Document:

Exhibit
10.3

 

LEASE AGREEMENT

 

 

between

 

 

PCCP HC Kierland, LLC,

a Delaware limited liability company,

 

as “Landlord”

 

 

and

 

 

The Ryland Group, Inc.,

a Maryland corporation,

 

as “Tenant”

 

 

Ryan Kierland Corporate Center

Scottsdale, Arizona

 

 

TABLE OF CONTENTS

 

	
  SECTION

  	
   

  	
  PAGE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  PREMISES

  	
  4

  
	
  2.

  	
   

  	
  TERM; POSSESSION

  	
  4

  
	
  3.

  	
   

  	
  RENT; SECURITY DEPOSIT

  	
  7

  
	
  4.

  	
   

  	
  RENTAL TAXES

  	
  12

  
	
  5.

  	
   

  	
  USE AND COMPLIANCE WITH
  LAWS

  	
  12

  
	
  6.

  	
   

  	
  TENANT IMPROVEMENTS AND
  ALTERATIONS

  	
  16

  
	
  7.

  	
   

  	
  MAINTENANCE AND REPAIRS

  	
  17

  
	
  8.

  	
   

  	
  TENANT’S PERSONAL PROPERTY
  TAXES

  	
  18

  
	
  9.

  	
   

  	
  UTILITIES AND SERVICES

  	
  18

  
	
  10.

  	
   

  	
  EXCULPATION AND
  INDEMNIFICATION

  	
  20

  
	
  11.

  	
   

  	
  INSURANCE

  	
  21

  
	
  12.

  	
   

  	
  DAMAGE OR DESTRUCTION

  	
  24

  
	
  13.

  	
   

  	
  CONDEMNATION

  	
  25

  
	
  14.

  	
   

  	
  ASSIGNMENT AND SUBLETTING

  	
  27

  
	
  15.

  	
   

  	
  DEFAULT AND REMEDIES

  	
  29

  
	
  16.

  	
   

  	
  LATE CHARGE AND INTEREST

  	
  32

  
	
  17.

  	
   

  	
  WAIVER

  	
  32

  
	
  18.

  	
   

  	
  ENTRY, INSPECTION AND
  CLOSURE

  	
  33

  
	
  19.

  	
   

  	
  SURRENDER AND HOLDING OVER

  	
  34

  
	
  20.

  	
   

  	
  ENCUMBRANCES

  	
  35

  
	
  21.

  	
   

  	
  ESTOPPEL CERTIFICATES

  	
  35

  
	
  22.

  	
   

  	
  NOTICES

  	
  36

  
	
  23.

  	
   

  	
  ATTORNEYS’ FEES

  	
  36

  
	
  24.

  	
   

  	
  QUIET POSSESSION

  	
  36

  
	
  25.

  	
   

  	
  SECURITY MEASURES

  	
  37

  
	
  26.

  	
   

  	
  FORCE MAJEURE

  	
  37

  
	
  27.

  	
   

  	
  RULES AND REGULATIONS

  	
  37

  
	
  28.

  	
   

  	
  LANDLORD’S LIABILITY

  	
  37

  
	
  29.

  	
   

  	
  CONSENTS AND APPROVALS

  	
  38

  
	
  30.

  	
   

  	
  WAIVER OF RIGHT TO JURY
  TRIAL

  	
  38

  
	
  31.

  	
   

  	
  BROKERS

  	
  38

  
	
  32.

  	
   

  	
  INTENTIONALLY DELETED

  	
  39

  
	
  33.

  	
   

  	
  PARKING

  	
  39

  
	
  34.

  	
   

  	
  ENTIRE AGREEMENT

  	
  39

  
	
  35.

  	
   

  	
  MISCELLANEOUS

  	
  40

  
	
  36.

  	
   

  	
  AUTHORITY

  	
  40

  

 

-i-

 

	
  37.

  	
   

  	
  SIGNAGE

  	
  40

  
	
  38.

  	
   

  	
  RIGHT OF FIRST OFFER

  	
  40

  
	
  39.

  	
   

  	
  LEASE CONTINGENCY

  	
  41

  
	
  39.

  	
   

  	
  LEASE CONTINGENCY

  	
  41

  

 

-ii-

 

	
  BASIC
  LEASE INFORMATION

  
	
   

  	
   

  	
   

  
	
  Lease
  Date:

  	
   

  	
  For
  identification purposes only, the date of this Lease is February 28, 2006.

