Document:

EXHIBIT 10.37

OFFICE
LEASE

 

71 STEVENSON
STREET

 

 

 

 

ECI
STEVENSON LLC,

a California limited liability company,

as Landlord,

and

MD
BEAUTY, INC.,

a Delaware
corporation,

as Tenant.

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
  ARTICLE 1 PREMISES, BUILDING,
  PROJECT, AND COMMON AREAS

  	
  6

  
	
  ARTICLE 2 TERM

  	
  13

  
	
  ARTICLE 3 BASE RENT

  	
  15

  
	
  ARTICLE 4 ADDITIONAL RENT

  	
  15

  
	
  ARTICLE 5 USE OF PREMISES

  	
  24

  
	
  ARTICLE 6 SERVICES AND UTILITIES

  	
  25

  
	
  ARTICLE 7 REPAIRS

  	
  28

  
	
  ARTICLE 8 ADDITIONS AND ALTERATIONS

  	
  28

  
	
  ARTICLE 9 COVENANT AGAINST LIENS

  	
  32

  
	
  ARTICLE 10 INSURANCE

  	
  32

  
	
  ARTICLE 11 DAMAGE AND DESTRUCTION

  	
  35

  
	
  ARTICLE 12 NONWAIVER

  	
  37

  
	
  ARTICLE 13 CONDEMNATION

  	
  37

  
	
  ARTICLE 14 ASSIGNMENT AND
  SUBLETTING

  	
  38

  
	
  ARTICLE 15 SURRENDER OF PREMISES;
  OWNERSHIP AND REMOVAL OF TRADE FIXTURES

  	
  42

  
	
  ARTICLE 16 HOLDING OVER

  	
  43

  
	
  ARTICLE 17 ESTOPPEL CERTIFICATES

  	
  44

  
	
  ARTICLE 18 SUBORDINATION

  	
  44

  
	
  ARTICLE 19 DEFAULTS; REMEDIES

  	
  45

  
	
  ARTICLE 20 COVENANT OF QUIET
  ENJOYMENT

  	
  48

  
	
  ARTICLE 21 SECURITY DEPOSIT

  	
  48

  
	
  ARTICLE 22 SUBSTITUTION OF OTHER
  PREMISES

  	
  50

  
	
  ARTICLE 23 SIGNS

  	
  50

  
	
  ARTICLE 24 COMPLIANCE WITH LAW

  	
  51

  
	
  ARTICLE 25 LATE CHARGES

  	
  51

  
	
  ARTICLE 26 LANDLORD’S RIGHT TO CURE
  DEFAULT; PAYMENTS BY TENANT

  	
  52

  
	
  ARTICLE 27 ENTRY BY LANDLORD

  	
  52

  
	
  ARTICLE 28 TENANT PARKING

  	
  53

  
	
  ARTICLE 29 MISCELLANEOUS PROVISIONS

  	
  54

  

EXHIBITS:

	
  A

  	
   

  	
  OUTLINE OF PREMISES

  
	
  A-1

  	
   

  	
  OUTLINE OF EXPANSION SPACE

  
	
  A-2

  	
   

  	
  OUTLINE OF MUST TAKE SPACES

  
	
  A-3

  	
   

  	
  OUTLINE OF ADDITIONAL EXPANSION SPACE

  
	
  B

  	
   

  	
  TENANT WORK LETTER

  
	
  C

  	
   

  	
  NOTICE OF LEASE TERM DATES

  
	
  D

  	
   

  	
  RULES AND REGULATIONS

  

 

i

 

 

	
  E

  	
   

  	
  FORM OF TENANT’S ESTOPPEL CERTIFICATE

  
	
  F

  	
   

  	
  APPROVED FORM OF LETTER OF CREDIT

  
	
  G

  	
   

  	
  JANITORIAL STANDARDS

  
	
  H

  	
   

  	
  FORM OF SNDA

  

 

 

ii

INDEX

 

	
   

  	
  Page(s)

  
	
   

  	
   

  
	
  Additional Expansion Space

  	
  11

  
	
  Additional Rent

  	
  15

  
	
  Alterations

  	
  29

  
	
  Alternative Expansion Option

  	
  10

  
	
  Alternative Expansion Space

  	
  10

  
	
  Amended Expiration Date

  	
  12

  
	
  Bank Prime Loan

  	
  52

  
	
  Base Building

  	
  29

  
	
  Base Building Elements

  	
  29

  
	
  Base Rent

  	
  15

  
	
  Base Year

  	
  16

  
	
  Builder’s All Risk

  	
  31

  
	
  Building

  	
  7

  
	
  Building Hours

  	
  25

  
	
  Clear Window

  	
  62

  
	
  Common Areas

  	
  7

  
	
  Conditional Termination Notice

  	
  37

  
	
  Direct Expenses

  	
  16

  
	
  Estimate

  	
  22

  
	
  Estimate Statement

  	
  22

  
	
  Estimated Excess

  	
  22

  
	
  Excess

  	
  22

  
	
  Existing Window

  	
  62

  
	
  Expansion Option

  	
  9

  
	
  Expansion Space

  	
  9

  
	
  Expansion Space Extension Term

  	
  12

  
	
  Expense Year

  	
  16

  
	
  Extension Option

  	
  13

  
	
  Extension Period

  	
  13

  
	
  Face Amount

  	
  49

  
	
  Force Majeure

  	
  57

  
	
  Holidays

  	
  25

  
	
  HVAC

  	
  25

  
	
  Landlord

  	
  1

  
	
  Landlord Parties

  	
  33

  
	
  Landlord Repair Notice

  	
  36

  
	
  Lease

  	
  1

  
	
  Lease Commencement Date

  	
  13

  
	
  Lease Expiration Date

  	
  13

  
	
  Lines

  	
  61

  
	
  Mail

  	
  57

  
	
  Notices

  	
  57

  
	
  Operating Expenses

  	
  16

  

 

iii

 

	
  Outside Delivery Date

  	
  9

  
	
  Permitted Transfer

  	
  42

  
	
  Permitted Transferee

  	
  42

  
	
  Premises

  	
  6

  
	
  Proposition 13

  	
  19

  
	
  Provider

  	
  62

  
	
  Renovations

  	
  60

  
	
  Rent

  	
  15

  
	
  Scheduled Delivery Date

  	
  9

  
	
  Security Deposit

  	
  48

  
	
  Service Failure

  	
  27

  
	
  Statement

  	
  22

  
	
  Subject Space

  	
  39

  
	
  Suite 2100 Commencement Date

  	
  12

  
	
  Suite 2100 Expansion Option

  	
  11

  
	
  Suite 2100 Expansion Space

  	
  11

  
	
  Suite 2120 Expansion Option

  	
  12

  
	
  Suite 2120 Expansion Space

  	
  11

  
	
  Summary

  	
  1

  
	
  Tax Expenses

  	
  19

  
	
  Tenant

  	
  1

  
	
  Tenant’s Security System

  	
  7

  
	
  Tenant’s Share

  	
  22

  
	
  Term

  	
  13

  
	
  Transfer

  	
  41

  
	
  Transfer Notice

  	
  39

  
	
  Transfer Premium

  	
  40

  
	
  Transferee

  	
  39

  
	
  Transfers

  	
  38

  

 

 

iv

71 STEVENSON STREET

OFFICE LEASE

This 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 ECI STEVENSON LLC, a California limited liability
company (“Landlord”), and MD BEAUTY, INC., a
Delaware corporation (“Tenant”).

SUMMARY OF BASIC LEASE
INFORMATION

 

	
  TERMS OF LEASE

  	
   

  	
  DESCRIPTION

  	
   

  
	
  1. Date:

  	
   

  	
   

  	
  February 23, 2005

  	
   

  
	
  2. Premises

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1   Building:

  	
   

  	
  A 23 story office
  building consisting of

  approximately 323,275 rentable square feet,

  located at:

  71 Stevenson Street

  San Francisco, California 94105

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2   Premises:

  	
   

  	
  A total of 35,427
  rentable square feet, consisting of:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
                  (a) 12,332 rentable square feet of space located on
  the twenty-second (22nd) floor of the Building and commonly known as Suite
  2200 as further set forth in Exhibit A
  to this Office Lease;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
                  (b) 12,398 rentable square feet of space located on
  the twenty-third (23rd) floor of the Building and commonly known as Suite 2300
  as further set forth in Exhibit A
  to this Office Lease;

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
                  (c) 9,614 rentable square feet of space located on
  the eighteenth (18th) floor of the Building and commonly known as Suite 1825
  as further set forth on Exhibit A
  to this Office Lease; and,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
                  (d) 1,083 rentable square feet of space located on
  the eighteenth (18th) floor of the Building and commonly known as Suite 1815
  as further set forth on Exhibit A
  to this Office Lease.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

	
  3. Term

  	
   

  	
   

  	
   

  	
   

  
	
  (Article
  2).

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1   Length of
  Term:

  	
   

  	
  Ten (10) years, plus
  any partial month at the end of the Term to result in the Term ending on the
  last day of a calendar month.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2   Lease Commencement
  Date:

  	
   

  	
  The 22nd/23rd Floor
  Commencement Date.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2.1   22nd/23rd
  Floor

  Commencement Date:

  	
   

  	
  June 1, 2005.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2.2   Suites
  1825/1815

  Commencement Date:

  	
   

  	
  July 1, 2005.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3   Lease Expiration Date:

  	
   

  	
  The last day of the calendar month in which the
  tenth (10th) anniversary of the Suites 1825/1815 Commencement Date falls.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4. Base Rent 

  	
   

  	
   

  	
   

  	
   

  
	
  (Article 3):

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1   Amount Due:

  	
   

  	
   

  	
   

  

 

	
  Years Following

  Lease Commencement Date

  	
   

  	
  Annual

  Base Rent

  	
   

  	
  Monthly

  Installment

  of Base Rent

  	
   

  	
  Annual

  Rental Rate

  per Rentable

  Square Foot

  	
   

  
	
  1 - 3*

  	
   

  	
  $

  	
  1,089,380.25

  	
   

  	
  $

  	
  90,781.69

  	
   

  	
  $

  	
  30.75

  	
   

  
	
  4 - 7

  	
   

  	
  $

  	
  1,160,234.25

  	
   

  	
  $

  	
  96,686.19

  	
   

  	
  $

  	
  32.75

  	
   

  
	
  8 - end of Term

  	
   

  	
  $

  	
  1,231,088.25

  	
   

  	
  $

  	
  102,590.69

  	
   

  	
  $

  	
  34.75

  	
   

  

 

 

2

 

 

	
  *  Notwithstanding any provision contained in
  this Lease to the contrary:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
              (a) During the initial 180 days following the 22nd/23rd
  Floor Commencement Date Tenant shall not be obligated to pay Base Rent for
  that portion of the Premises located on the Twenty-Second (22nd) and
  Twenty-Third (23rd) floors of the Building;

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
              (b) During the initial 180 days following the Suites
  1825/1815 Commencement Date Tenant shall not be obligated to pay Base Rent
  that portion of the Premises contained in Suites 1825 and 1815; and,

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
               (c) Any increases in Base Rent under this Section 4.1
  (i.,e. at the beginning of the 4th Year and the 8th Year) shall occur on the
  anniversary date of the Suites 1825/1815 Commencement Date.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.2 Rent Payment Address:

  	
   

  	
  ECI STEVENSON LLC

  Cushman & Wakefield as agent

  P.O. Box 45257

  San Francisco, CA 94145-0257

  
	
   

  	
   

  	
   

  	
   

  
	
  5. Base Year

  	
   

  	
   

  	
  Calendar year 2005

  
	
  (Article
  4):

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6. Tenant’s Share

  	
   

  	
   

  	
  Approximately 10.96%

  
	
  (Article 4):

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7. Permitted Use

  	
   

  	
   

  	
  General office use only, consistent with a
  first-class office 

  
	
  (Article 5):

  	
   

  	
   

  	
  building.

  

 

3

 

	
   

  	
   

  	
   

  	
   

  
	
  8. Security Deposit

  	
   

  	
   

  	
  A letter of credit (“L/C”) in the amount of
  $275,000, subject 

  
	
  (Article 21):

  	
   

  	
   

  	
  to L/C Burnoff, all in accordance with the
  provisions of Article 21 of this Lease. Furthermore, if and when Tenant
  leases more than 35,427 rentable square feet of space in the Building, the
  Face Amount of the L/C shall increase proportionately in accordance with the
  provisions of Article 21 of this Lease.

  
	
   

  	
   

  	
   

  	
   

  
	
  9. Parking

  	
   

  	
   

  	
                  Nine (9) unreserved valet parking passes, subject
  to 

  
	
  (Article
  28):

  	
   

  	
   

  	
  the terms of Article 28
  of this Lease.

  
	
   

  	
   

  	
   

  	
                  The foregoing parking privileges are based on
  Tenant leasing Suites 2200, 2300, 1825 and 1815 containing approximately
  35,427 rentable square feet of space. If and when Tenant leases more than
  35,427 rentable square feet of space in the Building, then for each five
  thousand (5,000) rentable square feet of space Tenant leases in excess of
  35,427 rentable square feet of space Tenant shall be entitled to, and shall
  lease, one (1) additional unreserved valet parking pass, subject to the terms
  of Article 28 of this Lease.

  
	
   

  	
   

  	
   

  	
   

  
	
  10.   Address of Tenant

  	
   

  	
   

  	
  MD Beauty, Inc.

  
	
  (Section 29.18):

  	
   

  	
   

  	
  425 Bush Street, 3rd floor

  
	
   

  	
   

  	
   

  	
  San Francisco, CA 94108

  Attn: Chief Financial Officer

  

  with a copy to:

  

  Gardner Carton & Douglas, LLP

  191 North Wacker Drive, Suite 3100

  Chicago, IL 60606-1698

  Attn: Barnett P. Ruttenberg, Esq.

  

  (Prior to Lease Commencement Date)

  

 

4

 

	
   

  	
  and

  	
   

  	
  MD Beauty, Inc.

  71 Stevenson Street, Suite 2300

  San Francisco, CA 94105-2934

  Attention: Chief Financial Officer

  

  with a copy to:

  

  Gardner Carton & Douglas, LLP

  191 North Wacker Drive, Suite 3100

  Chicago, IL 60606-1698

  Attn: Barnett P. Ruttenberg, Esq.

  

  (After Lease Commencement Date)

  
	
   

  	
   

  	
   

  	
   

  
	
  11.   Address
  of Landlord

  	
   

  	
   

  	
  See Section 29.18 of
  the Lease.

  
	
  (Section 29.18):

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.   Broker(s)

  	
   

  	
   

  	
  CB Richard Ellis Real
  Estate Services, Inc.

  
	
  (Section
  29.24):

  	
   

  	
   

  	
  101 California Street,
  44th Floor

  San Francisco, California 94111

  

  and

  

  The CAC Group

  255 California Street, Suite 200

  San Francisco, CA 94111

  
	
   

  	
   

  	
   

  	
   

  
	
  13.   Tenant
  Improvement Allowance

  (Section 2.1 of Exhibit B):

  	
   

  	
   

  	
  $40 per rentable square foot

  

 

 

5

ARTICLE
1

PREMISES,
BUILDING, PROJECT, AND COMMON AREAS

1.1           Premises, Building, Project and Common Areas.

 

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 each suite, floor or floors of the Premises has approximately the number of rentable square feet as set forth in Section
2.2 of the Summary.  The parties hereto
agree that the lease of the Premises is upon and subject to the terms,
covenants and conditions 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 terms, covenants and conditions 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. 
Except as specifically set forth in this Lease and in the Tenant Work
Letter attached hereto as Exhibit B (the
“Tenant Work Letter”), Landlord shall
not be obligated to provide or pay for any improvement work or services related
to the improvement of the Premises. 
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. 
The taking of possession of the Premises by Tenant shall conclusively
establish that the Premises and the Building were at such time in good and
sanitary order, condition and repair, except for any “punch list” items to be
completed by Landlord in connection with the improvements to be constructed by Landlord
under the Tenant Work Letter.

1.1.1                Access
to Premises and to Fire Stairwell.

1.1.1.1     After the Commencement Date Tenant (and such employees of Tenant to whom
Landlord has previously given access keys or cards as Tenant from time-to-time
requests pursuant to the provisions of this Lease) shall have access to the
Premises 24 hours per day, 365 days per year, subject to (a) security controls,
such as having keys and access cards to the Building and the Premises, (b)
limitations and denial of access due to emergencies, and (c) limitations and
denial of access due to reasons beyond the control of Landlord, such as actions
by governmental authorities.

1.1.1.2     Subject to
all applicable Laws, and Tenant’s
reasonable cooperation with Landlord,
so long as Tenant occupies the entire twenty-second (22nd) and twenty-third
(23rd) floors of the Building [and the twenty-first (21st) floor when Tenant
takes the entire floor], Tenant may, at Tenant’s own expense, use the existing
fire stairwell to gain access to and between the twenty-second (22nd) and
twenty-third (23rd) floors of the Building. 
Subject

 

6

to Landlord’s
prior written approval, which approval shall not be unreasonably withheld,
Tenant may install its own security system (“Tenant’s
Security System” to
access the twenty-second (22nd) and twenty-third (23rd) floors of the Building
from the existing fire
stairwell.  In no event shall Tenant’s
Security System tie into the Building’s security system or other systems or
equipment of the Building, unless required to do so by any applicable
governmental authority.  Tenant shall
provide Landlord with any information reasonably required regarding Tenant’s
Security System to provide access from the existing stairwell to the Premises
in the event of an emergency. 
Notwithstanding any provision contained in this Lease to the contrary,
at the expiration or early termination of this Lease, Landlord may require
Tenant to remove Tenant’s Security System and repair all damage to the Building
resulting from such removal, at Tenant’s sole cost and expense.

1.1.2                The
Building and The Project. 
The
Premises are a part of the building set forth in Section 2.1 of the Summary
(the “Building”).  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, subterranean parking facilities
and other improvements) upon which the Building and the Common Areas are
located, and (iii) at Landlord’s discretion, any additional real property,
areas, land, buildings or other improvements added thereto outside of the
Project.

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 as are
used in the operation of the Project, as designated by Landlord, in its
commercially reasonable discretion, are collectively referred to herein as the “Common Areas”).  The
manner in which the Common Areas are maintained and operated shall be at the
sole discretion of Landlord and the use thereof shall be subject to such rules,
regulations and restrictions as Landlord may make from time to time.  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.

1.2           Verification of Rentable Square Feet of Premises and
Building. 
For
purposes of this Lease, “rentable square feet” and of the Premises shall be
deemed as set forth in Section 2.2 of the Summary and shall not be subject to
remeasurement or modification.  An
independent architect has measured the Building and Premises in accordance with BOMA standards of
measurement.

1.3           Must Take Spaces.

1.3.1                Tenant
agrees to add to the Premises two (2) suites containing approximately 3,707
rentable square feet of space in the aggregate, on the eighteenth (18th) floor
of the Building (collectively, the “Must Take Spaces” and when referred to in
general, rather than specifically, the “Must Take Space”).  Each Must Take Space is identified on Exhibit
A-2 attached to this Lease.  The Must
Take Spaces are (a) Suite 1810 containing approximately 858 rentable square
feet of space (“Must Take Space 1810”); and (b) Suite 1830 containing
approximately 2,849 square feet of space (“Must Take Space 1830”).  Each Must Take Space is not subject to any
rights granted by Landlord (including Landlord’s predecessor-in-interest) to

 

7

others with respect to the respective Must Take Space (including
renewal and extension rights and rights of first offer, first negotiation,
first refusal or other expansion rights). 
Each Must Take Space may be available for Tenant to lease with different
commencement dates for each Must Take Space.

1.3.2                Landlord
agrees to use good faith efforts to deliver Must Take Space 1810 and Must Take
Space 1830 on or before April 20, 2007. 
Landlord agrees not to extend the term of the leases for either Must
Take Space 1810 or Must Take Space 1830, and to use commercially reasonable
efforts to cause the tenants occupying Must Take Space 1810 and Must Take Space
1830 to vacate the respective Must Take Spaces on or before April 20,
2007.  Landlord shall not be liable to
Tenant or otherwise be in default under this Lease if Landlord is unable to
deliver possession of Must Take Space 1810 or Must Take Space 1830, whether on
April 20, 2007, or any time thereafter. 
Landlord shall give Tenant written notice thirty (30) days prior to
delivering Must Take Space 1810 or Must Take Space 1830.  If Landlord does not deliver either Must Take
Space 1810 or Must Take Space 1830 to Tenant on or before June 1, 2007 because
the existing tenant(s) occupying Must Take Space 1810 and/or Must Take Space
1830 hold over beyond April 30, 2005 and refuse to vacate such Must Take
Space(s), then by written notice to Landlord before December 1, 2007, Tenant
shall have the right to terminate Tenant’s obligation to lease the undelivered
Must Take Space.

1.3.3                The
Term of the Lease for each of the Must Take Spaces shall commence upon the date
Landlord delivers possession of each of the respective Must Take Spaces to
Tenant, and shall continue through the expiration or early termination of the
Term.  Upon Landlord’s delivery of each
of the Must Take Spaces to Tenant the respective Must Take Space shall be part
of the Premises under the Lease (so that the term “Premises” in this Lease
shall refer to the space in the Premises immediately before the delivery of the
respective Must Take Space, plus the respective Must Take Space).

1.3.4                Tenant
shall pay Base Rent for each Must Take Space at the same Annual Rental Rate per
Rentable Square Foot contained in Section 4 of the Summary of Basic Lease
Information as Tenant is then paying for the Premises originally leased under
the terms of this Lease, as such rate changes during the Term.  Tenant shall commence paying Base Rent and
Additional Rent for each Must Take Space (the “Must Take Rent Commencement”)
sixty (60) days after Landlord delivers possession of the respective Must Take
Space to Tenant; provided that for each Must Take Space a portion of the Base
Rent for such specific Must Take Space will be waived for a period of time
immediately following the Must Take Rent Commencement, in accordance with the
following calculation:  The number of
days for which Base Rent is waived for a specific Must Take Space shall be
determined by multiplying one hundred eighty (180) by a fraction, the numerator
of which is the number of days in the Term following the Must Take Rent Commencement
for such specific Must Take Space, and the denominator of which is the number
of days in the original Term for the Premises originally leased under this
Lease (“Adjustment Factor”).

1.3.5                Landlord
shall deliver, and Tenant shall take, each Must Take Space in its then existing
“AS IS” condition.  Landlord shall
construct Tenant Improvements in each Must Take Space in accordance with the
provisions of this Lease.  For each Must
Take Space Landlord delivers to Tenant Landlord shall provide a Tenant Improvement
Allowance of $40 per

 

8

rentable square foot in such Must Take Space multiplied by
the relevant Adjustment Factor, in accordance with the provisions of this
Lease.

