the “Amended L-C”), which Amended L-C shall be
in the form, and subject to all the terms, set forth in this Section 21.2.

 

48

 

21.2.2                  L-C Amount.

 

21.2.2.1         Calculation of L-C Amount.  For purposes of this Lease, the “L-C Amount” shall initially be $3,450,427.20; provided,
however, that commencing on February 1, 2008, and continuing for the
remainder of the Lease Term, the L-C Amount shall be increased to an amount
equal to twelve (12) months of the then-current Monthly Installment of Base
Rent for the 10421 Building.

 

21.2.2.2         Conditional Increase/Reduction of L-C Amount.  Landlord and Tenant hereby acknowledge and
agree that the L-C Amount is subject to increase and reduction throughout the
Lease Term at the end of each financial quarter as set forth in this Section 21.2.2.2.  The starting L-C Amount shall be as set forth
in Section 21.2.2.1, above. 
Thereafter, the actual amount of the L-C posted by Tenant shall be equal
to the L-C Amount, as such L-C Amount shall be reduced as follows:

 

(i) to the extent that Tenant
maintains a “Working Capital,” as defined below, in excess of Thirty Million
and No/100 Dollars ($30,000,000.00) for four (4) consecutive financial
quarters during the Lease Term, a reduction of fifty percent (50%);

 

(ii) to the extent that Tenant
maintains a Working Capital in excess of Thirty Million and No/100 Dollars
($30,000,000.00) for eight (8) consecutive financial quarters during the
Lease Term, a reduction of one hundred percent (100%);

 

(iii) to the extent that Tenant
maintains a Working Capital in excess of Fifty Million and No/100 Dollars
($50,000,000.00) for four (4) consecutive financial quarters during the
Lease Term, a reduction of one hundred percent (100%).

 

As soon as reasonably practical
following the end of each financial quarter during the Lease Term, the L-C
Amount shall be recalculated pursuant to the terms of Section 21.2.2.1,
above, and any percentage reductions, which are applicable to the L-C pursuant
to subparagraphs (i) through (iii), above, shall be applied in
order to determine the then-existing amount of L-C which Tenant is required to
post (the “Required L-C Amount”).  In the event the determined Required L-C
Amount is less than the amount of the actual L-C then-posted by Tenant, Tenant
shall have the right to cause the amount of the then-current L-C to be reduced
to the Required L-C Amount, and Landlord shall timely execute and deliver such
commercially reasonable documents to the issuer(s) of the L-C as are presented
to Landlord by such issuer(s) and as may be reasonably necessary to effectuate
the change to the Required L-C Amount. 
Likewise, in the event that the Required L-C Amount is greater than the
amount of the L-C then posted by Tenant, Tenant shall upon its receipt of written notice from Landlord (the “Reestablishment Notice”), cause the amount of the then-current L-C to be increased to
equal the Required L-C Amount.  In
addition, in the event that, following the completion of each financial quarter
throughout the Lease Term (A) Tenant fails to deliver timely the unaudited
quarterly financial statements, or the annual audited financial statements
required for Tenant to make a determination with regard to such Required
Thresholds, (B) Tenant is in economic default under

 

49

 

the Lease (beyond any applicable
notice and cure periods) more than twice during the immediately preceding
twelve (12) months, or (C) following any reduction of the L-C Amount under
the terms of subparagraphs (i), (ii) or (iii), above, Tenant fails
during any one (1) financial quarter thereafter to maintain a Working
Capital in excess of Thirty Million and No/100 Dollars ($30,000,000.00), then
Tenant shall, upon receipt of a Reestablishment
Notice, cause the L-C to be
reestablished with the then applicable L-C Amount (as determined in accordance
with the terms of Section 22.2.2.1, above).  The L-C Amount shall thereafter be subject to
conditional reduction as set forth herein. 
For purposes of this Section 21.2.2, “Working Capital,” means then-current assets
of Tenant less then-current liabilities from Tenant’s previous quarterly
financial statements, which Working Capital shall include then-current
receivables (zero (0) to sixty (60) days only). 
In connection with this Section 21.2.2, Tenant shall provide
Landlord (1) Tenant’s current financial statements (applicable to the
financial quarter which just ended) certified by Tenant’s Chief Executive
Officer and Tenant’s Chief Financial Officer, within thirty (30) business days
following the end of each financial quarter during the Lease Term, (2) Tenant’s
current annual financial statement (applicable to the financial year which just
ended) audited and certified by an independent certified
public accountant, within one hundred twenty (120) days following the
end of each financial year during the Lease Term, and (3) a disclosure
statement of any material adverse changes in Tenant’s business.  The financial thresholds set forth in
subparagraphs (i) through (iii), above, are, collectively, the “Required Thresholds.”

 

21.2.3                  FAILURE TO REINSTATE; LIQUIDATED DAMAGES.  IN THE EVENT THAT TENANT FAILS, WITHIN TWENTY
(20) DAYS FOLLOWING TENANT’S RECEIPT OF A REESTABLISHMENT NOTICE, TO CAUSE THE
L-C TO BE REESTABLISHED IN THE REQUIRED L-C AMOUNT, THEN TENANT’S MONTHLY
INSTALLMENT OF BASE RENT SHALL BE INCREASED BY ONE HUNDRED FIFTY PERCENT (150%)
OF ITS THEN EXISTING LEVEL DURING THE PERIOD COMMENCING ON THE DATE WHICH IS
TWENTY (20) DAYS AFTER TENANT’S RECEIPT OF SUCH REESTABLISHMENT NOTICE AND
ENDING ON THE EARLIER TO OCCUR OF (I) THE DATE SUCH L-C IS REESTABLISHED
PURSUANT TO THE TERMS OF THIS SECTION 21.2, OR (II) THE DATE
WHICH IS NINETY (90) DAYS AFTER THE DATE OF SUCH REESTABLISHMENT NOTICE.  IN THE EVENT THAT TENANT FAILS, DURING SUCH
NINETY (90) DAY PERIOD FOLLOWING THE DATE OF THE REESTABLISHMENT NOTICE, TO
CAUSE THE L-C TO BE REESTABLISHED IN THE REQUIRED L-C AMOUNT, THEN TENANT’S
MONTHLY INSTALLMENT OF BASE RENT SHALL BE INCREASED BY TWO HUNDRED PERCENT
(200%) OF ITS THEN EXISTING LEVEL DURING THE PERIOD COMMENCING ON THE DATE
WHICH IS NINETY (90) DAYS AFTER THE DATE OF SUCH REESTABLISHMENT NOTICE AND
ENDING ON THE DATE SUCH L-C IS RE-ISSUED/REESTABLISHED PURSUANT TO THE TERMS OF
THIS SECTION 21.2. THE PARTIES AGREE THAT IT WOULD BE IMPRACTICABLE
AND EXTREMELY DIFFICULT TO ASCERTAIN THE ACTUAL DAMAGES SUFFERED BY LANDLORD AS
A RESULT OF TENANT’S FAILURE TO TIMELY REESTABLISH THE L-C FOLLOWING THE
REESTABLISHMENT NOTICE AS REQUIRED IN THIS SECTION 21.2, AND THAT
UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS LEASE, THE LIQUIDATED
DAMAGES PROVIDED FOR IN THIS SECTION 21.2.3 REPRESENT A REASONABLE
ESTIMATE OF THE DAMAGES WHICH LANDLORD WILL INCUR AS A RESULT OF SUCH FAILURE,
PROVIDED, HOWEVER, THAT THIS PROVISION SHALL NOT WAIVE OR AFFECT

 

50

 

LANDLORD’S
RIGHTS AND TENANT’S INDEMNITY OBLIGATIONS UNDER OTHER SECTIONS OF THIS LEASE
(EXCEPT THAT THE PARTIES SPECIFICALLY AGREE THAT THE FOREGOING PROVISION WAS
AGREED TO IN LIEU OF MAKING FAILURE TO RE-ESTABLISH THE L-C A DEFAULT UNDER THE
LEASE).  THE PARTIES ACKNOWLEDGE THAT THE
PAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY
WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTION 3275 OR 3369, BUT
IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO LANDLORD PURSUANT TO CALIFORNIA
CIVIL CODE SECTION 1671.  THE
PARTIES HAVE SET FORTH THEIR INITIALS BELOW TO INDICATE THEIR AGREEMENT WITH
THE LIQUIDATED DAMAGES PROVISION CONTAINED IN THIS SECTION 21.2.3.

 

 

	
  /s/
  JCH                      /s/
  SS

  	
   

  	
  /s/
  JPL

  	
   

  
	
  LANDLORD’S
  INITIALS

  	
   

  	
  TENANT’S
  INITIALS

  	
   

  

 

21.2.4                  Application of
Letter of Credit. 
The L-C shall be held by Landlord as security for the faithful
performance by Tenant of all the TCCs of this Lease to be kept and performed by
Tenant during the Lease Term.  The L-C
shall not be mortgaged, assigned or encumbered in any manner whatsoever by
Tenant without the prior written consent of Landlord.  If Tenant defaults with respect to any
provisions of this Lease, including, but not limited to, the provisions
relating to the payment of Rent, or if Tenant fails to renew the L-C at least
thirty (30) days before its expiration, Landlord may, but shall not be required
to, draw upon all or any portion of the L-C for payment of any Rent or any
other sum in default, or for the payment of any amount that Landlord may
reasonably spend or may become obligated to spend by reason of Tenant’s
default, or to compensate Landlord for any other loss or damage that Landlord
may suffer by reason of Tenant’s default. 
The use, application or retention of the L-C, or any portion thereof, by
Landlord shall not prevent Landlord from exercising any other right or remedy
provided by this Lease or by law, it being intended that Landlord shall not
first be required to proceed against the L-C and shall not operate as a
limitation on any recovery to which Landlord may otherwise be entitled.  Any amount of the L-C which is drawn upon by
Landlord, but is not used or applied by Landlord, shall be held by Landlord and
deemed a security deposit (the “L-C Security
Deposit”) and, in connection with such L-C Security Deposit, Tenant
hereby waives the provisions of Section 1950.7 of the California Civil
Code, or any successor statute.  If any
portion of the L-C is drawn upon and used or applied by Landlord, Tenant shall,
within ten (10) days after written demand therefor, either (i) deposit
cash with Landlord (which cash shall constitute part of the L-C Security
Deposit) in an amount sufficient to cause the sum of the L-C Security Deposit
and the amount of the remaining L-C to be equivalent to the amount of the L-C
then required under this Lease (and if any portion of the L-C Security Deposit
is thereafter used or applied, Tenant shall restore such L-C Security Deposit
to the amount then required under this Lease pursuant to the foregoing), or (ii) reinstate
the L-C to the amount then required under this Lease, in which case any unused
portion of the then-existing L-C Security Deposit shall be returned to
Tenant.  Tenant acknowledges that
Landlord has the right to transfer or mortgage its interest in the Project and
in this Lease and Tenant agrees that in the event of any such transfer or
mortgage, Landlord shall have the right to transfer or assign the L-C Security
Deposit and/or the

 

51

 

L-C to
the transferee or mortgagee, and in the event of such transfer, Tenant shall
look solely to such transferee or mortgagee for the return of the L-C Security
Deposit and/or the L-C, provided such transferee agrees in writing to be liable
to Tenant for the return of the L-C. 
Landlord shall pay all costs and fees, if any, charged by the issuing
bank to transfer the L-C.  Tenant shall,
within five (5) days of request by Landlord, execute such further
instruments or assurances as Landlord may reasonably deem necessary to evidence
or confirm Landlord’s transfer or assignment of the L-C Security Deposit and/or
the L-C to such transferee or mortgagee. 
If Tenant is not then in default under this Lease, the L-C Security Deposit
and/or the L-C, or any balance thereof, shall be returned to Tenant within
forty-five (45) days following the expiration of the Lease Term.

 

ARTICLE 22

 

TELECOMMUNICATIONS
EQUIPMENT

 

At any time during the Lease Term, subject to the TCCs
of this Article 22 and Article 8 of this Lease, Tenant
may install, at Tenant’s sole cost and expense, but without the payment of any
Rent or a license or similar fee or charge, a satellite or microwave dish or
other communications, HVAC or other equipment servicing the business conducted
by Tenant from within the Premises (all such equipment, including
non-telecommunication equipment is, for the sake of convenience, defined
collectively as the “Telecommunications Equipment”) upon the roof of the
Building.  The physical appearance and
the size of the Telecommunications Equipment shall be subject to Landlord’s
reasonable approval, the location of any such installation of the
Telecommunications Equipment shall be designated by Tenant subject to Landlord’s
reasonable approval and Landlord may require Tenant to install screening around
such Telecommunications Equipment, at Tenant’s sole cost and expense, as
reasonably designated by Landlord. 
Tenant shall maintain such Telecommunications Equipment, at Tenant’s
sole cost and expense.  In the event
Tenant elects to exercise its right to install the Telecommunication Equipment,
then Tenant shall give Landlord prior notice thereof.  Tenant shall remove such Telecommunications
Equipment upon the expiration or earlier termination of this Lease and shall
restore such area to the condition the same existed prior to the installation
of such Telecommunications Equipment. 
Such Telecommunications Equipment shall be installed pursuant to plans
and specifications approved by Landlord, which approval will not be
unreasonably withheld.  Such
Telecommunications Equipment shall, in all instances, comply with applicable
governmental laws, codes, rules and regulations.  The rights contained in this Article 22
shall be personal to the Original Tenant and its Affiliates and may only be
exercised by the Original Tenant or an Affiliate (and not any assignee,
sublessee or other transferee of the Original Tenant’s interest in this Lease)
if the Original Tenant and/or an Affiliate is in occupancy of at least sixty
percent (60%) of the then-existing Premises. 
Landlord shall reserve the concurrent right to use the roof for its own
use and for third-party use for installation of satellite dish and antenna
devices similar to Tenant’s Telecommunications Equipment (collectively, the “Landlord TCE”), provided such Landlord TCE
shall not interfere with Tenant’s operations on the roof of the Building, and
provided Landlord maintains, restores and repairs the Building rooftop space
associated with such Landlord TCE.  To
the extent Landlord elects to install Landlord TCE on the Building rooftop,
Landlord shall be responsible for the maintenance, repair and restoration of
such Landlord TCE.  Landlord shall be
responsible for (and shall make all necessary repairs and replacements for) any
damage to Tenant’s Telecommunications Equipment

 

52

 

due to the actions or omissions of Landlord or
Landlord Parties (or any third party to whom Landlord has granted roof access
rights).  Tenant shall be responsible for
(and shall make all necessary repairs and replacements for) any damage to the
Landlord TCE due to the negligence or willful misconduct of Tenant.

 

ARTICLE 23

 

SIGNS

 

23.1                           Prohibited Signage and Other Items.  Any signs, notices, logos, pictures, names or
advertisements which are installed and that have not been separately approved
by Landlord may be removed without notice by Landlord at the sole expense of
Tenant.  Except as expressly permitted
pursuant to Section 23.2, below, Tenant may not install any signs
on the exterior or roof of the Project or the Common Areas.  Any signs, window coverings, or blinds (even
if the same are located behind the Landlord-approved window coverings for the
Building), or other items visible from the exterior of the Premises or
Building, shall be subject to the prior approval of Landlord, in its sole
discretion.

 

23.2                           Tenant’s Signage.  Tenant shall be entitled
to install the following signage in connection with Tenant’s lease of the
Premises (collectively, the “Tenant’s Signage”):

 

(i)                     One
(1) building sign identifying Tenant’s name and logo located at the top of
the Building (the “Building Top Sign”),
as more particularly identified on Exhibit A-2
attached hereto; and

 

(ii)                  Non-exclusive
signage on a pro-rata portion (vis-á-vis the rentable square footage of the
Premises as compared to the rentable square footage of the Building) of the
monument located adjacent to the entrance of the Building (the “Building Monument Sign”).  Tenant hereby acknowledges and agrees that
Landlord may, at Landlord’s sole cost and expense, place a standard “owned and
managed” sign on such Project Monument Sign, provided that such “owned and
managed” sign shall not be larger than Tenant’s sign.  Landlord may also, at Landlord’s sole cost
and expense, install a small sign indicating its ownership and management of
the Building in the interior of the Building lobby in a location and of a size
reasonably approved by Tenant.

 

To the extent that Tenant leases all of the 10421
Building and the 10445 Building, Tenant shall be permitted to install, and the
term “Tenant’s Signage” shall be
revised to mean, all signage that is legally permitted in the Project;
provided, however, Landlord shall retain the right for limited identification
signage as identified in item (ii) above.

 

23.2.1                  Specifications
and Permits.  Tenant’s
Signage shall set forth Tenant’s name and logo as determined by Tenant in its
sole discretion; provided, however, in no event shall Tenant’s Signage include
an “Objectionable Name,” as that term is defined in Section 23.2.2,
of this Lease.  The graphics, materials,
color, design, lettering, lighting, size,

 

53

 

illumination, specifications and exact location of Tenant’s Signage
(collectively, the “Sign Specifications”)
shall be subject to the prior written approval of Landlord, which approval
shall not be unreasonably withheld, conditioned or delayed, and shall be
consistent and compatible with the quality and nature of the Project and Landlord’s
Building standard signage program.  For purposes of this Section 23.2.1,
the reference to “name” shall mean name and/or logo.  In addition, Tenant’s Signage shall be
subject to Tenant’s receipt of all required governmental permits and approvals
and shall be subject to all Applicable Law and to any covenants, conditions and
restrictions affecting the Project. 
Landlord shall use commercially reasonable efforts to assist Tenant in
obtaining all necessary governmental permits and approvals for Tenant’s
Signage.  Tenant hereby acknowledges
that, notwithstanding Landlord’s approval of Tenant’s Signage, Landlord has
made no representation or warranty to Tenant with respect to the probability of
obtaining all necessary governmental approvals and permits for Tenant’s
Signage.  In the event Tenant does not
receive the necessary governmental approvals and permits for Tenant’s Signage,
Tenant’s and Landlord’s rights and obligations under the remaining TCCs of this
Lease shall be unaffected.

 

23.2.2                  Objectionable Name.  To the extent Original Tenant desires to
change the name and/or logo set forth on Tenant’s Signage, such name and/or
logo shall not have a name which relates to an entity which is of a character
or reputation, or is associated with a political faction or orientation, which
is inconsistent with the quality of the Project, or which would otherwise
reasonably offend a landlord of the Comparable Buildings (an “Objectionable Name”). 
The parties hereby agree that the name “Favrille, Inc.,” or any
reasonable derivation thereof, shall not be deemed an Objectionable Name.

 

23.2.3                  Termination
of Right to Tenant’s Signage. 
The rights contained in this Section 23.2 shall be personal
to the Original Tenant and may only be exercised by the Original Tenant (and
not any assignee, sublessee or transferee of the Original Tenant’s interest in
this Lease) if the Original Tenant is in occupancy of no less than sixty percent (60%)
of the then existing Premises.

 

23.2.4                  Cost and Maintenance.  The costs of the actual signs comprising
Tenant’s Signage and the installation, design, construction, and any and all
other costs associated with Tenant’s Signage, including, without limitation,
utility charges and hook-up fees, permits, and maintenance and repairs, shall
be the sole responsibility of Tenant; provided, however, up to a total of Ten
Thousand and No/100 Dollars ($10,000.00) of the actual costs of such initial
installation, design and construction shall be subject to reimbursement from the
Improvement Allowance pursuant to Section 2.2.1 of the Tenant Work
Letter.  Should
Tenant’s Signage require repairs and/or maintenance, as determined in Landlord’s
reasonable judgment, Landlord shall have the right to provide notice thereof to
Tenant and Tenant shall cause such repairs and/or maintenance to be performed
within thirty (30) days after receipt of such notice from Landlord, at Tenant’s
sole cost and expense; provided, however, if such repairs and/or maintenance
are reasonably expected to require longer than thirty (30) days to perform,
Tenant shall commence such repairs and/or maintenance within such thirty (30)
day period and shall diligently prosecute such repairs and maintenance to
completion.  Should Tenant fail to
perform such repairs and/or maintenance within the periods described in the
immediately preceding sentence, Landlord shall, upon the delivery of an
additional ten (10) business days’ prior written notice, have the right to
cause such work to be performed and to charge Tenant as Additional Rent for the
cost (including

 

54

 

a percentage of the cost thereof sufficient to reimburse Landlord for
all overhead, general conditions, fees and other costs or expenses arising from
Landlord’s involvement with such repairs and/or maintenance) of such work.  Upon the expiration or earlier termination of
this Lease, Tenant shall, at Tenant’s sole cost and expense, cause Tenant’s
Signage to be removed and shall cause the areas in which such Tenant’s Signage
was located to be restored to the condition existing immediately prior to the
placement of such Tenant’s Signage except for ordinary wear and tear.  If Tenant fails to timely remove such Tenant’s
Signage or to restore the areas in which such Tenant’s Signage was located, as
provided in the immediately preceding sentence, then Landlord may perform such
work, and all costs incurred by Landlord in so performing (including a
percentage of the cost thereof sufficient to reimburse Landlord for all
overhead, general conditions, fees and other costs or expenses arising from
Landlord’s involvement with such repairs and/or maintenance) shall be
reimbursed by Tenant to Landlord within thirty (30) days after Tenant’s receipt
of an invoice therefor.  The TCCs of this
Section 23.2.4 shall survive the expiration or earlier termination
of this Lease.