  
	
   

  	
   

  	
   

  
	
  Landlord:

  	
   

  	
  PCCP
  HC Kierland, LLC, a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
  Tenant:

  	
   

  	
  The
  Ryland Group, Inc., a Maryland corporation

  
	
   

  	
   

  	
   

  
	
  Project:

  	
   

  	
  Ryan
  Kierland Corporate Center

  
	
   

  	
   

  	
   

  
	
  Building
  Address:

  	
   

  	
  14635
  North Kierland Boulevard, Scottsdale, Arizona 85254

  
	
   

  	
   

  	
   

  
	
  Rentable
  Area of

  Building:

  	
   

  	
  106,548
  rentable square feet

  
	
   

  	
   

  	
   

  
	
  Premises:

  	
   

  	
  Floor:
  Second

  
	
   

  	
   

  	
  Suite Number:
  200

  
	
   

  	
   

  	
  Rentable
  Area: 56,608 rentable square feet

  
	
   

  	
   

  	
  Usable
  Area: 53,225 usable square feet

  
	
   

  	
   

  	
   

  
	
  Initial
  Term: 

  	
   

  	
  Seventy-six
  (76) full calendar months (plus any partial month at the beginning of the
  Term)

  
	
   

  	
   

  	
   

  
	
  Renewal
  Terms: 

  	
   

  	
  Two
  (2) additional periods of sixty (60) months each (for a total if all
  Renewal Terms are exercised of one hundred twenty (120) months)

  
	
   

  	
   

  	
   

  
	
  Commencement
  Date: 

  	
   

  	
  The
  date that is one hundred twenty (120) days following Landlord’s delivery of
  the Premises to Tenant in accordance with Section 2.1 below

  
	
   

  	
   

  	
   

  
	
  Expiration
  Date: 

  	
   

  	
  The
  last day of the seventy-sixth (76th)full calendar month in
  the Term

  

 

	
  Base
  Rent:

  	
   

  	
  Monthly
  Installments of

  Base Rent

  	
   

  	
  Annual Base Rent
  per rentable

  square foot of the Premises

  	
   

  
	
  Months 01 through 04

  	
   

  	
  $0.00

  	
   

  	
  $0.00

  	
   

  
	
  Months 05 through 16

  	
   

  	
  $125,009.33

  	
   

  	
  $26.50

  	
   

  
	
  Months 17 through 28

  	
   

  	
  $127,368.00

  	
   

  	
  $27.00

  	
   

  
	
  Months 29 through 40

  	
   

  	
  $129,726.67

  	
   

  	
  $27.50

  	
   

  
	
  Months 41 through 52

  	
   

  	
  $132,085.33

  	
   

  	
  $28.00

  	
   

  
	
  Months 53 through 64

  	
   

  	
  $134,444.00

  	
   

  	
  $28.50

  	
   

  
	
  Months 65 through 76

  	
   

  	
  $136,802.67

  	
   

  	
  $29.00

  	
   

  

 

1

 

	
  Security Deposit:

  	
   

  	
  $0.00

  
	
   

  	
   

  	
   

  
	
  Tenant’s
  Share:

  	
   

  	
  Approximately 53.13%

  
	
   

  	
   

  	
   

  
	
  Operating
  Costs

  Expense Stop:

  	
   

  	
  An amount equal to the
  Operating Costs incurred by Landlord during calendar year 2006.

  
	
   

  	
   

  	
   

  
	
  Improvement

  Allowance:

  	
   

  	
  $35.00
  multiplied by the Usable Area of the Premises (or $1,862,875.00 based on a
  Premises consisting of 53,225 usable square feet), subject to reduction based
  upon the costs incurred by Landlord in connection with the Data
  Room Floor Construction as more particularly described under
  Section 25 of Exhibit C to this Lease.

  
	
   

  	
   

  	
   

  
	
  Covered
  Reserved

  Parking Spaces:

  	
   

  	
  Fifty-three (53) covered/reserved parking stalls

  
	
   

  	
   

  	
   

  
	
  Landlord’s
  Address

  for Payment of Rent:

  	
   

  	
  PCCP HC Kierland, LLC

  c/o Transwestern Commercial Services

  10040 North 25th Avenue, Suite 125

  Phoenix, Arizona 85021

  Attn: Joanne Damman

  
	
   

  	
   

  	
   

  
	
  Business
  Hours: 

  	
   

  	
  Between
  7:00 a.m. and 6:00 p.m., Monday through Friday, and between
  8:00 a.m. and noon on Saturday

  
	
   

  	
   

  	
   

  
	
  Landlord’s
  Address

  For Notices:

  	
   