1.3.6                As
Landlord delivers possession of each Must Take Space to Tenant, Tenant’s Share
of the Annual Direct Expenses shall be adjusted in accordance with the
provisions of Section 4.2.6 of this Lease, to reflect the increased Rentable
Area of the Premises.  Tenant’s lease of
each Must Take Space shall be on the same terms and conditions as affect the
original Premises, from time-to-time, including the same annual Base Rent per
Rentable Square foot as then applies to the original Premises (except that free
Base Rent and Tenant Improvement Allowance for each Must Take Space shall be
determined in accordance with Section 1.3.5 above).

1.3.7                After
Landlord delivers any Must Take Space to Tenant, Landlord and Tenant shall
execute a written confirmation of the addition of the respective Must Take
Space to the Premises on the terms and conditions set forth in this Section
1.3.  The written confirmation shall
confirm the actual delivery date of such Must Take Space, the amount of free
rent and Tenant Improvement Allowance applicable to such Must Take Space, the
Must Take Rent Commencement for such Must Take Space, the percentage that
constitutes Tenant’s Share of Direct Annual Direct Expenses, and any other
relevant provision applicable to such Must Take Space.

1.4           Expansion Option.

1.4.1                Provided
that MD Beauty, Inc. has not assigned this Lease or sublet more than
twenty-five percent (25%) or all of the Premises to an entity other than a
Permitted Transferee (as defined in Section 14.8 below) (it being intended that
all rights pursuant to this provision are and shall be personal to the original
Tenant under this Lease and its Permitted Transferees and shall not be
transferable or exercisable for the benefit of any Transferee other than a
Permitted Transferee), and provided Tenant is not in default under this Lease
beyond any applicable notice and cure periods on the date of exercise or at any
time thereafter until the commencement of the Term with respect to any space so
leased, Tenant shall have the following option (“Expansion
Option”) by giving written notice to Landlord of the
exercise of any such Expansion Option at any time prior to March 1, 2011 to
lease the Expansion Space described below. 
If Tenant fails to exercise the Expansion Option prior to March 1, 2011,
then the Expansion Option shall become void, and of no further force and
effect.  If Tenant effectively exercises
the Expansion Option, then Landlord shall use commercially reasonable efforts
to deliver possession of the Expansion Space to Tenant on or about the
Scheduled Delivery Date.  The Expansion
Space contains approximately 6,272 rentable square feet of space on the
fifteenth (15th) floor of the Building (“Expansion Space”),
as further set forth on Exhibit A-1 to this Office Lease.  The scheduled delivery date for the Expansion
Space is February 1, 2012 (“Scheduled Delivery Date”).  If, despite Landlord’s good faith efforts,
Landlord is unable to deliver the Expansion Space to Tenant on or before May 1,
2012 (“Outside Delivery Date”) in accordance
with the provisions of this Article 1.4, then Tenant shall have no further
rights with respect to the Expansion Space.

1.4.2                Tenant
may meet with Landlord reasonably prior to March 1, 2011 to identify space (“Alternative Expansion Space”), as an alternative to the
Expansion Space, and

 

9

the availability, terms, including rental rate and time for
delivery of the Alternative Expansion Space. 
Within ten (10) business days following the date Landlord and Tenant
agree upon the Alternative Expansion Space, and the terms upon which Tenant
would lease the Alternative Expansion Space, and as an alternative  to exercising the Expansion Option for the
Expansion Space, Tenant shall have the option (the “Alternative
Expansion Option”) by giving written notice to Landlord within such
ten (10) business day period to lease the Alternative Expansion Space instead
of the Expansion Space.  Landlord shall
deliver to Tenant the Alternative Expansion Space in accordance with the terms
mutually agreed upon by Landlord and Tenant, subject to the other provisions of
this Article 1.4.  If Tenant exercises
the Alternative Expansion Option as provided above, then the Expansion Option
for the Expansion Space identified above in Section 1.4.1 shall immediately
terminate without any notice, and shall be of no further force and effect.  If Tenant does not exercise the Alternative
Expansion Option within the ten (10) business day period specified above, then
such Alternative Expansion Option shall terminate.  Upon any termination of the Alternative
Expansion Option Tenant may still exercise the Expansion Option so long as it
is exercised prior to March 1, 2011, provided, however, that Tenant shall not
have the right to exercise both the Expansion Option and the Alternative Expansion
Option.  The Alternative Expansion Space
shall consist of contiguous vacant unleased space on one floor in the high-rise
elevator bank area of the Building and shall contain between 3,000 and 8,000
rentable square feet of space and that Landlord shall deliver the Alternative
Expansion Space to Tenant after April 30, 2008 and prior to May 1, 2011.  Upon delivery of any Alternative Expansion
Space to Tenant, then Tenant shall lease such Alternative Expansion Space in
accordance with the provisions of this Article 1.4.

1.4.3                The
exercise by Tenant of the Expansion Option, or the Alternative Expansion
Option, as the case may be, shall be irrevocable.  Upon exercise of the Expansion Option, or
upon mutual agreement as to the Alternative Expansion Space, the Expansion
Space or Alternative Expansion Space, as the case may be, shall be deemed to be
leased under the terms and conditions of this Lease and shall constitute a
portion of the Premises for all purposes of this Lease.  No further instrument shall be required to
make such Lease of the Expansion Space or Alternative Expansion Space
effective; provided that Landlord and Tenant shall, if requested by either
party, execute and acknowledge an amendment to this Lease confirming the lease
of such Expansion Space or Alternative Expansion Space.  The Expansion Option and the Alternative
Expansion Option shall terminate if not exercised precisely in the manner
provided herein.

1.4.4                The
lease of the Expansion Space or Alternative Expansion Space, as the case may
be, shall be on all the terms and conditions set forth in this Lease and all
Exhibits thereto, except that:

(a)           The Expansion Space, or Alternative
Expansion Space, as the case may be, shall be delivered to Tenant in an “as is”
condition;

(b)           The
term of the Lease with respect to the Expansion Space or Alternative Expansion
Space shall commence sixty (60) days after delivery of the Expansion Space or
Alternative Expansion Space to Tenant and shall expire on the Expiration Date
for the original Premises; provided, however, that if Tenant is granted any
option to extend the term of the Lease with respect to the original Premises,
such option(s) shall also apply to any Expansion Space or

 

10

Alternative Expansion Space leased by Tenant
at the commencement of the Extension Period, and the options to extend may only
be exercised with respect to the entire Premises, including the Expansion Space
or Alternative Expansion Space; and

 

(c)           The
Base Rent for the Expansion Space, or the Alternative Expansion Space, as the
case may be, shall be the Fair Market Base Rental (as defined in Section 2.2.2
below) and shall be determined in accordance with the provisions of Article
2.2.

1.5           Additional
Expansion Option.  In addition to the
Expansion Option contained in Section 1.4 above, Tenant shall have the option to lease space on the twenty-first (21st) floor of the
Building in accordance with the following provisions of this Section 1.5.

1.5.1                Provided that MD Beauty, Inc.
has not assigned this Lease or sublet more than twenty-five percent (25%) or
all of the Premises to an entity other than a Permitted Transferee (it being
intended that all rights pursuant to this provision are and shall be personal
to the original Tenant under this Lease and its Permitted Transferees and shall
not be transferable or exercisable for the benefit of any Transferee other than
a Permitted Transferee), and provided Tenant is not in default under this Lease
beyond any applicable notice and cure periods on the date of exercise or at any
time thereafter until the commencement of the Term with respect to any space so
leased, Tenant shall have the following options to lease each
additional expansion space (“Additional Expansion Space”) described
below.  Each Additional Expansion Space
is subject to any and all rights granted by Landlord (including Landlord’s
predecessor-in-interest) or asserted by others with respect to the respective
Additional Expansion Space (including renewal and extension rights and rights
of first offer, first negotiation, first refusal or other expansion
rights).  The
Additional Expansion Space consists of two (2) different suites on the
twenty-first (21st) floor of the Building, as further set forth on Exhibit A-3
attached to this Office Lease.  One suite
is known as Suite 2100 and contains approximately 11,523 rentable square feet
of space (“Suite 2100 Expansion Space”).  The other suite is known as Suite 2120 and
contains approximately 784 rentable square feet of space (“Suite 2120
Expansion Space”).

1.5.2                The Suite 2100 Expansion Space
is leased to a tenant under a lease that expires on March 31, 2011, with such
tenant having a right, on sixty (60) days prior written notice to Landlord, to
terminate its lease effective at any time after March 31, 2008.  Tenant shall exercise the option to lease the
Suite 2100 Expansion Space (“Suite 2100 Expansion
Option”) by giving written notice upon the earlier of (a)
thirty (30) days after Landlord gives Tenant written notice that the lease for
the Suite 2100 Expansion Space has terminated prior to its March 31, 2011
expiration date, or (b) at least twelve (12) months, but not more than fifteen (15)
months, prior to March 31, 2011.

1.5.3                The Suite
2120 Expansion Space is leased to a tenant under a lease that expires on August
31, 2011, with such tenant having a right, on sixty (60) days prior written
notice to Landlord, to terminate its lease effective at any time after August
31, 2008.  Tenant shall exercise the
option to lease the Suite 2120 Expansion Space (“Suite 2120
Expansion Option”) by giving written notice upon the earlier of (a)
thirty (30) days after Landlord gives Tenant written notice that the lease for
the Suite 2120 Expansion Space has terminated prior to

 

11

its March 31, 2011 expiration date, or (b) at least twelve (12) months, but not
more than fifteen (15) months, prior to August 31, 2011.

1.5.4                The
exercise by Tenant of the Suite 2100 Expansion Option and the Suite 2120
Expansion Option, as the case may be, shall be irrevocable.  Upon exercise of the Suite 2100 Expansion
Option or the Suite 2120 Expansion Option, as the case may be, the applicable
Additional Expansion Space shall be deemed to be leased under the terms and
conditions of this Lease and shall constitute a portion of the Premises for all
purposes of this Lease.  No further
instrument shall be required to make such lease of the applicable Additional
Expansion Space effective; provided that Landlord and Tenant shall, if
requested by either party, execute and deliver an amendment to this Lease
confirming the lease of such Suite 2100 Expansion Space or Suite 2120 Expansion
Space.  The Suite 2100 Expansion Option
and the Suite 2120 Expansion Option shall terminate if not exercised precisely
in the manner provided herein.

1.5.5                The lease of the Additional
Expansion Space shall be on all the terms and conditions set forth in this
Lease and all Exhibits thereto, except that:

(a)           The Additional Expansion Space shall
be delivered to Tenant in an “as is” condition;

(b)           The
Term of the Lease with respect to the applicable Additional Expansion Space
shall commence sixty (60) days after delivery of the Suite 2100 Expansion Space
(“Suite 2100 Commencement Date”) or the
Suite 2120 Expansion Space to Tenant, as the case may be, and shall expire on
the Expiration Date for the original Premises (unless the Term is extended
under the immediately following provisions); provided, however:

                (i)  if at the Suite 2100 Commencement Date the
then remaining Term of the Lease is less than five (5) years, the Term of the
Lease shall be extended to expire five (5) years following the Suite 2100
Commencement Date (“Amended Expiration Date”).  That portion of the Term between the Expiration
Date contained in Section 3.3 of the above Summary of Basic Lease Information
and the Amended Expiration Date is herein called the “Expansion
Space Extension Term” (; and,

                (ii)  if Tenant is granted any option to extend the
term of the Lease with respect to the original Premises, such option(s) shall
also apply to the Additional Expansion Space leased by Tenant at the
commencement of the Extension Period, and the options to extend may only be
exercised with respect to the entire Premises, including the Additional
Expansion Space; and,

(c)           The
Base Rent for the applicable Additional Expansion Space, shall be the Fair
Market Base Rental and shall be determined in accordance with the provisions of
Article 2.2.  If the Term of the Lease is
extended to expire at an Amended Expiration Date, then during the Expansion
Space Extension Term the Base Rent payable by Tenant for the entire Premises
then leased by Tenant (including all Premises leased by Tenant prior to or
following the Suite 2100 Commencement Date) shall be the Fair Market Base
Rental determined as of the Suite

 

12

2100 Commencement Date for the entire Premises, and shall be determined
in accordance with the provisions of Article 2.2.

ARTICLE 2

TERM

2.1           Initial Term.  The terms and provisions of this Lease shall
be effective as of the date of this Lease. 
The term of this Lease (the “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.  At any time during
the Term, Landlord or Tenant may deliver to the other party a notice in the
form as set forth in Exhibit C, attached hereto, as a confirmation only of the
information set forth therein, which the recipient shall execute and return
within ten (10) business days of receipt thereof.

 

                2.2           Extension Option.

 

                                2.2.1        Provided
that MD Beauty, Inc. has not assigned this Lease or sublet more than
twenty-five percent (25%) or all of the Premises to an entity other than a
Permitted Transferee (it being intended that all rights pursuant to this provision
are and shall be personal to the original Tenant under this Lease and its
Permitted Transferees and shall not be transferable or exercisable for the
benefit of any Transferee other than a Permitted Transferee), and provided
Tenant is not in default under this Lease beyond any applicable notice and cure
period at the time of exercise or at any time thereafter until the beginning of
any such extension of the Term, Tenant shall have the option (the “Extension Option”) to extend the Term for one (1) additional
consecutive period of five (5) years (“Extension Period”),
by giving written notice to Landlord of the exercise of any such Extension
Option at least twelve (12) months, but not more than fifteen (15) months,
prior to the expiration of the initial Term. 
The exercise of the Extension Option by Tenant shall be irrevocable and
shall cover the entire Premises leased by Tenant pursuant to this Lease.  Upon such exercise, the term of the Lease
shall automatically be extended for the Extension Period without the execution
of any further instrument by the parties; provided that Landlord and Tenant
shall, if requested by either party, execute and acknowledge an instrument
confirming the exercise of the Extension Option.  The Extension Option shall terminate if not
exercised precisely in the manner provided herein.  Any extension of the Term shall be upon all
the terms and conditions set forth in this Lease and all Exhibits thereto,
except that:  (i) Tenant shall have no
further option to extend the Term of the Lease; (ii) Landlord shall not be
obligated to contribute funds toward the cost of any remodeling, renovation,
alteration or improvement work in the Premises; and (iii) Base Rent for any
such Extension Period shall be the then Fair
Market Base Rental (as defined below) for the Premises for the space and term
involved, which shall be determined as set forth below.

 

                                2.2.2        “Fair Market Base Rental” shall mean the “fair market” Base
Rent at the time or times in question for the applicable space, based on the
prevailing rentals then being charged to tenants in the Building and tenants in
other office buildings in the general vicinity of the 

 

13

Building of comparable size,
location, quality and age as the Building for leases with terms approximately
equal to the Extension Period (or, if applicable, the initial term for the
Expansion Space, Alternative Expansion Space, or Expansion Space Extension
Term), taking into account the creditworthiness and financial strength of the
tenant, the financial guaranties provided by the tenant (if any), and the
desirability, location in the building, size and quality of the space, tenant
finish allowance and/or tenant improvements, included services, operating
expenses and tax and expense stops or other escalation clauses, for the space
in the Building for which Fair Market Base Rental is being determined and for
comparable space in the buildings which are being used for comparison.  Fair Market Base Rental shall also reflect
the then prevailing rental structure for comparable office buildings in the
general vicinity of the Property, so that if, for example, at the time Fair
Market Base Rental is being determined the prevailing rental structure for
comparable space and for comparable lease terms includes periodic rental
adjustments or escalations, Fair Market Base Rental shall reflect such rental
structure.

 

                                2.2.3        Landlord
and Tenant shall endeavor to agree upon the Fair Market Base Rental.  If they are unable to so agree within thirty
(30) days after receipt by Landlord of Tenant’s notice of exercise of the
Extension Option (or, if applicable, the exercise of the Expansion Option, the
Alternative Expansion Option or the Suite 2100 Expansion Option), Landlord and
Tenant shall mutually select a licensed real estate broker who is active in the
leasing of office space in the general vicinity of the Property.  Landlord shall submit Landlord’s
determination of Fair Market Base Rental and Tenant shall submit Tenant’s
determination of Fair Market Base Rental to such broker, at such time or times
and in such manner as Landlord and Tenant shall agree (or as directed by the
broker if Landlord and Tenant do not promptly agree).  The broker shall select either Landlord’s or
Tenant’s determination as the Fair Market Base Rental, and such determination
shall be binding on Landlord and Tenant. 
If Tenant’s determination is selected as the Fair Market Base Rental,
then Landlord shall bear all of the broker’s cost and fees.  If Landlord’s determination is selected as
the Fair Market Base Rental, then Tenant shall bear all of the broker’s cost
and fees.

 

                                2.2.4        In
the event the Fair Market Base Rental for any Extension Period has not been
determined at such time as Tenant is obligated to pay Base Rent for such
Extension Period, Tenant shall pay as Base Rent pending such determination, the
Base Rent in effect for the Premises immediately prior to the Extension Period;
provided, that upon the determination of the applicable Fair Market Base
Rental, any shortage of Base Rent paid, together with interest at the rate
specified in the Lease, shall be paid to Landlord by Tenant.

 

                                2.2.5        In
no event shall (a) the Base Rent during the Extension Period be less than the
Base Rent in effect immediately prior to such Extension Period, (b) the Base
Rent per rentable square foot for the Expansion Space, the Alternative
Expansion Space, or the Additional Expansion Space be less than the Base Rent per rentable square foot payable for the
original Premises immediately prior to the date the Term commences for the
Expansion Space, the Alternative Expansion Space or the Additional Expansion
Space, as the case may be, or (c) the Base Rent per rentable square foot during
the Expansion Space Extension Term be less than the Base Rent per rentable
square foot in effect immediately prior to such Expansion Space Extension Term.

 

14

 

                                2.2.6        The
term of this Lease, whether consisting of the initial Term alone or the initial
Term as extended by the Extension Period (if the Extension Option is
exercised), or the Expansion Space Extension Term (if the Term is extended by
the Expansion Space Extension Term) is referred to in this Lease as the “Term.”

ARTICLE
3

BASE
RENT

Tenant shall pay, without prior notice or
demand, to Landlord or Landlord’s agent at the address set forth in
Section 4.2 of the Summary, 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 Term, without any setoff or deduction
whatsoever.  The Base Rent for the first
full month of the Term which occurs after the expiration of any free rent
period shall be paid at the time of Tenant’s execution of this Lease.  If any “Rent,” as that term is defined in
Section 4.1 below, payment date (including the Lease Commencement Date) falls
on a day of the month other 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 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 terms 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.  In addition to paying the Base Rent specified in
Article 3 of this Lease, Tenant shall pay “Tenant’s
Share” of the annual “Direct
Expenses,” as those terms are defined in Sections 4.2.6 and 4.2.2 of
this Lease, respectively, which are in excess of the amount of Direct Expenses
applicable to the “Base Year,” as that term is defined in Section 4.2.1, below;
provided, however, that in no event shall any decrease in Direct Expenses for
any Expense Year below Direct Expenses for the Base Year entitle Tenant to any
decrease in Base Rent or any credit against sums due under this Lease.  Such payments by Tenant, together with any
and all other amounts payable by Tenant to Landlord pursuant to the terms 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.  All sums payable to Landlord on demand under the terms of this Lease
shall be payable within thirty (30) days after notice from Landlord of the
amounts due.  Without limitation on other
obligations of Tenant which
survive the expiration of the Term, the obligations of Tenant to pay the
Additional Rent provided for in this Article 4 shall survive the expiration of
the 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:

 

15

4.2.1                “Base Year”
shall
mean the period set forth in Section 5 of the Summary.

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

4.2.3                “Expense Year” shall mean
each calendar year after the Base Year in which any portion of the Term falls,
through and including the calendar year in which the 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 the Base Year or any
Expense Year because of or in connection with the management, maintenance,
security, repair, replacement, restoration or operation of the Project, or any
portion thereof.  Without limiting the
generality of the foregoing, Operating Expenses shall specifically include any
and all of the following without duplication: 
(i) the cost of supplying all utilities, 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 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, 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) payments under any
equipment rental agreements and the fair rental value of any management office
space; (viii) wages, salaries and other compensation and benefits, including
taxes levied thereon, of all persons engaged in the operation, maintenance and
security of the Project, who are at or below the level of building manager, all
such wages, salaries and other compensation to be appropriately allocated for
persons who also perform duties unrelated to the Project; (ix) [intentionally
deleted]; (x) operation, repair, maintenance and replacement of all systems and
equipment and components thereof of the Project not covered in clause (i) above
in this Section 4.2.4; (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
roofs and re-roofing; (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; (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, or reduce
current or future Operating Expenses, (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 

 

16

(D)
that are required under any governmental law or regulation; provided, however,
that any capital expenditure shall be amortized with interest over its useful
life as Landlord shall reasonably determine; (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 Project.  Operating Expenses
shall be net of rebates, credits, recoveries under the insurance maintained by
Landlord on the Building and similar items of which Landlord receives a
monetary benefit.

Notwithstanding
any provision contained in this Lease to the contrary, Operating Expenses shall
not include the following:

1.                                            the cost of alterations, capital improvements (unless required by any
new law, or which
are intended to effect economies in the operation or maintenance of the
Project, or any portion thereof, or reduce current or future Operating
Expenses, in which event such capital
improvement shall be amortized over its useful life, with interest at Landlord’s
cost of funds), equipment replacements, and other items which under generally accepted accounting principles are properly classified as
capital expenditures;

2.                                            painting or decorating other than in common or public areas of the
building;

3.                                            any tenant work performed or alteration of space leased to Tenant or
other tenants or occupants of the
building, whether such work or alteration is performed for the initial
occupancy by such tenant or occupant or thereafter;

4.                                            any cash or other consideration paid by Landlord on account of, with
respect to or in lieu of the tenant work or
alterations described in Clause 3 above;

5.                                            ground rent;

6.                                            depreciation or amortization, except as provided in exclusion number 1
above;

7.                                            repairs necessitated by the negligence of Landlord or required to cure
violations of laws in effect on the lease execution date and any other expenses incurred in connection
with upgrading the building or Project to comply
with insurance requirements, codes, statues or other laws including without
limitation ADA;

8.                                            costs of enforcement of leases;

9.                                            interest on indebtedness or any costs of financing or refinancing the
building, building equipment, or
building improvements, replacements, or repairs.