 

ARTICLE 24

 

COMPLIANCE
WITH LAW

 

Tenant shall not do anything or suffer anything to be
done in or about the Premises or the Project which will in any way conflict
with any law, statute, ordinance or other governmental rule, regulation or
requirement now in force or which may hereafter be enacted or promulgated
(collectively, “Applicable Laws”).  At its sole cost and expense, Tenant shall
promptly comply with all such Applicable Laws which relate to (i) Tenant’s
use of a portion of the Premises for non-general office use, (ii) the
Alterations or Tenant Improvements in the Premises, or (iii) the Building
Systems, and (iv) the Building Structure, but, as to the Building
Structure, only to the extent such obligations are triggered by Tenant’s
Alterations, the Tenant Improvements, the Tenant’s modification of the Building
Structure or use of a portion of the Premises for non-general office use.  Should any standard or regulation now or
hereafter be imposed on Landlord or Tenant by a state, federal or local
governmental body charged with the establishment, regulation and enforcement of
occupational, health or safety standards for employers, employees, landlords or
tenants, then Tenant agrees, at its sole cost and expense, to comply promptly
with such standards or regulations which are applicable to Tenant’s
business.  The judgment of any court of
competent jurisdiction or the admission of Tenant in any judicial action,
regardless of whether Landlord is a party thereto, that Tenant has violated any
of said governmental measures, shall be conclusive of that fact as between
Landlord and Tenant.  Landlord shall
comply with all Applicable Laws relating to (a) the Building Structure,
and (b) the exterior Project components, provided that compliance with
such Applicable Laws is not the responsibility of Tenant under this Lease, and
provided further that Landlord’s failure to comply therewith would (1) prohibit
Tenant from obtaining or maintaining a certificate of occupancy for the
Premises, (2) unreasonably and materially affect the safety of Tenant’s
employees or create a significant health hazard for Tenant’s employees, (3) invalidate
Tenant’s
cGMP compliance status in, or materially and unreasonably prevent, hinder, or
interrupt Tenant’s ability to continually function under cGMP conditions under
the applicable laws and regulations of, California and the United States, and
under the applicable statutes for any foreign regulatory body, including but
not limited to, Canada, Europe and Asia, or (4) materially increase the
costs incurred by Tenant to comply with its maintenance obligations under the
TCCs of this Lease. 
Landlord shall be

 

55

 

permitted to include in Operating Expenses any costs
or expenses incurred by Landlord under this Article 24 to the
extent consistent with the terms of Section 4.2.4, above.

 

ARTICLE 25

 

LATE
CHARGES

 

If any installment of Rent or any other sum due from
Tenant shall not be received by Landlord or Landlord’s designee within five (5) business
days after said amount is due, then Tenant shall pay to Landlord a late charge
equal to five percent (5%) of the overdue amount plus any attorneys’ fees
incurred by Landlord by reason of Tenant’s failure to pay Rent and/or other
charges when due hereunder.  The late
charge shall be deemed Additional Rent and the right to require it shall be in
addition to all of Landlord’s other rights and remedies hereunder or at law and
shall not be construed as liquidated damages or as limiting Landlord’s remedies
in any manner.  In addition to the late
charge described above, any Rent or other amounts owing hereunder which are not
paid within ten (10) days after the date they are due shall bear interest
from the date when due until paid at a rate per annum equal to the lesser of (i) the
annual “Bank Prime Loan” rate
cited in the Federal Reserve Statistical Release Publication G.13(415),
published on the first Tuesday of each calendar month (or such other comparable
index as Landlord and Tenant shall reasonably agree upon if such rate ceases to
be published) plus four (4) percentage points, and (ii) the highest
rate permitted by applicable law.

 

ARTICLE 26

 

LANDLORD’S
RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT

 

26.1                           Landlord’s Cure.  All covenants and agreements to be kept or
performed by Tenant under this Lease shall be performed by Tenant at Tenant’s
sole cost and expense and without any reduction of Rent, except to the extent,
if any, otherwise expressly provided herein. 
If Tenant shall fail to perform any obligation under this Lease, and
such failure shall continue in excess of the time allowed under Section 19.1.2,
above, unless a specific time period is otherwise stated in this Lease,
Landlord may, but shall not be obligated to, make any such payment or perform
any such act on Tenant’s part without waiving its rights based upon any default
of Tenant and without releasing Tenant from any obligations hereunder.

 

26.2                           Tenant’s Reimbursement.  Except as may be specifically provided to the
contrary in this Lease, Tenant shall pay to Landlord, upon delivery by Landlord
to Tenant of statements therefor:  (i) sums
equal to expenditures reasonably made and obligations incurred by Landlord in
connection with the remedying by Landlord of Tenant’s defaults pursuant to the
provisions of Section 26.1; (ii) sums equal to all losses,
costs, liabilities, damages and expenses referred to in Article 10
of this Lease; and (iii) sums equal to all expenditures made and obligations
incurred by Landlord in collecting or attempting to collect the Rent or in
enforcing or attempting to enforce any rights of Landlord under this Lease or
pursuant to law, including, without limitation, all reasonable legal fees and
other amounts so expended.  Tenant’s
obligations under this Section 26.2 shall survive the expiration or
sooner termination of the Lease Term.

 

56

 

ARTICLE 27

 

ENTRY
BY LANDLORD

 

Landlord reserves the right at all reasonable times
(during Building Hours with respect to items (i) and (ii) below) and
upon at least twenty-four (24) hours prior notice to Tenant (except in the case
of an emergency) and at all times (except in the case of an emergency)
accompanied by an authorized representative of Tenant and subject to Tenant’s
reasonable rules and regulations, to enter the Premises to (i) inspect
them; (ii) show the Premises to prospective purchasers, or to current or
prospective mortgagees, ground or underlying lessors or insurers, or during the
last nine (9) months of the Lease Term, to prospective tenants; (iii) post
notices of nonresponsibility; or (iv) alter, improve or repair the
Premises or the Building as permitted or required by the terms of this Lease,
or for structural alterations, repairs or improvements to the Building
Structure.  Notwithstanding anything to
the contrary contained in this Article 27, Landlord may enter the
Premises at any time to (A) perform services required of Landlord under
this Lease after reasonable notice to Tenant; (B) take possession due to
any breach of this Lease in the manner provided herein; and (C) perform
any covenants of Tenant which Tenant fails to perform (after any applicable
notice and cure periods).  Landlord may
make any such entries without the abatement of Rent, except as otherwise
provided in this Lease, and may take such reasonable steps as required to
accomplish the stated purposes; provided, however, except for (i) emergencies,
(ii) repairs, alterations, improvements or additions required by
governmental or quasi-governmental authorities or court order or decree, or (iii) repairs
which are the obligation of Tenant hereunder, any such entry shall be performed
in a manner so as not to unreasonably interfere with Tenant’s use of the Premises
and shall be performed after normal business hours if reasonably
practical.  With respect to items (ii) and
(iii) above, Landlord shall use commercially reasonable efforts to not
materially interfere with Tenant’s use of, or access to, the Premises.  Except as otherwise set forth in Section 6.4,
Tenant hereby waives any claims for damages or for any injuries or
inconvenience to or interference with Tenant’s business, lost profits, any loss
of occupancy or quiet enjoyment of the Premises, and any other loss occasioned
thereby.  For each of the above purposes,
Landlord shall at all times have a key with which to unlock all the doors in
the Premises, excluding Tenant’s vaults, safes and special security areas
designated in advance by Tenant.  In an
emergency, Landlord shall have the right to use any means that Landlord may
deem proper to open the doors in and to the Premises.  Any entry into the Premises by Landlord in
the manner hereinbefore described shall not be deemed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an actual or
constructive eviction of Tenant from any portion of the Premises.  No provision of this Lease shall be construed
as obligating Landlord to perform any repairs, alterations or decorations
except as otherwise expressly agreed to be performed by Landlord herein.

 

ARTICLE 28

 

TENANT
PARKING

 

Tenant shall be entitled to utilize, without charge,
commencing on the Lease Commencement Date, the amount of parking spaces set
forth in Section 9 of the Summary, on a monthly basis throughout
the Lease Term, which parking spaces shall pertain to the Project parking
facility.  Notwithstanding the foregoing,
Tenant shall be responsible for the full amount

 

57

 

of any taxes imposed by any governmental authority in
connection with the renting of such parking spaces by Tenant or the use of the
parking facility by Tenant.  Tenant’s
continued right to use the parking spaces is conditioned upon Tenant abiding by
all rules and regulations which are prescribed from time to time for the
orderly operation and use of the parking facility where the parking spaces are
located, including any sticker or other identification system established by
Landlord, Tenant’s cooperation in seeing that Tenant’s employees and visitors
also comply with such rules and regulations and Tenant not being in
default under this Lease.  Subject to
Landlord’s continued satisfaction of its obligation to provide Tenant the
number of parking spaces required by the TCCs of this Lease, Landlord
specifically reserves the right to change the size, configuration, design,
layout and all other aspects of the Project parking facility at any time and
Tenant acknowledges and agrees that Landlord may, without incurring any liability
to Tenant and without any abatement of Rent under this Lease, from time to
time, close-off or restrict access to the Project parking facility for purposes
of permitting or facilitating any such construction, alteration or
improvements.  Landlord may delegate its
responsibilities hereunder to a parking operator in which case such parking
operator shall have all the rights of control attributed hereby to the
Landlord.  The parking spaces rented by
Tenant pursuant to this Article 28 are provided to Tenant solely
for use by Tenant’s own personnel and such spaces may not be transferred,
assigned, subleased or otherwise alienated by Tenant without Landlord’s prior
approval; provided, however, Landlord shall be deemed to have granted such
approval with regard to Non-Transfers and Transfers approved pursuant to the
TCCs of Article 14.  Tenant
may validate visitor parking by such method or methods as the Landlord may
establish, at the validation rate from time to time generally applicable to
visitor parking.

 

ARTICLE 29

 

MISCELLANEOUS
PROVISIONS

 

29.1                           Terms; Captions.  The words “Landlord” and “Tenant” as used
herein shall include the plural as well as the singular.  The necessary grammatical changes required to
make the provisions hereof apply either to corporations or partnerships or
individuals, men or women, as the case may require, shall in all cases be
assumed as though in each case fully expressed. 
The captions of Articles and Sections are for convenience only and shall
not be deemed to limit, construe, affect or alter the meaning of such Articles
and Sections.

 

29.2                           Binding Effect.  Subject to all other provisions of this
Lease, each of the covenants, conditions and provisions of this Lease shall
extend to and shall, as the case may require, bind or inure to the benefit not
only of Landlord and of Tenant, but also of their respective heirs, personal
representatives, successors or assigns, provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14
of this Lease.

 

29.3                           No Air Rights.  No rights to any view or to light or air over
any property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease.  If at any time any
windows of the Premises are temporarily darkened or the light or view therefrom
is obstructed by reason of any repairs, improvements, maintenance or cleaning
in or about the Project, the same shall be without liability to Landlord and
without any reduction or diminution of Tenant’s obligations under this Lease.

 

58

 

29.4                           Modification of Lease.  Should any current or prospective mortgagee
or ground lessor for the Building or Project require a modification of this
Lease, which modification will not cause an increased cost or expense to Tenant
or in any other way materially and adversely change the rights and obligations
of Tenant hereunder, then and in such event, Tenant agrees that this Lease may
be so modified and agrees to execute whatever documents are reasonably required
therefor and to deliver the same to Landlord within ten (10) days
following a request therefor.  At the
request of Landlord or any mortgagee or ground lessor, Tenant agrees to execute
a short form of Lease and deliver the same to Landlord within ten (10) days
following the request therefor.

 

29.5                           Transfer of Landlord’s Interest.  Tenant acknowledges that Landlord has the
right to transfer all or any portion of its interest in the Project or Building
and in this Lease, and Tenant agrees that in the event of any such transfer,
Landlord shall automatically be released from all liability under this Lease
accruing after the date such transfer and Tenant agrees to look solely to such
transferee for the performance of Landlord’s obligations hereunder after the
date of transfer and such transferee shall be deemed to have fully assumed and
be liable for all obligations of this Lease to be performed by Landlord,
including the return of any Security Deposit, and Tenant shall attorn to such
transferee.  Tenant further acknowledges
that Landlord may assign its interest in this Lease to a mortgage lender as
additional security and agrees that such an assignment shall not release
Landlord from its obligations hereunder and that Tenant shall continue to look
to Landlord for the performance of its obligations hereunder.

 

29.6                           Prohibition Against Recording.  Except as provided in Section 29.4
of this Lease, neither this Lease, nor any memorandum, affidavit or other
writing with respect thereto, shall be recorded by Tenant or by anyone acting
through, under or on behalf of Tenant.

 

29.7                           Landlord’s Title.  Landlord’s title is and always shall be
paramount to the title of Tenant. 
Nothing herein contained shall empower Tenant to do any act which can,
shall or may encumber the title of Landlord.

 

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

 

29.9                           Application of Payments.  Landlord shall have the right to apply
payments received from Tenant pursuant to this Lease, regardless of Tenant’s
designation of such payments, to satisfy any obligations of Tenant hereunder,
in such order and amounts as Landlord, in its sole discretion, may elect.

 

29.10                     Time of Essence.  Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor.

 

29.11                     Partial Invalidity.  If any term, provision or condition contained
in this Lease shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term, provision or condition to
persons or circumstances other than those with respect to which it is invalid
or unenforceable, shall not be affected thereby, and each and every other term,

 

59

 

provision
and condition of this Lease shall be valid and enforceable to the fullest
extent possible permitted by law.

 

29.12                     No Warranty.  In executing and delivering this Lease,
Tenant has not relied on any representations, including, but not limited to,
any representation as to the amount of any item comprising Additional Rent or
the amount of the Additional Rent in the aggregate or that Landlord is
furnishing the same services to other tenants, at all, on the same level or on
the same basis, or any warranty or any statement of Landlord which is not set
forth herein or in one or more of the exhibits attached hereto.

 

29.13                     Landlord Exculpation.  The liability of Landlord or the Landlord
Parties to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord’s operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the
Premises shall be limited solely and exclusively to an amount which is equal to
the lesser of (a) the interest of Landlord in the Building or (b) the
equity interest Landlord would have in the Building if the Building were
encumbered by third-party debt in an amount equal to eighty percent (80%) of
the value of the Building (as such value is determined by Landlord), following
the payment of any outstanding liens and/or mortgages in connection with the
Project; provided, however, in no event shall the foregoing be deemed to limit
any obligation Landlord may have pursuant to the TCCs of this Lease to return
or pay the Improvement Allowance as set forth in the Tenant Work Letter, or to
Tenant the Security Deposit and/or the L-C Security Deposit.  Neither Landlord, nor any of the Landlord
Parties shall have any personal liability therefor, and Tenant hereby expressly
waives and releases such personal liability on behalf of itself and all persons
claiming by, through or under Tenant. 
The limitations of liability contained in this Section 29.13
shall inure to the benefit of Landlord’s and the Landlord Parties’ present and
future partners, beneficiaries, officers, directors, trustees, shareholders,
agents and employees, and their respective partners, heirs, successors and
assigns.  Under no circumstances shall
any present or future partner of Landlord (if Landlord is a partnership), or
trustee or beneficiary (if Landlord or any partner of Landlord is a trust),
have any liability for the performance of Landlord’s obligations under this
Lease.  Notwithstanding any contrary
provision herein, neither Landlord nor the Landlord Parties shall be liable
under any circumstances for consequential damages arising from any injury or damage
to, or interference with, Tenant’s business, including but not limited to, loss
of profits, loss of rents or other revenues, loss of business opportunity, loss
of goodwill or loss of use, in each case, however occurring.

 

29.14                     Entire Agreement.  It is understood and acknowledged that there
are no oral agreements between the parties hereto affecting this Lease and this
Lease constitutes the parties’ entire agreement with respect to the leasing of
the Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this Lease.  None of the terms, covenants, conditions or
provisions of this Lease can be modified, deleted or added to except in writing
signed by the parties hereto.

 

29.15                     Right to Lease.  Subject to the TCC’s of Section 1.3
of this Lease, Landlord reserves the absolute right to effect such other
tenancies in the Project as Landlord in the exercise

 

60

 

of its
sole business judgment shall determine to best promote the interests of the
Building or Project.  Tenant does not
rely on the fact, nor does Landlord represent, that any specific tenant or type
or number of tenants shall, during the Lease Term, occupy any space in the
Building or Project.

 

29.16                     Force Majeure.  Any prevention, delay or stoppage due to
strikes, lockouts, labor disputes, acts of God, inability to obtain services,
labor, or materials or reasonable substitutes therefor, governmental actions,
civil commotions, fire or other casualty, and other causes beyond the
reasonable control of the party obligated to perform, except with respect to
the obligations imposed with regard to Rent and other charges to be paid by
Tenant pursuant to this Lease and except as to Tenant’s obligations under Articles 5 and 24
of this Lease (collectively, a “Force Majeure”),
notwithstanding anything to the contrary contained in this Lease, shall excuse
the performance of such party for a period equal to any such prevention, delay
or stoppage and, therefore, if this Lease specifies a time period for
performance of an obligation of either party, that time period shall be
extended by the period of any delay in such party’s performance caused by a
Force Majeure.

 

29.17                     Waiver of Redemption by Tenant.  Tenant hereby waives, for Tenant and for all
those claiming under Tenant, any and all rights now or hereafter existing to
redeem by order or judgment of any court or by any legal process or writ,
Tenant’s right of occupancy of the Premises after any termination of this
Lease.

 

29.18                     Notices. 
All notices, demands, statements, designations, approvals or other
communications (collectively, “Notices”) given
or required to be given by either party to the other hereunder or by law shall
be in writing, shall be (A) sent by United States certified or registered
mail, postage prepaid, return receipt requested (“Mail”),
(B) transmitted by telecopy, if such telecopy is promptly followed by a
Notice sent by Mail, (C) delivered by a nationally recognized overnight
courier, or (D) delivered personally. 
Any Notice shall be sent, transmitted, or delivered, as the case may be,
to Tenant at the appropriate address set forth in Section 10 of the
Summary, or to such other place as Tenant may from time to time designate in a
Notice to Landlord, or to Landlord at the addresses set forth below, or to such
other places as Landlord may from time to time designate in a Notice to
Tenant.  Any Notice will be deemed given (i) three
(3) days after the date it is posted if sent by Mail, (ii) the date
the telecopy is transmitted, (iii) the date the overnight courier delivery
is made, or (iv) the date personal delivery is made or attempted to be
made (to the extent such attempted delivery is refused).  If Tenant is notified of the identity and
address of Landlord’s mortgagee or ground or underlying lessor, Tenant shall
give to such mortgagee or ground or underlying lessor written notice of any
default by Landlord under the terms of this Lease by registered or certified
mail, and such mortgagee or ground or underlying lessor shall be given the same
opportunity as Landlord following the date it receive writing notice of such
default, to cure such default prior to Tenant’s exercising any remedy available
to Tenant.  As of the date of this Lease,
any Notices to Landlord must be sent, transmitted, or delivered, as the case
may be, to the following addresses:

 

Kilroy Realty Corporation

12200 West Olympic Boulevard

Suite 200

 

61

 

Los Angeles, California  90064

Attention:  Legal Department

 

with copies to:

 

Kilroy Realty Corporation

3611 Valley Centre Drive, Suite 550

San Diego, California 
92130

Attention:  Mr. Brian
Galligan

 

and

 

Allen Matkins Leck
Gamble & Mallory LLP

1901 Avenue of the
Stars, Suite 1800

Los Angeles,
California 90067

Attention:  Anton N. Natsis, Esq.

 

29.19                     Joint and Several.  If there is more than one Tenant, the
obligations imposed upon Tenant under this Lease shall be joint and several.

 

29.20                     Authority. 
If Tenant or Landlord is a corporation, trust or partnership, each
individual executing this Lease on behalf of Tenant or Landlord hereby
represents and warrants that Landlord or Tenant, as appropriate, is a duly
formed and existing entity qualified to do business in California and that
Landlord or Tenant, as appropriate, has full right and authority to execute and
deliver this Lease and that each person signing on behalf of Landlord or
Tenant, as appropriate, is authorized to do so. 
Tenant shall, within ten (10) days after execution of this Lease,
deliver to Landlord satisfactory evidence of (i) good standing in Tenant’s
state of incorporation and (ii) qualification to do business in
California.

 

29.21                     Attorneys’ Fees.  In the event that either Landlord or Tenant
should bring suit for the possession of the Premises, for the recovery of any
sum due under this Lease, or because of the breach of any provision of this
Lease or for any other relief against the other, then all costs and expenses,
including reasonable attorneys’ fees, incurred by the prevailing party therein
shall be paid by the other party, which obligation on the part of the other
party shall be deemed to have accrued on the date of the commencement of such
action and shall be enforceable whether or not the action is prosecuted to
judgment.

 

29.22                     Governing Law; WAIVER OF TRIAL BY JURY.  This Lease shall be construed and enforced in
accordance with the laws of the State of California.  IN ANY ACTION OR PROCEEDING ARISING HEREFROM,
LANDLORD AND TENANT HEREBY CONSENT TO (I) THE JURISDICTION OF ANY COMPETENT
COURT WITHIN THE STATE OF CALIFORNIA, (II) SERVICE OF PROCESS BY ANY MEANS
AUTHORIZED BY CALIFORNIA LAW, AND (III) IN THE INTEREST OF SAVING TIME AND
EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT
BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT
OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP
OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY
CLAIM FOR INJURY OR

 

62

 

DAMAGE,
OR ANY EMERGENCY OR STATUTORY REMEDY.  IN
THE EVENT LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR ACTION FOR NONPAYMENT
OF BASE RENT OR ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OF
ANY NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY
SUCH PROCEEDING OR ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT ACTION AT
LAW.

 

29.23                     Submission of Lease.  Submission of this instrument for examination
or signature by Tenant does not constitute a reservation of, option for or
option to lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant.

 

29.24                     Brokers. 
Landlord and Tenant 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 Lease, excepting only the real estate brokers or agents
specified in Section 12 of the Summary (the “Brokers”),
and that they know of no other real estate broker or agent who is entitled to a
commission in connection with this Lease. 
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, 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 any dealings with
any real estate broker or agent, other than the Brokers, occurring by, through,
or under the indemnifying party.

 

29.25                     Independent Covenants.  This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord’s expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord, except as expressly set forth in this Lease.

 

29.26                     Project or Building Name and Signage.  Landlord shall have the right at any time to
change the name of the Project or Building and, subject to the TCCs of Section 23.2,
Landlord shall have the right to install, affix and maintain any and all signs
on the exterior and on the interior of the Project or Building as Landlord may,
in Landlord’s sole discretion, desire. 
Tenant shall not use the name of the Project or Building or use pictures
or illustrations of the Project or Building in advertising or other publicity
or for any purpose other than as the address of the business to be conducted by
Tenant in the Premises, without the prior written consent of Landlord.

 

29.27                     Counterparts.  This Lease may be executed in counterparts
with the same effect as if both parties hereto had executed the same
document.  Both counterparts shall be
construed together and shall constitute a single lease.

 

29.28                     Confidentiality.  Tenant acknowledges that the content of this
Lease and any related documents are confidential information.  Tenant shall keep such confidential
information strictly confidential and shall not disclose such confidential
information to any person or entity other than Tenant’s financial, legal, and
space planning consultants, and except as required to be disclosed by any
applicable law or regulation.  Landlord
and Tenant hereby acknowledge that a

 

63

 

copy of
this Lease would be attached to Tenant’s filings, if any, with the Securities
and Exchange Commission.