  	
  PCCP HC Kierland, LLC

  c/o Transwestern Commercial Services

  10040 North 25th Avenue, Suite 125

  Phoenix, Arizona 85021

  Attn: Joanne Damman

  
	
   

  	
   

  	
   

  
	
  with a
  copy to: 

  	
   

  	
  PCCP HC Kierland, LLC

  c/o Hibernia Capital Advisors, LLC

  2398 East Camelback Road, Suite 245

  Phoenix, Arizona 85016

  Attn: Richard A. O’Brien

  
	
   

  	
   

  	
   

  
	
  with a
  copy to: 

  	
   

  	
  Mr. R. Michael
  Valenzuela

  Valenzuela Law Group, PLC

  2398 East Camelback Road, Suite 760

  Phoenix, Arizona 85016

  

 

2

 

	
  Tenant’s Address

  For Notices: 

  	
   

  	
  The Ryland Group, Inc.

  6300 Canoga Avenue, 14th Floor

  Woodlands, California 91367

  Attn: Eric Menyuk

  
	
   

  	
   

  	
   

  
	
  Landlord’s
  Broker:

  	
   

  	
  Lee &  Associates
  (Tom Boyle)

  
	
   

  	
   

  	
   

  
	
  Tenant’s
  Broker: 

  	
   

  	
  Travers
  Realty Company (Jim Travers) and Core Realty Advisors (Mike Cavanaugh)

  
	
   

  	
   

  	
   

  
	
  Property
  Manager:

  	
   

  	
  Transwestern Commercial
  Services

  

 

	
  Exhibits:

  	
   

  	
   

  
	
  Exhibit A:

  	
   

  	
  Legal Description of the Land

  
	
  Exhibit B:

  	
   

  	
  The Premises

  
	
  Exhibit C:

  	
   

  	
  Construction Rider

  
	
  Exhibit D:

  	
   

  	
  Building Rules

  
	
  Exhibit E:

  	
   

  	
  Subordination, Non-Disturbance and Attornment Agreement

  
	
  Exhibit F:

  	
   

  	
  Operating Costs Exclusions

  
	
  Exhibit G:

  	
   

  	
  Exterior Building Signage Locations

  
	
  Exhibit G-1:

  	
   

  	
  Landlord Approved Signage

  

 

The Basic Lease Information set forth above is part of the Lease. In
the event of any conflict between any provision in the Basic Lease Information
and the Lease, the Lease shall control.

 

3

 

THIS LEASE is made as of the Lease Date set forth in the Basic Lease
Information, by and between the Landlord identified in the Basic Lease
Information (“Landlord”), and the Tenant
identified in the Basic Lease Information (“Tenant”).
Landlord and Tenant hereby agree as follows:

 

1.                                       PREMISES.
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, upon
the terms and subject to the conditions of this Lease, the space identified in
the Basic Lease Information as the Premises (the “Premises”),
in the Building located at the address specified in the Basic Lease Information
(the “Building”). The land upon which the
Building is located is described on Exhibit A (the “Land”). The approximate configuration and location of the
Premises is shown on Exhibit B. Landlord and Tenant agree that, for all
purposes of this Lease, the Rentable Area of the Premises, the Usable Area of
the Premises and the Rentable Area of the Building shall be as specified in the
Basic Lease Information. For purposes of Landlord’s determination of the Rentable
Area and Usable Area, the load factor (the Floor R/U Ratio) is six
and four-tenths percent (6.4%). The Building, the Land, and all improvements
thereon (collectively, the “Property”) are
part of the Project identified in the Basic Lease Information (the “Project”).

 

2.                                       TERM;
POSSESSION.

 

2.1 Term. The term of this Lease (the “Term”)
shall commence on the Commencement Date as described below and, unless sooner
terminated, shall expire on the Expiration Date set forth in the Basic Lease
Information (the “Expiration Date”).
Subject to the timely satisfaction of the contingencies set forth in Sections
39 and 40 below, Landlord will deliver the Premises to Tenant on or before
April 1, 2006 so that Tenant may cause the Tenant Improvements to be
constructed therein as soon as is reasonably practicable thereafter. Tenant
acknowledges and agrees that, subject to Landlord’s representations and
warranties concerning the Base Building as described in the Construction Rider
attached as Exhibit C (the “Construction Rider”),
the Premises are being leased to Tenant in an “AS IS” condition, without
representation, warranty or covenant of or from Landlord and without any
obligation of Landlord to construct any tenant improvements of any kind or
character whatsoever. Tenant further acknowledges that, except as expressly set
forth to the contrary in this Lease, Landlord has made no representations or
warranties, express or implied, concerning the tenant improvements presently
existing at, or the condition of, the Premises, and Tenant further acknowledges
that it has had adequate opportunity to inspect and approve, and has adequately
inspected and approved, the tenant improvements presently existing at, and the
condition of, the Premises. The “Commencement Date”
shall be the date that is one hundred twenty (120) days following Landlord’s
delivery of the Premises to Tenant as specified above in this
Section notwithstanding the actual date of Substantial Completion of the
Tenant Improvements. Tenant shall not do anything that could delay Substantial
Completion of the Tenant Improvements and, in the event the Tenant Improvements
are not Substantially Completed on or before the Commencement Date, then in
that event Tenant shall complete the Tenant Improvements at the earliest
practicable date thereafter. When the Commencement Date has been established,
Landlord and Tenant shall confirm the Commencement Date and the Expiration Date
in writing.