10.                                      management fees in excess of three percent (3%) of rental collections;

11.                                      corporate overhead and compensation paid to officers or executives of
the

 

17

                                                     Landlord;

12.                                      leasing commissions and advertising and promotional expenses;

13.                                      legal fees;

14.                                      the cost of repairs in excess of any commercially reasonable deductible
incurred by reason of fire or other casualty or condemnation to the extent that
either (a) Landlord is compensated therefore
through proceeds of insurance or condemnation awards; (b) Landlord failed to obtain insurance against such fire or casualty,
if insurance was available at a commercially
reasonable rate, against a risk of such nature at the time of same; or (c)
Landlord is not fully compensated therefore
due to the coinsurance provisions of its insurance policies on account of
Landlord’s failure to obtain a sufficient amount of coverage against such risk;

15.                                      purchase of works of art, provided that Landlord may include the costs
of maintenance of, and insurance on, any works of art (whether existing on the
Commencement Date or purchased subsequent thereto);

16.                                      overtime HVAC costs or electricity costs if charged separately to other
building tenants;

17.                                      the cost of performing additional services or installation to or for
tenants to the extent that such
service exceeds that available to Tenant without charge hereunder;

18.                                      “takeover expenses” (i.e., expenses incurred by Landlord with respect to space located in another
building of any kind or nature in connection with the leasing of space in the
Building);

19.                                      any amounts payable by Landlord by way of indemnity or for damages or
which constitute a fine, interest, or penalty, including interest (except as
part of amortization of capital improvements as provided in number 1 above) or
penalties for any late payments of operating costs;

20.                                      any improvement
installed or work performed or any other cost or expense incurred by Landlord for any tenant space in order to comply with the requirements for the
obtaining or renewal of a certificate of occupancy for the building or any space therein;

21.                                      any cost representing an amount paid for services or materials to a
related person, firm, or entity to the
extent such amount exceeds the amount that would be paid for such services or
materials at the then existing market rates to
an unrelated person, firm, or corporation;

22.                                      the operating costs incurred by Landlord relative to retail stores, deli’s,
or restaurants;

23.                                      the cost of
overtime or other expense to Landlord in curing its defaults in excess of costs
absent such default,

 

18

 

24.                                      reserves of any
kind.

If in either the Base
Year or any Expense Year, Landlord is not furnishing any particular work or
service (the cost of which, if performed by Landlord, would be included in
Operating Expenses) to a tenant who has undertaken to perform such work or
service in lieu of the performance thereof by Landlord, Operating Expenses
shall be deemed to be increased by an amount equal to the additional Operating
Expenses which would reasonably have been incurred during such period by
Landlord if it had at its own expense furnished such work or service to such
tenant.  If the Project is not at least
ninety-five percent (95%) occupied during all or a portion of the Base
Year or any Expense Year, Landlord shall make an appropriate adjustment to the
components of Operating Expenses for such year to determine the amount of
Operating Expenses that would have been incurred had the Project been ninety-five
percent (95%) occupied; and the amount so determined shall be deemed to have
been the amount of Operating Expenses for such year.  Operating Expenses for the Base Year shall
not include market-wide cost increases due to extraordinary non-recurring
circumstances, including, but not limited to, “Force Majeure,” as that term is
defined in Section 29.16 below, boycotts, strikes, conservation surcharges,
embargoes or shortages, or amortized costs relating to capital improvements.

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 the Base Year or 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 and
operation of the Project, or any portion thereof.

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

 

19

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.  Any special assessments shall be amortized
over the maximum period of time permitted by law and Tenant shall pay Tenant’s
Share of any special assessments (together with interest thereon at the rate
charged Landlord by the assessing entity) as a component of Tenant’s Share of
Taxes through the lesser of (i) the full amortized period of the special
assessment, or (ii) the end of the Term. 
If any special assessment is not payable in installments and less than
ten (10) years remains in the Term, any special assessment shall be apportioned
between Landlord and Tenant as if such special assessment were payable over ten
(10) years, with Tenant responsible to pay only that portion then deemed due
within the remaining Term as a component of Tenant’s Share of Taxes.  For any partial calendar year at the
beginning or the end of the Term, Taxes shall be prorated on the basis of a
365-day year by computing Tenant’s Share of Taxes for the entire year and then
prorating such amount for the number of days during such year included in the
Term.

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 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 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
within thirty (30) days after Landlord invoices Tenant therefore, Tenant’s
Share of any such increased Tax Expenses included by Landlord as Tax Expenses
pursuant to the terms of this Lease. 
Notwithstanding anything to the contrary contained in this Section
4.2.5, 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, transfer taxes and fees, federal and state net income
taxes, and other taxes to the extent applicable to Landlord’s general or net
income (as opposed to rents, receipts or income attributable to operations at
the Project), (ii) any items included as Operating Expenses, and (iii) any
items paid by Tenant under Section 4.5 of this Lease.

4.2.5.4     Notwithstanding
anything to the contrary set forth in this Lease, the amount of Tax Expenses
for the Base Year and any Expense Year shall be calculated without taking into
account any decreases in real estate taxes obtained in connection with
Proposition 8, and, therefore, the Tax Expenses in the Base Year and/or an
Expense Year may be greater than those actually incurred by Landlord, but
shall, nonetheless, be the Tax Expenses due under this Lease; provided that (i)
any costs and expenses incurred by Landlord in securing any Proposition 8
reduction shall not be included in Direct Expenses for purposes of this Lease,
and (ii) tax refunds under Proposition 8 shall not be deducted from Tax
Expenses, but rather shall be the sole property of Landlord.  Landlord and Tenant acknowledge that this
Section 4.2.5.4 is not intended to in any way affect (A) the inclusion in Tax Expenses
of the statutory two percent

 

20

(2.0%)
annual increase in Tax Expenses (as such statutory increase may be modified by
subsequent legislation), or (B) the inclusion or exclusion of Tax Expenses
pursuant to the terms of Proposition 13, which shall be governed pursuant to
the terms of Sections 4.2.5.1 through 4.2.5.3, above.

4.2.5.5     Proposition 13 Protection.  Notwithstanding any other provision of this Lease to the
contrary, if during the first three (3) calendar years in the Term (including
the calendar year in which the Commencement Date occurs), any sale,
refinancing, or change in ownership of the Building (a “Disposition”)
is consummated and, as a result, all or part of the Building is reassessed (“Reassessment”) for real estate tax purposes by the
appropriate government authority under the terms of Proposition 13 (as adopted
by the voters of the State of California in the June 1978 election), the terms
of this Subsection 4.2.5.5 shall apply.

(i)            For the
purposes of this Subsection 4.2.5.5, the term Tax Increase (“Tax Increase”) shall mean that portion of the Tax Expenses
that is attributable solely to the Reassessment.  Accordingly, a Tax Increase shall not include
any portion of the Tax Expenses that is (a) attributable to the initial
assessment of the value of the Project or any portion thereof; (b) attributable
to assessments pending immediately before the Reassessment that were conducted
during, and included in, that Reassessment or that were rendered unnecessary
following the Reassessment; (c) attributable to the annual inflationary increase
in real estate taxes; or (d) part of Tax Expenses incurred or considered to be
incurred during the Base Year as determined by this Lease.

(ii)           If a
Reassessment relates to a Disposition that occurs during the first (1st) full
or partial calendar year of the Term, then Tenant shall not be obligated to pay
(a) any portion of the Tax Increase during such first (1st) full or partial
calendar year, (b) two-thirds (2/3) of the Tax Increase during the second (2nd)
calendar year following the Commencement Date, (c) one-third (1/3) of the Tax
Increase during the third (3rd) calendar year following the Commencement
Date.  Beginning in the fourth (4th)
calendar year following the Commencement Date Tenant shall be obligated to pay
the entire amount of the Tax Increase.

(iii)          If a
Reassessment relates to a Disposition that occurs during the second (2nd)
calendar year of the Term, then Tenant shall not be obligated to pay (a)
two-thirds (2/3) of the Tax Increase during the second (2nd) calendar year
following the Commencement Date, (b) one-third (1/3) of the Tax Increase during
the third (3rd) calendar year following the Commencement Date.  Beginning in the fourth (4th) calendar year
following the Commencement Date Tenant shall be obligated to pay the entire
amount of the Tax Increase.

(iv)          If a
Reassessment relates to a Disposition that occurs during the third (3rd)
calendar year of the Term, then Tenant shall not be obligated to pay one-third
(1/3) of the Tax Increase during the third (3rd) calendar year following the
Commencement Date.  Beginning in the
fourth (4th) calendar year following the Commencement Date Tenant shall be
obligated to pay the entire amount of the Tax Increase.

4.2.6                “Tenant’s Share” shall mean the percentage
set forth in Section 6 of the Summary, determined by dividing the rentable
square feet of space in the Premises by the rentable square feet of space in
the Building.  If rentable square feet of
space in the Premises is

21

changed by Tenant’s leasing of
additional space hereunder or for any other reason, Tenant’s Share shall be
adjusted accordingly.

4.3           Cost Pools.  Landlord shall have the right, from time to time, to
equitably allocate some or all of the Direct Expenses for the Project among
different portions or occupants of the Project (the “Cost Pools”),
in Landlord’s reasonable discretion applied in a consistent way between Expense
Years and consistent with similar office buildings in the financial district of
San Francisco.  Such Cost Pools may
include, but shall not be limited to, the office space tenants of the Project,
and the retail space tenants of the Project. 
The Direct Expenses within each such Cost Pool shall be allocated and
charged to the tenants within such Cost Pool in an equitable manner.

4.4           Calculation and Payment of Additional Rent.  If for any Expense Year ending or commencing within
the Term, Tenant’s Share of Direct Expenses for such Expense Year exceeds
Tenant’s Share of Direct Expenses applicable to the Base Year, then Tenant
shall pay to Landlord, in the manner set forth in Section 4.4.1, below, and as
Additional Rent, an amount equal to the excess (the “Excess”).

4.4.1                Statement
of Actual Direct Expenses and Payment by Tenant.  Landlord shall endeavor to give to Tenant following
the end of each Expense Year, a statement (the “Statement”)
in reasonable detail which shall state the Direct Expenses incurred or accrued
for such preceding Expense Year and the Direct Expenses for the Base Year, and
which shall indicate the amount of the Excess. 
Upon receipt of the Statement for each Expense Year commencing or ending
during the Term, if an Excess is present, Tenant shall pay, within thirty (30)
days following receipt of the Statement, the full amount of the Excess for such
Expense Year, less the amounts, if any, paid during such Expense Year as “Estimated
Excess,” as that term is defined in Section 4.4.2, below, and any over payment
shall be credited to Rent or refunded within thirty (30) days if the Lease has
not terminated or expired.  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 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 an Excess if present, Tenant shall immediately pay to Landlord such
amount.  The provisions of this Section
4.4.1 shall survive the expiration or earlier termination of the Term.

4.4.2                Statement of Estimated Direct Expenses.  In addition, Landlord shall endeavor to
give Tenant a yearly expense estimate statement (the “Estimate
Statement”) which shall set forth 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
excess (the “Estimated Excess”) as calculated
by comparing the Direct Expenses for such Expense Year, which shall be based
upon the Estimate, to the amount of Direct Expenses for the Base Year.  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 Excess under this Article 4, nor
shall Landlord be prohibited from revising any Estimate Statement or Estimated
Excess theretofore delivered to the extent necessary, but not more than one (1)
time for any Expense Year.  Thereafter,
Tenant shall pay, with its next installment of Base Rent due, a fraction of the
Estimated Excess for the then-current Expense Year (reduced by any amounts paid
pursuant to 

 

22

the
next 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 Excess set forth in the previous Estimate Statement delivered
by Landlord to Tenant.  If any Taxes paid by Landlord and
previously included in Direct Expenses are refunded, Landlord shall promptly pay Tenant an amount
equal to the amount of such refund (less the reasonable expenses incurred by
Landlord in obtaining such refund) multiplied by Tenant’s Share in effect for
the period to which such refund relates.

4.4.3                Tenant’s
Audit Rights.               Tenant, at
its expense, shall have the right upon fifteen (15) days prior written notice
to Landlord ( “Tenant’s Audit Notice”) to be given only within ninety (90) days after Tenant receives the annual Statement of
Direct Expenses to audit Landlord’s books and records
relating to such Statement for such immediately preceding Expense Year, subject
to the following terms and conditions: 
(a) No audit shall be conducted at any time that an Event of Default
exists of any of the terms of this Lease; (b) any audit shall be conducted only
by certified public accountants practicing for an independent accounting firm,
employed by Tenant on an hourly or fixed fee basis, and not on a contingency
fee basis; and (c) Tenant shall not audit Landlord’s books and records more
than one (1) time for any Expense Year. 
Tenant acknowledges that Tenant’s right to inspect Landlord’s books and
records with respect to Direct Expenses for the preceding Expense Year is for
the exclusive purpose of determining whether Landlord has complied with the
terms of the Lease with respect to Direct Expenses.  Tenant shall have ninety (90) days after
Tenant’s Audit Notice to complete Tenant’s inspection of Landlord’s books and
records concerning Direct Expenses at
Landlord’s accounting office.  During its
inspection Tenant agrees to request, in writing, all pertinent documents
relating to the inspection.  Landlord
will provide such documents to Tenant within ten (10) days from Landlord’s
receipt of the request and Tenant shall not remove such records from Landlord’s
accounting office, but Tenant shall have the right to make copies of the
relevant documents at Tenant’s expense. 
Tenant shall deliver to Landlord a copy of the results of such audit
within fifteen (15) days of its receipt by Tenant.  The nature and content of any audit are
strictly confidential.  Tenant, on behalf
of its accountant, employees and agents shall not disclose the information
obtained from the audit to any other person or entity, including, without
limitation, any other tenant in the Building, or any agent, employee, officer,
shareholder, partner, accountant or attorney of such tenant in the
Building.  Except for a Permitted
Transferee, no assignee shall conduct an audit for any period during which such
assignee was not in possession of the Premises. 
If Tenant’s audit shows that Direct Expenses are overstated by more than five
percent (5%), then Landlord agrees to pay the reasonable costs of such audit, not to exceed Two Thousand and 00/100 Dollars
($2,000.00) per audit.

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

4.5.1                Tenant shall be liable for and shall
pay 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,

 

23

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 Project are assessed, then the Tax Expenses levied against
Landlord or the property by reason 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.

4.6           Notwithstanding
anything contained herein to the contrary, Landlord may adjust Operating
Expenses and submit a corrected Statement with respect to Operating Expenses no
more than two (2) years after the end of an Expense Year; provided, however,
such two (2) year limitation shall not apply to Taxes.

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 sole discretion.

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) offices of any health care professionals or service
organization; (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 shall not allow
occupancy density of use of the Premises which is greater than the average
density of the other tenants of the Building. 
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

 

24

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.  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 Project, 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.

ARTICLE
6

SERVICES
AND UTILITIES

6.1           Standard Tenant Services.  Landlord shall provide the following services on all
days (unless otherwise stated below) during the Term.

6.1.1                Subject to limitations imposed by
all governmental rules, regulations and guidelines applicable thereto, Landlord
shall provide adequate heating and air conditioning (“HVAC”)
to maintain the temperature in the Premises between sixty-eight degrees (68o)
Fahrenheit and seventy-five degrees (75o) Fahrenheit  from 6:30 A.M. to 6:00 P.M. Monday through Friday (except on Holidays)
(collectively, the “Building Hours”).  “Holidays”
include the date of observation of New Year’s Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, Christmas Day and, at Landlord’s discretion,
other locally or nationally recognized holidays consistent with similar class
office buildings located in the San Francisco financial district.

6.1.2                Landlord shall provide adequate
electrical wiring and facilities in the Building core for connection to Tenant’s
power distribution, wiring, lighting fixtures and incidental use equipment
adequate to service a connected electrical load of the incidental use equipment
and lighting fixtures averaging three (3) watts per usable square foot of the
Premises during the Building Hours, and the electricity so furnished for
incidental use equipment and lighting fixtures will be at a nominal one hundred
twenty (120) volts and no electrical circuit for the supply of such incidental
use equipment will require a current capacity exceeding twenty (20)
amperes.  Tenant will design Tenant’s
electrical system serving any equipment producing nonlinear electrical loads to
accommodate such nonlinear electrical loads, including, but not limited to,
oversizing neutral conductors, derating transformers and/or providing
power-line filters.  Engineering plans provided
by Tenant shall include a calculation of Tenant’s fully connected electrical
design load with and without demand factors and shall indicate the number of
watts of unmetered and submetered loads. 
Tenant shall be responsible for replacement of lamps, starters and ballasts
for non-Building standard lighting fixtures within the Premises.

6.1.3                Landlord shall provide city water
from the regular Building outlets for drinking, lavatory and toilet purposes in
the Common Areas.

 

25

6.1.4                Landlord shall provide janitorial
services to the Premises in accordance with the standards set forth on Exhibit
G, except the date of observation of the Holidays, in and about the Premises
and window washing services in a manner consistent with other comparable buildings
in the vicinity of the Building.

6.1.5                Landlord shall provide nonexclusive,
non-attended automatic passenger elevator service during the Building Hours,
and shall have at least one elevator available at all other times.

6.1.6                Landlord shall provide nonexclusive
freight elevator service subject to scheduling by Landlord and charges for such
service as determined by Landlord from time-to-time.

Tenant shall cooperate
fully with Landlord at all times and abide by all regulations and requirements
that Landlord may reasonably prescribe for the proper functioning and
protection of the HVAC, electrical, mechanical and plumbing systems.

6.2           Overstandard Tenant Use.  Tenant shall not, without Landlord’s prior written
consent, use heat-generating machines, machines other than normal fractional
horsepower office machines, or equipment or lighting other than Building
standard lights in the Premises, which may affect the temperature otherwise
maintained by the air conditioning system or increase the water required to be
furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of
this Lease.  If such consent is given,
Landlord shall have the right to install supplementary air conditioning units
or other facilities in the Premises, including supplementary or additional
metering devices, and the cost thereof, including the cost of installation,
operation and maintenance, increased wear and tear on existing equipment and
other similar charges, shall be paid by Tenant to Landlord upon billing by
Landlord.  If Tenant uses water,
electricity, heat or air conditioning in excess of that required to be
furnished by Landlord pursuant to Section 6.1 of this Lease, Tenant shall pay
to Landlord, upon billing, the cost of such excess consumption, the cost of the
installation, operation, and maintenance of equipment which is installed in
order to supply such excess consumption, and the cost of the increased wear and
tear on existing equipment caused by such excess consumption; and Landlord may
install devices to separately meter any increased use and in such event Tenant
shall pay the increased cost directly to Landlord, on demand, at the rates
charged by the public utility company furnishing the same, including the cost
of such additional metering devices. 
Tenant’s use of electricity shall never exceed the capacity of the
feeders to the Project or the risers or wiring installation, and subject to the
terms of Section 29.32, below, Tenant shall not install or use or permit the
installation or use of any computer or electronic data processing equipment in
the Premises, without the prior written consent of Landlord.  If Tenant desires to use heat, ventilation or
air conditioning during hours other than those for which Landlord is obligated
to supply such utilities pursuant to the terms of Section 6.1 of this Lease,
Tenant shall give Landlord such prior notice, if any, as Landlord shall from
time to time establish as appropriate, of Tenant’s desired use in order to
supply such utilities, and Landlord shall supply such utilities to Tenant at
such hourly cost to Tenant (which shall be treated as Additional Rent) as
Landlord shall from time to time establish. 
Subject to change by Landlord upon reasonable notice to Tenant, as of
the date of this Lease the hourly cost established by Landlord for use of fans
only is $150 per hour, and for full heating, ventilating and air conditioning
is $250 per hour, with a minimum of four (4) hours per request.

 

26

6.3           Interruption of Use.  Except as provided in Section 6.4 below,
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; 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.  Furthermore, Landlord shall not be liable
under any circumstances for a 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.  Landlord may comply with voluntary
controls or guidelines promulgated by any governmental entity relating to the
use or conservation of energy, water, gas, light or electricity or the
reduction of automobile or other emissions without creating any liability of
Landlord to Tenant under this Lease, provided that the Premises are not thereby
rendered untenantable.

6.4           Interruption of
Services.  In the event of an
interruption in, or failure or inability to provide electricity, water, or air
conditioning (a “Service Failure), such
Service Failure shall not, regardless of its duration, constitute an eviction
of Tenant, constructive or otherwise, or impose upon Landlord any liability
whatsoever, including, but not limited to, liability for consequential damages
or loss of business by Tenant or, except as provided herein, entitle Tenant to
an abatement of rent or to terminate this Lease.

 

                                (a)           If any Service Failure not caused by
Tenant or its Representatives prevents Tenant from reasonably using a material
portion of the Premises and Tenant in fact ceases to use such portion of the
Premises, Tenant shall be entitled to an abatement of Base Rent and Additional
Rent with respect to the portion of the Premises that Tenant is prevented from
using by reason of such Service Failure in the following circumstances:  (i) if Landlord fails to correct the Service
Failure within two (2) business days following Landlord’s receipt of a notice
from Tenant of the occurrence of the Service Failure, and such failure has
persisted and continuously prevented Tenant from using a material portion of
the Premises during that period, the abatement of rent shall commence on the
day of the Service Failure and continue until Tenant is no longer so prevented
from using such portion of the Premises.

 

                                (b)           If a Service Failure is caused by
Tenant or its Representatives, Landlord shall nonetheless remedy the Service
Failure, at the expense of Tenant, pursuant to Landlord’s maintenance and
repair obligations under this Lease, but Tenant shall not be entitled to an
abatement of rent or to terminate this Lease as a result of any such Service
Failure.

 

                                (c)           Notwithstanding Tenant’s entitlement
to rent abatement under the preceding provisions, Tenant shall continue to pay
Tenant’s then current rent until such time as Landlord and Tenant agree on the
amount of the rent abatement.  If
Landlord and Tenant are unable to agree on the amount of such abatement within
ten (10) Business Days of the date they commence negotiations

 

27

 regarding the abatement, then either party may
submit the matter to binding arbitration pursuant to Sections 1280 et  seq.
of the California Code of Civil Procedure.

 

                                (d)           Where the cause of a Service Failure
is within the control of a public utility or other public or quasi-public
entity outside Landlord’s control, notification to such utility or entity of
the Service Failure and request to remedy the failure shall constitute “reasonable
efforts” by Landlord to remedy the Service Failure.

                                (f)            Tenant hereby waives the provisions
of California Civil Code Section 1932(1) or any other applicable existing or
future law, ordinance or governmental regulation permitting the termination of
this Lease due to such interruption, failure or inability.

ARTICLE
7

REPAIRS

Tenant shall, at Tenant’s
own expense, pursuant to the terms of this Lease, including without limitation
Article 8 hereof, keep the Premises, including all improvements, fixtures
and furnishings therein, and the floor coverings of the Building on which the
Premises are located, in good order, repair and condition at all times during
the Term.  In addition, Tenant shall, at
Tenant’s own expense, but under the supervision and subject to the prior
approval of Landlord, and within any reasonable period of time specified by
Landlord, pursuant to the terms of this Lease, including without limitation
Article 8 hereof, promptly and adequately repair all damage to the
Premises and replace or repair all damaged, broken, or worn fixtures and
appurtenances, except for damage caused by ordinary wear and tear or beyond the
reasonable control of Tenant;  provided
however, that, at Landlord’s option, or if Tenant fails to make such repairs,
Landlord may, but need not, make such repairs and replacements, and Tenant
shall pay Landlord its actual out-of-pocket cost thereof, including a
percentage of the cost thereof, not to exceed ten percent (10%) (to be
uniformly established for the Project) sufficient to reimburse Landlord for all
overhead, general conditions, fees and other costs or expenses arising from
Landlord’s involvement with such repairs and replacements forthwith upon being
billed for same.  Landlord may, but shall
not be required to, enter the Premises at all reasonable times to make such
repairs, alterations, improvements or additions to the Premises or to the
Project or to any equipment located in the Project as Landlord shall desire or
deem necessary or as Landlord may be required to do by governmental or
quasi-governmental authority or court order or decree.  Tenant hereby waives any and all rights under
and benefits of subsection 1 of Section 1932 and Sections 1941 and 1942 of the
California Civil Code or under any similar law, statute, or ordinance now or
hereafter in effect.