 

29.29                     Transportation Management.  Tenant shall fully comply with all present or
future governmental programs intended to manage parking, transportation or
traffic in and around the Building, and in connection therewith, Tenant shall
take responsible action for the transportation planning and management of all
employees located at the Premises by working directly with Landlord, any
governmental transportation management organization or any other
transportation-related committees or entities.

 

29.30                     Building Renovations.  It is specifically understood and agreed that
Landlord has made no representation or warranty to Tenant and has no obligation
and has made no promises to alter, remodel, improve, renovate, repair or
decorate the Premises, Building, or any part thereof and that no
representations respecting the condition of the Premises or the Building have
been made by Landlord to Tenant except as specifically set forth herein or in
the Tenant Work Letter.  However, Tenant
hereby acknowledges that Landlord is currently renovating or may during the
Lease Term renovate, improve, alter, or modify (collectively, the “Renovations”) the Project, the Building and/or the Premises
including without limitation the parking structure, common areas, systems and
equipment, roof, and structural portions of the same, which Renovations may
include, without limitation, (i) installing sprinklers in the Building
common areas and tenant spaces, (ii) modifying the common areas and tenant
spaces to comply with applicable laws and regulations, including regulations
relating to the physically disabled, seismic conditions, and building safety
and security, and (iii) installing new floor covering, lighting, and wall
coverings in the Building common areas, and in connection with any Renovations,
Landlord may, among other things, erect scaffolding or other necessary
structures in the Building, limit or eliminate access to portions of the
Project, including portions of the common areas, or perform work in the
Building, which work may create noise, dust or leave debris in the
Building.  To the extent that such
Renovations and Landlord’s actions do not violate the TCCs of Article 28
and/or the last sentence of Section 1.1.3 of this Lease, Tenant
hereby agrees that such Renovations and Landlord’s actions in connection with
such Renovations shall in no way constitute a constructive eviction of Tenant
nor entitle Tenant to any abatement of Rent. 
Landlord shall have no responsibility or for any reason be liable to
Tenant for any direct or indirect injury to or interference with Tenant’s
business arising from the Renovations, nor shall Tenant be entitled to any
compensation or damages from Landlord for loss of the use of the whole or any
part of the Premises or of Tenant’s personal property or improvements resulting
from the Renovations or Landlord’s actions in connection with such Renovations,
or for any inconvenience or annoyance occasioned by such Renovations or
Landlord’s actions.  Notwithstanding
anything set forth in this Section 29.30 to the contrary, Landlord
shall provide Tenant with five (5) business days prior notice of any
Renovations and shall use commercially reasonable efforts to minimize any
interference with Tenant’s business caused by Landlord’s actions in connection
with such Renovations.

 

29.31                     No Violation.  Tenant and Landlord each hereby warrant and
represent that neither its execution of nor performance under this Lease shall
cause such party to be in violation of any agreement, instrument, contract,
law, rule or regulation by which it is bound, and each party shall
protect, defend, indemnify and hold the other harmless against any claims,
demands,

 

64

 

losses,
damages, liabilities, costs and expenses, including, without limitation,
reasonable attorneys’ fees and costs, arising from such party’s breach of this
warranty and representation.

 

29.32                     Communications and Computer Lines.  Tenant may install, maintain, replace, remove
or use any communications or computer wires and cables (collectively, the “Lines”) at the Project in or serving the Premises, provided
that (i) Tenant shall obtain Landlord’s prior written consent (which
consent shall not be unreasonably withheld), use an experienced and qualified
contractor approved in writing by Landlord, and comply with all of the other
provisions of Articles 7 and 8 of this Lease, (ii) the
Lines therefor (including riser cables) shall be appropriately insulated to
prevent excessive electromagnetic fields or radiation, and shall be surrounded
by a protective conduit reasonably acceptable to Landlord, (iii) any new
or existing Lines servicing the Premises shall comply with all applicable
governmental laws and regulations, (iv) as a condition to permitting the
installation of new Lines, Landlord may require that Tenant remove existing
Lines located in or serving the Premises and repair any damage in connection
with such removal, and (v) Tenant shall pay all costs in connection
therewith.  Landlord reserves the right
to require that Tenant remove any Lines located in or serving the Premises
which are installed in violation of these provisions, or which are at any time
in violation of any laws or represent a dangerous or potentially dangerous
condition.

 

29.33                     Hazardous Substances.

 

29.33.1            Definitions.  For purposes of this Lease, the following
definitions shall apply:  “Hazardous Material(s)” shall mean any solid, liquid or
gaseous substance or material that is described or characterized as a toxic or
hazardous substance, waste, material, pollutant, contaminant or infectious
waste, or any matter that in certain specified quantities would be injurious to
the public health or welfare, or words of similar import, in any of the “Environmental
Laws,” as that term is defined below, or any other words which are intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity or
reproductive toxicity and includes, without limitation, asbestos, petroleum (including
crude oil or any fraction thereof, natural gas, natural gas liquids, liquefied
natural gas, or synthetic gas usable for fuel, or any mixture thereof),
petroleum products, polychlorinated biphenyls, urea formaldehyde, radon gas,
nuclear or radioactive matter, medical waste, soot, vapors, fumes, acids,
alkalis, chemicals, microbial matters (such as molds, fungi or other bacterial
matters), biological agents and chemicals which may cause adverse health
effects, including but not limited to, cancers and /or toxicity.  “Environmental Laws”
shall mean any and all federal, state, local or quasi-governmental laws
(whether under common law, statute or otherwise), ordinances, decrees, codes,
rulings, awards, rules, regulations or guidance or policy documents now or
hereafter enacted or promulgated and as amended from time to time, in any way
relating to (i) the protection of the environment, the health and safety
of persons (including employees), property or the public welfare from actual or
potential release, discharge, escape or emission (whether past or present) of
any Hazardous Materials or (ii) the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any Hazardous
Materials.

 

29.33.2            Compliance
with Environmental Laws. 
Landlord covenants that during the Lease Term, Landlord shall comply
with all Environmental Laws in accordance with, and as required by, the TCCs of
Article 24 of this Lease. 
Tenant shall not sell, use, or store in or

 

65

 

around the Premises any Hazardous Materials, except if stored, properly
packaged and labeled, disposed of and/or used in accordance with applicable
Environmental Laws.  In addition, Tenant
agrees that it: (i) shall not cause or suffer to occur, the release,
discharge, escape or emission of any Hazardous Materials at, upon, under or
within the Premises or any contiguous or adjacent premises; (ii) shall
notify Landlord promptly following receipt of any knowledge with respect to any
actual release, discharge, escape or emission (whether past or present) of any
Hazardous Materials at, upon, under or within the Premises; (iii) shall
promptly forward to Landlord copies of all orders, notices, permits,
applications and other communications and reports in connection with any
release, discharge, escape or emission of any Hazardous Materials at, upon,
under or within the Premises or any contiguous or adjacent premises, and (iv) in
connection with Tenant’s surrender of the Premises upon the expiration or
earlier termination of this Lease, Tenant shall deliver the same free of
Hazardous Materials brought upon, kept or used in or about the Premises by any
persons during the Lease Term or the term of the Original Lease, and shall
obtain and provide to Landlord (A) all Hazardous Materials Clearances, (B) evidence
from the applicable governmental entities of “closure” of all permits which had
been required for Tenant’s use of the Premises, together with “no further
action letters” from such applicable governmental entities and a “no further
action letter” for unrestricted future use of the Premises, and (C) a
Phase I report with regard to the Premises. 
Such Phase I report shall be (x) performed by an environmental
assessment or engineering firm and on a scope of work acceptable to Landlord in
its sole discretion, (y) shall identify Landlord as a beneficiary of such
report, and (z) completed no earlier than six (6) months prior to the
expiration of this Lease and no later than the Lease Expiration Date; provided,
however, in the event this Lease is terminated early for any reason, Tenant
shall complete such Phase I report within a commercially reasonable time
immediately following such early termination of this Lease.  Such Phase I report shall either (1) indicate
that the property shows no evidence of reasonably possible hazardous materials
contamination of the building, soil or groundwater; or (2) recommend
further investigation of the site, in which event, if such further
investigation relates to Tenant’s or the Tenant Parties’ use of the Premises,
then it shall be performed by an environmental assessment or engineering firm
and on a scope of work acceptable to Landlord in its sole discretion and at the
Tenant’s sole expense.  Such additional
investigation, if any, shall be completed within sixty (60) days of such
recommendation.  Landlord and Tenant
hereby agree that for purposes of establishing a baseline, Landlord shall,
promptly following the date of this Lease, obtain and provide to Tenant an
updated Phase I report with regard to the Premises; provided, however, and
Tenant shall reimburse Landlord for one-half (1⁄2) of the cost or fees reasonably
incurred for such report as Additional Rent.

 

29.33.3            List
of Documents and Operations. 
The parties acknowledge that Tenant has delivered to Landlord a list
identifying each type of Hazardous Materials to be present on the Premises and
setting forth any and all governmental approvals or permits required in
connection with the presence of such Hazardous Materials on the Premises (the “Hazardous Materials List”).  Tenant shall deliver to Landlord an updated
Hazardous Materials List at least once a year and shall also deliver an updated
list before any new Hazardous Material(s) is brought onto to the Premises.  Tenant shall deliver to Landlord true and
correct copies of the following documents (the “Haz Mat Documents”) related to the handling, use, storage,
disposal and emission of Hazardous Materials prior to the Lease Commencement
Date, or if unavailable at that time, concurrent with the receipt from, or
submission to, a governmental agency: 
permits; approvals; reports; storage and manufacturing plans; notice of
violations of any laws; plans relating to the installation of any storage tanks
to be installed in or under the Project (provided,

 

66

 

said installation of tanks shall only be permitted after Landlord has
given Tenant its written consent to do so, which consent may be withheld in
Landlord’s sole and absolute discretion); and all closure plans or any other
documents required by any and all federal, state, and local governmental
agencies and authorities for any storage tanks installed in, on or under the
Project for the closure of any such tanks. 
Tenant is not required, however, to provide Landlord with any portion(s)
of the Haz Mat Documents containing information of a proprietary nature which,
in and of themselves, do not contain a reference to any Hazardous Materials or
hazardous activities.  It is not the intent
of this Section 29.33.3 to provide Landlord with information which
could be detrimental to Tenant’s business should such information become
possessed by Tenant’s competitors.  In
connection with the foregoing, Tenant hereby represents and warrants to Landlord
that neither Tenant, or any of its legal predecessors, has been required by any
prior landlord, lender or governmental authority at any time to take remedial
action in connection with Hazardous Materials contaminating a property which
contamination was permitted by Tenant or resulting from Tenant’s action or use
of the property in question, and Tenant is not subject to any enforcement order
issued by any governmental authority in connection with the use, disposal or
storage of a Hazardous Materials.  If
Landlord determines that this representation and warranty was not true as of
the date of this Lease, Landlord shall have the right to terminate this Lease
in Landlord’s sole and absolute discretion.

 

29.33.4            Landlord’s
Right of Environmental Audit. 
Landlord may, upon reasonable notice to Tenant, be granted access to
and enter the Premises no more than once annually to perform or cause to have
performed an environmental inspection, site assessment or audit.  Such environmental inspector or auditor may be
chosen by Landlord, in its sole discretion, and be performed at Landlord’s sole
expense.  To the extent that the report
prepared upon such inspection, assessment or audit, indicates the presence of
Hazardous Materials (due to Tenant or the Tenant Parties) in violation of
Environmental Laws, or provides recommendations or suggestions to prohibit the
release, discharge, escape or emission of any Hazardous Materials (by Tenant or
the Tenant Parties) at, upon, under or within the Premises, or to comply with any
Environmental Laws related to Tenant’s or the Tenant Parties’ use of the
Premises (including the use of Hazardous Materials therein), Tenant shall
promptly, at Tenant’s sole expense, comply with any reasonable recommendations
or suggestions, including, but not limited to performing such additional
investigative or subsurface investigations or remediation(s) as reasonably
recommended by such inspector or auditor (taking into account all legal
requirements and governmental agency recommendations).  Notwithstanding the above, if at any time,
Landlord has actual notice or reasonable cause to believe that Tenant has
violated, or permitted any violations of any Environmental Law, then Landlord
will be entitled to perform its environmental inspection, assessment or audit
at any time, notwithstanding the above mentioned annual limitation, and Tenant
must reimburse Landlord for the cost or fees incurred for such as Additional
Rent.

 

29.33.5            Indemnifications.   Landlord agrees to indemnify, defend,
protect and hold harmless the Tenant and the Tenant Parties from and against
any liability, obligation, damage or costs, including without limitation,
attorneys’ fees and costs, resulting directly or indirectly from any use,
presence, removal or disposal of any Hazardous Materials to the extent such
liability, obligation, damage or costs (i) was a result of actions caused
or permitted by Landlord or a Landlord Party, or (ii) arose prior to the
date of Tenant’s occupancy of any portion of the Premises, including, without
limitation, Tenant’s occupancy of the Premises under the

 

67

 

terms of the Original Lease. 
Tenant agrees to indemnify, defend, protect and hold harmless Landlord
and the Landlord Parties from and against any liability, obligation, damage or
costs, including without limitation, attorneys’ fees and costs, resulting
directly or indirectly from any use, presence, removal or disposal of any
Hazardous Materials or breach of any provision of this section, to the extent
such liability, obligation, damage or costs was a result of actions caused or
permitted by Tenant or a Tenant Party. 
These mutual environmental indemnities shall survive any expiration or
termination of this Lease, and are not affected by any claims of breach of any
other provisions of this Lease.

 

29.33.6            Ongoing Obligations.  All obligations of Tenant hereunder not fully
performed as of the termination of the Lease Term, including the obligations of
Tenant pursuant to this Section 29.33, shall survive the expiration
or earlier termination of the Lease, including, without limitation, indemnity
obligations, payment obligations with respect to Rent and obligations
concerning the condition and repair of the Premises.

 

29.34                     Development of the Project.

 

29.34.1            Subdivision.  Landlord reserves the right to further
subdivide all or a portion of the Project. 
Tenant agrees to execute and deliver, upon demand by Landlord and in the
form requested by Landlord, any additional documents needed to conform this
Lease to the circumstances resulting from such subdivision, which shall be
limited to description of the Project and/or Building.

 

29.34.2            The Other Improvements.  If portions of the Project or property
adjacent to the Project (collectively, the “Other
Improvements”) are owned by an entity other than Landlord, Landlord,
at its option, may enter into an agreement with the owner or owners of any or
all of the Other Improvements to provide (i) for reciprocal rights of
access and/or use of the Project and the Other Improvements, (ii) for the
common management, operation, maintenance, improvement and/or repair of all or
any portion of the Project and the Other Improvements, (iii) for the
allocation of a portion of the Direct Expenses to the Other Improvements and
the operating expenses and taxes for the Other Improvements to the Project, and
(iv) for the use or improvement of the Other Improvements and/or the
Project in connection with the improvement, construction, and/or excavation of
the Other Improvements and/or the Project; provided that none of the foregoing
materially adversely interfere with Tenant’s rights, or increase Tenant’s
financial obligations, under this Lease. 
Nothing contained herein shall be deemed or construed to limit or
otherwise affect Landlord’s right to convey all or any portion of the Project
or any other of Landlord’s rights described in this Lease.

 

29.34.3            Construction of Project and Other Improvements.  Tenant acknowledges that portions of the
Project and/or the Other Improvements may be under construction following
Tenant’s occupancy of the Premises, and that such construction may result in
levels of noise, dust, obstruction of access, etc. which are in excess of that
present in a fully constructed project. 
Landlord shall use its commercially reasonable efforts to minimize the
disruption to Tenant and Tenant’s business from such construction and in no
event shall Landlord be entitled to use Tenant’s parking areas for construction
staging, storage of equipment or other construction related activities without
Tenant’s approval, which may be granted or withheld in

 

68

 

Tenant’s
sole discretion.  Tenant hereby waives
any and all rent offsets or claims of constructive eviction which may arise in
connection with such construction.

 

29.34.4            Tenant’s Lease of the Entire Project.  To the extent that
Tenant leases all of the 10421 Building and the 10445 Building, the terms of
this Section 29.34 shall not apply.

 

29.35                     Central Plant Area.  Tenant has constructed that certain “Central Plant Area” pursuant to the terms
of the Original Lease.  Tenant
shall continue to maintain such Central Plant Area, at Tenant’s sole cost and
expense.  Tenant shall remove such
Central Plant Area upon the expiration or earlier termination of this Lease and
shall repair
any damage to the Building caused by such removal and return the affected
portion of the Premises to a building standard tenant improved condition as
determined by Landlord. 
Such Central Plant Area shall, in all instances, comply with applicable
governmental laws, codes, rules and regulations.

 

29.36                     No Discrimination.  Tenant covenants by and for itself, its
heirs, executors, administrators and assigns, and all persons claiming under or
through Tenant, and this Lease is made and accepted upon and subject to the
following conditions:  that there shall
be no discrimination against or segregation of any person or group of persons,
on account of race, color, creed, sex, religion, marital status, ancestry or
national origin in the leasing, subleasing, transferring, use, or enjoyment of
the Premises, nor shall Tenant itself, or any person claiming under or through
Tenant, establish or permit such practice or practices of discrimination or
segregation with reference to the selection, location, number, use or
occupancy, of tenants, lessees, sublessees, subtenants or vendees in the
Premises.

 

29.37                     10445 Premises; Sublease Space; Alternate Temporary Space.  Landlord shall use commercially reasonable
efforts to cause the termination of the Nuera Lease (which termination shall
occur following the full execution and unconditional delivery [i.e., with no conditions to the
effectiveness of such termination agreement outstanding] of a lease termination
agreement with respect to the Nuera Lease, in a manner acceptable to Landlord
in its sole and absolute discretion) to occur on or before January 31,
2006; provided, however, that Landlord shall have no liability whatsoever to
Tenant relating to or arising from Landlord’s inability or failure to enter
into such a termination agreement or deliver the 10445 Premises to Tenant, or
Landlord’s delay in entering into such a termination agreement or delivering
the 10445 Premises to Tenant.

 

29.37.1            Nuera
Sublease.  In the event
that Landlord in unable to timely cause the termination of the Nuera Lease on
or before January 31, 2006, then commencing as of such date, Tenant shall
use good faith, diligent efforts to enter into a sublease agreement directly
with Nuera (the “Nuera Sublease”)
on terms acceptable to Tenant in its reasonable discretion, whereby Tenant
would sublease from Nuera at least 20,000 rentable square feet of the 10445
Premises and which Nuera Sublease would commence no later than June 1,
2006.  The parties hereto acknowledge
that Landlord is using, and Landlord agrees to continue to use commercially
reasonable efforts to assist Tenant in entering into such Nuera Sublease.  Landlord shall have no liability whatsoever
to Tenant relating to or arising from any inability of Tenant to enter into
such Nuera Sublease or any delay in Tenant’s occupancy of the sublease premises
under such Nuera Sublease.

 

69

 

29.37.2            Temporary Space. In the event that
Landlord in unable to timely cause the termination of the Nuera Lease as set
forth in Section 29.37, above, and in the event that despite Tenant’s
good faith, diligent efforts, Tenant is unable to enter into such Nuera
Sublease as set forth in Section 39.37.1, above (which failure
shall be deemed not to have occurred in the event that Tenant refuses to enter
into the Nuera Sublease on commercially reasonable terms) on or before June 1,
2006, then no later than June 1, 2006, Landlord shall provide Tenant with
at least 20,000 rentable square feet of space in the building located at 6340
Sequence Drive, San Diego, California 
92121 (the “Temporary Space”).  The term of Tenant’s lease of the Temporary
Space shall terminate on the date (the “Temporary
Space Expiration Date”) which is ninety-one (91) days following the
date upon which Landlord tenders possession of all or any portion of the 10445
Premises to Tenant.  Tenant’s possession
of the Temporary Space shall be subject to the terms and conditions of this
Lease as though such Temporary Space were included in the Premises, except that
(A) Tenant shall not be required to pay Base Rent or, generally, Tenant’s
Share of the Direct Expenses otherwise attributable to such Temporary Space
during Tenant’s period of occupancy of the
Temporary Space; provided, however, Tenant shall pay for all utilities and
other costs incurred in connection with Tenant’s use and occupancy of the
Temporary Space, (B) Tenant shall have no right to assign, sublease
or otherwise transfer its interest with respect to the Temporary Space, (C) Tenant
shall accept the Temporary Space in its existing “as is” condition, (D) Tenant
shall not make any alterations or improvements to the Temporary Space or any
portion thereof, without Landlords prior written approval, which approval may
be withheld in Landlord’s sole discretion, (E) the terms of the Tenant
Work Letter shall be inapplicable to the Temporary Space, and (F) Landlord
shall have no obligation to provide or pay for improvements of any kind with
respect to the Temporary Space.   Tenant
shall vacate and surrender the Temporary Space to Landlord on or before the
Temporary Space Expiration Date in as good order and condition as when Tenant
took possession, reasonable wear and tear excepted.  Tenant shall be solely responsible for all
costs incurred in connection with moving in and out of the Temporary Space.

 

ARTICLE 30

 

RIGHT OF FIRST NEGOTIATION

 

30.1                           Landlord’s Right of First Negotiation.
Throughout the Lease Term, in the event that Tenant desires to lease, sublease
or purchase space (other than the Premises) within San Diego County, then prior
to communicating such space requirement to the marketplace (whether through
distribution of a “request for proposal” therefor or otherwise), Tenant shall
first provide Landlord with ten (10) business days advance written notice
of such space requirement, which notice shall set forth the general terms of
such space requirements.  During the ten (10) business
days following Landlord’s receipt of such notice, Landlord shall have the right
to submit to Tenant a proposal with respect to such requirements, and Tenant
agrees to consider any such proposal in good faith and to meet with Landlord
discuss its offer.  Neither such notice
nor any proposal shall create any binding obligation on the part of either party,
including any obligation to enter into or continue any negotiations with
respect thereto.  Landlord agrees to
maintain the confidentiality of Tenant’s space requirements (unless and until
Tenant makes such space requirement public), and Tenant agrees to maintain the
confidentiality of any proposal by Landlord, and the parties shall not to
disclose the same to any parties other than their respective financial, legal, and
space planning consultants, and except as required to be disclosed by any

 

70

 

applicable
law or regulation.   Tenant’s obligation
to provide Landlord such notice and opportunity to submit a proposal shall
expire at such time as the named Landlord hereunder transfers the Property to
any party other than an affiliated entity which controls, in controlled by or
under common control as the named Landlord.

 

[continued on the following page]

 

71

 

IN WITNESS WHEREOF, Landlord and Tenant have
caused this Lease to be executed the day and date first above written.

 

	
   

  	
   

  	
  “LANDLORD”:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KILROY
  REALTY, L.P.,

  
	
   

  	
   

  	
  a
  Delaware limited partnership 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kilroy
  Realty Corporation,

  
	
   

  	
   

  	
   

  	
  a
  Maryland corporation,

  
	
   

  	
   

  	
   

  	
  General
  Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By

  	
  :   /s/
  Jeffrey C. Hawken

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
      Its:

  	
   Executive
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   Chief
  Operating Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
            
  /s/ Steve Scott

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
      Its:

  	
   Senior
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “TENANT”:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FAVRILLE,
  INC.,

  
	
   

  	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     /s/
  John P. Longenecker

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
     Its:

  	
      President
  and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     /s/
  Tamara A. Seymour

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
     Its:

  	
      Chief
  Financial Officer

  	
   

  
													

 

72

 

 

EXHIBIT A

 

PACIFIC CORPORATE CENTER 

 

OUTLINE OF PREMISES

 

[ATTACHED]

 

1

 

EXHIBIT B

 

PACIFIC CORPORATE CENTER 

 

TENANT WORK LETTER

 

[ATTACHED]

 

1

 

EXHIBIT B

 

PACIFIC CORPORATE CENTER 

 

TENANT WORK LETTER

 

This Tenant Work
Letter shall set forth the terms and conditions relating to the construction of
the Premises.  This Tenant Work Letter is
essentially organized chronologically and addresses the issues of the
construction of the Premises, in sequence, as such issues will arise during the
actual construction of the Premises.  All
references in this Tenant Work Letter to Articles or Sections of “this Lease”
shall mean the relevant portions of Articles 1 through 29 of
the Amended and Restated Office Lease to which this Tenant Work Letter is
attached as Exhibit B,
and all references in this Tenant Work Letter to Sections of “this Tenant Work
Letter” shall mean the relevant portions of Sections 1 through 5
of this Tenant Work Letter.

 

SECTION 1

 

PREMISES

 

Landlord and Tenant acknowledge that Tenant has been
occupying the Premises pursuant to the Original Lease.  Except as specifically set forth herein or in
the Lease, Landlord shall not be obligated to construct or install any
improvements or facilities of any kind in the Premises, and Tenant shall
continue to accept the Premises in its currently-existing, “as-is” condition,
subject to Landlord express obligations set forth in Article 7 of this
Lease, including, without limitation, with respect to the Building
Structure.  

 

SECTION 2

 

TENANT IMPROVEMENTS

 

2.1                                 Improvement Allowance.  Tenant shall be entitled to a one-time
improvement allowance (the “Improvement
Allowance”) in the amount of Ten Million and No/100 Dollars
($10,000,000.00) for the costs relating to the “hard costs” of the construction
of Tenant’s improvements which are permanently affixed to the Premises (the “Tenant Improvements”) and Landlord
and Tenant hereby acknowledge and agree that all such Tenant Improvements
shall, upon completion of the same, be and become a part of the Premises and
the property of Landlord. 
In no event shall Landlord be obligated to make disbursements pursuant
to this Tenant Work Letter in a total amount which exceeds the Improvement
Allowance.

 

2.2                                 Disbursement of the Improvement Allowance.

 

2.2.1                        Improvement Allowance Items.  Except as otherwise set forth in this Tenant
Work Letter, the Tenant Improvement Allowance shall be disbursed by Landlord
(each of which disbursements shall be made pursuant to Landlord’s disbursement
process) for costs related to the construction of the Tenant Improvements and
for the following items and costs (collectively the “Improvement Allowance Items”):

 

1

 

2.2.1.1               The hard cost of construction of the
Tenant Improvements, including, without limitation, testing and inspection
costs, freight elevator usage, hoisting and trash removal costs, and
contractors’ fees and general conditions;

 

2.2.1.2               The cost of any changes in the Base
Building when such changes are required by the Construction Drawings (including
if such changes are due to the fact that such work is prepared on an unoccupied
basis), provided that such cost shall not include any architectural and/or
engineering fees and expenses incurred in connection therewith;

 

2.2.1.3               The cost of any changes to the Tenant
Improvements required by Code;

 

2.2.1.4               The cost of the “Landlord Supervision
Fee,” as that term is defined in Section 4.2.2 of this Tenant Work
Letter; and

 

2.2.1.5               All other costs required or allowed by
the terms of this Tenant Work Letter to be expended by Landlord in connection
with the construction of the Tenant Improvements.

 

Tenant expressly
acknowledges and agrees that no portion of the Improvement Allowance may be
used for any “soft costs” in connection with the design, permitting or
construction of the Tenant Improvements, which soft costs shall include,
without limitation, (i) payment of the fees of the “Architect” and the “Engineers,”
as those terms are defined in Section 3.1 of this Tenant Work
Letter, (ii) the payment of plan check, permit and license fees relating
to construction of the Tenant Improvements, and (iii) the cost of any of
Tenant’s furniture, fixtures or equipment. 

 

2.3                                 Standard Tenant Improvement Package.  Landlord has established specifications (the “Building Standard Tenant Improvements”) for
the Building standard components to be used in the construction of the Tenant
Improvements in the office areas of the Premises, which Building Standard
Tenant Improvements are set forth on Schedule 1,
attached hereto.  The quality of Tenant
Improvements shall be equal to or of greater quality than the quality of the
Building Standard Tenant Improvements.

 

2.4                                 Removal of Above Building Standard Tenant Improvements.  “Above
Standard Tenant Improvements” shall mean (a) any part of the
office portions of the Tenant Improvements which do not constitute Building
Standard Tenant Improvements; (b) a configuration of the Tenant Improvements
which is not usual and customary for either normal occupancy or generic wet/dry
lab space; and (c) Tenant Improvements of a nature specific to the cGMP
Standards.  Landlord may require that Tenant,
upon the expiration or any earlier termination of this Lease, remove any Above
Standard Tenant Improvements in the lab portion of the Premises identified by
Landlord concurrently with Landlord’s review and approval of the Approved
Working Drawings to the extent such Tenant Improvements are unique and particular
to Tenant vis-à-vis generic wet/dry lab space (collectively, the “Extraordinary Alterations”), and to repair
any damage to the Premises and Building caused by such removal (reasonable wear
and tear excepted); provided, however, if Landlord, in its approval of any
Above Standard Tenant Improvements, fails to address the removal requirement
with regard to particular Above

 

2

 

Standard Tenant Improvements,
Landlord shall be deemed to have agreed to waive the removal requirement with
regard to such particular Above Standard Tenant Improvements; provided further,
however, in no event shall identified Extraordinary Alterations include
improvements which are industry standard improvements in research and development
wet labs.

 

SECTION 3

 

CONSTRUCTION DRAWINGS

 

3.1                                 Selection of Architect/Construction Drawings.  Tenant shall retain an architect/space
planner selected by Tenant, subject to Landlord’s reasonable approval (the “Architect”) to prepare the “Construction Drawings,”
as that term is defined in this Section 3.1.  Tenant shall retain the engineering
consultants selected by Tenant, subject to Landlord’s reasonable approval (the “Engineers”) to prepare all plans and
engineering working drawings relating to the structural, mechanical,
electrical, plumbing, HVAC, lifesafety, and sprinkler work in the Premises,
which work is not part of the Base Building. 
Landlord shall approve or disapprove of Tenant’s proposed Architect or
Engineers, as the case may be, within five (5) business days following
Tenant’s submission of the name(s) of Tenant’s proposed Architects or
Engineers, respectively, together with all documentation and other information
reasonably required by Landlord.  The
plans and drawings to be prepared by Architect and the Engineers hereunder
shall be known collectively as the “Construction
Drawings.”  All Construction
Drawings shall comply with the drawing format and specifications determined by
Landlord, and shall be subject to Landlord’s approval, which approval shall not
be unreasonably withheld.  Tenant and
Architect shall verify, in the field, the dimensions and conditions as shown on
the relevant portions of the base building plans, and Tenant and Architect
shall be solely responsible for the same, and Landlord shall have no
responsibility in connection therewith. 
Landlord’s review of the Construction Drawings as set forth in this Section 3,
shall be for its sole purpose and shall not imply Landlord’s review of the
same, or obligate Landlord to review the same, for quality, design, Code
compliance or other like matters. 
Accordingly, notwithstanding that any Construction Drawings are reviewed
by Landlord or its space planner, architect, engineers and consultants, and
notwithstanding any advice or assistance which may be rendered to Tenant by
Landlord or Landlord’s space planner, architect, engineers, and consultants,
Landlord shall have no liability whatsoever in connection therewith and shall
not be responsible for any omissions or errors contained in the Construction
Drawings, and Tenant’s waiver and indemnity set forth in this Lease shall
specifically apply to the Construction Drawings.

 

3.2                                 Final Space Plan.  Tenant shall supply Landlord with four (4) copies
signed by Tenant of its final space plan for the Premises before any
architectural working drawings or engineering drawings have been
commenced.  The final space plan (the “Final Space Plan”) shall include a layout
and designation of all offices, rooms and other partitioning, their intended
use, and equipment to be contained therein. 
Landlord may request clarification or more specific drawings for special
use items not included in the Final Space Plan. 
Landlord shall, within ten (10) business days after Landlord’s
receipt of the Final Space Plan, (i) approve the Final Space Plan, (ii) approve
the Final Space Plan subject to specified conditions to be complied with when
the Final Working Drawings are submitted by Tenant to Landlord, or (iii) disapprove
the Final Space Plan and return the same to Tenant with detailed requested
revisions.  If Landlord disapproves the
Final Space Plan, Tenant shall resubmit the Final Space Plan to Landlord, and

 

3

 

Landlord
shall approve or disapprove of the resubmitted Final Space Plan, based upon the
criteria set forth in this Section 3.2 (except that Landlord’s
disapproval of the Final Space Plan, as resubmitted, shall be final), within
five (5) business days after Landlord receives such resubmitted Final
Space Plan.  If Tenant is so advised,
Tenant shall promptly cause the Final Space Plan to be revised to correct any
deficiencies or other matters Landlord may reasonably require.

 

3.3                                 Final Working Drawings.  After the Final Space Plan has been approved
by Landlord, Tenant shall supply the Engineers with a complete listing of
standard and non-standard equipment and specifications, including, without
limitation, B.T.U. calculations, electrical requirements and special electrical
receptacle requirements for the Premises, to enable the Engineers and the
Architect to complete the “Final Working Drawings” (as that term is defined
below) in the manner as set forth below. 
Upon the approval of the Final Space Plan by Landlord and Tenant, Tenant
shall promptly cause the Architect and the Engineers to complete the
architectural and engineering drawings for the Premises, and Architect shall
compile architectural, structural, mechanical, electrical and plumbing working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (which may be done by subspecialty if such
subspecialty will be separately permitted by the City) (collectively, the “Final Working Drawings”) and shall submit
the same to Landlord for Landlord’s approval. 
Tenant shall supply Landlord with four (4) copies signed by Tenant
of such Final Working Drawings.  Landlord
shall, within ten (10) business days after Landlord’s receipt of the Final
Working Drawings, (i) approve the Final Working Drawings, (ii) approve
the Final Working Drawings subject to specified conditions to be satisfied by
Tenant prior to submitting the Approved Working Drawings for permits as set
forth in Section 3.4, below, or (iii) disapprove the Final
Working Drawings and return the same to Tenant with detailed requested
revisions.  If Landlord disapproves the
Final Working Drawings, Tenant shall resubmit the Final Working Drawings to
Landlord, and Landlord shall approve or disapprove of the resubmitted Final
Working Drawings (except that Landlord’s disapproval of the Final Working
Drawings, as resubmitted, shall be final), within five (5) business days
after Landlord receives such resubmitted Final Working Drawings.  If Tenant is so advised, Tenant shall
immediately revise the Final Working Drawings in accordance with such review
and any disapproval of Landlord in connection therewith.  In addition, if the Final Working Drawings or
any amendment thereof or supplement thereto shall require alterations in the
Base Building (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, at its
sole cost and expense, the cost of such required changes upon receipt of bills
therefor.

 

3.4                                 Approved Working Drawings.  Notwithstanding anything in this Tenant Work
Letter to the contrary, Tenant shall not commence (or allow the commencement
of) the construction of the Tenant Improvements until the Final Working
Drawings are approved in writing by Landlord (the “Approved Working Drawings”). 
After approval by Landlord of the Final Working Drawings, Tenant may
submit the same to the appropriate municipal authorities for all applicable
building permits.  Tenant hereby agrees
that neither Landlord nor Landlord’s consultants shall be responsible for
obtaining any building permit or certificate of occupancy for the Premises and
that obtaining the same shall be Tenant’s responsibility; provided, however,
that Landlord shall cooperate with Tenant in executing permit applications and
performing other ministerial acts reasonably necessary to enable Tenant to
obtain any such permit or certificate of

 

4

 

occupancy.  Subject to the terms of Section 4.2.1,
below, no changes, modifications or alterations in the Approved Working
Drawings may be made without the prior written consent of Landlord, which
consent may not be unreasonably withheld.

 

SECTION 4

 

CONSTRUCTION OF THE TENANT IMPROVEMENTS

 

4.1                                 The Contractor.  Tenant shall select, subject to Landlord’s
reasonable approval, three (3) licensed general contractors (the “Bidding Contractors”) to bid on the
construction of the Tenant Improvements. 
Following such selection, Tenant shall solicit bids from the Bidding
Contractors and, following such bidding process, shall select which Bidding
Contractor shall be the contractor to construct the Tenant Improvements (the “Contractor”).  Landlord shall independently retain the
Contractor to construct the Tenant Improvements in accordance with the Approved
Working Drawings.  All subcontractors,
materialmen and suppliers are subject to Tenant’s prior approval, which
approval shall not be unreasonably withheld, conditioned or delayed,

 

4.2                                 Construction of Tenant Improvements by Contractor
under the Supervision of Landlord and Tenant.

 

4.2.1                        Construction Contract; Over-Allowance Amount.  Landlord and Tenant shall jointly negotiate
and prepare the form of the construction contract (the “Contract”) to be executed by and between
Landlord and the Contractor. 
Notwithstanding the foregoing, the Contract shall expressly state that
all “change orders” which (x) involve the expenditure of more than
$25,000.00 in the aggregate; (y) adversely affect the systems and
equipment of the Building or the Building Structure, or (z) adversely
affect the exterior appearance of the Building, must be
approved in advance by Landlord and Tenant in writing.  Prior to the commencement of the construction
of the Tenant Improvements, and after Tenant has accepted all bids for the
Tenant Improvements, Landlord shall submit to Tenant, for Tenant’s review and
approval, a detailed breakdown, by trade, of the final costs to be incurred or
which have been incurred, as set forth more particularly in Sections 2.2.1.1
through 2.2.1.5, above, in connection with the design and construction of
the Tenant Improvements, which costs form a basis for the amount of the
Contract (the “Final Costs”).  Prior to the commencement of construction of
the Tenant Improvements, Tenant and Landlord shall identify the amount (the “Over-Allowance Amount”) equal to the
difference between the amount of the Final Costs and the Improvement Allowance
(less any portion thereof already disbursed by Landlord, or in the process of
being disbursed by Landlord, on or before the commencement of construction of
the Tenant Improvements).  To the extent
there exists an Over-Allowance Amount, then following Landlord’s disbursement
of ninety percent (90%) of the Improvement Allowance to the Contractor (i.e.,
all of such Improvement Allowance minus a ten percent (10%) retention (the “Final Retention”) which Final Retention
shall only be disbursed by Landlord to the Contractor following the completion
of the Tenant Improvements and in accordance with the terms of the Contract),
Tenant shall, at Tenant’s sole cost, pay to Contractor an amount equal to the
total amount then due and owing to the Contractor (other than any corresponding
Final Retention which shall be paid concurrently with Landlord’s payment of its
portion of the Final Retention to the Contractor), and such payment by Tenant
shall be a condition to Landlord’s obligation to pay the Final Retention.  In

 

5

 

no
event shall any delays resulting from any failure by Tenant to pay any such
amount be deemed to be a Landlord Caused Delay (as that term is defined in Section 5.1,
below).  In the event that, after the
Final Costs have been determined, any revisions, changes, or substitutions
shall be made to the Construction Drawings or the Tenant Improvements, any
additional costs which arise in connection with such revisions, changes or
substitutions or any other additional costs shall be deemed to be an addition to
the Over-Allowance Amount.

 

4.2.2                        Supervision of Contractor. 
Landlord and Tenant shall jointly supervise the construction of the
Tenant Improvements by Contractor. 
Landlord and Tenant shall mutually cooperate with each other in all phases
of such supervision in order to for the Tenant Improvements to be completed in
a timely manner in accordance with the Approved Working Drawings.  Notwithstanding such joint supervision,
Tenant shall pay a construction supervision and management fee (the “Landlord Supervision Fee”) to Landlord in
an amount equal to the product of (A) one percent (1%), and (B) the
costs incurred with the Improvement Allowance Items identified in Sections
2.2.1.1 – 2.2.1.3, and 2.2.1.5 (whether paid for via the
Improvement Allowance or as an Over-Allowance Amount, which Landlord
Supervision Fee shall be for services relating to the coordination of the
construction of the Tenant Improvements.

 

4.2.3                        Contractor’s Warranties and Guaranties.  Landlord hereby assigns to Tenant all
warranties and guaranties by Contractor relating to the Tenant Improvements,
and Tenant hereby waives all claims against Landlord relating to, or arising
out of the construction of, the Tenant Improvements and which claims are
covered by such warranties.

 

4.2.4                        Indemnity.  Tenant’s
indemnity of Landlord as set forth in this Lease shall also apply with respect
to any and all costs, losses, damages, injuries and liabilities incurred by
Landlord Parties and related in any way to any act or omission of Tenant or
Tenant’s Architect at the Project; provided, however, that the foregoing
indemnity shall not apply to the extent of Landlord’s gross negligence or
willful misconduct.

 

4.2.5                        Requirements of Contractor.  The Contractor shall guarantee to Landlord
and for the benefit of Tenant that the portion of the Tenant Improvements for
which it is responsible shall be free from any defects in workmanship and
materials for a period of not less than one (1) year from the date of
completion thereof, and that the Contractor shall be responsible for the
replacement or repair, without additional charge, of all work done or furnished
in accordance with its contract that shall become defective within one (1) year
after the later to occur of (i) completion of the work performed by such
contractor or subcontractors and (ii) the Lease Commencement Date.  The correction of such work shall include,
without additional charge, all additional expenses and damages incurred in
connection with such removal or replacement of all or any part of the Tenant
Improvements, and/or the Building and/or common areas that may be damaged or
disturbed thereby.  All such warranties
or guarantees as to materials or workmanship of or with respect to the Tenant
Improvements shall be contained in the Contract or subcontract and shall be written
such that such guarantees or warranties shall inure to the benefit of both
Landlord and Tenant, as their respective interests may appear, and may be
directly enforced by either.  Landlord
covenants to give to Tenant any assignment or other assurances which may be
necessary to effect such right of direct enforcement.

 

4.2.6                        Insurance
Requirements.

 

 

6

 

4.2.6.1               General
Coverages.  Contractor and
all subcontractors shall carry worker’s compensation insurance covering all of
their respective employees, and shall also carry public liability insurance,
including property damage, all with limits, in form and with companies as are
required to be carried by Tenant as set forth in this Lease.

 

4.2.6.2               Special
Coverages.  “Builder’s All
Risk” insurance in an amount approved by Landlord covering the construction of
the Tenant Improvements, and such other insurance as Landlord may require, it
being understood and agreed that the Tenant Improvements shall be insured by
Tenant pursuant to this Lease immediately upon completion thereof.  Such insurance shall be in amounts and shall
include such extended coverage endorsements as may be reasonably required by
Landlord including, but not limited to, the requirement that all Contractor and
all subcontractors shall carry excess liability and Products and Completed
Operation Coverage insurance, each in amounts not less than $500,000 per
incident, $1,000,000 in aggregate, and in form and with companies as are
required to be carried by Tenant as set forth in this Lease.

 

4.2.6.3               General
Terms.  Certificates for
all insurance carried pursuant to this Section 4.2.6.3 shall be
delivered to Landlord and Tenant before the commencement of construction of the
Tenant Improvements and before the Contractor’s equipment is moved onto the
site.  All such policies of insurance
must contain a provision that the company writing said policy will give
Landlord and Tenant thirty (30) days prior written notice of any cancellation
or lapse of the effective date or any reduction in the amounts of such
insurance.  In the event that the Tenant
Improvements are damaged by any cause during the course of the construction
thereof, Landlord shall immediately repair the same.  Landlord shall use commercially reasonable
efforts to ensure that Contractor and all subcontractors maintain all of the
foregoing insurance coverage in force until the Tenant Improvements are fully
completed and accepted by Tenant, except for any Products and Completed
Operation Coverage insurance, which is to be maintained for ten (10) years
following completion of the work and acceptance by Landlord and Tenant.  All policies carried under this Section 4.2.6.3
shall insure Landlord and Tenant, as their interests may appear, as well as
Contractor and Tenant’s Agents.  Landlord
shall use commercially reasonable efforts to ensure that all insurance, except
Workers’ Compensation, maintained by Contractor and all subcontractors shall
preclude subrogation claims by the insurer against anyone insured
thereunder.  Such insurance shall provide
that it is primary insurance as respects the owner and that any other insurance
maintained by owner is excess and noncontributing with the insurance required
hereunder.  The requirements for the
foregoing insurance shall not derogate from the provisions for indemnification
of Landlord by Tenant under Section 4.2.4 of this Tenant Work
Letter.

 

4.2.7                        Governmental Compliance. 
The Tenant Improvements shall comply in all respects with the
following:  (i) the Code and other
state, federal, city or quasi-governmental laws, codes, ordinances and
regulations, as each may apply according to the rulings of the controlling
public official, agent or other person; (ii) applicable standards of the
American Insurance Association (formerly, the National Board of Fire
Underwriters) and the National Electrical Code; and (iii) building
material manufacturer’s specifications.

 

4.2.8                        Inspection. 
Landlord and Tenant shall each have the right to inspect the Tenant
Improvements at all times, provided however, that Landlord’s or Tenant’s
failure to

 

7

 

inspect
the Tenant Improvements shall in no event constitute a waiver of any of
Landlord’s or Tenant’s, respectively, rights hereunder nor shall any such
inspection of the Tenant Improvements constitute either party’s approval of the
same.  Should either party disapprove any
portion of the Tenant Improvements based on the failure of the Tenant
Improvements to conform to the Final Working Drawings, the disapproving party
shall notify the other in writing of such disapproval and shall specify the
items disapproved.  Any defects or
deviations in, and/or such disapproval of, the Tenant Improvements shall be rectified
by Landlord.