ARTICLE
8

ADDITIONS
AND ALTERATIONS

8.1           Landlord’s Consent to Alterations.  Tenant may not make any improvements, alterations,
additions 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

 

28

requested by Tenant not less than thirty (30) 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 any other provision contained herein, Tenant
shall not be required to obtain Landlord’s prior consent for minor,
non-structural Alterations that (a) do not affect either the electrical system
outside of the Premises or any of the other Building systems, (b) are not
visible from the exterior of the Premises, and (c) cost less than Fifty
Thousand Dollars ($50,000), so long as Tenant gives Landlord notice of the
proposed Alterations at least ten (10) days prior to commencing the Alterations
and complies with all of the following provisions of this Article 8 (except
that Tenant shall not be required to obtain Landlord’s approval of any plans or
specifications therefor).  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.

8.2.1                Landlord
may impose, as a condition of its consent to any and all Alterations or repairs
of the Premises or about the Premises, such reasonable, non-discriminatory
requirements as Landlord in its sole discretion may deem desirable, including,
but not limited to, the requirement that Tenant utilizes for such purposes only
contractors, subcontractors, materials, mechanics and materialmen selected by
Tenant and approved by Landlord, the requirement that upon Landlord’s request,
Tenant shall, at Tenant’s expense, remove such Alterations upon the expiration
or any early termination of the Term, and the requirement that all Alterations
conform in terms of quality and style to the Building’s standards established
by Landlord.  Notwithstanding
the foregoing, Landlord shall have the right to designate contractors and
subcontractors for Alterations affecting either the structure of the Building,
the electrical system outside the Premises, or other Building systems.  At the time Landlord consents to any
Alterations, Landlord shall indicate which of Tenant’s Alterations Tenant must
remove at Tenant’s sole cost and expense at the end of the Term.  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 Francisco, all in conformance with Landlord’s
construction rules and regulations.

8.2.2                The
“Base Building” shall include the
structural portions of the Building, and the public restrooms and the systems
and equipment located in the internal core of the Building on the floor or
floors on which the Premises are located. 
The term “Base Building Elements” shall mean
the (a) structural portions of the Building, (b) exterior of the Building
(including the curtain wall and curtain wall elements), (c) public restrooms,
(d) exit staircases, (e) fire-rated exit corridors, (f) the elevators and other
shafts and portions of the Building core, and (g) mechanical systems and
equipment located in the internal core of the Building on the floor or floors
on which the Premises are located.  If
governmentally required changes to the Base Building Elements are triggered by
the initial Tenant Improvements described in Exhibit B and such changes cause
work on the Base Building Elements in any way, then Landlord shall make such
changes to the Base Building Elements at Tenant’s expense.  Notwithstanding the foregoing, Landlord shall
be responsible, at Landlord’s expense, for (x) any work required for the
restrooms and common areas located on the eighteenth (18th), twenty-first
(21st), twenty-

 

29

second
(22nd) and twenty-third (23rd) floors of the Building in their presently
existing condition (prior to any Tenant Improvements) to comply with all
applicable Laws, including the then applicable building codes for the City of
San Francisco, in effect as of the date that construction commences on the
initial Tenant Improvements on the eighteenth (18th), twenty-first (21st),
twenty-second (22nd) and twenty-third (23rd) floors of the Building, and (y)
correcting any building code deficiencies for tenant improvements existing in
the Premises prior to commencing construction of Tenant Improvements, if such
tenant improvements are retained in place without material change by
Tenant.  If governmentally required
changes to the Base Building Elements are triggered by (i) Tenant’s use of the
Premises other than for ordinary office purposes, or (ii) construction of any
Alterations by Tenant, then Landlord shall make such changes to the Base
Building Elements at Tenant’s expense; provided, however, prior to commencing
such changes to the Base Building Elements Landlord shall notify Tenant of such
changes together with the estimated cost therefore.  Tenant shall then have the opportunity to
change its use or Alterations to avoid or minimize Tenant’s obligation for
costs of changes to the Base Building Elements. 
Landlord, at Landlord’s sole cost and expense, shall make all other
repairs, replacements, alterations, or improvements required to comply with
applicable Laws to the extent such Laws relate to the Base Building and are not
the responsibility of Tenant as aforesaid.

8.2.3                In performing the work of any
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 Francisco in accordance with Section 3093 of the Civil Code
of the State of California or any successor statute.

8.3           Payment for Improvements.  If payment is made directly to contractors, Tenant
shall comply with Landlord’s requirements for final lien releases and waivers
in connection with Tenant’s payment for work to contractors.  Whether or not Tenant orders any work
directly from Landlord, Tenant shall pay to Landlord a percentage of the cost
of such work sufficient to compensate Landlord for all overhead, general
conditions, fees and other costs and expenses arising from Landlord’s
involvement with such work, provided that such percentage payable to Landlord
shall not exceed three percent (3%) of the cost of 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 approved by Landlord covering the construction of such
Alterations, and such other insurance as Landlord may require, it being
understood and agreed that all of such Alterations shall be insured by Tenant
pursuant to Article 10 of this Lease immediately upon completion thereof.  As a condition of Landlord’s approving
Alterations costing more than One Hundred Fifty Thousand Dollars ($150,000)
Landlord may request Tenant to demonstrate to Landlord’s reasonable
satisfaction that Tenant has the financial

 

 

30

resources to pay the costs of constructing such
Alterations.  If following such request
Tenant does not provide to Landlord financial statements demonstrating that
Tenant has the financial resources to fully pay for the Alterations without
materially adversely affecting Tenant’s financial condition, then prior to
Tenant commencing construction of such Alterations, Landlord may, in its
discretion, notify Tenant that Tenant shall be required to obtain a lien and
completion bond or some alternate form of security satisfactory to Landlord in
an amount sufficient to ensure the lien-free completion of such Alterations and
naming Landlord as a co-obligee.

8.5           Landlord’s Property.  All
Alterations, improvements, fixtures, 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 that Tenant may remove any Alterations, improvements, fixtures and/or
equipment which Tenant can substantiate to Landlord have not been paid for with
any Tenant 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 (i.e., that portion of the
Premises where the Alterations are removed) to a building standard tenant
improved condition.  At the time
Landlord consents to any Alterations, Landlord shall indicate which of Tenant’s
Alterations Tenant must remove at Tenant’s sole cost and expense at the end of
the Term.  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 return the affected portion of the Premises to a building standard
tenant improved condition, then 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
installation, placement, removal or financing of any such Alterations,
improvements, fixtures and/or equipment in, on or about the Premises, which
obligations of Tenant shall survive the expiration or earlier termination of
this Lease.

8.6           Alteration Plan Submission.  Before making
any Alterations, Tenant shall submit to Landlord for Landlord’s prior approval
reasonably detailed final plans and specifications prepared by a licensed
architect or engineer, a copy of the construction contract, including the name
of the contractor and all subcontractors selected in accordance with Section
8.2 above to make the Altera­tions and a copy of the contractor’s license.  Tenant shall reimburse Landlord upon demand
for any expenses incurred by Landlord in connection with any Alterations made
by Tenant, which shall include (a) reasonable fees charged by Landlord’s
contractors or consultants to review plans and specifications prepared by
Tenant and to update the existing as-built plans and specifications of the
Building to reflect the Alterations, and (b) Landlord’s “in-house” fee for
review of plans and specifications for Alterations, which “in-house” fee shall
not to exceed $500 per request.  Tenant
shall obtain all applicable permits, authorizations and governmental approvals
and deliver copies of the same to Landlord before commencement of any
Alterations.  Within thirty (30) days following
the completion of any Alterations Tenant shall deliver to the Building
management office (i) “as built” plans showing the completed Alterations, (ii) all permits, approvals and other documents issued by any
governmental agency in connection with the Alterations, and (iii) certificate
of occupancy, or evidence of closure by all applicable building inspectors. 
The “as built” plans shall be “hard copy” on paper and in digital form
(if done on CAD), and show the Alterations in reasonable detail, including (a)
the location of walls, partitions and doors, including fire exits and ADA paths
of travel, (b) electrical, plumbing and 

 

31

life safety fixtures, and (c) a
reflected ceiling plan showing the location of heating, ventilating and air
conditioning registers, lighting and life safety systems.

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, by endorsement
to the title insurance policies of Landlord and any lender having a lien on the
Building (if any such endorsement protects Landlord and Landlord’s lender to
the same extent as does a bond) or otherwise, at Tenant’s expense, within
fifteen (15) business 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
Project 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 Project 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.

ARTICLE
10

INSURANCE

10.1         Assumption of Risk, Indemnification and Waiver.

10.1.1              Damage to Tenant and Tenant’s Property.  Tenant hereby assumes all risk of damage to
property in, upon or about the Premises from any cause whatsoever and agrees
that Landlord, its partners, subpartners and their respective officers, agents,
servants, employees, and independent contractors (collectively, “Landlord Parties”) shall not be liable for, and are hereby
released from any responsibility for, any damage to property or resulting from
the loss of use thereof, which damage is sustained by Tenant or by other
persons claiming through Tenant.

10.1.2              Landlord’s Indemnification of
Tenant. 
Landlord shall indemnify, protect, defend and hold Tenant harmless from
and against any and all loss, damage, claims, actions, cost, expense and
liability (including without limitation court costs and reasonable attorneys’
fees) incurred in defending against the same asserted by any third party
against Tenant

 

32

for loss, injury or damage, to
the extent such loss, injury or damage is caused by the willful misconduct or
negligent acts or omissions of Landlord or its authorized representatives.

10.1.3              Tenant’s Indemnification of Landlord.  Tenant shall indemnify, defend, protect, and
hold harmless the Landlord Parties from and against any and all loss, damage,
claims, actions, cost, expense and liability (including without limitation
court costs and reasonable attorneys’ fees) incurred in connection with or
arising from any cause in, on or about the Premises, any violation of any of
the requirements, ordinances, statutes, regulations or other laws, including,
without limitation, any environmental laws, any acts, omissions or negligence
of Tenant or of any person claiming by, through or under Tenant, or of the
contractors, agents, servants, employees, invitees, guests or licensees of
Tenant or any such person, in, on or about the Project, either prior to,
during, or after the expiration of the Term. 
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,
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 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.

10.2         Tenant’s Compliance With Landlord’s Fire and
Casualty Insurance.  Tenant shall,
at Tenant’s expense, comply with all 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.  Tenant shall not be responsible to pay for
any increase in such premiums arising out of the Permitted Use.

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 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

  Property Damage Liability

  	
   

  	
  $3,000,000 each
  occurrence

  $3,000,000 annual aggregate

  
	
  Personal Injury
  Liability

  	
   

  	
  $3,000,000 each
  occurrence

  $3,000,000 annual aggregate

  0% Insured’s participation

  

 

 

33

 

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, and (ii) all other improvements, alterations and additions to the
Premises after the Commencement Date. 
Such insurance shall be written on an “all risks” of 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, including sprinkler leakage, bursting or stoppage of
pipes, and explosion, and providing business interruption coverage for a period
of one year.

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,
Landlord’s lender, and any other party the Landlord so specifies, 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; (iii) be
issued by an insurance company having a rating of not less than A-:VIII 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 diminished unless thirty (30) days’ prior
written notice shall have been given to Landlord and any mortgagee of
Landlord.  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, 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.  Any
insurance required pursuant to this Lease may be provided by means of a
so-called “blanket” policy, so long as the Building or Premises are
specifically covered (by rider, endorsement or otherwise), the limits of the
policy are applicable on a “per location” basis to the Building or Premises,
and the policy otherwise complies with the provisions of this Lease.

10.5         Landlord’s Insurance.  During the
Term, to the extent such coverages are available at a commercially reasonable
cost, Landlord shall maintain in effect insurance on the Building with
responsible insurers, on an “all risk” or “special form” basis, insuring the
Building and the Tenant Improvements in an amount equal to at 100% of the
replacement cost thereof 

 

34

(except for a
commercially reasonable deductible), excluding land, foundations, footings and
underground installations.  Landlord may,
but shall not be obligated to, carry insurance against additional perils and/or
in greater amounts.

10.6         Subrogation.  Landlord and Tenant intend that their respective
property loss risks shall be borne by reasonable insurance carriers to the
extent above provided, and 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, or which is actually carried if broader in coverage.  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.

10.7         Additional Insurance Obligations.  Tenant shall carry and maintain during the entire
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, subject to the following as to liability insurance:  Not more frequently than once in each three
(3) years, if, in the reasonable opinion of Landlord, the amount of liability
insurance required under this Lease is not adequate in comparison to that
carried for comparable properties of similar usage, Tenant shall increase said
insurance coverage as reasonably required by Landlord; provided, however, in no
event shall the amount of liability insurance coverage increase by more than
fifty percent (50%) greater than the amount required of Tenant during the
preceding three (3) years of the Term.

ARTICLE
11

DAMAGE
AND DESTRUCTION

11.1         Repair of Damage to Premises by Landlord.  Tenant shall promptly notify Landlord of any damage to
the Premises resulting from fire or any other casualty.  If the Premises or any Common Areas 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, and
subject to all other terms of this Article 11, restore the Base Building and
such Common Areas.  Such restoration
shall be to substantially the same condition of the Base Building and the
Common Areas 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 Common Areas deemed
desirable by Landlord, 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, upon notice (the “Landlord Repair Notice”)
to Tenant from Landlord, Landlord shall repair any injury or damage to the
Tenant Improvements installed in the Premises and shall return such Tenant
Improvements to their original condition to the extent permitted by then applicable Laws; provided, however, that
in no event shall Landlord have any obligation for repair or restoration beyond
the extent of insurance proceeds received by

 

35

Landlord for
such repair or restoration, or for any of Tenant’s personal property, Trade
Fixtures or Alterations.  Whether or not Landlord delivers a Landlord
Repair Notice, 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 Landlord shall select the contractors 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, Landlord shall allow Tenant a proportionate abatement of Rent to the
extent Landlord is reimbursed from the proceeds of rental interruption
insurance purchased by Landlord as part of Operating Expenses, during the time
and to the extent the Premises are unfit for occupancy for the purposes
permitted under this Lease, and not occupied by Tenant as a result thereof;
provided, further, however, that if the damage or destruction is due to the
negligence or willful misconduct of Tenant or any of its agents, employees,
contractors, invitees or guests, Tenant shall be responsible for any reasonable,
applicable insurance deductible not to exceed Twenty-Five Thousand Dollars
($25,000.00) (which shall be payable to Landlord upon demand) and there shall
be no rent abatement.

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 Premises, Building
and/or Project, 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 or Project 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 ninety (90) 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 Landlord’s insurance policies (except for a commercially reasonable
deductible); or (iv) Landlord decides to rebuild the Building or Common Areas
so that they will be substantially different structurally or architecturally;
or (v) the damage occurs during the last twelve (12) months of the Term.

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.

11.4         Termination Rights.  If (a) the opinion of Landlord’s architect
indicates that such repairs and restoration to the Premises, the Building or
the Project shall take more than two hundred seventy (270) days following the
date of the Casualty and the damage materially impairs

 

36

Tenant’s
use of the Premises, or (b) such Casualty occurs during the last two (2) years
of the Term and the opinion of Landlord’s architect indicates that such repairs
and restoration to the Premises, the Building or the Project shall take more
than sixty (60) days following the date of the Casualty and the damage
materially impairs Tenant’s use of the Premises, then Tenant shall have the
right to terminate this Lease as of the date of such Casualty by written notice
to Landlord within thirty (30) days following Tenant’s receipt of the opinion
of Landlord’s architect.  If, after three
hundred (300) days following the date of the Casualty, the repairs and
restoration to the Premises, the Building or the Project are not substantially
completed, then Tenant shall have the right to give Landlord a conditional
termination notice (the “Conditional Termination
Notice”) within fifteen (15) days following
the expiration of such three hundred (300) day period.  If the repairs and restoration to the
Premise, the Building or the Project are not substantially completed within
thirty (30) days following Landlord’s receipt of the Conditional Termination
Notice, then within fifteen (15) days following the expiration of such thirty
(30) day grace period Tenant shall have the right to terminate this Lease by
written notice to Landlord.

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 Term
or of Tenant’s right of possession hereunder, or after the giving of any notice
shall reinstate, continue or extend the 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, Building or Project 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

 

37

any part of the Premises,
Building or Project, 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 twenty-five percent (25%) 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 Tenant’s personal property and fixtures belonging to
Tenant and removable by Tenant upon expiration of the Term pursuant to the
terms 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
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 that Tenant is unable to use for its business
as a result of the taking 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, 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 in
excess of twenty-five percent (25%) of the rentable square feet in the
Premises, 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 an executed copy of all
documentation

 

38

effectuating the proposed Transfer, including all operative
documents to evidence such Transfer and all agreements incidental or related to
such Transfer, provided that Landlord shall have the right to require Tenant to
utilize Landlord’s standard Transfer documents in connection with the
documentation of such Transfer, (iv) current financial statements of the
proposed Transferee certified by an officer, partner or owner thereof (if at the
time of such request the financial condition of Tenant is less than the
financial condition of Tenant as of the date of this Lease), business credit
and personal references and history of the proposed Transferee and any other
reasonably information required by Landlord which will enable Landlord to
reasonably 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 pay Landlord’s review and processing fees
(which currently equal $1,500.00 for each proposed Transfer), as well as any
reasonable professional fees (including, without limitation, attorneys’,
accountants’, architects’, engineers’ and consultants’ fees) incurred by
Landlord, within thirty (30) days after written request by Landlord.

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, or would be a significantly less prestigious
occupant of the Building than Tenant;

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              [Intentionally Deleted];

14.2.5              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;

14.2.6              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;

14.2.7              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

 

39

Tenant
(or will allow the Transferee to occupy space leased by Tenant pursuant to any
such right); or

14.2.8              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, unless
in either case Landlord has insufficient rentable area in the Building to
accommodate the needs of such proposed Transferee; or

14.2.9              [Intentionally Deleted].

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 material
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 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.

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 in any particular
calendar per month.  “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 Tenant’s reasonable
out-of-pocket legal and accounting fees, brokerage commissions, advertising
expenses and improvement costs paid by Tenant in connection with any such
assignment or subletting.  “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.

14.4         Landlord’s Option as to Subject Space.  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

 

40

for the remainder of the Term.  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 (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 terms and
conditions 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
an independent certified public accountant, or 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 two percent (2%)
and not the result of a good faith error, 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, of twenty-five percent (25%) or
more of the partners, or transfer of twenty-five percent (25%) 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 an exchange or over the counter),
(A) the dissolution, merger, consolidation or other reorganization of Tenant or
(B) the sale or other transfer of an aggregate of twenty-five percent (25%) or
more of the voting shares of Tenant (other than to immediate family members by
reason of gift or death), within a twelve (12)-month period, or (C) the sale,
mortgage, hypothecation or pledge of an aggregate of twenty-five percent (25%)
or more of the value of the unencumbered assets of Tenant within a twelve
(12)-month period.

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

 

41

Transfer, Landlord shall have the right to:  (i) treat such Transfer as cancelled 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 have committed
an Event of 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         Permitted Transfers.  Notwithstanding any provision contained in the Section 14 to the
contrary, Tenant shall have the right, without the consent of Landlord, upon
ten (10) days prior written notice to Landlord, to engage in any of the
following transactions (each a “Permitted Transfer”)
and to Transfer the Lease to any of the following entities (each, a “Permitted Transferee” : (i)  a
successor entity related to Tenant by merger, consolidation, or non-bank­ruptcy
reorganiza­tion, (ii) a purchaser of at least ninety percent (90%) of
Tenant’s assets as an ongoing concern, or (iii) an “Affiliate” of Tenant, provided that no such Permitted
Transfer materially reduces Tenant’s financial ability to perform Tenant’s
obligations under this Lease.  The
provisions of Sections 14.3 and 14.4 shall not apply with respect to a
Permitted Transfer, but any transfer pursuant to the provisions of this Section
14.8 shall be subject to all other terms and conditions of this Lease,
including the provisions of this Section 14.8. 
Tenant shall remain liable under this Lease after any such
transfer.  For the purposes of this Article
14, the term “Affiliate” of Tenant shall mean and refer to any entity
controlling, controlled by or under common control with Tenant or Tenant’s
parent, as the case may be.  “Control” as
used herein shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such controlled entity.  For purposes of this Lease, a sale of Tenant’s
capital stock through any public exchange, or through any public offering shall
not be deemed an assign­ment, sub­letting or other transfer of this Lease or
the Premises requiring Landlord’s consent. 
Notwithstanding anything in the Lease to the contrary, neither a sale of
the assets, stock or ownership interests of Tenant or
reorganization/reincorporation under the laws of a different state effected
through a merger shall be deemed to be a Transfer for purposes of this Lease.

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 Term shall be deemed to constitute an
acceptance by Landlord

 

42

of a surrender of the Premises unless such intent is
specifically acknowledged in 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 Term, or upon any earlier
termination of this Lease, Tenant shall, subject to the provisions of this Article
15 and Section 8.5 of this Lease, 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 at Landlord’s discretion, remove Lines installed under the
provisions of Section 29.32 of this Lease, and Tenant shall repair at its own
expense all damage to the Premises and Building resulting from such removal
identified in this Section 15.2.

ARTICLE
16

HOLDING
OVER

If Tenant holds over
after the expiration of the 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 150% of the Base Rent plus the Additional Rent applicable during the
last rental period of the Term under this Lease.  Such month-to-month tenancy shall be subject
to every other applicable term, covenant and agreement contained herein.  For purposes of this Article 16, a holding
over shall include Tenant’s remaining in the Premises after the expiration or
earlier termination of the Term, as required pursuant to the terms of Section
8.5, above, to remove any Alterations or improvements located within the
Premises.  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

 

43

of the foregoing, any
claims made by any succeeding tenant founded upon such failure to surrender and
any lost profits to Landlord resulting therefrom.  In no event shall Tenant be liable to Landlord
or any third party for any damages, costs or expenses of any nature (excepting
the holdover rent at the rate contained above in this Article 16) as a result
of Tenant’s remaining in possession of the Premises after the expiration or
termination of this Lease unless such retention of possession continues for
fifteen (15) business days after Tenant’s receipt of written notice from
Landlord that it must vacate the Premises within fifteen (15) business days
after such notice or be liable for such damages.

ARTICLE
17

ESTOPPEL
CERTIFICATES

Within ten (10) business
days following a request in writing, each party shall execute, acknowledge and
deliver to the requesting party an estoppel certificate, which shall be
substantially in the form of Exhibit E,
attached hereto (or such other form as may be 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 such party.  Any such certificate may be relied upon by
any prospective mortgagee or purchaser of all or any portion of the
Project.  At any time during the Term,
Landlord may require Tenant to provide Landlord with a current financial statement
and financial statements of the two (2) years prior to the current 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
either party to timely execute, acknowledge and deliver such estoppel
certificate or other instruments within ten (10) business days following
receipt of a request shall constitute an acceptance of the Premises and an
acknowledgment that statements included in the estoppel certificate are true
and correct, without exception.

ARTICLE
18

SUBORDINATION

Prior to delivery of the
Premises to Tenant, Landlord shall deliver to Tenant, and Tenant executes, a
non-disturbance, attornment and subordination agreement substantially in the
form of Exhibit H attached hereto or in such other form as is
commercially reasonable and is reasonably acceptable to Tenant (the “SNDA”),
executed by any current mortgagees, ground lessor, underlying lessor or the
like of the Premises, if any.

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, if and only if, Landlord obtains for the benefit of
Tenant from any such mortgagee, ground lessor,

 

44

underlying lessor or the
like and delivers to Tenant, and Tenant executes, a new SNDA executed by each
such mortgagee, ground lessor, underlying lessor or the like in form containing
provisions substantially similar to the terms of the SNDA attached hereto as
Exhibit H.  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
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 terms, covenants and conditions of this Lease to be
observed and performed by Tenant. 
Landlord’s interest herein may be assigned as security at any time to
any lienholder.  Tenant shall, within ten
(10) business 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 an “Event of 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, when due unless such failure is cured within five (5) business days
after notice; 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
proceeding under an insolvency or bankruptcy law, unless in the case of a
proceeding filed

 

45

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 deleted]

19.1.5              The failure by Tenant to observe or
perform according to the provisions of 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.

Notwithstanding anything
to the contrary contained in 19.1.1 above or in any other provision of this
Lease, if Landlord gives Tenant written notice more than two (2) times during
any twelve (12) month period that Tenant has failed to pay Rent, or any
part thereof, when due, then in the twelve (12) month
period following such second (2nd) notice of failure to pay when due Landlord
shall not be obligated to give Tenant either written notice or a period of time
to correct any such failure to pay when due, it being understood under such
circumstances that the occurrence of such failure to pay Rent shall constitute,
without the necessity of any notice or grace period, an Event of Default under
this Lease.

19.2         Remedies Upon Default.  Upon the occurrence of any event of an 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:

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

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

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

 

46

(iv)          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

(v)           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 Paragraphs 19.2.1(i) and (ii),
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 Paragraph 19.2.1(iii) 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

 

47

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 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.

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 terms,
covenants, conditions, provisions and agreements herein contained on the part
of Tenant to be kept, observed and performed, shall, during the Term, peaceably
and quietly have, hold and enjoy the Premises subject to the terms, covenants,
conditions, 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.

ARTICLE
21

SECURITY
DEPOSIT

 

                21.1.        Security Deposit.  Concurrent with Tenant’s execution of this
Lease, Tenant shall deposit with Landlord the L/C identified below in this
Article 21 as the security deposit (the “Security Deposit”)
in the amount set forth in Paragraph 8 of the Summary of Basic Lease
Information, 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 L/C to its applicable Face Amount (as
defined below in this Article 21).  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
thirty (30) days following the expiration of the Term.  Tenant acknowledges that Landlord has agreed to accept a letter of
credit in lieu of an additional cash deposit as an accommodation to Tenant and
Tenant agrees that the letter of credit and all amounts drawn thereunder shall
be treated for all purposes under this Lease as if a cash deposit had been
tendered to Landlord upon the execution of this Lease.  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.

 

48

                21.2         Tenant shall deliver to Landlord an unconditional, irrevocable,
transferable and negotiable standby letter of credit (the “L/C”)
in an amount equal to Two Hundred Seventy-Five Thousand Dollars ($275,000) (the
“Face Amount”) issued by a bank or trust company (“Issuer”)
and in form and content acceptable to Landlord, in its sole and absolute
discretion, as additional security for the performance of Tenant’s obligations
under this Lease.  If Tenant leases
additional space in the Building, then in accordance with the provisions of
Section 21.3 below, Tenant shall deliver an amendment to the L/C increasing the
Face Amount.  An L/C in the form attached
hereto as Exhibit F is hereby approved by Landlord.  The L/C shall name Landlord as beneficiary
thereunder and provide that draws, including, at Landlord’s election, partial
draws will be honored upon the delivery to the Issuer of a certificate signed
by Landlord, or its authorized agent, that Tenant has failed to perform its
obligations under the Lease.  The L/C
shall also provide that it will be automatically extended upon each renewal
date unless the Issuer thereof delivers to Landlord, no later than forty-five
(45) days prior to the stated expiration date of the L/C, written notice of Issuer’s
intent not to extend or renew the L/C. 
During any period that Tenant is required to maintain the L/C, Tenant
shall, at least thirty (30) days prior to any expiration or termination of the
L/C, provide Landlord either with written confirmation that the existing L/C
will be automatically extended and renewed or with a new L/C that satisfies all
of the requirements for the L/C in this Section 21.2.  In addition, upon a
proposed sale or other transfer of any interest in the Building, the Land, this
Lease or Landlord (including consolidations, mergers, or other entity changes),
Tenant, at its sole cost and expense and
upon ten (10) Business Days’ notice, shall, concurrent with Landlord’s delivery to Tenant of the then outstanding
L/C, deliver to any such transferees, successors, or assigns a
replacement L/C on identical terms (except
for the stated beneficiary) from the same Issuer or another bank or trust
company acceptable to Landlord, in Landlord’s sole discretion, or an amendment
to the outstanding L/C naming the new landlord as the beneficiary thereof.  Tenant’s failure to perform or observe any of the covenants set forth in
this Section 21.2 for any reason shall entitle Landlord to draw on the full
amount of the L/C and shall constitute an Event of Default under this Lease
without the requirement of any notice from Landlord.   Any amount(s) drawn under the L/C shall be
held or used by Landlord in accordance with the terms of Section 21.1 above.

 

                21.3  Increases in Face Amount of L/C and L/C
Burnoff.

 

                                At least thirty
(30) days prior to the Commencement Date of any additional space Tenant leases
in the Building beyond the initial Premises identified in Article 2.2 of the
Summary of Basic Lease Information, Tenant shall deliver to Landlord an
amendment to the L/C proportionately increasing the then current Face Amount by
an amount determined as follows:

 

                                (a)  The Face Amount shall be increased by
multiplying the additional rentable square feet by a fraction, the numerator of
which is the Face Amount in effect immediately prior to the Commencement Date
of the additional rentable square feet, and the denominator of which is the
rentable square feet which Tenant has been leasing in the Building immediately
prior to such Commencement Date.

 

                                (b)  Following any increase in the Face Amount
under 21.3 (a) above, the amount of each L/C Burnoff (as defined below) shall
be increased by an amount determined by multiplying the amount of the L/C
Burnoff immediately prior to any such increase by a fraction, the numerator of

 

49

which
is the applicable increase in such Face Amount, and the denominator of which is
the Face Amount immediately preceding any such increase in the Face Amount.

 

                21.4  If no prior or current Event of Default has
occurred, then effective as of ten (10) days following the date Tenant delivers
to Landlord Tenant’s audited financial statements for calendar year 2007
prepared in accordance with generally accepted accounting principles
consistently applied (which financial statements shall also be delivered for
each subsequent calendar year), and the audited financial
statements for the applicable calendar year show that Tenant has (a) a positive
net worth of at least Ten Million Dollars ($10,000,000), and (b) achieved
positive net earnings during such calendar year, then, subject to any increases
under the provisions of 21.3 (b) above, the Face Amount of the L/C may be reduced by fifty thousand dollars ($50,000)
following the applicable calendar year (the “L/C Burnoff”),
provided that the Face Amount of the L/C shall not at any time during the Term
(including Extension Period, if the Extension Option is exercised) be less than
fifty thousand dollars ($50,000).  If Tenant is a publicly traded company, and Tenant’s financial statements
are accessible by the public, then Tenant shall not be required to deliver such
financial statements to Landlord; instead, the requirements of this Section
21.4 shall be satisfied by Landlord obtaining Tenant’s most recent publicly
available financial statements.  In the
event Tenant does not qualify for qualify for any portion of the L/C Burnoff at
the time such would occur pursuant to the provisions of this Section 21.4, but
Tenant does qualify for the L/C Burnoff in any subsequent year, then the L/C
Burnoff shall occur on a cumulative basis at the time of such subsequent
qualification.

ARTICLE
22

SUBSTITUTION
OF OTHER PREMISES

[Intentionally deleted].

ARTICLE
23

SIGNS

23.1         Full Floors.  Subject to Landlord’s prior written approval, in its
sole discretion, and provided all signs are in keeping with the quality, design
and style of the Building and Project, Tenant, if the Premises comprise an
entire floor of the Building, at its sole cost and expense, may install
identification signage anywhere in the Premises including in the elevator lobby
of the Premises, provided that such signs must not be visible from the exterior
of the Building.

23.2         Multi-Tenant Floors.  If other tenants occupy space on the floor on which
the Premises is located, Tenant’s identifying signage shall be provided by
Landlord, at Tenant’s cost, and such signage shall be comparable to that used
by Landlord for other similar floors in the Building and shall comply with
Landlord’s Building standard signage program.

23.3         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.  Tenant may not

 

 

50

install any signs on the exterior or roof of the Building 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.

23.4         Building Directories.  Tenant shall be entitled to two
(2) lines on the Building directory in the main lobby of the
Building.  Tenant’s entries on the
Building directories shall be at Tenant’s sole cost and expense.

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.  At
its sole cost and expense, Tenant shall promptly comply with all such
governmental measures applicable to the Premises.  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 relating to Tenant’s manner of use of the Premises, then Tenant agrees,
at its sole cost and expense, to comply promptly with such standards or
regulations.  Tenant shall be
responsible, at its sole cost and expense, to make all alterations to the
Premises as are required to comply with the governmental rules, regulations,
requirements or standards described in this Article 24.  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.

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.  Notwithstanding the foregoing, Tenant shall
not be obligated to pay a late charge on the first payment of Rent not received
by Landlord when due in any consecutive twelve (12) month period unless Tenant
does not pay such Rent within five (5) business days after written notice from
Landlord that such payment of Rent is past due (the “Late Notice”).  Commencing with any second (2nd) payment
which is not received by Landlord within five (5) business days after said
amount is due, and continuing with each past due payment thereafter in the
twelve (12) month period following any Late Notice, Tenant shall pay to
Landlord the late charge equal to five percent (5%) of the amount without the
requirement for any notice from Landlord. 
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

 

51

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 actually
collecting or actually 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 legal fees and other amounts so
expended.  Tenant’s obligations under
this Section 26.2 shall survive the expiration or sooner termination of the
Term.

ARTICLE
27

ENTRY
BY LANDLORD

Landlord reserves the right at all reasonable
times and upon reasonable notice to Tenant (except in the case of an emergency)
to enter the Premises to (i) inspect them; (ii) show the Premises to
prospective purchasers, mortgagees, or to current or prospective mortgagees,
ground or underlying lessors or insurers; (iii) post notices of
nonresponsibility; or (iv) alter, improve or repair the Premises or the
Building, or for structural alterations, repairs or improvements to the
Building or the Building’s systems and equipment.  In addition, during the last twelve (12) months to the Term, Landlord
shall have the right to show the Premises to prospective tenants upon
reasonable prior oral or written notice to Tenant.  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, including janitorial service; (B)
take possession due to any breach of this

 

52

 

Lease in the manner provided herein; and (C)
perform any covenants of Tenant regarding repairs to the Premises which Tenant
fails to perform after written notice from Landlord (except that Landlord shall
not be required to give prior notice in the event of an emergency).  Landlord may make any such entries without
the abatement of Rent and may take such reasonable steps as required to
accomplish the stated purposes.  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

28.1         Tenant Parking Passes.  Tenant shall rent from Landlord, commencing
on the Lease Commencement Date, the amount of unreserved valet parking passes
set forth in Section 9 of the Summary, which parking passes shall pertain to
the Project parking facility; provided, however, Tenant shall have the right to
reduce (but not increase) the number of such parking passes following written
notice to Landlord, and thereafter Tenant shall not be obligated to pay for
such parking passes returned to Landlord. 
Tenant shall pay to Landlord for automobile parking passes on a monthly
basis the prevailing rate charged from time to time for such parking passes.  In addition, Tenant shall be responsible for
the full amount of any taxes imposed by any governmental authority in
connection with the renting of such parking passes by Tenant or the use of the
parking facility by Tenant.  Tenant’s
continued right to use the parking passes 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 Project parking facility, 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.

28.2         Other Terms.  Landlord specifically reserves the right to
change the size, configuration, design, layout and all other aspects of the
Project parking facility at any time (including, but not limited to, converting
some or all of the unreserved valet parking to alternate forms of parking), 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, or relocate Tenant’s parking passes to other parking structures
and/or surface parking areas within a reasonable distance of the Premises, for purposes of permitting or facilitating any such
construction, alteration or improvements with respect to the Project parking
facility or to accommodate or facilitate the renovation, alteration,

 

53

construction or other modification of other
improvements or structures located in the Project.  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 passes rented by Tenant
pursuant to this Article 28 are provided to Tenant solely for use by Tenant’s
own personnel and such passes may not be transferred, assigned, subleased or
otherwise alienated by Tenant, except to a Permitted Transferee, without
Landlord’s prior approval.  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.

28.3         Parking Procedures.  Landlord shall in no event be responsible for any loss
or damage to any vehicle or other property or for any injury to any person in
connection with the use of the Project parking facility.  Tenant’s parking passes shall be used only
for parking of automobiles no larger than full size passenger automobiles,
sport utility vehicles or pick-up trucks. 
Tenant shall comply with all rules and regulations which may be adopted
by Landlord from time to time with respect to parking and/or the parking
facilities servicing the Project.  Tenant
shall not at any time use more parking passes than the number so allocated to
Tenant.  Tenant shall not have the
exclusive right to use any specific parking space.

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.

29.4         Modification of Lease.  [Intentionally Deleted].

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

 

54

from all liability under this Lease 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,
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

 

55

Landlord would have in the Building if the Building were
encumbered by third-party debt in an amount equal to seventy-five percent (75%)
of the value of the Building (as such value is determined by Landlord),
provided that in no event shall such liability extend to any sales or insurance
proceeds received by Landlord or the Landlord Parties in connection with the
Project, Building or Premises.  Neither
Landlord, nor any of the Landlord Parties shall have any personal liability
therefore except to the extent personal liability of Landlord is required or
necessary in order for Tenant to obtain equitable relief such as by injunction
or specific performance, 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 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.  Landlord reserves the absolute right to effect such
other tenancies in the Project as Landlord in the exercise 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 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, acts of war, terrorist acts, 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.

 

56

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)
delivered by a nationally recognized overnight courier, or (C) 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 the date delivery is made or attempted
to be made.  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 a reasonable opportunity to cure such default prior to Tenant’s
exercising any remedy available to Tenant. 
Notices may be given by an attorney representing the notifying party, or
by a managing agent if the authority is delegated to such by the Landlord.  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:

ECI STEVENSON LLC

c/o Embarcadero Capital Partners, LLC

1199 Howard Ave., Suite 250

Burlingame, CA 94010

Attention:  John
Hamilton

with copies to:

 

Ed Cherry, Esq.

Farella Braun & Martel, LLP

235 Montgomery Street, Suite 3000

San Francisco, CA 94104

and

Cushman & Wakefield

Building Management Office

71 Stevenson Street, Suite 1815

San Francisco, California 94105

Attention:  Mike Meyer

Telephone:  (415) 908-0888

Telecopy:  (415) 908-0881

 

57

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 is a corporation, trust or partnership, each
individual executing this Lease 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 Lease and that each person signing on behalf of Tenant is
authorized to do so.  In such event,
Tenant shall, within ten (10) days after execution of this Lease, deliver to
Landlord satisfactory evidence of such authority and, if a corporation, upon
demand by Landlord, also 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 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. 
Landlord shall pay the fee or
commission of the 

 

58

Brokers in
accordance with Landlord’s separate written agreement with the Brokers. 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.

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 shall reimburse Tenant for its
reasonable actual out-of-pocket costs, not to exceed $2,500, reasonably
resulting from such change in name) and 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.

29.29       Transportation Management.  Tenant shall fully comply with all present or future
programs intended to manage parking, transportation or traffic in and around
the Project, 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       Project 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, Project, or any part thereof and that no representations respecting
the condition of the Premises or the Project 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 Term
renovate, improve, alter, or modify (collectively, the “Renovations”)
the Project, the

 

59

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 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 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
Project, which work may create noise, dust or leave debris in the Project.  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.  In the exercise of its
obligations under this Section, Landlord shall (a) use all reasonable efforts
not to materially adversely interfere with ingress and/or egress to the
Premises or to interrupt the operation of Tenant’s business at the Premises,
and (b) subject to the other provisions of this Lease, at all times provide at
least one (1) elevator to the floor(s) in which the Premises are located.  In the event that ingress/egress to the
Premises is materially adversely interfered with for five (5) business days
after Landlord receives written notice of such interference from Tenant, then
Rent shall abate commencing on the date Landlord receives such written notice
of the material adverse interference with ingress/egress and continuing until
the it ends.

29.31       No Violation.  Tenant hereby warrants and represents that neither its
execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by
which Tenant is bound, and Tenant shall protect, defend, indemnify and hold
Landlord harmless against any claims, demands, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys’ fees
and costs, arising from Tenant’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, 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) an acceptable number of spare Lines and
space for additional Lines shall be maintained for existing and future
occupants of the Project, as determined in Landlord’s reasonable opinion, (iii)
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, (iv) any new Lines
servicing the Premises and installed by Tenant shall comply with all applicable
governmental laws and regulations, (v) [Intentionally Deleted], and (vi) 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 by Tenant in violation
of

 

60

these provisions, or which were installed by Tenant and are
at any time in violation of any laws or represent a dangerous or potentially
dangerous condition.

29.33       Development of the Project.

29.33.1                    Subdivision.  Landlord reserves the right to further subdivide all
or a portion of the Project.  Tenant
agrees to execute and deliver, within thirty (30) days after 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.

29.33.2                    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.  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.

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

29.34       Office and Communications Services.

29.34.1            The
Provider.  Landlord has
advised Tenant that certain office and communications services may be offered
to tenants of the Building by a concessionaire under contract to Landlord (“Provider”).  Except
for WSI, which is the Provider for fire alarm and life safety systems, Tenant
shall be permitted, but not required, to contract with a Provider for the provision
of any or all of such services (other than fire alarm and life safety systems)
on such terms and conditions as Tenant and Provider may agree.  The existing Provider for telecommunications
is Capitol Communications.  Subject to
Landlord’s prior written approval, which approval shall not be unreasonably
withheld or delayed, and subject to the provisions of Section 29.32 of this
Lease, Tenant may elect to use a different service Provider (other than for
fire alarm and life safety systems) and Landlord agrees to cooperate in the
provision of such services.  Landlord
shall have the sole right to select the Provider for fire alarm and life safety
systems.

 

61

29.34.2            Other Terms.  Tenant acknowledges and agrees that:  (i) Landlord has made no warranty or
representation to Tenant with respect to the availability of any such services,
or the quality, reliability or suitability thereof; (ii) the Provider is not
acting as the agent or representative of Landlord in the provision of such
services, and Landlord shall have no liability or responsibility for any
failure or inadequacy of such services, or any equipment or facilities used in
the furnishing thereof, or any act or omission of Provider, or its agents, employees,
representatives, officers or contractors; (iii) Landlord shall have no
responsibility or liability for the installation, alteration, repair,
maintenance, furnishing, operation, adjustment or removal of any such services,
equipment or facilities; and (iv) any contract or other agreement between
Tenant and Provider shall be independent of this Lease, the obligations of
Tenant hereunder, and the rights of Landlord hereunder, and, without limiting
the foregoing, no default or failure of Provider with respect to any such
services, equipment or facilities, or under any contract or agreement relating
thereto, shall have any effect on this Lease or give to Tenant any offset or
defense to the full and timely performance of its obligations hereunder, or
entitle Tenant to any abatement of rent or additional rent or any other payment
required to be made by Tenant hereunder, or constitute any accrual or
constructive eviction of Tenant, or otherwise give rise to any other claim of
any nature against Landlord.

29.34.3            Clear Glass Window.  Subject to Landlord’s prior written approval
of the type of glass and manner of installation, which approval will not be
unreasonably withheld, and subject to approval from any applicable governmental
authority, Tenant shall have the right to install, at Tenant’s sole cost and
expense, a clear glass exterior window (the “Clear Window”)
at the twenty-third (23rd) floor of the Building.  Landlord makes no representation or warranty
that installation of the Clear Window will be approved by applicable
governmental authorities.  The
effectiveness of this Lease is not subject to Tenant’s installation of the
Clear Window.  If Tenant’s installation
of the Clear Window triggers other changes to the Building, then Landlord shall
have the right to disapprove Tenant’s installation of the Clear Window, unless
Tenant agrees to pay the costs of such other changes to the Building.  Using reasonable care Landlord agrees to
store the existing window (the “Existing Window”)
which Tenant removes to install the Clear Window; provided that Tenant bears
the risk of damage to or destruction of the Existing Window during its
storage.  At the expiration or early
termination of the Term, if Landlord elects to remove the Clear Window, then
Tenant shall be responsible to pay the cost of removing the Clear Window and
re-installing the Existing Window, provided that if the Existing Window is not
re-usable, in Landlord’s sole judgment, then Tenant shall also pay the cost of
purchasing (including delivery, taxes and other costs associated with any such
purchase) a window similar to the Existing Window as a replacement for the
Existing Window.  The cost of any such
re-installation and/or purchase shall be payable by Tenant within thirty (30)
days following the date Landlord invoices Tenant therefore, notwithstanding any
prior termination or expiration of this Lease.

29.34.4            Waiver of Landlord Lien. 
Landlord hereby waives any
statutory or common law lien it may have on Tenant’s personal property.