 

4.2.9                        Meetings.  Commencing
upon Tenant’s selection of the Contractor and Architect, Landlord and Tenant
shall hold regular meetings at a reasonable time (but in no event to be
required more often than weekly), with the Architect and the Contractor (or
their agents) regarding the progress of the preparation of Construction
Drawings and the construction of the Tenant Improvements, which meetings shall
be held at a location reasonably designated by Tenant or, in Landlord’s
discretion, at the Premises.  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 Contractor’s
current request for payment.

 

4.3                                 Notice of Completion; Copy of Record Set of Plans.  Within ten (10) days after completion of
construction of the Tenant Improvements, Landlord shall cause a Notice of
Completion to be recorded in the office of the Recorder of the county in which
the Building is located in accordance with Section 3093 of the Civil Code
of the State of California or any successor statute, and shall furnish a copy
thereof to Tenant upon such recordation. 
If Landlord fails to do so, Tenant may execute and file the same on
behalf of Landlord as Landlord’s agent for such purpose, at Landlord’s sole
cost and expense.  At the conclusion of
construction, (i) Landlord and Tenant shall cause the Architect and
Contractor (A) to update the Approved Working Drawings as necessary to
reflect all changes made to the Approved Working Drawings during the course of
construction, (B) to certify to the best of their knowledge that the “record-set”
of as-built drawings are true and correct, which certification shall survive
the expiration or termination of this Lease, and (C) to deliver to
Landlord and Tenant two (2) sets of copies of such record set of drawings
within ninety (90) days following issuance of a certificate of occupancy for
the Premises, and (ii) Landlord shall deliver to Tenant a copy, bound in a
binder (with an index), of all warranties, guaranties, and operating manuals
and information relating to the improvements, equipment, and systems in the
Premises.

 

4.4                                 Cooperation and Joint Efforts.  Landlord and Tenant hereby acknowledge that
the design and construction of the Tenant Improvements will require both of
Landlord and Tenant to mutually cooperate in good faith, using diligent and
commercially reasonable efforts to reach agreement or otherwise cooperate in
connection with a significant amount of design and construction milestones and
action items, only the most significant of which milestones and items are
specifically addressed in this Tenant Work Letter.  Landlord and Tenant each hereby commit to so
cooperate in good faith, and to use such diligent and commercially reasonable
efforts.  Such cooperative efforts shall
include the parties’ prompt sharing of information with regard to municipal or
local planning group meetings which may affect the construction of the Tenant
Improvements so as to provide all relevant parties an opportunity to attend the
same.

 

8

 

SECTION 5

 

LANDLORD
CAUSED DELAY

 

5.1                                 Landlord Caused Delays.  If there shall be a delay or there are delays
in the “Substantial Completion of the Tenant Improvements” (as that term is
defined in Section 5.4, below) due to a “Landlord Caused Delay,” then
Tenant shall be entitled to the “Substantial Completion Rent Abatement” as more
particularly set forth in Section 5.3, below.  As used in this Tenant Work Letter, “Landlord Caused Delay” shall mean actual
delays to the extent resulting from the acts or omissions of Landlord
including, but not limited to (i) failure of Landlord to timely approve or
disapprove any Construction Drawings; (ii) material and unreasonable
interference by Landlord, its agents, employees or contractors with the
Substantial Completion of the Tenant Improvements and which objectively
preclude or delay the construction of tenant improvements in the Building by
any person, which interference relates to access by Tenant, or the Contractor
to the Building or any Building facilities (including loading docks and freight
elevators) or service (including temporary power and parking areas as provided
herein) during normal construction hours, or the use thereof during normal
construction hours; (iii) delays due to the acts or failures to act of
Landlord, its agents, employees or contractors including without limitation any
such acts or failures to act with respect to payment of the Improvement
Allowance.  

 

5.2                                 Determination of a Landlord Caused Delay.  If Tenant contends that a Landlord Caused
Delay has occurred, Tenant shall immediately notify Landlord in writing (the “Delay Notice”) of the event that constitutes such Landlord
Caused Delay.  If such action, inaction
or circumstance qualifies as a Landlord Caused Delay, then a Landlord Caused
Delay shall be deemed to have occurred commencing on the date such action,
inaction or circumstance first occurred, and ending on the date such delay
ends.  Each day during such period shall
be referred to herein as a “Landlord Delay
Day;” provided, however, to the extent Tenant is aware (or using
commercially reasonable due diligence, should be aware) of an event that
otherwise constitutes a Landlord Caused Delay and fails to immediately provide
a Delay Notice to Landlord, then the number of Landlord Delay Days shall be
reduced by the number of calendar days occurring during the period commencing
on the date when Tenant became aware (or using commercially reasonable due
diligence, should have become aware) of such event and the date upon which
Tenant actually provides a Delay Notice to Landlord in connection with the
same.  

 

5.3                                 Substantial Completion Rent Abatement.  In the event a Landlord Delay shall be
determined to have occurred as set forth in Section 5.2, above,
then commencing on February 1, 2007, and continuing for each Landlord
Delay Day (such period, the “Substantial
Commencement Rent Abatement Period”), Tenant shall receive a
day-for-day abatement of the Base Rent otherwise attributable to the
10421 Premises (as opposed to the 10445 Premises) (the “Substantial Completion Rent Abatement”) for
each Landlord Delay Day. 

 

5.4                                 Definition of Substantial Completion of the Tenant
Improvements.  For
purposes of this Section 5, “Substantial
Completion of the Tenant Improvements” shall mean completion of
construction of the Tenant Improvements in the Premises pursuant to the
Approved Working Drawings as evidenced by a Certificate of Completion from the
Architect,

 

9

 

with
the exception of any punch list items and any tenant fixtures, work-stations,
built-in furniture, or equipment to be installed by Tenant or under the
supervision of Contractor.

 

SECTION 6

 

MISCELLANEOUS

 

6.1                                 Tenant’s Representative.  Tenant has designated Richard Murawski and
Tamara Seymour as its representatives with respect to the matters set forth in
this Tenant Work Letter, each of whom shall have full authority and
responsibility to act on behalf of the Tenant as required in this Tenant Work
Letter.

 

6.2                                 Landlord’s Representative.  Landlord has designated Jim Edwards as its
sole representatives with respect to the matters set forth in this Tenant Work
Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter.

 

6.3                                 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.  If any item requiring approval is timely
disapproved by Landlord, the procedure for preparation of the document and
approval thereof shall be repeated until the document is approved by Landlord.

 

6.4                                 Tenant’s Lease Default.  Notwithstanding any provision to the contrary
contained in this Lease, if an economic or material default (after applicable
notice and cure periods, if any) as described in the Lease or this Tenant Work
Letter has occurred at any time on or before the substantial completion of the
Tenant Improvements, then (i) in addition to all other rights and remedies
granted to Landlord pursuant to this Lease, Landlord shall have the right to
withhold payment of all or any portion of the Improvement Allowance(in which
case, Tenant shall be responsible for any delay in the substantial completion
of the Premises caused thereby), 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 this Lease (in
which case, Tenant shall be responsible for any delay in the substantial
completion of the Premises caused by such inaction by Landlord).

 

6.5                                 No Constructive Eviction.  Tenant hereby acknowledges that,
notwithstanding Tenant’s occupancy of the Premises during the construction of
the Tenant Improvements by Landlord, Landlord shall be permitted to construct
the Tenant Improvements in the Premises during normal business hours, in
accordance with a schedule agreed to by Landlord and Tenant. Such schedule may
involve construction outside business hours as requested by Tenant, and Tenant
hereby acknowledges that such scheduling may involve overtime or other cost
premiums which may increase the cost of the construction of the Tenant
Improvements.  Since Tenant is currently
occupying the Premises, Landlord agrees that it shall use commercially
reasonable efforts to perform the Tenant Improvements in a manner so as to
minimize interference with Tenant use of the Premises.  Tenant shall cooperate in good faith with
Landlord and Landlord’s construction schedule so that the Tenant
Improvements will be completed in a timely manner, and Tenant shall provide a
clear working area for such work, if necessary (including, but not limited to,
the moving of furniture, fixtures and Tenant’s property away from the area in
which

 

10

 

Landlord
is constructing the Tenant Improvements). 
Tenant hereby agrees that the construction of the Tenant Improvements
shall in no way constitute a constructive eviction of Tenant nor (except as
provided in Section 5 of this Tenant Work Letter) entitle Tenant to any
abatement of rent.  Landlord shall have
no responsibility or for any reason be liable to Tenant for any direct or
indirect injury to or interference with Tenant’s business arising from the
Tenant Improvements, nor (except to the extent arising due to the gross
negligence or willful misconduct of Landlord or any of its employees or agents,
or the breach by Landlord of its obligations herein) shall Tenant be entitled
to any compensation or damages from Landlord for loss of the use of the whole
or any part of the Premises or of Tenant’s personal property or improvements
resulting from the Tenant Improvements or Landlord’s actions in connection with
the Tenant Improvements, or for any inconvenience or annoyance occasioned by
the Tenant Improvements or Landlord’s actions in connection with the Tenant
Improvements.

 

11

 

SCHEDULE 1

 

BUILDING
STANDARD TENANT IMPROVEMENTS 

 

[ATTACHED]

 

1

 

EXHIBIT C

 

PACIFIC CORPORATE CENTER 

 

NOTICE OF LEASE TERM DATES

 

To:                                                       

                         

                         

                         

 

 

 

 

Re:                               Office
Lease dated                          ,
200    between                                  ,
a                                     
(“Landlord”), and                                       ,
a                                           
(“Tenant”) concerning Suite             
on floor(s)                   
of the office building located at                                                  ,
                             ,
California.

 

Gentlemen:

 

In accordance with
the Office Lease (the “Lease”), we wish to advise you and/or confirm as
follows:

 

1.                                       The
Lease Term shall commence on or has commenced on                                  
for a term of                                  
ending on                                  .

 

2.                                       Rent
commenced to accrue on                                  ,
in the amount of                                  .

 

3.                                       If
the Lease Commencement Date is other than the first day of the month, the first
billing will contain a pro rata adjustment. 
Each billing thereafter, with the exception of the final billing, shall
be for the full amount of the monthly installment as provided for in the Lease.

 

4.                                       Your
rent checks should be made payable to                                  
at                                  .

 

5.                                       The
exact number of rentable/usable square feet within the Premises is                             
square feet.

 

1

 

6.                                       Tenant’s
Share as adjusted based upon the exact number of usable square feet within the Premises
is                             %.

 

	
   

  	
  “Landlord”:

  
	
   

  	
   

  
	
   

  	
   

  	
  ,

  
	
   

  	
  a

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Agreed to and Accepted

  as of                        ,
  200    .

  	
   

  
	
   

  	
   

  
	
  “Tenant”: 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
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2

 

EXHIBIT D

 

PACIFIC CORPORATE CENTER 

 

RULES AND REGULATIONS

 

Tenant shall faithfully observe and comply with the
following Rules and Regulations. 
Landlord shall not be responsible to Tenant for the nonperformance of
any of said Rules and Regulations by or otherwise with respect to the acts
or omissions of any other tenants or occupants of the Project; provided,
however, in no event shall Landlord enforce such Rules and Regulations in
a discriminatory manner to the detriment of Tenant.  In the event of any conflict between the Rules and
Regulations and the other provisions of this Lease, the latter shall control.

 

1.                                       Safes
and other heavy objects shall, if reasonably considered necessary by Landlord,
stand on supports of such thickness as is necessary to properly distribute the
weight.  Landlord will not be responsible
for loss of or damage to any such safe or property in any case.  Any damage to any part of the Building, its
contents, occupants or visitors by moving or maintaining any such safe or other
property shall be the sole responsibility and expense of Tenant.

 

2.                                       The
requirements of Tenant will be attended to only upon application at Landlord’s
management office or at such office location designated by Landlord.  Employees of Landlord shall not perform any
work or do anything outside their regular duties unless under special
instructions from Landlord.

 

3.                                       No
advertisement, notice or handbill shall be exhibited, distributed, painted or
affixed by Tenant on any part of the Pacific Corporate Center without the prior
written consent of the Landlord.  Tenant
shall not disturb, solicit, peddle, or canvass any occupant of the Pacific
Corporate Center and shall cooperate with Landlord and its agents of Landlord
to prevent same.

 

4.                                       Tenant
shall not overload the floor of the Premises.

 

5.                                       Tenant
shall not use or keep in or on the Premises, the Building, or the Project any
kerosene, gasoline, explosive material, corrosive material, material capable of
emitting toxic fumes, or other inflammable or combustible fluid chemical,
substitute or material, except in compliance with applicable law.  Tenant shall maintain material safety data
sheets for any Hazardous Material used or kept on the Premises.

 

6.                                       Tenant
shall not use, keep or permit to be used or kept, any foul or noxious gas or
substance in or on the Premises to the extent the same is noticeable in the
Common Areas of the Pacific Corporate Center or which affects other tenants of
the Pacific Corporate Center.  Tenant
shall not throw anything out of doors, windows or skylights.

 

7.                                       No
cooking shall be done or permitted on the Premises (unless Tenant receives
Landlord’s prior written approval to install a cafeteria for its employees in
the Premises), nor shall the Premises be used for lodging.  Notwithstanding the foregoing, Underwriters’
laboratory-approved equipment and microwave ovens may be used in the Premises
for heating food and

 

1

 

brewing coffee, tea, hot chocolate and similar
beverages for employees and visitors, provided that such use is in accordance
with all applicable federal, state, county and city laws, codes, ordinances, rules and
regulations.

 

8.                                       Intentionally
Omitted.

 

9.                                       Tenant
shall store all its trash and garbage within the interior of the Premises or in
the appropriate external trash area(s) for the Building.  No material shall be placed in the trash
boxes or receptacles if such material is of such nature that it may not be
disposed of in the ordinary and customary manner of removing and disposing of
trash and garbage in San Diego, California without violation of any law or
ordinance governing such disposal; provided, however, Tenant may maintain
separate trash enclosures for the storage of non-conforming disposal items to
the extent Tenant satisfies and complies with any applicable laws or other
governmental regulations relating to the storage and disposal thereof.  If the Premises is or becomes infested with
vermin as a result of the use or any misuse or neglect of the Premises by Tenant,
its agents, servants, employees, contractors, visitors or licensees, Tenant
shall forthwith, at Tenant’s expense, cause the Premises to be exterminated
from time to time to the satisfaction of Landlord and shall employ such
licensed exterminators as shall be approved in writing in advance by Landlord.

 

10.                                 Tenant
shall comply with all safety, fire protection and evacuation procedures and
regulations established by any governmental agency.

 

11.                                 Neither
the interior nor exterior of any windows shall be coated or otherwise
sunscreened without the prior written consent of Landlord.  Tenant shall be responsible for any damage to
the window film on the exterior windows of the Premises and shall promptly
repair any such damage at Tenant’s sole cost and expense.

 

12.                                 Tenant
must comply with requests by the Landlord concerning the informing of their
employees of items of reasonable importance to the Landlord vis-à-vis the
operation of the Project and the Pacific Corporate Center.

 

13.                                 Tenant
must comply with any applicable “NO-SMOKING”
Ordinances.  If Tenant is required under
the ordinance to adopt a written smoking policy, a copy of said policy shall be
on file in the office of the Building. 
Additionally, Tenant must provide at least one area within the Premises
in which its employees, invitees and visitors may smoke, to the extent such
area is required by law.

 

14.                                 Tenant
hereby acknowledges that Landlord shall have no obligation to provide guard
service or other security measures for the benefit of the Premises, the
Building or the Project.  Tenant hereby
acknowledges and agrees that Landlord shall have no responsibility for the
protection of Tenant and its agents, employees, contractors, invitees and
guests, and the property thereof, from acts of third parties, including keeping
doors locked and other means of entry to the Premises closed, whether or not
Landlord, at its option, elects to provide security protection for the Project
or any portion thereof.  Tenant further assumes
the risk that any safety and security devices, services and programs which
Landlord elects, in its sole discretion, to provide may not be effective, or
may malfunction or be circumvented by an unauthorized third

 

2

 

party, and Tenant shall, in addition to its other
insurance obligations under this Lease, obtain its own insurance coverage to
the extent Tenant desires protection against losses related to such
occurrences.  Tenant shall cooperate in
any reasonable safety or security program developed by Landlord or required by
law.

 

15.                                 No
auction, liquidation, fire sale, going-out-of-business or bankruptcy sale shall
be conducted in the Premises without the prior written consent of Landlord.

 

16.                                 No
tenant shall use or permit the use of any portion of the Premises for living
quarters, sleeping apartments or lodging rooms.

 

Landlord reserves
the right at any time to change or rescind any one or more of these Rules and
Regulations, or to make such other and further reasonable, non-discriminatory Rules and
Regulations as in Landlord’s judgment may from time to time be necessary
(relative to a building occupied solely by one tenant) for the management,
safety, care and cleanliness of the Premises, Building, the Common Areas and
the Project, and for the preservation of good order therein, as well as for the
convenience of other occupants and tenants therein.  Landlord may waive any one or more of these Rules and
Regulations for the benefit of any particular tenants, but no such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations in
favor of any other tenant, nor prevent Landlord from thereafter enforcing any
such Rules or Regulations against any or all tenants of the Project;
provided, however, in no event shall Landlord enforce such Rules and
Regulations in a discriminatory manner to the detriment of Tenant.  Tenant shall be deemed to have read these Rules and
Regulations and to have agreed to abide by them as a condition of its occupancy
of the Premises.

 

3

 

EXHIBIT E

 

PACIFIC CORPORATE CENTER 

 

FORM OF TENANT’S ESTOPPEL CERTIFICATE

 

The undersigned as Tenant under that certain Office
Lease (the “Lease”) made and entered into as of               ,
200     by and between                            
as Landlord, and the undersigned as Tenant, for Premises on the                            
floor(s) of the office building located at                            ,
                           ,
California                            ,
certifies as follows:

 

1.                                       Attached
hereto as Exhibit A is a true and correct copy of the Lease and all
amendments and modifications thereto. 
The documents contained in Exhibit A represent the entire
agreement between the parties as to the Premises.

 

2.                                       The
undersigned currently occupies the Premises described in the Lease, the Lease
Term commenced on                            ,
and the Lease Term expires on                            ,
and the undersigned has no option to terminate or cancel the Lease or to purchase
all or any part of the Premises, the Building and/or the Project.

 

3.                                       Base
Rent became payable on                            .

 

4.                                       The
Lease is in full force and effect and has not been modified, supplemented or
amended in any way except as provided in Exhibit A.

 

5.                                       Tenant
has not transferred, assigned, or sublet any portion of the Premises nor
entered into any license or concession agreements with respect thereto except
as follows:

 

6.                                       Intentionally
Omitted.

 

7.                                       All
monthly installments of Base Rent, all Additional Rent and all monthly
installments of estimated Additional Rent have been paid when due through                            .  The current monthly installment of Base Rent
is $                                                      .

 

8.                                       All
conditions of the Lease to be performed by Landlord necessary to the
enforceability of the Lease have been satisfied and Landlord is not in default
thereunder.  In addition, the undersigned
has not delivered any notice to Landlord regarding a default by Landlord
thereunder.

 

9.                                       No
rental has been paid more than thirty (30) days in advance and no security has
been deposited with Landlord except as provided in the Lease.

 

1

 

10.                                 As
of the date hereof, there are no existing defenses or offsets, or, to the
undersigned’s knowledge, claims or any basis for a claim, that the undersigned
has against Landlord.

 

11.                                 If
Tenant is a corporation or partnership, each individual executing this Estoppel
Certificate on behalf of Tenant hereby represents and warrants that Tenant is a
duly formed and existing entity qualified to do business in California and that
Tenant has full right and authority to execute and deliver this Estoppel
Certificate and that each person signing on behalf of Tenant is authorized to
do so.

 

12.                                 There
are no actions pending against the undersigned under the bankruptcy or similar
laws of the United States or any state.

 

13.                                 Other
than in compliance with all applicable laws and incidental to the ordinary
course of the use of the Premises, the undersigned has not used or stored any
hazardous substances in the Premises.

 

14.                                 To
the undersigned’s knowledge, all tenant improvement work to be performed by
Landlord under the Lease has been completed in accordance with the Lease and
has been accepted by the undersigned and all reimbursements and allowances due
to the undersigned under the Lease in connection with any tenant improvement
work have been paid in full.

 

The undersigned
acknowledges that this Estoppel Certificate may be delivered to Landlord or to
a prospective mortgagee or prospective purchaser, and acknowledges that said
prospective mortgagee or prospective purchaser will be relying upon the
statements contained herein in making the loan or acquiring the property of
which the Premises are a part and that receipt by it of this certificate is a
condition of making such loan or acquiring such property.

 

Executed at                            
on the           day of                            ,
200      .

 

	
   

  	
  “Tenant”

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
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2

 

 

EXHIBIT F

 

PACIFIC
CORPORATE CENTER

 

KILROY
REALTY

 

RECORDING REQUESTED BY

AND WHEN RECORDED RETURN TO:

 

ALLEN MATKINS LECK GAMBLE

& MALLORY LLP

 

1901 Avenue of the Stars

18th Floor

Los Angeles, California 90067

Attention:  Anton N. Natsis, Esq.

 

 

RECOGNITION
OF COVENANTS,

CONDITIONS,
AND RESTRICTIONS

 

This Recognition of Covenants, Conditions,
and Restrictions (this “Agreement”)
is entered into as of the      day of                 ,
200    , by and between                                     
(“Landlord”), and                                  
(“Tenant”), with reference to the following facts:

 

A.                                   Landlord and Tenant
entered into that certain Office Lease Agreement dated           ,
200     (the “Lease”).  Pursuant to the Lease, Landlord leased to
Tenant and Tenant leased from Landlord space (the “Premises”) located in an office building on certain real
property described in Exhibit A
attached hereto and incorporated herein by this reference (the “Property”).

 

B.                                     The Premises are
located in an office building located on real property which is part of an area
owned by Landlord containing approximately       
(    ) acres of real property located in the City of
                        ,
California (the “Project”), as
more particularly described in Exhibit B
attached hereto and incorporated herein by this reference.

 

C.                                     Landlord, as
declarant, has previously recorded, or proposes to record concurrently with the
recordation of this Agreement, a Declaration of Covenants, Conditions, and
Restrictions (the “Declaration”),
dated                                 ,
200    , in connection with the Project.