 

62

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

 

	
   

  	
  “Landlord”:

  
	
   

  	
   

  
	
   

  	
  ECI STEVENSON LLC,

  
	
   

  	
  a California limited liability company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  by:
  

  	
  Embarcadero Capital Investors LP,

  
	
   

  	
   

  	
  sole
  member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by:
  

  	
  Embarcadero
  Capital Partners LLC,

  
	
   

  	
   

  	
   

  	
  sole
  general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  Hamilton
  Partners, LP,

  
	
   

  	
   

  	
   

  	
  manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
  /s/
  John Hamilton

  
	
   

  	
   

  	
  John
  Hamilton,

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  “Tenant”:

  
	
   

  	
   

  	
   

  
	
   

  	
  MD BEAUTY, INC

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Myles McCormick

  
	
   

  	
   

  	
  Its:

  	
  CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Gary W. Weatherford

  
	
   

  	
   

  	
  Its:

  	
  COO

  

 

63

 

EXHIBIT
A

71 STEVENSON
STREET

OUTLINE OF PREMISES

 

 

[IMAGES]

 

 

 

A-1

EXHIBIT
B

71 STEVENSON STREET

TENANT WORK LETTER

This Tenant Work Letter
shall set forth the terms and conditions relating to the construction of the
tenant improvements in 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 portion of the
Office Lease to which this Tenant Work Letter is attached as Exhibit B
and of which this Tenant Work Letter forms a part, and all references in this
Tenant Work Letter to Sections of “this Tenant Work Letter” shall mean the
relevant Section(s) of this Tenant Work Letter.

SECTION 1

LANDLORD’S INITIAL CONSTRUCTION IN THE PREMISES

1.1           Base, Shell and Core of the
Premises as Constructed by Landlord. 
Landlord has constructed, at its sole cost and expense, the base, shell,
and core (i) of the Premises and (ii) of the floor of the Building on which the
Premises is located (collectively, the “Base, Shell, and Core”).  The Base, Shell and Core shall consist of
those portions of the Premises which were in existence prior to the
construction of the tenant improvements in the Premises for the prior tenant of
the Premises.

1.2           Landlord Work.  Landlord shall, at Tenant’s sole cost and
expense, cause the construction or installation of the following items on the
floor of the Building containing the Premises (collectively, the “Landlord Work”).  Tenant may not change or alter the Landlord
Work.

1.2.1        Public Corridor (only as to that
portion of the Premises, if any, which occupies only a portion of a floor,
rather than an entire floor, of the Building).  The actual public corridor wall, the standard
tenant entries and exits including doors, frames, hardware, and sidelight (if
any), and standard tenant entry signage and exit lights (collectively, the “Public
Corridor”), which Public Corridor is adjacent to the Premises.

1.2.2        Demising Walls Between Tenants (only
as to that portion of the Premises, if any, which occupies only a portion of a
floor, rather than an entire floor, of the Building).   One-half of the cost of the demising
partitions between tenants which shall include studs, acoustical insulation and
dry wall ready for finish on tenant side only and any necessary penetrations,
fire dampers and sound traps (collectively, the “Demising Walls”), which
Demising Walls are adjacent to the Premises.

1.2.3        Additional Landlord Work.  In addition to the matters described in the
foregoing, Landlord shall be responsible to perform the work described in
Section 8.2 of the

 

B-1

Lease, subject to the
provisions of such Section 8.2 of the Lease, including responsibility for the
costs of such work.

SECTION 2

TENANT IMPROVEMENTS

2.1           Tenant Improvement
Allowance.  Tenant shall be entitled to a one-time
tenant improvement allowance (the “Tenant Improvement Allowance”) in the amount
of $40.00 per rentable square foot of the Premises for the costs relating to
the initial design and construction of Tenant’s improvements which are
permanently affixed to the Premises (the “Tenant Improvements”).  In no event shall Landlord be obligated to
make disbursements pursuant to this Tenant Work Letter in a total amount which
exceeds the Tenant Improvement Allowance. 
All Tenant Improvements for which the Tenant Improvement Allowance has
been made available shall be deemed Landlord’s property under the terms of the
Lease.

2.2           Disbursement of the Tenant
Improvement Allowance.  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 [as set forth herein]) for
costs related to the construction of the Tenant Improvements and for the
following items and costs (collectively, the “Tenant Improvement Allowance
Items”):  (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 for space planning and design, but not for payment of the
fees incurred by, and the cost of documents and materials supplied by, Landlord
and Landlord’s consultants (other than any structural engineer whose fees shall
be in addition to Landlord’s fee) in connection with the review of the “Construction
Drawings,” as that term is defined in Section 3.1 of this Tenant Work
Letter which is included in the fee described in Section 4.3.2 of this Work
Letter (except for any independent structural engineer retained by Landlord in
connection with the Construction Drawings); (ii) the cost of any changes in the
Base, Shell and Core when such changes are required by the Construction
Drawings; (iii) the cost of any changes to the Construction Drawings or Tenant
Improvements required by all applicable building codes (the “Code”); (iv) the
cost of the Landlord Work; (v) the “Landlord Supervision Fee”, as that term is
defined in Section 4.3.2 of this Tenant Work Letter; (vi) any signage;
(vii) permits; (ix) security systems, telecommunications and data cabling; (x)
moving costs; and (xi) furniture, fixtures and equipment, provided that the
portion of the Tenant Improvement Allowance used for purchase of furniture,
fixtures and equipment shall not exceed Five Dollars ($5.00) per rentable
square feet in the Premises.

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 Premises, which Building Standard Tenant Improvements have been
delivered by Landlord to Tenant.  The
quality of Tenant Improvements shall be equal to or of greater quality than the
quality of the Building Standard Tenant Improvements, provided that Landlord
may, at Landlord’s option, require the Tenant Improvements to comply with
certain Building Standard Tenant Improvements. 
On prior written notice to Tenant, for work other than Tenant
Improvements, Landlord may make changes to the Building Standard Tenant
Improvements from time to time.

 

B-2

SECTION 3

CONSTRUCTION DRAWINGS

3.1           Selection of
Architect/Construction Drawings. 
Tenant shall retain the architect/space planner (the “Architect”)
designated by Tenant, subject to Landlord’s reasonable approval, to prepare the
“Construction Drawings,” as that term is defined in this Section 3.1.  Tenant shall retain the engineering
consultants designated by Landlord (the “Engineers”) to prepare all plans and
engineering working drawings relating to the structural, mechanical,
electrical, plumbing, HVAC, life safety, and sprinkler work of the Tenant Improvements.  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 as reasonably determined
by Landlord, and shall be subject to Landlord’s approval, which approval shall
not be unreasonably withheld, conditioned or delayed.  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.  As soon as is possible, Tenant and the
Architect shall prepare the final space plan for Tenant Improvements in the
Premises (collectively, the “Final Space Plan”), which 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, and shall deliver
the Final Space Plan to Landlord for Landlord’s approval, which approval shall
not be unreasonably withheld, conditioned or delayed.

3.3           Final Working Drawings.  As soon as is possible Tenant, the Architect
and the Engineers shall complete the architectural and engineering drawings for
the Premises, and the final architectural working drawings in a form which is
complete to allow subcontractors to bid on the work and to obtain all
applicable permits (collectively, the “Final Working Drawings”) and shall
submit the same to Landlord for Landlord’s approval, which approval shall not
be unreasonably withheld, conditioned or delayed.

3.4           Permits.  The Final Working Drawings shall be approved
by Landlord (the “Approved Working Drawings”) prior to the commencement of the
construction of the Tenant Improvements, which approval shall not be
unreasonably withheld, conditioned or delayed. 
Tenant shall immediately submit the Approved Working Drawings to the
appropriate municipal authorities for all applicable building permits necessary
to allow “Contractor,” as that term is defined in Section 4.1, below, to
commence and fully complete the construction of the Tenant

 

B-3

Improvements (the “Permits”),
and, in connection therewith, Tenant shall coordinate with Landlord in order to
allow Landlord, at its option,  to take
part in all phases of the permitting process and shall supply Landlord, as soon
as possible, with all plan check numbers and dates of submittal and obtain the
Permits.  Notwithstanding anything to the
contrary set forth in this Section 3.4, 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 the
obtaining of the same shall be Tenant’s responsibility; provided however that
Landlord shall, in any event, 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.  No changes, modifications or alterations in
the Approved Working Drawings may be made without the prior written consent of
Landlord, provided that Landlord may withhold its consent, in its sole
discretion, to any change in the Approved Working Drawings if such change would
directly or indirectly delay the “Substantial Completion” of the Premises as
that term is defined in Section 5.1 of this Tenant Work Letter.

3.5           Time Deadlines.  Tenant shall use its best, good faith,
efforts and all due diligence to cooperate with the Architect, the Engineers,
and Landlord to complete all phases of the Construction Drawings and the permitting
process and to receive the permits, and with Contractor for approval of the “Cost
Proposal,” as that term is defined in Section 4.2 of this Tenant Work
Letter, as soon as possible after the execution of the Lease, and, in that
regard, shall meet with Landlord on a scheduled basis to be determined by
Landlord, to discuss Tenant’s progress in connection with the same.

SECTION 4

CONSTRUCTION OF THE TENANT IMPROVEMENTS

4.1           Contractor.  One of the three (3) following contractors
designated by Landlord (“Contractor Bid List”) shall construct the Tenant
Improvements.

(a) Venture Builders, (b)
Webcor Builders, and (c) W. L. Butler.

Landlord shall submit the
Working Drawings to such three (3) contractors on the Contractor Bid List, and
shall solicit bids from such three (3) contractors.  Landlord shall deliver copies of all of the
bids to Tenant.  Landlord and Tenant
shall then mutually and jointly review the bids in order to determine which of
the three (3) contractors on the Contractor Bid List is best able to complete
the work in accordance with the schedule and within a budget approved by
Landlord and Tenant.  Tenant acknowledges
that the lowest bid may not necessarily be the contractor to be selected, it is
the intention of the parties to select the lowest cost contractor from the
Contractor Bid List who is approved by both Landlord and Tenant, absent
circumstances that are reasonably acceptable to Tenant.  The contractor selected by Landlord and
Tenant from the Contractor Bid List is called the “Contractor.”

4.2           Cost Proposal.  After the Approved Working Drawings are
signed by Landlord and Tenant, Landlord shall provide Tenant with a cost
proposal in accordance with the Approved Working Drawings, which cost proposal
shall include, as nearly as possible, the cost of all Tenant Improvement
Allowance Items to be incurred by Tenant in connection with the design

 

B-4

and construction of the
Tenant Improvements (the “Cost Proposal”). 
Tenant shall approve and deliver the Cost Proposal to Landlord within
five (5) business days of the receipt of the same, and upon receipt of the same
by Landlord, Landlord shall be released by Tenant to purchase the items set
forth in the Cost Proposal and to commence the construction relating to such
items.  The date by which Tenant must
approve and deliver the Cost Proposal to Landlord shall be known hereafter as
the “Cost Proposal Delivery Date”.

4.3           Construction of Tenant
Improvements by Contractor under the Supervision of Landlord.

4.3.1        Over-Allowance Amount.  The difference between (i) the amount of the
Cost Proposal and (ii) the amount of the Tenant Improvement Allowance is herein
called the “Over-Allowance Amount”.  On
the Cost Proposal Delivery Date, Tenant shall deliver to Landlord an amount
equal to twenty percent (20%) of the Over-Allowance Amount (the “Initial
Payment”).  Tenant shall pay to Landlord
the remainder of the Over-Allowance Amount on a pari passu basis (after
deducting the Initial Payment) with Landlord’s disbursement of the Allowance as
work progresses.  Concurrent with
Landlord’s request for payments of the Over-Allowance Amount (following the
Initial Payment) Landlord shall deliver to Tenant an affidavit of the
Contractor detailing the work that has been performed as of the date of such
affidavit, as well as such other information as is customarily contained in
requests for disbursements of construction funds.  In the event that, after the Cost Proposal
Delivery Date, 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 paid by Tenant to Landlord immediately upon Landlord’s
request as an addition to the Over-Allowance Amount.  In addition, if the Final Working Drawings or
any amendment thereof or supplement thereto shall require alterations in the
Base, Shell and Core (as contrasted with the Tenant Improvements), and if
Landlord in its sole and exclusive discretion agrees to any such alterations,
and notifies Tenant of the need and cost for such alterations, then Tenant
shall pay the cost of such required changes upon receipt of bills
therefor.  Tenant shall pay all direct
architectural and/or engineering fees in connection therewith.

4.3.2        Landlord’s Retention of Contractor.  Landlord shall independently retain
Contractor to construct the Tenant Improvements in accordance with the Approved
Working Drawings and the Cost Proposal and Landlord shall supervise the
construction by Contractor, and Tenant shall pay a construction supervision and
management fee (the “Landlord Supervision Fee”) to Landlord in an amount equal
to the product of (i) three percent (3%) and (ii) an amount equal to the Tenant
Improvement Allowance plus the Over-Allowance Amount (as such Over-Allowance
Amount may increase pursuant to the terms of this Tenant Work Letter), provided
that the Landlord Supervision Fee shall not exceed Forty-One Thousand Dollars
($41,000).

4.3.3        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.

 

B-5

4.3.4        Tenant’s Covenants.  Tenant hereby indemnifies Landlord for any
loss, claims, damages or delays arising from the actions of Architect on the
Premises or within the Project. 
Immediately after the Substantial Completion of the Premises, Tenant
shall have prepared and delivered to the Project management office a copy of
the “as built” plans and specifications (including all working drawings) for
the Tenant Improvements.

SECTION 5

COMPLETION OF THE TENANT IMPROVEMENTS;

LEASE COMMENCEMENT DATE

5.1           Ready for Occupancy.  The Premises shall be deemed “Ready for
Occupancy” upon the Substantial Completion of the Premises.  For purposes of this Lease, “Substantial Completion”
of the Premises shall occur upon the completion of construction of the Tenant
Improvements in the Premises pursuant to the Approved Working Drawings, 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.  The term “Substantial
Completion” shall also include the issuance of a certificate of occupancy, or
evidence of closure by all applicable building inspectors.

5.2           Delay of the
Substantial Completion of the Premises. 
[Intentionally Deleted].

SECTION 6

MISCELLANEOUS

6.1           Tenant’s Entry Into the Premises
Prior to Substantial Completion. 
Provided that Tenant and its agents do not interfere with Contractor’s
work in the Project and the Premises, Contractor shall allow Tenant access to
the Premises prior to the Substantial Completion of the Premises for the
purpose of Tenant installing overstandard equipment or fixtures (including
Tenant’s data and telephone equipment) in the Premises.  Prior to Tenant’s entry into the Premises as
permitted by the terms of this Section 6.1, Tenant shall submit a schedule to
Landlord and Contractor, for their approval, which schedule shall detail the
timing and purpose of Tenant’s entry. 
Tenant shall hold Landlord harmless from and indemnify, protect and
defend Landlord against any loss or damage to the Project or Premises and
against injury to any persons caused by Tenant’s actions pursuant to this Section
6.1.

6.2           Freight Elevators.  Landlord shall, consistent with its
obligations to other tenants of the Building, make the freight elevator
reasonably available to Tenant in connection with initial decorating,
furnishing and moving into the Premises. 
Landlord acknowledges that with respect to construction of the Tenant
Improvements and related deliveries prior to the Commencement Date, Tenant, the
Contractor and Tenant’s vendors shall receive a priority use of the freight
elevator to avoid delays provided that Tenant and Tenant’s vendors give Landlord
reasonable advance notice of deliveries, and use reasonable efforts to schedule
deliveries at time reasonably approved by Landlord.  In addition, the use of the freight elevator
shall be at no cost or fee to Tenant.

 

B-6

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

6.4           Landlord’s Representative.  Landlord has designated Kheay Loke as “Project Manager” who
shall be responsible for the implementation of all Tenant Improvements to be
performed by Landlord in the Premises. 
With regard to all matters involving such Tenant Improvements, Tenant
shall communicate with the Project Manager rather than with the  Contractor. 
Landlord shall not be responsible for any statement, representation or
agreement made between Tenant and the Contractor or any subcontractor.  It is hereby expressly acknowledged by Tenant
that such Contractor is not Landlord’s agent and has no authority whatsoever to
enter into agreements on Landlord’s behalf or otherwise bind Landlord.  The Project Manager will furnish Tenant with
notices of substantial completion, cost estimates, and Landlord’s approvals or
disapprovals of all documents to be prepared by Tenant pursuant to this Tenant
Work Letter and changes thereto.

6.5           Tenant’s Agents.  All subcontractors, laborers, materialmen,
and suppliers retained directly by Tenant shall all be union labor in
compliance with the then existing master labor agreements.

6.6           Time of the Essence in This Tenant
Work Letter.  Unless otherwise
indicated, all references herein to a “number of days” shall mean and refer to
calendar days.  In all instances where
Tenant is required to approve or deliver an item, if no written notice of
approval is given or the item is not delivered within the stated time period, at
Landlord’s sole option, at the end of such period the item shall automatically
be deemed approved or delivered by Tenant and the next succeeding time period
shall commence.

6.7           Tenant’s Lease Default.  Notwithstanding any provision to the contrary
contained in this Lease, if an Event of Default as described in the Lease, or a
default by Tenant under this Tenant Work Letter, following receipt of notice of
the event that would constitute an Event of Default and the passage of time for
the applicable cure period without such event or failure having been satisfied
or cured, has occurred at any time on or before the Substantial Completion of
the Premises, then (i) in addition to all other rights and remedies granted to
Landlord pursuant to the Lease, Landlord shall have the right to withhold
payment of all or any portion of the Tenant Improvement Allowance and/or
Landlord may cause Contractor to cease the construction of the Premises (in
which case, Tenant shall be responsible for any delay in the Substantial
Completion of the Premises caused by such work stoppage as set forth in Section
5 of this Tenant Work Letter), and (ii) all other obligations of Landlord
under the terms of this Tenant Work Letter shall be forgiven until such time as
such default is cured pursuant to the terms of the Lease.

 

B-7

SCHEDULE
1 TO EXHIBIT B

TIME DEADLINES

[Intentionally Deleted]

 

SCHEDULE 1 TO EXHIBIT B

1

EXHIBIT
C

71 STEVENSON STREET

NOTICE OF LEASE TERM
DATES

 

To:          

 

 

 

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

Dear                          :

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

1.                                       The 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 feet within
the Premises is                    
 square feet.

 

C-1

6.                                       Tenant’s Share is                        %.

 

	
   

  	
  “Landlord”:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
                                                                     
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  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Agreed to and
  Accepted

  as of                            
  , 20      .

  

  “Tenant”:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  a

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  	
   

  	
   

  

 

C-2

EXHIBIT
D

71 STEVENSON
STREET

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. 
In the event of any conflict between the Rules and Regulations and the
other provisions of this Lease, the latter shall control.

1.             Tenant shall not alter any lock or
install any new or additional locks or bolts on any doors or windows of the
Premises without obtaining Landlord’s prior written consent.  Tenant shall bear the cost of any lock changes
or repairs required by Tenant.  Landlord
will furnish Tenant magnetic card keys for after-hours access to the Building
and/or elevator, and six (6) mechanical keys for access to the Premises.  Tenant shall pay to Landlord a deposit of $20
for each after-hours Building access card issued to Tenant.  Landlord may retain such deposit for any
after-hours Building access card not returned to Landlord at the expiration or
termination of the Term.  Any additional
mechanical keys required by Tenant must be obtained from Landlord at a
reasonable non-discriminatory cost to be established by Landlord.  Upon the termination of this Lease, Tenant
shall restore to Landlord all keys of stores, offices, and toilet rooms, either
furnished to, or otherwise procured by, Tenant and in the event of the loss of
keys so furnished, Tenant shall pay to Landlord the cost of replacing same or
of changing the lock or locks opened by such lost key if Landlord shall deem it
necessary to make such changes.

2.             All doors opening to public corridors shall be kept
closed at all times except for normal ingress and egress to the Premises.

3.             Landlord reserves the right to close and keep locked all
entrance and exit doors of the Building during such hours as are customary for
comparable buildings in the San
Francisco, California area.  Any
tenant, its employees, agents or any other persons entering or leaving the
Building at any time when it is so locked, or any time when it is considered to
be after normal business hours for the Building, may be required to sign the
Building register.  Access to the
Building may be refused unless the person seeking access has proper
identification or has a previously arranged pass for access to the Building.  Landlord will furnish passes to persons for
whom Tenant requests same in writing. 
Tenant shall be responsible for all persons for whom Tenant requests
passes.  The Landlord and his agents
shall in no case be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person.  In case of invasion, mob, riot, public
excitement, or other commotion, Landlord reserves the right to prevent access
to the Building or the Project during the continuance thereof by any means it
deems appropriate for the safety and protection of life and property.

4.             No furniture, freight or equipment of any kind shall be
brought into the Building without prior notice to Landlord.  All moving activity into or out of the
Building shall be scheduled with Landlord and done only at such time and in
such manner as Landlord reasonably designates on a non-discriminatory
basis.  Landlord shall have the right to
prescribe the weight,

 

D-1

size and position of all
safes and other heavy property brought into the Building and also the times and
manner of moving the same in and out of the Building.  Safes and other heavy objects shall, if
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.

5.             No furniture, packages, supplies, equipment or
merchandise will be received in the Building or carried up or down in the
elevators in such specific elevator as shall be designated by Landlord.  Landlord shall supply nonexclusive freight
elevator service twenty-four (24) hours per day, seven (7) days per week,
subject to reasonable advance scheduling.

6.             The requirements of Tenant will be attended to only upon
application at the management office for the Project 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.

7.             No sign, advertisement, notice or handbill shall be
exhibited, distributed, painted or affixed by Tenant on any part of the
Premises visible from the Building, the exterior of the Building or any Common
Areas of the Building, or the Project without the prior written consent of the
Landlord.  Tenant shall not disturb,
solicit, peddle, or canvass any occupant of the Project and shall cooperate
with Landlord and its agents of Landlord to prevent same.

8.             The toilet rooms, urinals, wash bowls and other
apparatus shall not be used for any purpose other than that for which they were
constructed, and no foreign substance of any kind whatsoever shall be thrown
therein.  The expense of any breakage,
stoppage or damage resulting from the violation of this rule shall be borne by
the tenant who, or whose servants, employees, agents, visitors or licensees
shall have caused same.

9.             Tenant shall not overload the floor of the Premises, nor
mark, drive nails or screws, or drill into the partitions, woodwork or drywall
or in any way deface the Premises or any part thereof without Landlord’s prior
written consent except for art work in the Premises.

10.           Except for vending machines intended
for the sole use of Tenant’s employees and invitees, no vending machine or
machines other than fractional horsepower office machines shall be installed,
maintained or operated upon the Premises without the written consent of
Landlord.

11.           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
Tenant may use and store normal small quantities of such materials customarily
used in the conduct of general office activities, such as copier fluids and cleaning
supplies, provided such use and storage complies with applicable environmental
Laws.  At the expiration or termination
of this Lease Tenant shall remove all such materials from the Premises and the
Project.  Tenant shall provide material
safety data sheets for any Hazardous Material used or kept on the Premises.

 

D-2

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

13.           Tenant shall not use, keep or permit
to be used or kept, any foul or noxious gas or substance in or on the Premises,
or permit or allow the Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Project by reason of noise,
odors, or vibrations, or interfere with other tenants or those having business
therein, whether by the use of any musical instrument, radio, phonograph, or in
any other way.  Tenant shall not throw
anything out of doors, windows or skylights or down passageways.