 

D.                                    Tenant is agreeing
to recognize and be bound by the terms of the Declaration, and the parties
hereto desire to set forth their agreements concerning the same.

 

NOW, THEREFORE, in consideration of (a) the
foregoing recitals and the mutual agreements hereinafter set forth, and (b) for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows,

 

1

 

1.                                       Tenant’s
Recognition of Declaration. 
Notwithstanding that the Lease has been executed prior to the
recordation of the Declaration, Tenant agrees that its use of the Premises and
the Project shall be subject to, and shall comply with, all of the terms and
conditions of the Declaration.

 

2.                                       Miscellaneous.

 

2.1                                 This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, estates, personal representatives, successors, and assigns.

 

2.2                                 This Agreement is made
in, and shall be governed, enforced and construed under the laws of, the State
of California.

 

2.3                                 This Agreement
constitutes the entire understanding and agreements of the parties with respect
to the subject matter hereof, and shall supersede and replace all prior
understandings and agreements, whether verbal or in writing.  The parties confirm and acknowledge that
there are no other promises, covenants, understandings, agreements,
representations, or warranties with respect to the subject matter of this
Agreement except as expressly set forth herein.

 

2.4                                 This Agreement is not
to be modified, terminated, or amended in any respect, except pursuant to any
instrument in writing duly executed by both of the parties hereto.

 

2.5                                 In the event that
either party hereto shall bring any legal action or other proceeding with
respect to the breach, interpretation, or enforcement of this Agreement, or
with respect to any dispute relating to any transaction covered by this
Agreement, the losing party in such action or proceeding shall reimburse the
prevailing party therein for all reasonable costs of litigation, including
reasonable attorneys’ fees, in such amount as may be determined by the court or
other tribunal having jurisdiction, including matters on appeal.

 

2.6                                 All captions and
heading herein are for convenience and ease of reference only, and shall not be
used or referred to in any way in connection with the interpretation or
enforcement of this Agreement.

 

2.7                                 If any provision of
this Agreement, as applied to any party or to any circumstance, shall be
adjudged by a court of competent jurisdictions to be void or unenforceable for
any reason, the same shall not affect any other provision of this Agreement,
the application of such provision under circumstances different form those
adjudged by the court, or the validity or enforceability of this Agreement as a
whole.

 

2.8                                 Time is of the essence
of this Agreement.

 

2.9                                 The Parties agree to
execute any further documents, and take any further actions, as may be
reasonable and appropriate in order to carry out the purpose and intent of this
Agreement.

 

2

 

2.10                           As used herein, the
masculine, feminine or neuter gender, and the singular and plural numbers,
shall each be deemed to include the others whenever and whatever the context so
indicates.

 

3

 

SIGNATURE
PAGE OF RECOGNITION OF

 

COVENANTS,
CONDITIONS AND RESTRICTIONS

 

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

 

	
   

  	
   

  	
  “Landlord”:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
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4

 

EXHIBIT G

 

PACIFIC
CORPORATE CENTER 

 

FORM OF
LETTER OF CREDIT

(Letterhead
of a money center bank

acceptable
to the Landlord)

 

                            ,
200  

                                                  

                                                  

                                                  

                                                  

 

Gentlemen:

 

We hereby establish our Irrevocable Letter of
Credit and authorize you to draw on us at sight for the account of                                           ,
a                                                       ,
the aggregate amount of                                           
                                                                  
($                          ).

 

Funds under this Letter of Credit are
available to the beneficiary hereof as follows:

 

Any or all of the sums hereunder may be drawn
down at any time and from time to time from and after the date hereof by a
representative of Kilroy Realty, L.P., a Delaware limited partnership (“Beneficiary”)
when accompanied by this Letter of Credit and a written statement signed by a
representative of Beneficiary, certifying that such moneys are due and owing to
Beneficiary.

 

This Letter of Credit is transferable in its
entirety at no cost to Beneficiary. 
Should a transfer be desired, such transfer will be subject to the
return to us of this advice, together with written instructions.

 

The amount of each draft must be endorsed on
the reverse hereof by the negotiating bank. 
We hereby agree that this Letter of Credit shall be duly honored upon
presentation and delivery of the certification specified above.

 

This Letter of Credit shall expire on                             .

 

Notwithstanding the above expiration date of
this Letter of Credit, the term of this Letter of Credit shall be automatically
renewed for successive, additional one (1) year periods unless, at least
thirty (30) days prior to any such date of expiration, the undersigned shall
give written notice to Beneficiary, by certified mail, return receipt requested
and at the addresses set forth below or at such other address as may be given
to the undersigned by Beneficiary, that this Letter of Credit will not be
renewed.  Unless otherwise directed by
Beneficiary, any notices to Beneficiary shall be sent to the following
addresses:

 

1

 

Kilroy Realty Corporation

12200 West Olympic Boulevard

Suite 200

Los Angeles, California  90064

Attention:  Legal Department

 

with copies
to:

 

Kilroy Realty Corporation

3611 Valley Centre Drive, Suite 550

San Diego, California  92130

Attention:  Mr. Brian Galligan

 

and

 

Allen Matkins
Leck Gamble & Mallory LLP

1901 Avenue of
the Stars, Suite 1800

Los Angeles,
California 90067

Attention:  Anton N. Natsis, Esq.

 

This Letter of Credit is governed by the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication 500.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
  (Name of Issuing Bank)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  

 

2

 

EXHIBIT H

 

PACIFIC
CORPORATE CENTER 

 

FIRST
AMENDMENT TO AMENDED AND RESTATED OFFICE LEASE

 

[ATTACHED]

 

1

 

FIRST
AMENDMENT TO AMENDED AND RESTATED OFFICE LEASE

 

This FIRST AMENDMENT TO AMENDED AND RESTATED
OFFICE LEASE (“First Amendment”)
is made and entered into as of the        day of
October, 2005, by and between KILROY REALTY, L.P., a Delaware limited partnership
(“Landlord”), and FAVRILLE, INC.,
a Delaware corporation  (“Tenant”).

 

R
E  C  I  T  A  L  S :

 

A.                                   Landlord and Tenant
entered into that certain Amended and Restated Office Lease dated as of October 31,
2005 (the “Lease”), whereby
Landlord leased to Tenant and Tenant leased from Landlord those certain
premises consisting of 79,871 rentable square feet of space (“Existing Premises”) and comprising the
entire building located at 10421 Pacific Center Court, San Diego,
California  92121 (the “10421 Building”).  The Existing Premises is referred to in the
Lease as the “10421 Premises.”

 

B.                                     Tenant desires to
expand the Existing Premises to include that certain space consisting of
approximately 48,709 rentable square feet of space (the “Expansion Premises”), and comprising the
entire building located at 10445 Pacific Center Court, San Diego,
California  92121 (the “10445 Building”) as delineated on Exhibit A attached hereto and made
a part hereof.  The Expansion Premises is
referred to in the Lease as the “10445 Premises,” and the 10421 Building and
the 10445 Building are part of the project commonly known as “Pacific Corporate Center.”  In connection therewith, Landlord and Tenant
desire to amend the Lease as hereinafter provided.

 

A
G  R  E  E  M  E  N  T :

 

NOW, THEREFORE, in consideration of the
foregoing recitals and the mutual covenants contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

 

1.                                       Capitalized Terms. 
All capitalized terms when used herein shall have the same meaning as is
given such terms in the Lease unless expressly superseded by the terms of this
First Amendment.

 

2.                                       Premises.

 

2.1.                              Modification of Premises. 
Effective as of the date (the “Expansion
Commencement Date”) which is the earlier to occur of (i) the
ninety-first (91st) day following the date upon which Landlord
tenders possession of the entire Expansion Premises to Tenant for construction
of the Tenant Improvements therein (which delivery shall in no event occur
prior to February 28, 2006), and (ii) March 1, 2007, Tenant
shall lease from Landlord and Landlord shall

 

 

lease to Tenant the Expansion Premises.  Consequently, effective upon the Expansion
Commencement Date, the Premises (as that term is defined in the Lease) shall be
increased to include the Expansion Premises. 
Landlord and Tenant hereby acknowledge that such addition of the
Expansion Premises to the Existing Premises shall, effective as of the
Expansion Commencement Date, increase the size of the Premises to approximately
128,580 rentable square feet.  The
Existing Premises and the Expansion Premises may hereinafter collectively be
referred to as the “Premises.”

 

2.2.                              Verification of Rentable
Square Feet of Expansion Premises.  For
purposes of the Lease, the “rentable square feet” of the Expansion Premises
shall be calculated pursuant to the Building Owners and Managers Association
Standard Method of Measuring Floor Area in Industrial Building, and it
accompanying guidelines (“BOMA”).  Within
thirty (30) days after the Expansion Commencement Date, Tenant’s space
planner/architect shall measure the rentable square feet of the Expansion
Premises in accordance with the provisions of this Section, and the results
thereof shall be presented to Landlord in writing.  Landlord’s space planner/architect may review
Tenant’s space planner/architect’s determination of the number of rentable
square feet of the Expansion Premises and Landlord may, within fifteen (15)
business days after Landlord’s receipt of Tenant’s space planner/architect’s
written determination, object to such determination by written notice to
Tenant.  Landlord’s failure to deliver
written notice of such objection within said fifteen (15) business day period
shall be deemed to constitute Landlord’s acceptance of Tenant’s space
planner/architect’s determination.  If
Landlord objects to such determination, Landlord’s space planner/architect and
Tenant’s space planner/architect shall promptly meet and attempt to agree upon
the rentable square footage of the Expansion Premises.  If Landlord’s space planner/architect and
Tenant’s space planner/architect cannot agree on the rentable square footage of
the Expansion Premises within thirty (30) days after Landlord’s objection thereto,
Landlord and Tenant shall mutually select an independent third party space
measurement professional to field measure the Expansion Premises pursuant to
BOMA.  Such independent third party
measurement professional’s determination shall be conclusive and binding on
Landlord and Tenant.  Landlord and Tenant
shall each pay one-half (1⁄2) of the fees and expenses of the independent third
party space measurement professional.  To
the extent the Lease Term commences prior to such final determination, Tenant’s
determination shall be utilized until a final determination is made, whereupon
an appropriate adjustment, if necessary, shall be made retroactively, and
Landlord, or Tenant, as applicable, shall make appropriate payment to the
other.  In the event that it is
determined, pursuant to the procedure described in this Section above,
that the square footage amounts shall be different from those set forth in this
Amendment, all amounts, percentages and figures appearing or referred to in
this Amendment based upon such incorrect amount shall be modified in accordance
with such determination.  Such final
determination shall be confirmed in writing between Landlord and Tenant.

 

2.3.                              Use of the Premises. 
Tenant’s use of the Expansion Premises shall be subject to all of the
TCCs of the Lease; provided, however, with respect to the Expansion Premises
only, and provided any such use is legally permissible, Tenant shall use the
Expansion Premises solely for general office use, research and development,
warehousing, biotechnology labs, pharmaceutical manufacturing (in accordance
with cGMP), and any other uses related thereto, all pursuant to the applicable
zoning and the Pacific Corporate Center P.I.D.

 

2

 

2.4.                              Maintenance and Repair
of the Premises.  Tenant’s maintenance and repair obligations
with respect to the Expansion Premises shall 
subject to all of the TCCs of the Lease; provided, however Tenant shall
keep the Expansion Premises in first class order, repair, condition and
appearance at all times during the Expansion Term in a manner consistent with
the “Comparable Buildings,” as that term is defined in Section 3.2.2,
below.

 

3.                                       Lease Term.

 

3.1.                              Expansion Term. 
The term of Tenant’s lease of the Expansion Premises (the “Expansion Term”) shall commence on the
Expansion Commencement Date and expire coterminously with Tenant’s Lease of the
Existing Premises on the Lease Expiration Date (i.e.,  June 20, 2025), unless sooner terminated
as provided in the Lease, as hereby amended.

 

3.2.                              Expansion Term Option
Right.

 

3.2.1.                     Option Right. 
Landlord hereby grants the Original Tenant, its Affiliates and any
Permitted Assignee, two (2) options to extend the Expansion Term for
the entire Expansion Premises each by a period of five (5) years (each, an “Option Term”) as set forth in this Section 3.2.  The TCCs of Section 2.2 of the
Lease shall not be applicable to the Expansion Premises.  Such options shall be exercisable only by
Notice delivered by Tenant to Landlord as provided below, provided that, as of
the date of delivery of such Notice, Tenant is not in default under the Lease
(as amended, beyond any applicable notice and cure periods).  Upon the proper exercise of an option to
extend, and provided that, as of the end of the then applicable Expansion Term,
Tenant is not in default under the Lease (as amended, beyond any applicable
notice and cure periods), the Expansion Term, as it applies to the entire
Expansion Premises, shall be extended for a period of five (5) years.

 

3.2.2.                     Option Rent. 
The Rent payable by Tenant during the Option Term (the “Option Rent”) shall be equal to the Market
Rent as set forth below.  For purposes of
this Section 3.2, the term “Market
Rent” shall mean rent (including additional rent and considering any
“base year” or “expense stop” applicable thereto), including all escalations,
at which tenants, as of the commencement of the applicable term are, pursuant
to transactions completed within the twenty-four (24) months prior to the date
Tenant delivers to Landlord the “Exercise Notice,” as that term is set forth
below, leasing non-sublease, non-encumbered, non-synthetic, non-equity space
(unless such space was leased pursuant to a definition of “fair market”
comparable to the definition of Market Rent) comparable in size, location and
quality to the Expansion Premises for a “Comparable Term,” as that term is
defined in this Section 3.2.2 (the “Comparable Deals”), which comparable space is located in the “Comparable
Buildings,” as that term is defined in this Section 3.2.2, giving
appropriate consideration to the annual rental rates per rentable square foot
(adjusting the base rent component of such rate to reflect a net value after
accounting for whether or not utility expenses are directly paid by the tenant
such as Tenant’s direct utility payments provided for in Section 6.1
of the Lease), the standard of measurement by which the rentable square footage
is measured, parking ratios, general access to such Comparable Buildings, the
general visibility of such Comparable Buildings, and taking into consideration
only, and granting only, the following concessions (provided that the rent
payable in Comparable Deals in which the terms of such Comparable Deals are
determined by use of a discounted fair market rate formula shall be equitably
increased in order that such Comparable

 

3

 

Deals will not reflect a discounted rate)
(collectively, the “Rent Concessions”):  (a) rental abatement concessions or
build-out periods, if any, being granted such tenants in connection with such
comparable spaces; (b) tenant improvements or allowances provided or to be
provided for such comparable space, taking into account the value of the
existing improvements in the Expansion Premises, such value to be based upon
the age, quality and layout of the improvements and the extent to which the
same can be utilized by this particular Tenant, (c) Proposition 13
protection, and (d) all other monetary concessions, if any, being granted
such tenants in connection with such comparable space; provided, however, that
notwithstanding anything to the contrary herein, no consideration shall be
given to the fact that Landlord is or is not required to pay a real estate
brokerage commission in connection with the applicable term or the fact that
the Comparable Deals do or do not involve the payment of real estate brokerage
commissions.  The term “Comparable Term” shall refer to the length
of the lease term, without consideration of options to extend such term, for
the space in question.  In addition, the
determination of the Market Rent shall include a determination as to whether,
and if so to what extent, Tenant must provide Landlord with financial security,
such as a letter of credit or guaranty, for Tenant’s rent obligations during
any Option Term.  Such determination
shall be made by reviewing the extent of financial security then generally
being imposed in Comparable Transactions upon tenants of comparable financial condition
and credit history to the then existing financial condition and credit history
of Tenant (with appropriate adjustments to account for differences in the
then-existing financial condition of Tenant and such other tenants).  If in determining the Market Rent, Tenant
would, pursuant to the Comparable Deals and the Rent Concessions set forth
therein, otherwise be entitled to a tenant improvement or comparable allowance
for the improvement of the Expansion Premises (the “Option Term TI Allowance”), Tenant shall not be entitled, and
shall not be compelled, to receive such Option Term TI Allowance and Landlord
shall reduce the rental rate component of the Market Rent to be an effective
rental rate which takes into consideration that Tenant will not receive any
Option Term TI Allowance.  The term “Comparable Buildings” shall mean the
Building and other office and research/development buildings which are
comparable to the Building in terms of age (based upon the date of completion
of construction or major renovation as to the building containing the portion
of the Expansion Premises in question), quality of construction, level of
services and amenities, size and appearance, and are located in the Sorrento
Mesa area of San Diego, California (the “Comparable
Area”).

 

3.2.3.                     Exercise of Option. 
The option contained in this Section 3.2 shall be exercised
by Tenant, if at all, only in the manner set forth in this Section 3.2.3.  Tenant shall deliver notice (the “Exercise Notice”) to Landlord not more than
fifteen (15) months nor less than nine (9) months prior to the expiration
of the then Expansion Term, stating that Tenant is exercising its option.  Concurrently with such Exercise Notice,
Tenant shall deliver to Landlord Tenant’s calculation of the Market Rent (the “Tenant’s Option Rent Calculation”).  Landlord shall deliver notice (the “Landlord Response Notice”) to Tenant on or
before the later to occur of (i) the date which is thirty (30) days after
Landlord’s receipt of the Exercise Notice and Tenant’s Option Rent Calculation,
and (ii) the date which is nine (9) months prior to the expiration of
the then Expansion Term (the “Landlord
Response Date”), stating that (A) Landlord is accepting Tenant’s
Option Rent Calculation as the Market Rent, or (B) rejecting Tenant’s
Option Rent Calculation and setting forth Landlord’s calculation of the Market
Rent (the “Landlord’s Option Rent Calculation”).  Within ten (10) business days of its
receipt of the Landlord Response Notice, Tenant may, at its option, accept the
Market Rent contained in the

 

4

 

Landlord’s Option Rent Calculation.  If Tenant does not affirmatively accept or
Tenant rejects the Market Rent specified in the Landlord’s Option Rent
Calculation, the parties shall follow the procedure, and the Market Rent shall
be determined as set forth in Section 3.2.5.

 

3.2.4.                     No Defaults; Required
Financial Condition of Tenant.  The
rights contained in this Section 3.2 shall be personal to the
Original Tenant, its Affiliates and any Permitted Assignee and may only be
exercised by such Original Tenant, Affiliate or Permitted Assignee (and not any
other assignee, sublessee or other transferee of the Original Tenant’s interest
in the Lease, as amended) if the Original Tenant, Affiliate and/or Permitted
Assignee occupies not less than one hundred percent (100%) of the then existing
Expansion Premises.  The right to extend
the Expansion Term as provided in this Section 3.2 may not be
exercised if, as of the date of the attempted exercise of the extension option
by Tenant, or as of the commencement date of such Option Term, (A) Tenant
is in economic or material default pursuant to the terms of the Lease (as
amended, beyond any applicable notice and cure periods), (B) Tenant has
previously been in economic or material default under the Lease (as amended,
beyond any applicable notice and cure periods) during the previous twenty-four
(24) month period, or (C) Tenant fails to satisfy the “Threshold
Requirements,” as that term is set forth in Section 21.2.2 of the
Lease.

 

3.2.5.                     Determination of Market
Rent.  In the event Tenant objects or is deemed to
have objected to the Market Rent, Landlord and Tenant shall attempt to agree
upon the Market Rent using reasonable good-faith efforts.  If Landlord and Tenant fail to reach
agreement within sixty (60) days following Tenant’s objection or deemed
objection to the Landlord’s Option Rent Calculation (the (the “Outside Agreement Date”), then (i) in
connection with the Option Rent, Landlord’s Option Rent Calculation and Tenant’s
Option Rent Calculation, each as previously delivered to the other party, shall
be submitted to the arbitrators pursuant to the TCCs of this Section 3.2.4,
and (ii) in connection with any other contested calculation of market
Rent, the parties shall each make a separate determination of the Market Rent
and shall submit the same to the arbitrators pursuant to the TCCs of this Section 3.2.5.  The submittals shall be made concurrently
with the selection of the arbitrators pursuant to this Section 3.2.5
and shall be submitted to arbitration in accordance with Section 3.2.5.1
through 3.2.5.5 of this First Amendment, but subject to the
conditions, when appropriate, of Section 3.2.3.

 

3.2.5.1.            Landlord and Tenant shall mutually and
reasonably select and appoint one arbitrator who shall by profession be a real
estate broker, appraiser or attorney (the “Neutral
Arbitrator”) who shall have been active over the five (5) year
period ending on the date of such appointment in the leasing (or appraisal, as
the case may be) of first-class office/lab/manufacturing properties in the
Comparable Area.  The determination of
the Neutral Arbitrator shall be limited solely to the issue of whether Landlord’s
or Tenant’s submitted Market Rent, is the closest to the actual Market Rent as
determined by the Neutral Arbitrator, taking into account the requirements of Section 3.2.2
of this First Amendment.  Such Neutral
Arbitrator shall be appointed within thirty (30) days after the applicable
Outside Agreement Date.  Neither the
Landlord nor Tenant may, directly or indirectly, consult with the Neutral
Arbitrator prior to subsequent to his or her appearance.  The Neutral Arbitrator shall be retained via
an engagement letter jointly prepared by Landlord’s counsel and Tenant’s
counsel.

 

5

 

3.2.5.2.            Within thirty (30) days of the
appointment of the Neutral Arbitrator, such Neutral Arbitrator shall reach a
decision as to Market Rent and determine whether the Landlord’s or Tenant’s
determination of Market Rent as submitted pursuant to Section 3.2.5.1
and Section 3.2.3 of this First Amendment is closest to Market Rent
as determined by such Neutral Arbitrator and simultaneously publish a ruling (“Award”) indicating whether Landlord’s or
Tenant’s submitted Market Rent is closest to the Market Rent as determined by
the Neutral Arbitrator.  Following
notification of the Award, the Landlord’s or Tenant’s submitted Market Rent
determination, whichever is selected by the Neutral Arbitrator as being closest
to Market rent shall become the then applicable Market Rent.

 

3.2.5.3.            The Award issued by the Neutral
Arbitrator shall be binding upon Landlord and Tenant.

 

3.2.5.4.            If Landlord and Tenant fail to agree upon
and appoint the Neutral Arbitrator, then either party may petition Judicial
Arbitration & Mediation Services, Inc. (“JAMS”) to designate an independent third
party to appoint the Neutral Arbitrator, subject to criteria in Section 3.2.5.1
of this First Amendment.

 

3.2.5.5.            The cost of arbitration shall be paid by
the party (either Landlord or Tenant) whose Market Rent is not selected by the
Neutral Arbitrator.