14.           Tenant shall not bring into or keep
within the Project, the Building or the Premises any animals (except for guide
dogs or other service animals required by any disabled employee or invitee of
Tenant), birds, aquariums, or, except in areas designated by Landlord, bicycles
or other vehicles.

15.           No cooking shall be done or permitted
on the Premises, nor shall the Premises be used for the storage of merchandise,
for lodging or for any improper, objectionable or immoral purposes.  Notwithstanding the foregoing, Underwriters’
laboratory-approved equipment and microwave ovens or in any kitchen shown on
the Approved Plans may be used in the Premises for heating food and 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.

16.           The Premises shall not be used for
manufacturing or for the storage of merchandise except as such storage may be
incidental to the use of the Premises provided for in the Summary.  Tenant shall not occupy or permit any portion
of the Premises to be occupied as an office for a messenger-type operation or
dispatch office, public stenographer or typist, or for the manufacture or sale
of liquor, narcotics, or tobacco in any form, or as a medical office, or as a
barber or manicure shop, or as an employment bureau without the express prior
written consent of Landlord.  Tenant
shall not engage or pay any employees on the Premises except those actually
working for such tenant on the Premises nor advertise for laborers giving an
address at the Premises.

17.           Landlord reserves the right to
exclude or expel from the Project any person who, in the judgment of Landlord,
is intoxicated or under the influence of liquor or drugs, or who shall in any
manner do any act in violation of any of these Rules and Regulations.

18.           Tenant, its employees and agents
shall not loiter in or on the entrances, corridors, sidewalks, lobbies, courts,
halls, stairways, elevators, vestibules or any Common Areas for the purpose of
smoking tobacco products or for any other purpose, nor in any way obstruct such
areas, and shall use them only as a means of ingress and egress for the
Premises.

19.           Tenant shall not waste electricity,
water or air conditioning and agrees to cooperate fully with Landlord to ensure
the most effective operation of the Building’s heating and air conditioning
system, and shall refrain from attempting to adjust any controls.  Tenant shall participate in recycling
programs undertaken by Landlord.

 

D-3

20.           Tenant shall store all its trash and
garbage within the interior of the Premises. 
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 Francisco, California without
violation of any law or ordinance governing such disposal.  All trash, garbage and refuse disposal shall
be made only through entry-ways and elevators provided for such purposes at
such times as Landlord shall designate and by Landlord as part of its
janitorial service.  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.

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

22.           Any persons employed by Tenant to do
janitorial work shall be subject to the prior written approval of Landlord, and
while in the Project and outside of the Premises, shall be subject to and under
the control and direction of the Project manager (but not as an agent or
servant of such manager or of Landlord), and Tenant shall be responsible for
all acts of such persons.

23.           No awnings or other projection shall
be attached to the outside walls of the Building without the prior written
consent of Landlord, and no curtains, blinds, shades or screens shall be
attached to or hung in, or used in connection with, any window or door of the
Premises other than building standard window coverings.  All electrical ceiling fixtures hung in the
Premises or spaces along the perimeter of the Building must be fluorescent
and/or of a quality, type, design and a warm white bulb color approved in
advance in writing by Landlord.  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.  Tenant shall abide by Landlord’s regulations
concerning the opening and closing of window coverings which are attached to
the windows in the Premises, if any, and which have a view of any interior
portion of the Building or Common Areas.

24.           The sashes, sash doors, skylights,
windows, and doors that reflect or admit light and air into the halls,
passageways or other public places in the Building shall not be covered or
obstructed by Tenant, nor shall any bottles, parcels or other articles be
placed on the windowsills.

25.           Tenant must comply with requests by
the Landlord concerning the informing of their employees of items of importance
to the Landlord.

26.           Tenant must comply with all
applicable “NO-SMOKING” or similar
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 Project.

27.           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, 

 

D-4

including keeping doors
locked and other means of entry to the Premises closed.  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 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.

28.           All office equipment of any
electrical or mechanical nature shall be placed by Tenant in the Premises in
settings approved by Landlord, to absorb or prevent any vibration, noise and
annoyance.

29.           Tenant shall not use in any space or
in the public halls of the Building, any hand trucks except those equipped with
rubber tires and rubber side guards.

30.           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.

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

32.           Tenant shall not use janitorial or
maintenance or other similar services from any company or persons not approved
by Landlord.  Landlord shall approve a
sufficient number of sources of such services to provide Tenant with a
reasonable selection, but only in such instances and to such extent as Landlord
in its judgment shall consider consistent with the security and proper
operation of the Building.

33.           Tenant shall install and maintain, at
Tenant’s sole cost and expense, an adequate, visibly marked and properly
operational fire extinguisher next to any duplicating or photocopying machines
or similar heat producing equipment, which may or may not contain combustible
material, in the Premises.

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 Rules and Regulations
as in Landlord’s judgment may from time to time be necessary 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. 
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.

 

D-5

EXHIBIT
E

71 STEVENSON
STREET

FORM OF TENANT’S ESTOPPEL
CERTIFICATE

The undersigned as Tenant
under that certain Office Lease (the “Lease”) made and entered into as of              ,
20       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 22nd/23rd Floor Commencement Date occurred on                      ,
the Suites 1825/1815 Commencement Date occurred on                     ,
and the 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.             Tenant shall not modify the documents contained in
Exhibit A without the prior written consent of Landlord’s mortgagee.

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.

 

E-1

 

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.

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.           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                  ,
20    .

 

	
   

  	
  “Tenant”:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
                                                                     
  ,

  
	
   

  	
  a

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

E-2

EXHIBIT
F

71 STEVENSON
STREET

APPROVED LETTER OF CREDIT
FORM

 

[Letterhead of Issuing Bank]

[must be a Bank whose location,
credit and practices Landlord has approved]

 

 

RE:          IRREVOCABLE
COMMERCIAL LETTER OF CREDIT NO.              

 

TO:         [Name of project owner] (“Landlord”),                             

                                             
 [Landlord’s
address]

 

Gentlemen:

 

We hereby issue our Irrevocable Commercial
Letter of Credit in your favor, for the account of                                        
[name of tenant and type of entity (e.g. “ABC
Corporation, a California corporation”)] (“Tenant”), in the amount
of                                    
Dollars ($                 
).  This amount is available to you on
presentation of your sight draft drawn upon us referring to the above letter of
credit number, date and amount being drawn hereunder, accompanied by the signed
statement of you or your authorized agent, Embarcadero Capital Partners LLC, that the amount
drawn hereunder is being drawn pursuant to the terms of the                               
 [title of lease document
(e.g. Office Lease, Lease Agreement, etc.)] dated as of                  ,
between Tenant, as tenant, and Landlord, as landlord, for certain premises
located at                           

                                             
(the “Lease”).

 

Any draft presented for payment must be
presented on or before                              
 [term should be at least
one year], the date this Letter of Credit expires.  Partial drawings are permitted.

 

If you sell or otherwise transfer any
interest in the “Building” (as defined in the Lease) [be sure to
use the defined terms used in the Lease (e.g. if the building is called the “Property”
in the Lease, then use that term here)], in the land upon which the
same is located, in the Lease, or in Landlord (including consolidations,
mergers or other entity changes), you shall have the right to transfer this
Letter of Credit to your transferee(s), successors or assigns.

 

We hereby certify that this is an
unconditional and irrevocable Letter of Credit and agree that a draft drawn
under and in compliance with the terms hereof will be honored upon presentation
at our office at                                                
[it must be a location easily accessible to us
(e.g. no country banks located in some tiny town in the Southeastern corner of
Texas].

 

This Letter of Credit shall automatically be
extended and renewed for successive one year periods at the end of the stated
expiration date and each anniversary thereof unless we notify you

 

F-1

 

 in
writing, no later than forty-five (45) days prior to the then applicable
expiration date, that we will not extend and renew the Letter of Credit for
another one year term.

 

 

 

Except to the extent inconsistent with the
express provisions hereof, this Letter of Credit is subject to and governed by
Uniform Customs and Practice for Documentary Credits (1993 Revision)
International Chamber of Commerce publication number 500.

 

	
   

  	
   

  	
  [Name
  of Bank]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized
  Signature

  
	
   

  	
   

  	
   

  

 

 

F-2

EXHIBIT G

 

JANITORIAL SPECIFICATIONS

 

                I.              Janitorial Service Specifications for Tenant Suites and Common Areas on
Tenant-Occupied Floors

 

                                1.             Nightly Services

 

                                a.                                       Secure all lights as soon as possible each
night.

 

                                b.                                      Vacuum all carpeted areas.

 

                                c.                                       Dust mop all resilient and composition floors
with treated dust mops. Damp 
                                mop to
remove spills and water stains as required.

 

                                d.                                      Dust all desks and office furniture with treated dust cloths.

 

                                e.                                       Papers and folders on desks are not to be
moved.

 

                                f.                                         Sanitize all telephone receivers.

 

                                g.                                      Empty all waste paper baskets and other trash
containers.

 

                                h.                                      Remove all trash from floors to the designated trash areas.

 

                                i.                                          Remove fingerprints, dirt smudges, graffiti,
etc., from all doors, frames, glass
                                partitions, windows, light switches, walls, elevator door
jambs and elevator 
                                interiors.

 

                                j.                                          Return chairs and waste baskets to proper position.

 

                                k.                                       Clean, sanitize and polish drinking fountains.

 

                                l.                                          Police all service stair wells.

 

                                m.                                  Police all interior public corridor planters.

 

                                n.                                      Dust and remove debris from all metal door
thresholds.

 

                                o.                                      Wipe clean smudged brightwork.

 

                                p.                                      Spot clean resilient and composition floors
as required.

 

 

 

JANITORIAL SPECIFICATIONS page two

 

q.                                      Service all walk-off mats as required.

 

 

2.             Weekly Services

 

a.                                       Dust all low reach areas including, but not limited to,
chair rungs, structural and furniture ledges, baseboards, window sills, door louvers,
wood paneling molding, etc.

 

b.                                      Wipe clean and polish all brightwork.

 

c.                                       Sweep all service stair wells.

 

d.                                      Dust all vinyl base flooring.

 

 

3.             Monthly Services

 

a.                                       Dust all high reach areas including, but not
limited to, tops of door frames, structural and furniture ledges, tops of
partitions, picture frames, etc.

 

b.                                      Edge all carpeted areas.

 

c.                                       Clean and spray buff all building standard
resilient and/or composite flooring.

 

4.             Bi-Monthly Services

 

a.                                       Spot clean all corridor walls, trim, etc.

 

b.                                      Clean and refinish all resilient floors with
a slip-retardant finish.

 

 

 

JANITORIAL SPECIFICATIONS page three

 

5.                                       Quarterly Services

 

a.                                       Dust all Venetian blinds.

 

6.                                       Semi-Annual Services

 

a.                                       Wash and dry all supply and return air
diffusers and grilles.

 

7.                                       Annual Services

 

a.                                       Dust and wipe clean all light lenses.

 

 

B.                                     Restroom Service Specifications

 

1.                                       Nightly Services

 

a.
                                    Restock all restrooms with supplies from the
Owner’s stock, including paper towels, toilet tissue, seat covers and hand
soap, sanitary napkins and tampons as required. Restock all restrooms with
trash liners, and sanisacks.

 

b.                                      Wash and polish all mirrors, dispensers,
faucets, flushometers and brightwork with non-scratch disinfectant cleaner.
Wipe dry all sinks.

 

c.                                       Wash and sanitize all toilets, toilet seats,
urinals and sinks with non-scratch disinfectant cleaner.

 

d.                                      Remove stains, descale toilets, urinals and
sinks, as required.

 

e.                                       Mop all restroom floors with disinfectant
germicidal solution,

 

f.                                         Empty and sanitize all waste and sanitary
napkin and tampon receptacles.

 

g.                                      Remove all restroom trash.

 

 

 

JANITORIAL SPECIFICATIONS page four

 

h.                                      Spot clean finger prints, marks and graffiti
from walls, partitions, glass, aluminum and stainless and light switches as
required.

 

i.                                          Empty and damp wipe all ashtrays.

 

j                                             Check for light fixtures burned out lights or
not working properly and report them to supervisor.

 

 

3.                                       Monthly Services

 

a.                                       Wipe down all tile walls and metal
partitions. Partitions shall be left clean and unstreaked after this work.

 

b.                                      Dust all doors and door jambs.

 

c.                                       Thoroughly machine scrub all ceramic tile floors.

 

 

4.                                       Quarterly Services

 

a.                                       Dust and wipe clean light lenses and ceiling
grilles.

 

 

 

	
  RECORDING
  REQUESTED BY)

  	
  )

  
	
  AND WHEN RECORDED MAIL TO:)

  	
  )

  
	
  Bank of America, N.A.)

  	
  )

  
	
  Commercial Real Estate Banking)

  	
  )

  
	
  CA5-705-06-11)

  	
  )

  
	
  555 California Street, 6th Floor)

  	
  )

  
	
  San Francisco, CA 94104-1503)

  	
  )

  
	
  Attn.: Karen Guenther)

  	
  )

  

___________________________________________________________________________________________

Space above
for Recorder's Use

 

SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT

 

NOTICE: THIS SUBORDINATION, NONDISTURBANCE AND
ATTORNMENT AGREEMENT RESULTS IN YOUR LEASEHOLD ESTATE BECOMING SUBJECT TO AND
OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT.

 

This Subordination, Nondisturbance and Attornment Agreement
(this "Agreement") dated January       ,
2005 is made among MD Beauty, Inc, a Delaware corporation ("Tenant"),
ECI STEVENSON LLC, a California limited liability company ("Landlord"),
and Bank of America, N.A., a national banking association ("Lender").

 

WHEREAS,
Lender is the owner of a promissory or deed of trust note (herein, as it may
have been or may be from time to time renewed, extended, amended, supplemented
or restated, called the "Note") dated                 ,
200   , executed by Landlord and payable to the order of Lender,
in the face principal amount of $                      
bearing interest and payable as therein provided, secured by, among other
things, a Deed of Trust, Assignment, Security Agreement and Fixture Filing (herein,
as it may have been or may be from time to time renewed, extended, amended or
supplemented, called the "Deed of Trust"), recorded in the
real property records of San Francisco County, California, covering, among
other property, the land (the "Land") described in Exhibit
"A" which is attached hereto and incorporated herein by
reference, and the improvements (the "Improvements") thereon
(such Land and Improvements being herein together called the "Property");

 

WHEREAS,
Tenant is the tenant under a lease from Landlord dated                         
(herein, as it may from time to time be renewed, extended, amended or
supplemented, called the "Lease"), covering a portion of the
Property (said portion being herein referred to as the "Premises");
and

 

WHEREAS, the
term "Landlord" as used herein means the present landlord
under the Lease or, if the landlord's interest is transferred in any manner,
the successor(s) or assign(s) occupying the position of landlord under the
Lease at the time in question.

 

 

1

 

NOW,
THEREFORE, in consideration of the mutual agreements herein, and for other good and valuable consideration, the receipt
and suffciency of which are hereby acknowledged, the parties agree as follows:

1.             Subordination. Tenant agrees
and covenants that the Lease and the rights of Tenant thereunder, all of Tenant’s
right, title and interest in and to the property covered by the Lease, and any lease
thereafter executed by Tenant covering any part of the Property, are and shall be subject,
subordinate and inferior to (a) the Deed of Trust and the rights of Lender thereunder, and all
right, title and interest of Lender in the Property, and (b) all other security
documents now or hereafter securing payment of any indebtedness of Landlord (or
any prior landlord)
to Lender which cover or affect the Property (the “Security Documents”).
This Agreement is not intended and shall not be construed to subordinate the
Lease to any mortgage, deed of trust or other security document other than
those referred to in the preceding sentence, securing the indebtedness to
Lender.

2.              Nondisturbance.
Lender agrees that so long as the Lease is in full force and effect and Tenant
is not in default in the payment of rent, additional rent or other payments or
in the performance of any of the other terms, covenants or conditions of the
Lease on Tenant’s part to be performed (beyond the period, if any, specifed in the
Lease within which Tenant may cure such default),

(a)             Tenant’s possession of the Premises under the
Lease shall not be disturbed or interfered with by Lender in the
exercise of any of its foreclosure rights under the Deed of Trust or in connection
with any conveyance in lieu of foreclosure, and

(b)            Lender will not join Tenant as a party
defendant for the purpose of terminating Tenant’s interest and estate under the
Lease in any proceeding for foreclosure of the Deed of Trust.

3.              Attornment.

(a)             Tenant covenants and agrees that in
the event of foreclosure of the Deed of
Trust, whether by power of sale or by court action, or upon a transfer of the
Property by conveyance in lieu of foreclosure (the purchaser at foreclosure or
the transferee in lieu of foreclosure, including Lender if it is such purchaser
or transferee, being herein called “New Owner”), Tenant shall attorn to
New Owner as Tenant’s new landlord, and agrees that the Lease shall continue in
full force and effect as a direct lease between Tenant and New Owner upon all of the terms, covenants, conditions and
agreements set forth in the Lease and this Agreement, except for provisions
which are impossible for New Owner to perform; provided, however, that in no event shall New Owner be:

(i)            liable for any act,
omission, default, misrepresentation or breach of warranty of any previous
landlord (including Landlord) or obligations accruing prior to New Owner’s
actual ownership of the Property. New Owner shall remain responsible to fund any unfunded portion
of Landlord’s Contribution (as defined in the Workletter attached to the
Lease), or alternatively, may elect to have Tenant fund the unfunded portion of
such contribution in which case Tenant shall be entitled to offset against Rent

 

 

2

 

next becoming due under the Lease the portion of the Landlord’s
Contribution funded by Tenant;

(ii)           bound by any payment of rent,
additional rent or other payments made by Tenant to any previous landlord
(including Landlord) for more than one (1) month in advance;

(iii)          bound by any amendment or modification
of the Lease hereafter made, or consent or acquiescence by any previous
landlord (including Landlord) under the Lease to any assignment or sublease
hereafter granted, without the written consent of Lender, which consent shall
not be unreasonably withheld, delayed or conditioned; or

(iv)          liable for any deposit that Tenant may
have given to any previous landlord (including Landlord) which has not, as such, been
transferred to New Owner.

(b)            The provisions of
this Agreement regarding attornment by Tenant shall be self-operative and
effective without the necessity of execution of any new lease or other document on the part of
any party hereto or the respective heirs, legal representatives, successors or
assigns of any such party. Tenant agrees, however, to execute and deliver upon
the request of New Owner, any instrument or certifcate which in the reasonable
judgment of New Owner may be necessary or appropriate to evidence such
attornment, including a new lease of the Premises on the same terms and
conditions as the Lease for the unexpired term of the Lease, all in form and
content reasonably acceptable to Tenant.

4.              Estoppel
Certificate. Tenant agrees to execute and deliver from time to time, upon
the request of Landlord or of any holder(s) of any of the indebtedness or
obligations 

secured
by the Deed of Trust, a certifcate regarding the status of the Lease,
certifying (a) that the Lease is in full force and effect, (b) the date through
which rentals have been paid, (c) the date of the commencement of the term of
the Lease, (d) the nature of any amendments or modifications of the Lease, (e)
that to the best of Tenant’s knowledge no default, or state of facts which with
the passage of time or notice (or both) would constitute a default, exists
under the Lease, (f) that to the best of Tenant’s knowledge, no setoffs,
recoupments, estoppels, claims or counterclaims exist against Landlord, and (g)
such other matters as may be reasonably requested. If any of the foregoing statements are
untrue, Tenant’s certificate shall state the reasons therefor.

5.              Acknowledgment and Agreement by Tenant. Tenant acknowledges and agrees as follows:

(a)             Tenant acknowledges that in
connection with the financing of the Property,
Landlord is executing and delivering to Lender the Deed of Trust which contains
an assignment of leases and rents. Tenant hereby expressly consents to such assignment and agrees that such assignment
shall, in all respects, be superior to any interest Tenant has in the Lease or
the Property, subject to the provisions of this Agreement. Tenant will not
amend, alter or waive any material provision of, or consent to the amendment, alteration or
waiver of, any provision of the Lease without the prior written consent of Lender,
which consent shall not be unreasonably withheld, delayed or conditioned. Tenant shall not
prepay any rents or other sums due under the

 

 

3

Lease for more than one (1) month
in advance of the due date therefor. Tenant acknowledges that Lender will rely
upon this instrument in connection with such financing.

(b)           Lender, in making any
disbursements to Landlord, is under no obligation or duty to oversee or direct
the application of the proceeds of such disbursements, and such proceeds may be
used by Landlord for purposes other than improvement of the Property.

(c)           From and after the
date hereof, in the event of any act or omission by Landlord which would give
Tenant the right, either immediately or after the lapse of time, to terminate
the Lease or to claim a partial or total eviction, Tenant will not exercise any
such right (i) until it has given written notice of such act or omission to
Lender, and (ii) until the same period of time as is given to Landlord under
the Lease to cure such act or omission shall have elapsed following such giving
of notice to Lender and following the time when Lender shall have become
entitled under the Deed of Trust to remedy the same. In no event will Tenant
exercise any such right less than 30 days after receipt of such notice or prior
to the passage of such longer period of time as may be necessary to cure or
remedy such default, act or omission including such period of time necessary to
obtain possession of the Property and thereafter cure such default, act or
omission, during which period of time Lender shall be permitted to cure or
remedy such default, act or omission; provided that Tenant shall not have to
wait such thirty (30) day period in the event of an emergency that creates an
imminent risk of damage to property or injury to persons or otherwise
substantially interferes with the ability of Tenant to conduct its normal
operations at or from the Premises. Notwithstanding the foregoing, Lender shall
have no duty or obligation to cure or remedy any breach or default. It is specifically
agreed that Tenant shall not, as to Lender, require cure of any such default
which is personal to Landlord and therefore not susceptible to cure by Lender.

(d)           In the event that
Lender notifies Tenant of a default under the Deed of Trust, Note or Security
Documents and demands that Tenant pay its rent and all other sums due under the
Lease directly to Lender, Tenant shall honor such demand and pay the full
amount of its rent and all other sums due under the Lease directly to Lender,
without offset, or as otherwise required pursuant to such notice beginning with
the payment due thirty (30) days after such notice of default, without inquiry
as to whether a default actually exists under the Deed of Trust, Security
Documents or otherwise in connection with the Note, and notwithstanding any
contrary instructions of or demands from Landlord.

(e)           Tenant shall send a copy of any notice or statement under
the Lease to Lender at the same time such notice or statement is sent to
Landlord if such notice or statement has a material impact on the economic
terms, operating covenants or duration of the Lease.

(f)            Tenant has no right
or option of any nature whatsoever, whether pursuant to the Lease or otherwise,
to purchase the Premises or the Property, or any portion thereof or any
interest therein, and to the extent that Tenant has had, or hereafter acquires,
any such right or option, the same is hereby acknowledged to be subject and
subordinate to the Deed of Trust and is hereby waived and released as against
Lender and New Owner.