 

3.3.                              Expansion Premises
Termination Right.  Notwithstanding anything to the contrary in
the Lease (as hereby amended), Tenant shall have one-time option to terminate
and cancel the Lease with respect to the Expansion Premises only effective as
of June 1, 2017 (the “Termination Date”)
upon Tenant’s delivery of written notice to Landlord (the “Termination Notice”), which notice shall be
delivered to Landlord on or before December 31, 2016.  Subject to Landlord’s timely receipt of the
Termination Notice, the Lease (as hereby amended) with respect to the Expansion
Premises only shall automatically terminate and be of no further force or
effect, and Landlord and Tenant shall be relieved of their respective
obligations under the Lease (as hereby amended) with respect to the Expansion
Premises, as of the Termination Date, except with respect to those obligations
set forth in the Lease (as amended) which specifically survive the expiration
or earlier termination of the Lease, including, without limitation, the payment
by Tenant of all amounts owed by Tenant under the Lease (as hereby amended)
with respect to the Expansion Premises arising or accruing prior to the
Termination Date.  The termination rights
granted to Tenant under this Section 3.3 are personal to the
Original Tenant, any Affiliate or a Permitted Assignee and may not be assigned
or transferred to any other person or entity.

 

4.                                       Base Rent.

 

4.1.                              Existing Premises. 
Notwithstanding anything to the contrary in the Lease as hereby amended,
Tenant shall continue to pay Base Rent for the Existing Premises in accordance
with the terms of Article 3 of the Lease.

 

4.2.                              Expansion Premises. 
Commencing on the Expansion Commencement Date and continuing throughout
the Expansion Term, Tenant shall pay to Landlord monthly installments of Base
Rent for the Expansion Premises as follows:

 

6

 

	
  Lease Years, Commencing

  on the Expansion

  Commencement Date,

  During Expansion Term

  	
   

  	
  Annualized

  Base Rent

  	
   

  	
  Monthly

  Installment

  of Base Rent

  	
   

  	
  Approximate Monthly

  Rental Rate

  per Rentable

  Square Foot

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  $

  	
  818,311.20

  	
   

  	
  $

  	
  68,192.60

  	
   

  	
  $

  	
  1.4000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  $

  	
  846,952.09

  	
   

  	
  $

  	
  70,579.34

  	
   

  	
  $

  	
  1.4490

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  $

  	
  876,595.42

  	
   

  	
  $

  	
  73,049.62

  	
   

  	
  $

  	
  1.4997

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  $

  	
  907,276.25

  	
   

  	
  $

  	
  75,606.35

  	
   

  	
  $

  	
  1.5522

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  $

  	
  939,030.92

  	
   

  	
  $

  	
  78,252.58

  	
   

  	
  $

  	
  1.6065

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  $

  	
  971,897.01

  	
   

  	
  $

  	
  80,991.42

  	
   

  	
  $

  	
  1.6628

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  $

  	
  1,005,913.40

  	
   

  	
  $

  	
  83,826.12

  	
   

  	
  $

  	
  1.7210

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  $

  	
  1,041,120.37

  	
   

  	
  $

  	
  86,760.03

  	
   

  	
  $

  	
  1.7812

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  $

  	
  1,077,559.58

  	
   

  	
  $

  	
  89,796.63

  	
   

  	
  $

  	
  1.8435

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  $

  	
  1,115,274.17

  	
   

  	
  $

  	
  92,939.51

  	
   

  	
  $

  	
  1.9081

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
  $

  	
  1,154,308.76

  	
   

  	
  $

  	
  96,192.40

  	
   

  	
  $

  	
  1.9748

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  $

  	
  1,194,709.57

  	
   

  	
  $

  	
  99,559.13

  	
   

  	
  $

  	
  2.0440

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
  $

  	
  1,236,524.41

  	
   

  	
  $

  	
  103,043.70

  	
   

  	
  $

  	
  2.1155

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
   

  	
  $

  	
  1,279,802.76

  	
   

  	
  $

  	
  106,650.23

  	
   

  	
  $

  	
  2.1895

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
  $

  	
  1,324,595.86

  	
   

  	
  $

  	
  110,382.99

  	
   

  	
  $

  	
  2.2662

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
  $

  	
  1,370,956.71

  	
   

  	
  $

  	
  114,246.39

  	
   

  	
  $

  	
  2.3455

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17

  	
   

  	
  $

  	
  1,418,940.20

  	
   

  	
  $

  	
  118,245.02

  	
   

  	
  $

  	
  2.4276

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18

  	
   

  	
  $

  	
  1,468,603.10

  	
   

  	
  $

  	
  122,383.59

  	
   

  	
  $

  	
  2.5125

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19

  	
   

  	
  $

  	
  1,520,004.21

  	
   

  	
  $

  	
  126,667.02

  	
   

  	
  $

  	
  2.6005

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20 though Lease Expiration Date

  	
   

  	
  $

  	
  1,573,204.36

  	
   

  	
  $

  	
  131,100.36

  	
   

  	
  $

  	
  2.6915

  	
   

  

 

On or before the Expansion Commencement Date,
Tenant shall pay to Landlord the Base Rent payable for the Expansion Premises
for the first full month of the Expansion Term.

 

7

 

5.                                       Tenant’s Share of
Building Direct Expenses.

 

5.1.                              Existing Premises. 
Notwithstanding anything in the Lease, as hereby amended, to the
contrary, Tenant shall continue to pay Tenant’s Share of Direct Expenses in
connection with the Existing Premises and attributable to the 10421 Building in
accordance with the terms of the Lease.

 

5.2.                              Expansion Premises. 
Except as specifically set forth in this Section 5.2,
commencing on the Expansion Commencement Date, Tenant shall pay Tenant’s Share
of Direct Expenses in connection with the Expansion Premises in accordance with
the terms of Article 4 of the Lease, provided that with respect to
the calculation of Tenant’s Share of Direct Expenses in connection with the
Expansion Premises and attributable to the 10445 Building, Tenant’s Share shall
equal 100%.

 

6.                                       Abated Rent. 
In the event that Tenant is not then in economic default of the Lease
(as hereby amended, and beyond any applicable notice and cure period), then
during the twelve month period commencing on the Expansion Commencement Date
and ending on the day immediately prior to the first anniversary of the
Expansion Commencement Date (the “Rent
Abatement Period”), Tenant shall only be obligated to pay one-half
(1⁄2) of (i) the Base Rent and (ii) Tenant’s Share of Direct Expenses,
which are otherwise attributable to the Expansion Premises during such Rent
Abatement Period (the “Rent Abatement”).  To the extent that Tenant is in such economic
default of the Lease (as hereby amended, and beyond any applicable notice and
cure period) as of the first day of any calendar month that is part of the Rent
Abatement Period, then Tenant shall be obligated to immediately pay the full
amount of the Base Rent and Tenant’s Share of Direct Expenses otherwise (but
for the Rent Abatement) attributable to the Expansion Premises during such
calendar month (each such month, a “Deferred
Abatement Month”); provided, however, that following Tenant’s full
payment of any and all such amounts and Tenant’s cure of any such economic
default, the Rent Abatement Period shall be extended one (1) month for
each Deferred Abatement Month; provided further, however, in no event shall the
total dollar amount of such Rent Abatement exceed the dollar amount of the Rent
Abatement otherwise attributable to the first twelve months immediately
following the Expansion Commencement Date.

 

7.                                       Expansion Improvements. 
Except as specifically set forth herein, Landlord shall not be obligated
to provide or pay for any improvement work or services related to the
improvement of the Expansion Premises, and Tenant shall accept the Expansion
Premises in its presently existing, “as-is” condition.  The improvements in the Expansion Premises
shall be constructed pursuant to the terms of the First Amendment Work Letter
attached hereto as Exhibit B
(the “First Amendment Work Letter”).  The terms and conditions of the First
Amendment Work Letter shall not be applicable to the construction of the
Existing Premises.

 

8.                                       Parking. 
Effective as of the Expansion Commencement Date and continuing
throughout the Expansion Term, Tenant shall be entitled to utilize, without
charge, up to one hundred ninety-four (194) unreserved parking passes in
connection with Tenant’s lease of the Expansion Premises (the “Expansion Parking Passes”) (i.e., four (4) unreserved
parking spaces for every 1,000 rentable square feet of the Expansion
Premises).  Except as set forth in this

 

8

 

Section 8, Tenant’s use of the Expansion Parking Passes
shall be in accordance with the provisions of Article 28 of the
Lease.

 

9.                                       Security Deposit. 
Landlord and Tenant acknowledge that, in accordance with Section 21.1
of the Lease, Tenant has previously delivered the sum of Three Hundred Fifty-Five
Thousand Seven Hundred Twenty-Seven and 60/100 Dollars ($355,727.60) (the “Existing Security Deposit”) to Landlord as
security for the faithful performance by Tenant of the terms, covenants and
conditions of the Lease with respect to the Existing Premises.  Landlord shall continue to retain the
Existing Security Deposit as security for the faithful performance by Tenant of
the terms, covenants and conditions of the Lease, as hereby amended, with
respect to the Expansion Premises. 
Notwithstanding the foregoing, to the extent that Tenant timely elects
to exercise its termination right with respect to the Expansion Premises as set
forth in Section 3.3, above, then subject to the terms and
conditions of Section 21.1 of the Lease, the amount of the Security
Deposit shall be reduced to Two Hundred Eight-Seven Thousand Five Hundred
Thirty-Five and No/100 Dollars ($287,535.00) and Landlord shall, within
forty-five days following the Termination Date, return an amount equal to
Sixty-Eight Thousand One Hundred Ninety-Two and 60/100 Dollars ($68,192.60) to
Tenant.

 

10.                                 Broker. 
Landlord and Tenant 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 First Amendment other than Colliers International (the “Broker”), and that they know of no other
real estate broker or agent who is entitled to a commission in connection with
this First Amendment.  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, other than the Broker, occurring
by, through, or under the indemnifying party. 
The terms of this Section 10 shall survive the expiration or
earlier termination of this First Amendment.

 

11.                                 Effectiveness of This
First Amendment.  Landlord and Tenant hereby acknowledge that
the Expansion Premises is currently occupied by a third-party (the “Existing Tenant”) pursuant to an existing
lease between Landlord and the Existing Tenant (the “Existing Lease”). 
Notwithstanding the full execution and delivery of this First Amendment
between Landlord and Tenant, this First Amendment is expressly conditioned upon
the termination of the Existing Lease, which shall occur following the full
execution and unconditional delivery (i.e., no conditions to the effectiveness
of such termination agreement) of a lease termination agreement with respect to
the Existing Lease (the “Existing Lease
Termination Agreement”), in a manner acceptable to Landlord in its
sole and absolute discretion.  Following
the full execution and delivery of this First Amendment between Landlord and
Tenant, Landlord agrees to use commercially reasonable efforts to enter into
such Existing Lease Termination Agreement. 
Landlord shall have no liability whatsoever to Tenant relating to or
arising from Landlord’s inability or failure to deliver, or Landlord’s delay in
delivering, the Expansion Premises to Tenant.

 

9

 

12.                                 No Further Modification. 
Except as set forth in this First Amendment, all of the terms and
provisions of the Lease shall apply with respect to the Expansion Premises and
shall remain unmodified and in full force and effect.

 

IN WITNESS WHEREOF, this First Amendment has
been executed as of the day and year first above written.  

 

	
   

  	
   

  	
  “LANDLORD”:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KILROY REALTY, L.P.,

  	
   

  
	
   

  	
   

  	
  a Delaware limited partnership

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kilroy Realty Corporation,

  	
   

  
	
   

  	
   

  	
   

  	
  a Maryland corporation,

  	
   

  
	
   

  	
   

  	
   

  	
  General Partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
     Its:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
     Its:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “TENANT”:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FAVRILLE, INC.,

  	
   

  
	
   

  	
   

  	
  a Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
     Its:

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
     Its:

  	
   

  	
   

  	 

									

 

10

 

EXHIBIT A

 

PACIFIC
CORPORATE CENTER 

 

OUTLINE
OF EXPANSION PREMISES

 

[ATTACHED]

 

1

 

EXHIBIT B

 

PACIFIC
CORPORATE CENTER 

 

FIRST
AMENDMENT WORK LETTER

 

[ATTACHED]

 

1

 

EXHIBIT B

 

PACIFIC
CORPORATE CENTER 

 

FIRST
AMENDMENT WORK LETTER

 

This First Amendment Work Letter shall set
forth the terms and conditions relating to the construction of the Expansion
Premises which shall be referred to in this First Amendment Work Letter as the “Premises.” 
This First Amendment Work Letter is essentially organized
chronologically and addresses the issues of the construction of the Premises,
in sequence, as such issues will arise during the actual construction of the Premises.  All references in this First Amendment Work
Letter to Sections of “this Amendment”
shall mean the relevant portion of the First Amendment to which this First
Amendment Work Letter is attached as Exhibit B
and of which this First Amendment Work Letter forms a part, all references in
this First Amendment Work Letter to Articles or Sections of “this Lease” shall
mean the relevant portions of Articles 1 through 29 of the
Amended and Restated Office Lease being amended by this Amendment, and all
references in this First Amendment Work Letter to Sections of “this Tenant Work
Letter” shall mean the relevant portions of Sections 1 through 5
of this First Amendment Work Letter.

 

SECTION 1

DELIVERY OF THE PREMISES AND BASE BUILDING

 

In accordance with the TCCs of this Lease and
this Amendment, Landlord shall deliver the Premises and “Base Building,” as
that term is defined in Section 8.2 of the Lease, of such Premises
to Tenant.  The Base Building shall be in
good condition and working order and shall comply with applicable building
codes and other governmental laws, ordinances and regulations which were
enacted prior to the date of this Amendment to the extent the same would be
required to obtain a certificate of occupancy on an unoccupied basis as of the
date Landlord delivers the Premises and Base Building to Tenant (collectively,
the “Code”).  In connection with, and to the extent
consistent with, the foregoing obligation, Landlord shall address the issues
raised by Tenant in that certain 
memorandum prepared by Tenant entitled 10445 PCC Code Compliance Summary
and dated October 21, 2005, under the following headings:  “Accessible Parking,” “Curb Ramps,” and “Toilet
and Bathing Facilities (Including Dressing & Fitting Rooms).  Tenant shall, except as otherwise set forth
in this Lease or in this Tenant Work Letter, accept the Premises and Base
Building from Landlord in their then existing, “as-is” condition, subject to
the terms of this Tenant Work Letter, subject only to punchlist items and
Landlord’s obligations set forth in Article 7 of this Lease,
including, without limitation, Landlord’s obligation to maintain in accordance
with Section 7.1 of the Lease the Building Structure.

 

SECTION 2

TENANT IMPROVEMENTS

 

2.1                                 Improvement Allowance.  Tenant shall be entitled to a one-time
improvement allowance (the “Improvement
Allowance”) in the amount of One Million Two Hundred

 

1

 

Thousand and No/100 Dollars ($1,200,000.00) for the costs relating to
the initial design and construction of Tenant’s improvements and certain
additional costs, all of which are set forth in Section 2.2.1,
below, as “Improvement Allowance Items” (the “Tenant
Improvements”) and Landlord and Tenant hereby acknowledges and agree
that all such Tenant Improvements shall, upon completion of the same, be and
become a part of the Premises and the property of Landlord.  In no event shall Landlord be obligated to
make disbursements pursuant to this Tenant Work Letter in a total amount which
exceeds the Improvement Allowance.

 

2.2                                 Disbursement of the Improvement Allowance.

 

2.2.1                        Improvement Allowance Items.  Except as otherwise set forth in this Tenant
Work Letter, the Tenant Improvement Allowance shall be disbursed by Landlord
(each of which disbursements shall be made pursuant to Landlord’s disbursement
process) for costs related to the construction of the Tenant Improvements and
for the following items and costs (collectively the “Improvement Allowance Items”):

 

2.2.1.1               Payment of the fees of the “Architect”
and the “Engineers,” as those terms are defined in Section 3.1 of
this Tenant Work Letter;

 

2.2.1.2               The payment of plan check, permit and
license fees relating to construction of the Tenant Improvements, and the cost
of installing and purchasing Tenant’s voice and data cabling (the Tenant
Improvements Allowance Items set forth in Section 2.2.1.1, above,
and in this Section 2.2.1.2, shall, collectively, be known as the “Soft Costs”);

 

2.2.1.3               The cost of construction of the Tenant
Improvements, including, without limitation, testing and inspection costs,
freight elevator usage, hoisting and trash removal costs, and contractors’ fees
and general conditions;

 

2.2.1.4               The cost of any changes in the Base
Building when such changes are required by the Construction Drawings (including
if such changes are due to the fact that such work is prepared on an unoccupied
basis), such cost to include all direct architectural and/or engineering fees
and expenses incurred in connection therewith;

 

2.2.1.5               The cost of any changes to the
Construction Drawings or Tenant Improvements required by Code;

 

2.2.1.6               The cost of the “Coordination Fee,” as
that term is defined in Section 4.2.2 of this Tenant Work Letter;
and

 

2.2.1.7               All other costs required or allowed by
the terms of this Tenant Work Letter to be expended by Landlord in connection
with the construction of the Tenant Improvements.

 

2.2.2                        Other Terms. 
Landlord shall only be obligated to make disbursements from the
Improvement Allowance to the extent costs are incurred by Tenant for
Improvement Allowance Items.  All
Improvement Allowance Items for which the Improvement Allowance has been used
shall be deemed Landlord’s property under the terms of this Lease.

 

2

 

2.3                                 Standard Tenant Improvement Package.  Landlord has established specifications (the “Building Standard Tenant Improvements”) for
the Building standard components to be used in the construction of the Tenant
Improvements in the office areas of the Premises, which Building Standard
Tenant Improvements are set forth on Schedule 1,
attached hereto.  The quality of Tenant
Improvements shall be equal to or of greater quality than the quality of the
Building Standard Tenant Improvements.

 

2.4                                 Removal of Above Building Standard Tenant Improvements.  “Above
Standard Tenant Improvements” shall mean (a) any part of the
Tenant Improvements which do not constitute Building Standard Tenant
Improvements; and (b) a configuration of the Tenant Improvements which is
not usual and customary for either normal occupancy or generic wet/dry lab
space.  Landlord may require that Tenant,
upon the expiration or any earlier termination of this Lease, remove any Above
Standard Tenant Improvements in the lab portion of the Premises identified by Landlord
concurrently with Landlord’s review and approval of the Approved Working
Drawings to the extent such Tenant Improvements are unique and particular to
Tenant vis-à-vis generic wet/dry lab space (collectively, the “Extraordinary Alterations”), and to repair
any damage to the Premises and Building caused by such removal (reasonable wear
and tear excepted); provided, however, if Landlord, in its approval of any
Above Standard Tenant Improvements, fails to address the removal requirement
with regard to particular Above Standard Tenant Improvements, Landlord shall be
deemed to have agreed to waive the removal requirement with regard to such
particular Above Standard Tenant Improvements; provided further, however, in no
event shall identified Extraordinary Alterations include improvements which are
industry standard improvements in research and development wet labs.

 

SECTION 3

CONSTRUCTION DRAWINGS

 

3.1                                 Selection of Architect/Construction Drawings.  Tenant shall retain an architect/space
planner selected by Tenant, subject to Landlord’s reasonable approval (the “Architect”) to prepare the “Construction
Drawings,” as that term is defined in this Section 3.1.  Tenant shall retain the engineering
consultants selected by Tenant, subject to Landlord’s reasonable approval (the “Engineers”) to prepare all plans and
engineering working drawings relating to the structural, mechanical,
electrical, plumbing, HVAC, life safety, and sprinkler work in the Premises,
which work is not part of the Base Building. 
Landlord shall approve or disapprove of Tenant’s proposed Architect or
Engineers, as the case may be, within five (5) business days following
Tenant’s submission of the name(s) of Tenant’s proposed Architects or
Engineers, respectively, together with all documentation and other information
reasonably required by Landlord.  The
plans and drawings to be prepared by Architect and the Engineers hereunder
shall be known collectively as the “Construction
Drawings.”  All Construction
Drawings shall comply with the drawing format and specifications determined by
Landlord, and shall be subject to Landlord’s approval, which approval shall not
be unreasonably withheld.  Tenant and
Architect shall verify, in the field, the dimensions and conditions as shown on
the relevant portions of the base building plans, and Tenant and Architect
shall be solely responsible for the same, and Landlord shall have no
responsibility in connection therewith. 
Landlord’s review of the Construction Drawings as set forth in this Section 3,
shall be for its sole purpose and shall not imply Landlord’s review of the
same, or obligate Landlord to review the same, for

 

3

 

quality, design, Code compliance or other like matters.  Accordingly, notwithstanding that any
Construction Drawings are reviewed by Landlord or its space planner, architect,
engineers and consultants, and notwithstanding any advice or assistance which
may be rendered to Tenant by Landlord or Landlord’s space planner, architect,
engineers, and consultants, Landlord shall have no liability whatsoever in
connection therewith and shall not be responsible for any omissions or errors
contained in the Construction Drawings, and Tenant’s waiver and indemnity set
forth in this Lease shall specifically apply to the Construction Drawings.

 

3.2                                 Final Space Plan.  Tenant shall supply Landlord with four (4) copies
signed by Tenant of its final space plan for the Premises before any
architectural working drawings or engineering drawings have been
commenced.  The final space plan (the “Final Space Plan”) shall include a layout
and designation of all offices, rooms and other partitioning, their intended
use, and equipment to be contained therein. 
Landlord may request clarification or more specific drawings for special
use items not included in the Final Space Plan. 
Landlord shall, within ten (10) business days after Landlord’s
receipt of the Final Space Plan, (i) approve the Final Space Plan, (ii) approve
the Final Space Plan subject to specified conditions to be complied with when
the Final Working Drawings are submitted by Tenant to Landlord, or (iii) disapprove
the Final Space Plan and return the same to Tenant with detailed requested
revisions.  If Landlord disapproves the
Final Space Plan, Tenant shall resubmit the Final Space Plan to Landlord, and
Landlord shall approve or disapprove of the resubmitted Final Space Plan, based
upon the criteria set forth in this Section 3.2 (except that
Landlord’s disapproval of the Final Space Plan, as resubmitted, shall be final),
within five (5) business days after Landlord receives such resubmitted
Final Space Plan.  If Tenant is so
advised, Tenant shall promptly cause the Final Space Plan to be revised to
correct any deficiencies or other matters Landlord may reasonably require.