 

 

4

(g)           This Agreement satisfies any
condition or requirement in the Lease relating
to the granting of a nondisturbance agreement and Tenant waives any requirement
to the contrary in the Lease.

(h)           Except as provided
in Section 3 above, Lender and any New Owner shall have no obligation nor shall they
incur any liability with respect to the erection or completion of the improvements in which the Premises are located or for completion of
the Premises or any improvements for Tenant’s use and occupancy, either at the
commencement of the term of the Lease, upon any renewal or extension thereof or
upon the addition of additional space pursuant to any expansion rights contained
in the Lease.

(i)            Lender and any New
Owner shall have no obligation nor shall they incur any liability with respect
to any warranties of any nature whatsoever, whether pursuant to the Lease or otherwise,
including any warranties respecting use, compliance with zoning, Landlord’s title, Landlord’s
authority, habitability, fitness for purpose or possession.

(j)            In the event that
Lender or any New Owner shall acquire title to the Premises or the Property, Lender
or such New Owner shall have no obligation, nor shall it incur any liability,
beyond Lender’s or New Owner’s then-equity interest, if any, in the Property or
the Premises, and Tenant shall look exclusively to such equity interest of
Lender or New Owner, if any, for the payment and
discharge of any obligations imposed upon Lender or New Owner hereunder or
under the Lease or for recovery of any judgment from Lender or New Owner, and
in no event shall Lender, New Owner, or any of their respective officers,
directors, shareholders, agents, representatives, servants, employees or
partners ever be personally liable for such judgment.

(k)           Tenant has never
permitted, and will not permit, the generation, treatment, storage or disposal of any hazardous substance as defined under federal,
state, or local law, on the Premises or Property except for such substances of a
type and only in a quantity normally used in
connection with the occupancy or operation of buildings (such as non-fammablecleaning fluids and
supplies normally used in the day-to-day operation of first class establishments similar to the Improvements), which substances are being
held, stored, and used in strict compliance with federal, state, and local laws.
Tenant shall be solely responsible for and shall
reimburse and indemnify Landlord, New Owner or Lender, as applicable, for any
loss, liability, claim or expense, including cleanup and all other expenses,
including legal fees that Landlord, New Owner or Lender, as applicable, may
incur by reason of Tenant’s violation of the requirements
of this Section 5(1).

6.              Acknowledgment
and Agreement by Landlord. Landlord, as landlord under the Lease and
trustor under the Deed of Trust, acknowledges and agrees for itself and its
heirs, representatives, successors and assigns, that: (a) this Agreement does
not constitute a waiver by Lender of any of its rights under the Deed of Trust,
Note or Security Documents, nor does this Agreement in any way release
Landlord from its obligations to comply with the terms, provisions, conditions, covenants, agreements and clauses of the Deed of
Trust, Note and Security Documents; (b) the provisions of the Deed of Trust,
Note and Security Documents remain in full force and effect and must be
complied with by Landlord; and (c) Tenant is hereby authorized to pay its rent
and all other sums due under the Lease directly to Lender upon receipt

 

5

 

of a
notice as set forth in Section 5(d) above from Lender and that Tenant is
not obligated to inquire as to whether a default actually exists under the Deed
of Trust or the Security Documents or otherwise in connection with the Note.
Landlord hereby releases and discharges Tenant of and from any liability to
Landlord resulting from Tenant’s payment to Lender in accordance with this
Agreement. Landlord represents and warrants to Lender that a true and complete
copy of the Lease has been delivered by Landlord to Lender.

7.              Lease Status.
Landlord and Tenant certify to Lender that neither Landlord nor Tenant has
knowledge of any default on the part of the other under the Lease, that the
Lease is bona fide and contains all of the agreements of the parties thereto
with respect to the letting of the Premises and that all of the agreements and
provisions therein contained are in full force and effect.

8.              Notices.
All notices, requests, consents, demands and other communications required or
which any party desires to give hereunder shall be in writing and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
telegram, telex, or facsimile, by expedited delivery service with proof of
delivery, or by registered or certified United States mail, postage prepaid, at
the addresses specified at the end of this Agreement (unless changed by similar
notice in writing given by the particular party whose address is to be
changed). Any such notice or communication shall be deemed to have been given
either at the time of personal delivery or, in the case of delivery service or
mail, as of the date of first attempted delivery at the address and in the
manner provided herein, or, in the case of telegram, telex or facsimile, upon
receipt. Notwithstanding the foregoing, no notice of change of address shall be
effective except upon receipt. This Section 8 shall not be construed in any way
to affect or impair any waiver of notice or demand provided in this Agreement
or in the Lease or in any document evidencing, securing or pertaining to the
loan evidenced by the Note or to require giving of notice or demand to or upon
any person in any situation or for any reason.

 

9.              Miscellaneous.

 

(a)           This Agreement supersedes any
inconsistent provision of the Lease.

 

(b)           Nothing contained in this Agreement
shall be construed to derogate from or in any
way impair or affect the lien, security interest or provisions of the Deed of
Trust, Note or Security Documents.

(c)           This Agreement shall
inure to the benefit of the parties hereto, their respective successors and
permitted assigns, and any New Owner, and its heirs, personal representatives,
successors and assigns; provided, however, that in the event of the assignment
or transfer of the interest of Lender, all obligations and liabilities of the
assigning Lender under this Agreement shall terminate, and thereupon all such
obligations and liabilities shall be the responsibility of the party to whom
Lender’s interest is assigned or transferred; and provided further that the
interest of Tenant under this Agreement may not be assigned or transferred
without the prior written consent of Lender.

(d)           THIS AGREEMENT AND ITS
VALIDITY, ENFORCEMENT AND INTERPRETATION SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF

 

6

 

CALIFORNIA
AND APPLICABLE UNITED STATES FEDERAL LAW EXCEPT ONLY TO THE EXTENT,
IF ANY, THAT THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED NECESSARILY
CONTROL.

(e)           The words “herein,”
“hereof” “hereunder” and other similar compounds of
the word “here” as used in this Agreement refer to this entire Agreement
and not to any particular section or provision. The terms “include” and “including”
shall be interpreted as if followed by the words “without limitation.”

(f)            This Agreement may not be modified
orally or in any manner other than by an agreement in writing signed by the
parties hereto or their respective successors in interest.

(g)           If
any provision of this Agreement shall be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not apply to or affect any other provision hereof, but this Agreement
shall be construed as if such invalidity, illegality or unenforceability did
not exist.

 

(h)           This Agreement will be recorded in
the real property records of San Francisco County,
California.

 

[Signatures appear on the following page]

 

 

7

NOTICE: THIS AGREEMENT CONTAINS A
PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON YOUR LEASE TO OBTAIN A LOAN, A
PORTION OF WHICH MAY BE EXPENDED FOR PURPOSES OTHER THAN IMPROVEMENT OF THE
PROPERTY.

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

 

	
  ADDRESS OF LENDER:

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  	
   

  
	
  CA5-705-06-11

  	
   

  	
  BANK
  OF AMERICA, N.A., a national

  
	
  555 California Street,
  6th Floor

  	
   

  	
  banking association

  
	
  San
  Francisco, CA 94104-1503

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attention: Karen
  Guenther

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ADDRESS
  OF TENANT:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  	
   

  
	
  MD Beauty, Inc.

  	
   

  	
   

  
	
  71 Stevenson St., Suite
  2300

  	
   

  	
   

  
	
  San
  Francisco, CA 94105-2934

  	
   

  	
   

  	
   

  
	
  Attention:
  Chief Financial Officer

  	
   

  	
  MD
  BEAUTY, INC.

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: 

  	
   

  
	
  Gardner
  Carton & Douglas, LLP

  	
   

  	
  Title:

  	
   

  
	
  191
  N. Wacker Dr., Suite 3700

  	
   

  	
   

  	
   

  
	
  Chicago,
  Illinois   60606-1698

  	
   

  	
   

  	
   

  
	
  Attention: Barnett P.
  Ruttenberg

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ADDRESS
  OF LANDLORD:

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  	
   

  
	
  c/o Embarcadero Capital
  Partners

  	
   

  	
  ECI
  STEVENSON LLC

  
	
  1199
  Howard Avenue Suite 250

  	
   

  	
  a California limited
  liability company

  
	
  Burlingame.
  CA 94010

  	
   

  	
  By:

  	
  EMBARCADERO
  CAPITAL

  
	
   

  	
   

  	
   

  	
  INVESTORS
  LP. a Delaware

  
	
  Attention:

  	
   

  	
   

  	
  limited partnership

  
	
  -Eric
  Yopes

  	
   

  	
   

  	
  Its Sole Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  EMBARCADERO
  CAPITAL

  

 

8

 

	
   

  	
   

  	
  PARTNERS LLC, a Delaware

  
	
   

  	
   

  	
  limited liability company

  
	
   

  	
   

  	
  Its Sole General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Eric Yopes, Manager

  

 

 

9

 

STATE
OF CALIFORNIA

 

COUNTY OF

 

On                           , before me,                               a notary public,
personally appeared                       , personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s) or the
entity upon behalf of which the person(s) acted, executed the instrument.

 

WITNESS my hand and official
seal.

 

______________________________

Notary Public

 

My Commission Expires:

 

                                                                        
[Notarial Seal]

 

ACKNOWLEDGMENT

 

STATE OF CALIFORNIA

 

COUNTY OF

 

On                           , before me,                               a notary public,
personally appeared                      
, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s)
acted, executed the instrument.

 

WITNESS my hand and official
seal.

 

______________________________

Notary Public

 

My Commission Expires:

 

                                                                         
[Notarial Seal]

 

 

10

 

ACKNOWLEDGMENT

 

STATE OF CALIFORNIA

 

COUNTY OF

 

On                           , before me,                               a notary public,
personally appeared                      
, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s) or the entity upon behalf of which the
person(s) acted, executed the instrument.

 

WITNESS my hand and official
seal.

 

______________________________

Notary Public

 

My Commission Expires:

 

                                                                         [Notarial
Seal]

 

 

 

11

 

EXHIBIT A

 

LEGAL DESCRIPTION OF THE LAND

 

All that
certain real property in the City of San Francisco, County of San Francisco,
State of California, described as follows:

 

A-1Exhibit 10.9

EMPLOYMENT AGREEMENT

THIS
AGREEMENT is made effective as of the 22nd day of May, 2006, by and among
Compression Polymers Holding Corporation, a Delaware corporation (“CPH”),  and its wholly owned subsidiary, Compression
Polymers Corp., a Delaware corporation (“CPC”) (CPH and CPC collectively, “Employer”), and Ray
Terwilliger (“Executive”).

RECITALS

WHEREAS,
Executive desires to be employed by Employer;

WHEREAS,
Employer desires to employ Executive and to utilize his management services as
indicated herein, and Executive has agreed to provide such management services
to Employer; and

WHEREAS,
as a condition precedent and a material inducement for Employer to enter into
this Agreement, Executive has agreed to execute this Agreement and the Noncompetition
Agreement among Employer, Executive and the other parties thereto, dated as of
the date hereof (the “Noncompetition
Agreement”), and be bound by the provisions herein and therein.

NOW,
THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:

PROVISIONS

1.             Term and Duties.  Employer hereby agrees to employ Executive as
Senior Vice President — People Services, commencing on July 1, 2006 (the “Start Date”) and
continuing for a period of three (3) years (the “Initial Term”) or until terminated in
accordance with this Section 1 or Section 5. 
Unless terminated by written notice delivered at least thirty (30) days
prior to the expiration of the Initial Term, Executive’s employment shall
continue for successive one (1) year terms (each one (1) year term hereinafter
referred to as a “Subsequent
Term” and together with the Initial Term, the “Term”) until
terminated by written notice delivered at least thirty (30) days prior to the
expiration of the Subsequent Term. 
Subject to the provisions of this Agreement, during the Term, Executive
shall devote his best efforts and abilities to the performance of Executive’s
duties on behalf of Employer and to the promotion of its interests consistent
with and subject to the direction and control of the Board of Directors of
Employer (the “Board”)
and the Chief Executive Officer of Employer. 
Executive shall devote substantially all of his business time, energies,
attention and abilities to the operation of the business of Employer and shall
not be actively involved in any other trade or business or as an employee of
any other trade or business.

 

 

2.             Compensation During Term.

(a)           Base Compensation. 
In consideration of the services to be rendered by Executive during the
Term of this Agreement, Employer shall pay to Executive, in the aggregate,
$160,000 per year (“Base
Compensation”), payable bi-weekly and pro-rated for any partial
employment period.

(b)           Incentive Bonus.  Subject only to the limitations set forth in
this Agreement, Executive shall be eligible to receive an annual incentive
bonus (pro-rated for 2006) (the “Incentive Bonus”) based upon the achievement of certain
budget and individual performance goals related to Employer’s (i) EBITDA, (ii)
working capital, (iii) capital expenditures and/or (iv) such other performance
criteria as the Compensation Committee of the Board (the “Compensation Committee”)
shall determine.  Such goals shall be
determined by the Compensation Committee in consultation with the Chief Executive
Officer of the Employer.  For the 2006
fiscal year, Executive’s target bonus shall be 37.5% of his Base Compensation.

(c)           Signing Bonus.  As soon as practicable following the Start
Date, Employer shall pay Executive a one-time signing bonus of $80,000 (the “Signing Bonus”); provided,
that, if Executive terminates his employment pursuant to Section 5(c) during
the first twelve (12) months of his employment with Employer, Executive shall
immediately repay to Employer a pro-rata portion of the Signing Bonus equal to
the product of $80,000 and a fraction, the numerator of which is the number of
days employed in such twelve (12) month period and the denominator of which is
365.

(d)           Promotion.  In its sole discretion, the Board may promote
Executive to Chief Operating Officer.  If
such promotion occurs, thereafter (i) Executive’s Base Compensation will be
$200,000, (ii) Executive’s target bonus will be 50% of Base Compensation and
(iii) Executive will be eligible to purchase one hundred (100) Class B or
economically equivalent units of Compression Polymers Holding I LP (“CPH I”) pursuant to
a subscription agreement between Executive and CPH I to be entered into at the
time of such promotion.

3.             Equity Participation.             
On the Start Date, Executive shall purchase one hundred (100) Class B
units of CPH I pursuant to and in accordance with the terms of the subscription
agreement between Executive and CPH I attached hereto as Exhibit A.

4.             Benefits.

(a)           Executive shall be eligible
to participate in such benefit programs offered by Employer (other than bonus
plans), such as health, dental, life insurance, vision, vacations and 401(k),
as are offered to similarly-situated employees (except in the case of
equity-based incentive plans where awards are subject to Board (or committee
thereof) approval) and in each case no less favorable than the terms of
benefits generally 

 

2

 

available to the employees of Employer (based on
seniority and salary level), subject in each case to the generally applicable
terms and conditions of the plan, benefit or program in question.

(b)           During the Term, Executive
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder.  Employer shall reimburse Executive for such
expenses upon presentation of an itemized account and appropriate supporting
documentation, all in accordance with the generally applicable policies;
provided the Board’s written approval shall be required prior to Executive’s
incurring $10,000 of expenses in any one instance or $20,000 of expenses in the
aggregate.

5.             Termination.  Executive’s employment shall terminate upon
the first to occur of the following (each a “Termination Date”):

(a)           The expiration of the Term;

(b)           Executive’s death or
disability (mentally, physically or emotionally), so that Executive cannot
substantially perform his duties hereunder for a period of ninety (90)
consecutive days or for one hundred eighty (180) days during any 365-day period
during the Term;

(c)           Executive’s voluntary
termination of his employment for any reason, upon not less than 10 business
days’ written notice to Employer; or

(d)           Employer’s termination of
Executive’s employment with or without Cause (as hereinafter defined).

6.             Termination Payments.

(a)           Except as otherwise provided
herein, Executive’s Base Compensation and other benefits (it being understood
that no Incentive Bonus shall be payable), if any, shall terminate on the
Termination Date.

(b)           Upon termination of
Executive’s employment without Cause, Employer shall be obligated, in lieu of
any other remedies available to Executive, to pay Executive (A) an amount equal
to his then current Base Compensation (the “Termination Payment”), plus (B) all earned
but unpaid amounts payable to Executive under this Agreement (the “Accrued Payment”).  Employer’s obligation to make the Termination
Payment shall be conditioned upon (i) Executive’s continued compliance with the
Noncompetition Agreement and (ii) Executive’s execution, delivery and
non-revocation of a valid and enforceable general release of claims in a form
reasonably acceptable to Employer (the “Release”). 
Subject to Section 6(e), the Termination Payment shall be paid in
installments on Employer’s regular payroll dates occurring during the twelve
(12) 

 

3

 

month period immediately
following the effectiveness of the Release. 
Subject to Section 6(e), the Accrued Payment shall be paid within thirty
(30) days following the Termination Date.

(c)           In the event of a
termination of Executive’s employment pursuant to Section 5(a) or 5(b),
Employer shall pay to Executive, his estate or legal representative, as the
case may be, the Accrued Amount.

(d)           Any termination of the Term
shall not adversely affect or alter Executive’s rights under any employee
benefit plan of Employer in which Executive, at the date of termination, has a
vested interest, unless otherwise provided in such employee benefit plan or any
agreement or other instrument attendant thereto.

(e)           If Executive is a “specified
employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as
amended, any payments required to be made pursuant to this Section 6 which are
subject to Section 409A shall not commence until six months from the
Termination Date, with the first payment to be equal to the aggregate amount
that would have been paid to Executive under this Section 6 during the first
six months immediately following the Termination Date had this Section 6(e) not
been applicable.

7.             Definitions.           “Cause” as used herein shall mean Executive’s
(i) commission of an act which constitutes common law fraud, embezzlement
(other than occasional, customary and de minimis use of Employer’s property for
personal purposes) or a felony, an act of moral turpitude, or of any tortious
or unlawful act causing material harm to Employer’s business, standing or
reputation, (ii) gross negligence on the part of Executive in the performance
of his duties hereunder, (iii) breach of his duty of loyalty or care to
Employer, (iv) other misconduct that is materially detrimental to Employer; (v)
ongoing refusal or failure to perform Executive’s duties or the deliberate and
consistent refusal to conform to or follow any reasonable policy adopted by the
Board, in each case after receiving written notice describing his noncompliance
and being given a five (5) business days opportunity to cure (to the extent
curable) such non-compliance; or (vi) material breach by Executive of this
Agreement, the Noncompetition Agreement or any other agreement with or for the
benefit of Employer to which Executive is a party or by which Executive is
bound, which is not cured (to the extent curable) within five (5) business days
following written notice from Employer.

8.             Consideration.  Executive acknowledges and agrees that the
consideration set forth in the recitals to this Agreement and the rights and
benefits hereunder are all and singularly valuable consideration which are
sufficient for any or all of Executive’s covenants set forth herein or in the
Noncompetition Agreement.

 

4

 

9.             No Prior Agreements.  Executive represents and warrants that his
performance of all the terms of this Agreement does not and shall not breach
any fiduciary or other duty or any covenant, agreement or understanding
(including, without limitation, any agreement relating to any proprietary
information, knowledge or data acquired in confidence, trust or otherwise) to
which he is a party or by the terms of which he may be bound.  Executive further covenants and agrees not to
enter into any agreement or understanding, either written or oral, in conflict
with the provisions of this Agreement.

10.           Notices.  All notices, requests, consents and demands
by the parties hereto shall be delivered by hand, by confirmed facsimile
transmission, by recognized national overnight courier service or by deposit in
the United States mail, postage prepaid, by registered or certified mail, return
receipt requested, addressed to the party to be notified at the addresses set
forth below:

if
to Executive:

 

Ray
Terwilliger

1509
Wyoming Avenue

Forty
Fort, P.A. 18704

 

if
to Employer:

 

c/o
AEA Investors LLC

Park
Avenue Tower

65
East 55th Street

New
York, NY  10022

Attn:  Sanford Krieger

 

with
copy to:

 

Fried,
Frank, Harris, Shriver and Jacobson LLP

One
New York Plaza

New
York, NY  10004-1980

Attn:  Chris Ewan

 

Notices shall be effective immediately upon personal delivery or
facsimile transmission, one (1) business day after deposit with an overnight
courier service or three (3) business days after the date of mailing
thereof.  Other notices shall be deemed
given on the date of receipt.  Any party
hereto may change the address specified herein by written notice to the other
parties hereto.

 

5

 

11.           Entire Agreement.  This Agreement cancels and supersedes any and
all prior agreements and understandings between the parties hereto with respect
to the obligations of Executive, whether oral or written, including any offer
letter.  This Agreement and the
Noncompetition Agreement constitute the entire agreement between the parties
with respect to the matters herein provided, and no modifications or waiver of
any provision hereof shall be effective unless in writing and signed by
Employer and Executive.

12.           Binding Effect.  All of the terms and provisions of this
Agreement shall be binding upon the parties hereto and its or his heirs,
executors, administrators, legal representatives, successors and assigns, and
inure to the benefit of and be enforceable by Employer and its successors and
assigns, except that the duties and responsibilities of Executive hereunder are
of a personal nature and shall not be assignable or delegable in whole or in
part.

13.           Severability.  In the event that any provision of this
Agreement or application thereof to anyone or under any circumstance is found
to be invalid or unenforceable in any jurisdiction to any extent for any
reason, such invalidity or unenforceability shall not affect any other
provision or application of this Agreement which can be given effect without
the invalid or unenforceable provision or application and shall not invalidate
or render unenforceable such provision or application in any other
jurisdiction.

14.           Remedies; Waiver.  No remedy conferred upon Employer by this
Agreement is intended to be exclusive of any other remedy, and each and every
such remedy shall be cumulative and shall be in addition to any other remedy
given hereunder or now or hereafter existing at law or in equity.  No delay or omission by Employer in
exercising any right, remedy or power hereunder or existing at law or in equity
shall be construed as a waiver thereof, and any such right, remedy or power may
be exercised by the party possessing the same from time to time and as often as
may be deemed expedient or necessary by such party in its sole discretion.

15.           Counterparts.  This Agreement may be executed in several
counterparts, each of which is an original and all of which shall constitute
one instrument.  It shall not be
necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.

16.           Governing Law.  The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of New York, without application of conflict of laws principles.

17.           Headings. 
The captions and headings contained in this Agreement are for
convenience only and shall not be construed as a part of the Agreement.

 

6

 

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

	
   

  	
  COMPRESSION POLYMERS
  HOLDING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN R. LOYACK

  
	
   

  	
   

  	
  Name:  John R. Loyack

  
	
   

  	
   

  	
  Title:    President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COMPRESSION POLYMERS CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN R. LOYACK

  
	
   

  	
   

  	
  Name:  John R. Loyack

  
	
   

  	
   

  	
  Title:    President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ RAY TERWILLIGER

  
	
   

  	
   

  	
  Ray Terwilliger

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00106-of-00352.parquet"}]]