 

3.3                                 Final Working Drawings.  After the Final Space Plan has been approved
by Landlord, Tenant shall supply the Engineers with a complete listing of
standard and non-standard equipment and specifications, including, without
limitation, B.T.U. calculations, electrical requirements and special electrical
receptacle requirements for the Premises, to enable the Engineers and the
Architect to complete the “Final Working Drawings” (as that term is defined
below) in the manner as set forth below. 
Upon the approval of the Final Space Plan by Landlord and Tenant, Tenant
shall promptly cause the Architect and the Engineers to complete the
architectural and engineering drawings for the Premises, and Architect shall
compile architectural, structural, mechanical, electrical and plumbing working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (which may be done by subspecialty if such
subspecialty will be separately permitted by the City) (collectively, the “Final Working Drawings”) and shall submit
the same to Landlord for Landlord’s approval. 
Tenant shall supply Landlord with four (4) copies signed by Tenant
of such Final Working Drawings.  Landlord
shall, within ten (10) business days after Landlord’s receipt of the Final
Working

 

4

 

Drawings, (i) approve the Final Working Drawings, (ii) approve
the Final Working Drawings subject to specified conditions to be satisfied by
Tenant prior to submitting the Approved Working Drawings for permits as set
forth in Section 3.4, below, or (iii) disapprove the Final
Working Drawings and return the same to Tenant with detailed requested
revisions.  If Landlord disapproves the
Final Working Drawings, Tenant shall resubmit the Final Working Drawings to
Landlord, and Landlord shall approve or disapprove of the resubmitted Final
Working Drawings (except that Landlord’s disapproval of the Final Working
Drawings, as resubmitted, shall be final), within five (5) business days
after Landlord receives such resubmitted Final Working Drawings.  If Tenant is so advised, Tenant shall
immediately revise the Final Working Drawings in accordance with such review
and any disapproval of Landlord in connection therewith.  In addition, if the Final Working Drawings or
any amendment thereof or supplement thereto shall require alterations in the
Base Building (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, at its
sole cost and expense, the cost of such required changes upon receipt of bills
therefor.

 

3.4                                 Approved Working Drawings.  Notwithstanding anything in this Tenant Work
Letter to the contrary, Tenant shall not commence (or allow the commencement
of) the construction of the Tenant Improvements until the Final Working
Drawings are approved in writing by Landlord (the “Approved Working Drawings”). 
After approval by Landlord of the Final Working Drawings, Tenant may
submit the same to the appropriate municipal authorities for all applicable
building permits.  Tenant hereby agrees
that neither Landlord nor Landlord’s consultants shall be responsible for
obtaining any building permit or certificate of occupancy for the Premises and
that obtaining the same shall be Tenant’s responsibility; provided, however,
that Landlord shall cooperate with Tenant in executing permit applications and
performing other ministerial acts reasonably necessary to enable Tenant to
obtain any such permit or certificate of occupancy.  Subject to the terms of Section 4.2.1,
below, no changes, modifications or alterations in the Approved Working
Drawings may be made without the prior written consent of Landlord, which
consent may not be unreasonably withheld.

 

SECTION 4

CONSTRUCTION OF THE TENANT IMPROVEMENTS

 

4.1                                 The Contractor.  Tenant shall select, subject to Landlord’s
reasonable approval, three (3) licensed general contractors (the “Bidding Contractors”) to bid on the
construction of the Tenant Improvements. 
Following such selection, Tenant shall solicit bids from the Bidding
Contractors and, following such bidding process, shall select which Bidding
Contractor shall be the contractor to construct the Tenant Improvements (the “Contractor”).  Landlord shall independently retain the
Contractor to construct the Tenant Improvements in accordance with the Approved
Working Drawings.  All subcontractors,
materialmen and suppliers are subject to Tenant’s prior approval, which
approval shall not be unreasonably withheld, conditioned or delayed.

 

4.2                                 Construction of Tenant Improvements by Contractor
under the Supervision of Landlord and Tenant.

 

4.2.1                        Construction Contract; Over-Allowance Amount.  Landlord and Tenant shall jointly negotiate
and prepare the form of the construction contract (the “Contract”) to be executed by and between
Landlord and the Contractor. 
Notwithstanding the foregoing, the Contract shall expressly state that
all “change orders” which (x) involve the expenditure of more than
$25,000.00 in the aggregate; (y) adversely affect the systems and
equipment of the Building or the Building Structure, or (z) adversely
affect the exterior appearance of the Building, must be approved in advance by
Landlord and Tenant in writing.  Prior to
the commencement of the

 

5

 

construction of the Tenant Improvements, and after Tenant has accepted
all bids for the Tenant Improvements, Landlord shall submit to Tenant, for
Tenant’s review and approval, a detailed breakdown, by trade, of the final
costs to be incurred or which have been incurred, as set forth more
particularly in Sections 2.2.1.1 through 2.2.1.7, above, in connection
with the design and construction of the Tenant Improvements, which costs form a
basis for the amount of the Contract (the “Final
Costs”).  Prior to the
commencement of construction of the Tenant Improvements, Tenant and Landlord
shall identify the amount (the “Over-Allowance
Amount”) equal to the difference between the amount of the Final
Costs and the Improvement Allowance (less any portion thereof already disbursed
by Landlord, or in the process of being disbursed by Landlord, on or before the
commencement of construction of the Tenant Improvements).  To the extent there exists an Over-Allowance
Amount, then following Landlord’s disbursement of ninety percent (90%) of the
Improvement Allowance to the Contractor (i.e., all of such Improvement
Allowance minus a ten percent (10%) retention (the “Final Retention”) which Final Retention shall only be
disbursed by Landlord to the Contractor following the completion of the Tenant
Improvements and in accordance with the terms of the Contract), Tenant shall,
at Tenant’s sole cost, pay to Contractor an amount equal to the total amount
then due and owing to the Contractor (other than any corresponding Final
Retention which shall be paid concurrently with Landlord’s payment of its
portion of the Final Retention to the Contractor), and such payment by Tenant
shall be a condition to Landlord’s obligation to pay the Final Retention.  In no event shall any delays resulting from
any failure by Tenant to pay any such amount be deemed to be a Landlord Caused
Delay (as that term is defined in Section 5.1, below).  In the event that, after the Final Costs have
been determined, any revisions, changes, or substitutions shall be made to the
Construction Drawings or the Tenant Improvements, any additional costs which
arise in connection with such revisions, changes or substitutions or any other
additional costs shall be deemed to be an addition to the Over-Allowance
Amount.

 

4.2.2                        Supervision of Contractor. 
Landlord and Tenant shall jointly supervise the construction of the
Tenant Improvements by Contractor.  Landlord
and Tenant shall mutually cooperate with each other in all phases of such
supervision in order to for the Tenant Improvements to be completed in a timely
manner in accordance with the Approved Working Drawings.  Notwithstanding such joint supervision, Tenant
shall pay a construction supervision and management fee (the “Landlord Supervision Fee”) to Landlord in
an amount equal to the product of (A) one percent (1%), and (B) the
hard costs incurred with the Improvement Allowance Items identified in Sections
2.2.1.3 – 2.2.1.5 (whether paid for via the Improvement Allowance or
as an Over-Allowance Amount, which Landlord Supervision Fee shall be for
services relating to the coordination of the construction of the Tenant
Improvements.

 

4.2.3                        Contractor’s Warranties and Guaranties.  Landlord hereby assigns to Tenant all
warranties and guaranties by Contractor relating to the Tenant Improvements,
and Tenant hereby waives all claims against Landlord relating to, or arising
out of the construction of, the Tenant Improvements and which claims are
covered by such warranties.

 

4.2.4                        Indemnity.  Tenant’s
indemnity of Landlord as set forth in this Lease shall also apply with respect
to any and all costs, losses, damages, injuries and liabilities incurred by
Landlord Parties and related in any way to any act or omission of Tenant or
Tenant’s Architect at the Project; provided, however, that the foregoing
indemnity shall not apply to the extent of Landlord’s gross negligence or
willful misconduct.

 

6

 

4.2.5                        Requirements of Contractor.  The Contractor shall guarantee to Landlord
and for the benefit of Tenant that the portion of the Tenant Improvements for
which it is responsible shall be free from any defects in workmanship and materials
for a period of not less than one (1) year from the date of completion
thereof, and that the Contractor shall be responsible for the replacement or
repair, without additional charge, of all work done or furnished in accordance
with its contract that shall become defective within one (1) year after
the later to occur of (i) completion of the work performed by such
contractor or subcontractors and (ii) the Lease Commencement Date.  The correction of such work shall include,
without additional charge, all additional expenses and damages incurred in
connection with such removal or replacement of all or any part of the Tenant
Improvements, and/or the Building and/or common areas that may be damaged or
disturbed thereby.  All such warranties
or guarantees as to materials or workmanship of or with respect to the Tenant
Improvements shall be contained in the Contract or subcontract and shall be
written such that such guarantees or warranties shall inure to the benefit of
both Landlord and Tenant, as their respective interests may appear, and may be
directly enforced by either.  Landlord
covenants to give to Tenant any assignment or other assurances which may be
necessary to effect such right of direct enforcement.

 

4.2.6                        Insurance Requirements.

 

4.2.6.1               General
Coverages.  Contractor and
all subcontractors shall carry worker’s compensation insurance covering all of
their respective employees, and shall also carry public liability insurance,
including property damage, all with limits, in form and with companies as are
required to be carried by Tenant as set forth in this Lease.

 

4.2.6.2               Special
Coverages.  “Builder’s All
Risk” insurance in an amount approved by Landlord covering the construction of
the Tenant Improvements, and such other insurance as Landlord may require, it
being understood and agreed that the Tenant Improvements shall be insured by
Tenant pursuant to this Lease immediately upon completion thereof.  Such insurance shall be in amounts and shall
include such extended coverage endorsements as may be reasonably required by
Landlord including, but not limited to, the requirement that all Contractor and
all subcontractors shall carry excess liability and Products and Completed
Operation Coverage insurance, each in amounts not less than $500,000 per incident,
$1,000,000 in aggregate, and in form and with companies as are required to be
carried by Tenant as set forth in this Lease.

 

4.2.6.3               General
Terms.  Certificates for
all insurance carried pursuant to this Section 4.2.6.3 shall be
delivered to Landlord and Tenant before the commencement of construction of the
Tenant Improvements and before the Contractor’s equipment is moved onto the
site.  All such policies of insurance
must contain a provision that the company writing said policy will give
Landlord and Tenant thirty (30) days prior written notice of any cancellation
or lapse of the effective date or any reduction in the amounts of such
insurance.  In the event that the Tenant
Improvements are damaged by any cause during the course of the construction
thereof, Landlord shall immediately repair the same.  Landlord shall use commercially reasonable
efforts to ensure that Contractor and all subcontractors maintain all of the
foregoing insurance coverage in force until the Tenant Improvements are fully
completed and accepted by Tenant, except for any Products and Completed
Operation Coverage insurance, which is to be maintained for ten (10) years
following completion of the work and acceptance by Landlord and

 

7

 

Tenant.  All policies carried
under this Section 4.2.6.3 shall insure Landlord and Tenant, as
their interests may appear, as well as Contractor and Tenant’s Agents.  Landlord shall use commercially reasonable
efforts to ensure that all insurance, except Workers’ Compensation, maintained
by Contractor and all subcontractors shall preclude subrogation claims by the
insurer against anyone insured thereunder. 
Such insurance shall provide that it is primary insurance as respects
the owner and that any other insurance maintained by owner is excess and
noncontributing with the insurance required hereunder.  The requirements for the foregoing insurance
shall not derogate from the provisions for indemnification of Landlord by
Tenant under Section 4.2.4 of this Tenant Work Letter.

 

4.2.7                        Governmental Compliance. 
The Tenant Improvements shall comply in all respects with the
following:  (i) the Code and other
state, federal, city or quasi-governmental laws, codes, ordinances and
regulations, as each may apply according to the rulings of the controlling
public official, agent or other person; (ii) applicable standards of the
American Insurance Association (formerly, the National Board of Fire
Underwriters) and the National Electrical Code; and (iii) building material
manufacturer’s specifications.

 

4.2.8                        Inspection. 
Landlord and Tenant shall each have the right to inspect the Tenant
Improvements at all times, provided however, that Landlord’s or Tenant’s
failure to inspect the Tenant Improvements shall in no event constitute a
waiver of any of Landlord’s or Tenant’s, respectively, rights hereunder nor
shall any such inspection of the Tenant Improvements constitute either party’s
approval of the same.  Should either
party disapprove any portion of the Tenant Improvements based on the failure of
the Tenant Improvements to conform to the Final Working Drawings, the
disapproving party shall notify the other in writing of such disapproval and
shall specify the items disapproved.  Any
defects or deviations in, and/or such disapproval of, the Tenant Improvements
shall be rectified by Landlord.

 

4.2.9                        Meetings. 
Commencing upon Tenant’s selection of the Contractor and Architect,
Landlord and Tenant shall hold regular meetings at a reasonable time (but in no
event to be required more often than weekly), with the Architect and the
Contractor (or their agents) regarding the progress of the preparation of
Construction Drawings and the construction of the Tenant Improvements, which
meetings shall be held at a location reasonably designated by Tenant or, in
Landlord’s discretion, at the Premises. 
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 Contractor’s current request for payment.

 

4.3                                 Notice of Completion; Copy of Record Set of Plans.  Within ten (10) days after completion of
construction of the Tenant Improvements, Landlord shall cause a Notice of
Completion to be recorded in the office of the Recorder of the county in which
the Building is located in accordance with Section 3093 of the Civil Code
of the State of California or any successor statute, and shall furnish a copy
thereof to Tenant upon such recordation. 
If Landlord fails to do so, Tenant may execute and file the same on
behalf of Landlord as Landlord’s agent for such purpose, at Landlord’s sole
cost and expense.  At the conclusion of
construction, (i) Landlord and Tenant shall cause the Architect and
Contractor (A) to update the Approved Working Drawings as necessary to
reflect all changes made to the Approved Working Drawings during the course of
construction, (B) to certify to the best of their knowledge that the “record-set”
of as-built drawings are true and correct, which certification shall survive
the expiration or

 

8

 

termination of this Lease, and (C) to deliver to Landlord and
Tenant two (2) sets of copies of such record set of drawings within ninety
(90) days following issuance of a certificate of occupancy for the Premises,
and (ii) Landlord shall deliver to Tenant a copy, bound in a binder (with
an index), of all warranties, guaranties, and operating manuals and information
relating to the improvements, equipment, and systems in the Premises.

 

4.4                                 Cooperation and Joint Efforts.  Landlord and Tenant hereby acknowledge that
the design and construction of the Tenant Improvements will require both of
Landlord and Tenant to mutually cooperate in good faith, using diligent and
commercially reasonable efforts to reach agreement or otherwise cooperate in
connection with a significant amount of design and construction milestones and
action items, only the most significant of which milestones and items are
specifically addressed in this Tenant Work Letter.  Landlord and Tenant each hereby commit to so
cooperate in good faith, and to use such diligent and commercially reasonable
efforts.  Such cooperative efforts shall
include the parties’ prompt sharing of information with regard to municipal or local
planning group meetings which may affect the construction of the Tenant
Improvements so as to provide all relevant parties an opportunity to attend the
same.

 

SECTION 5

 

LANDLORD CAUSED DELAY

 

5.1                                 Landlord Caused Delays.  If there shall be a delay or there are delays
in the “Substantial Completion of the Tenant Improvements” (as that term is
defined in Section 5.4, below) due to a “Landlord Caused Delay,” then
Tenant shall be entitled to the “Substantial Completion Rent Abatement” as more
particularly set forth in Section 5.3, below.  As used in this Tenant Work Letter, “Landlord Caused Delay” shall mean actual
delays to the extent resulting from the acts or omissions of Landlord
including, but not limited to (i) failure of Landlord to timely approve or
disapprove any Construction Drawings; (ii) material and unreasonable
interference by Landlord, its agents, employees or contractors with the
Substantial Completion of the Tenant Improvements and which objectively
preclude or delay the construction of tenant improvements in the Building by
any person, which interference relates to access by Tenant, or the Contractor
to the Building or any Building facilities (including loading docks and freight
elevators) or service (including temporary power and parking areas as provided
herein) during normal construction hours, or the use thereof during normal
construction hours; (iii) delays due to the acts or failures to act of
Landlord, its agents, employees or contractors including without limitation any
such acts or failures to act with respect to payment of the Improvement
Allowance.

 

5.2                                 Determination of a Landlord Caused Delay.  If Tenant contends that a Landlord Caused
Delay has occurred, Tenant shall immediately notify Landlord in writing (the “Delay Notice”) of the event that
constitutes such Landlord Caused Delay. 
If such action, inaction or circumstance qualifies as a Landlord Caused
Delay, then a Landlord Caused Delay shall be deemed to have occurred commencing
on the date such action, inaction or circumstance first occurred, and ending on
the date such delay ends.  Each day
during such period shall be referred to herein as a “Landlord Delay Day;” provided, however, to the extent Tenant
is aware (or using commercially reasonable due diligence, should be aware) of
an event that otherwise constitutes a Landlord Caused Delay and fails to
immediately provide a Delay Notice to

 

9

 

Landlord, then the number of Landlord Delay Days shall be reduced by
the number of calendar days occurring during the period commencing on the date
when Tenant became aware (or using commercially reasonable due diligence,
should have become aware) of such event and the date upon which Tenant actually
provides a Delay Notice to Landlord in connection with the same.

 

5.3                                 Substantial Completion Rent Abatement.  In the event a Landlord Delay shall be
determined to have occurred as set forth in Section 5.2, above,
then commencing on the Expansion Commencement Date, and continuing for each
Landlord Delay Day (such period, the “Substantial
Commencement Rent Abatement Period”), Tenant shall receive a
day-for-day abatement of the Base Rent otherwise attributable to the
10445 Premises (as opposed to the 10421 Premises) (the “Substantial Completion Rent Abatement”) for
each Landlord Delay Day.

 

5.4                                 Definition of Substantial Completion of the Tenant
Improvements.  For
purposes of this Section 5, “Substantial
Completion of the Tenant Improvements” shall mean completion of
construction of the Tenant Improvements in the Premises pursuant to the
Approved Working Drawings as evidenced by a Certificate of Completion from the
Architect, with the exception of any punch list items and any tenant fixtures,
work-stations, built-in furniture, or equipment to be installed by Tenant or
under the supervision of Contractor.

 

SECTION 6

MISCELLANEOUS

 

6.1                                 Tenant’s Representative.  Tenant has designated Richard Murawski and
Tamara Seymour as its representatives with respect to the matters set forth in
this Tenant Work Letter, each of whom shall have full authority and
responsibility to act on behalf of the Tenant as required in this Tenant Work
Letter.

 

6.2                                 Landlord’s Representative.  Landlord has designated Jim Edwards as its
sole representatives with respect to the matters set forth in this Tenant Work
Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter.

 

6.3                                 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.  If any item requiring approval is timely
disapproved by Landlord, the procedure for preparation of the document and
approval thereof shall be repeated until the document is approved by Landlord.

 

6.4                                 Tenant’s Lease Default.  Notwithstanding any provision to the contrary
contained in this Lease, if an economic or material default (after applicable
notice and cure periods, if any) as described in the Lease or this Tenant Work
Letter has occurred at any time on or before the substantial completion of the
Tenant Improvements, then (i) in addition to all other rights and remedies
granted to Landlord pursuant to this Lease, Landlord shall have the right to
withhold payment of all or any portion of the Improvement Allowance(in which
case, Tenant shall be responsible for any delay in the substantial completion of
the Premises caused thereby),

 

10

 

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 this Lease (in which case, Tenant shall be responsible
for any delay in the substantial completion of the Premises caused by such
inaction by Landlord).

 

11

 

SCHEDULE 1

 

BUILDING
STANDARD TENANT IMPROVEMENTS 

 

[ATTACHED]

 

1

 

EXHIBIT I

 

BASE
RENT FOR THE PREMISES PRIOR TO FEBRUARY 1, 2007

 

1.                                       Original Premises.

 

	
  Period

  During

  Lease Term

  	
   

  	
  Annualized

  Base Rent

  	
   

  	
  Monthly

  Installment

  of Base Rent

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Effective Date – January 31, 2006

  	
   

  	
  $

  	
  1,657,455.84

  	
   

  	
  $

  	
  138,121.32

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  February 1, 2006 – August 31,
  2006.*

  	
   

  	
  $

  	
  1,830,219.24

  	
  *

  	
  $

  	
  152,518.27

  	
  *

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  September 1, 2006 – January 31,
  2007.

  	
   

  	
  $

  	
  1,892,683.92

  	
   

  	
  $

  	
  157,723.66

  	
   

  

 

*                                         Provided
that the Original Tenant, Affiliate or Permitted Assignee is not then in
default of this Lease (after expiration of any applicable notice and cure
periods), then the Original Tenant, Affiliate or Permitted Assignee shall have
no obligation to pay the Base Rent otherwise attributable to Original Premises
during the month of July 2006.

 

2.                                       First Expansion Premises.

 

	
  Period

  During

  Lease Term

  	
   

  	
  Annualized

  Base Rent

  	
   

  	
  Monthly

  Installment

  of Base Rent

  	
   

  	
  Approximate Monthly

  Rental Rate

  per Rentable

  Square Foot

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Effective Date – July 31, 2006

  	
   

  	
  $

  	
  157,101.96

  	
   

  	
  $

  	
  13,091.83

  	
   

  	
  $

  	
  0.9360

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  August 1, 2006 –January 31, 2007

  	
   

  	
  $

  	
  163,386.00

  	
   

  	
  $

  	
  13,615.50

  	
   

  	
  $

  	
  0.9734

  	
   

  

 

3.                                       Third Expansion Premises.

 

	
  Period

  During

  Lease Term

  	
   

  	
  Annualized

  Base Rent

  	
   

  	
  Monthly

  Installment

  of Base Rent

  	
   

  	
  Approximate Monthly

  Rental Rate

  per Rentable

  Square Foot

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Effective Date – July 31, 2006

  	
   

  	
  $

  	
  162,000.00

  	
   

  	
  $

  	
  13,500.00

  	
   

  	
  $

  	
  0.781

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  August 1, 2006 –January 31, 2007

  	
   

  	
  $

  	
  167,670.00

  	
   

  	
  $

  	
  13,972.50

  	
   

  	
  $

  	
  0.808

  	
   

  

 

Effective as of February 1, 2007, the Base Rent applicable to the
entire Premises shall be as more particularly set forth in Section 4 of
the Summary of this Lease.

 

1

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