 

4

 

2.2                                  Tenant’s
Property. Tenant agrees that Landlord shall not be liable in
any way for any injury, loss or damage which may occur to any of Tenant’s
property placed upon or installed in the Premises prior to the Commencement
Date, the same being at Tenant’s sole risk, and Tenant shall be liable for all
injury, loss or damage to persons or property arising as a result of such entry
into the Premises by Tenant or its Representatives (as hereinafter defined).

 

2.3                                  Occupancy of
Premises. Tenant shall have the right to occupy the Premises
throughout the Term, seven (7) days a week, twenty-four (24) hours a day,
subject to all of the terms of this Lease, including, without limitation,
casualty, condemnation, Force Majeure or other events beyond the control of
Landlord. From and after the Commencement Date, during any period that Tenant
is not occupying and operating the Premises, Tenant will keep those portions of
the Premises visible from Common Areas (as hereinafter defined) from appearing
abandoned, including, without limitation, keeping such areas lighted during
Business Hours, free of stored materials, clean and otherwise maintained such that it is not apparent that business is not being
conducted therein.

 

2.4                                  Renewal Options. In the
absence of an Event of Default by Tenant when it exercises a Renewal Option or
when a Renewal Term begins, Tenant has the option (each, a “Renewal Option”) to renew this Lease for the number of
successive terms set forth in the Basic Lease Information (each, a “Renewal Term”) (for a total if all Renewal Options are
exercised of ten (10) years) by giving notice of exercise of a Renewal
Option to Landlord at least nine (9) months before the end of the
then-current Term. If Tenant fails to deliver timely written notice of exercise
of a Renewal Option to Landlord, all remaining Renewal Options shall lapse and
Tenant will have no further privilege to extend the Term. Time is of the
essence of this provision. The terms of the Renewal Terms are as follows:

 

(a)                    Each Renewal Term shall be
on the same terms and conditions of this Lease (unless clearly inapplicable),
except that Base Rent during each Renewal Term shall be based upon the fair
market rental rate for comparable space in buildings of similar size, type,
quality, age and location prevailing at the start of each Renewal Term (“Market Rental Rate”). Within thirty (30) days after Landlord
receives Tenant’s notice of exercise of a Renewal Option, Landlord will
reasonably calculate the Market Rental Rate and will notify Tenant of same.
Determination of the effective Market Rental Rate will give appropriate
consideration to rental rates for renewals, rental escalations, common area
charges, operating costs, and other terms that would affect the economics in a
similar lease renewal at a competing building in the area.

 

(b)                   If Tenant disputes
Landlord’s determination of the Market Rental Rate for a Renewal Term, Tenant
will deliver notice of such dispute, together with Tenant’s proposed Market
Rental Rate, to Landlord within five days of Tenant’s receipt of Landlord’s
determination. The parties will then attempt in good faith to agree upon the
Market Rental Rate. If they fail to agree within fifteen (15) days, they will
within seven days thereafter mutually appoint an appraiser to select the

 

5

 

Market Rental Rate in the manner set forth below. The appraiser must
have at least five years of full-time commercial appraisal experience with
projects comparable to the Project and be a member of the American Institute of
Real Estate Appraisers or a similar appraisal association. The appraiser shall
not have any material financial or business interest in common with either of
the parties. If Landlord and Tenant are unable to agree upon an appraiser
within such seven days, the parties will within five days thereafter each
appoint an appraiser meeting the criteria set forth above, which appraisers
will, within seven days of their appointment, mutually select a third appraiser
meeting the criteria set forth above to select the Market Rental Rate in the
manner set forth below. Within seven days of the appointment
(either by agreement or selection) of the deciding appraiser, Landlord and
Tenant will submit to that appraiser their respective determinations of the
Market Rental Rate and any related information. Within twenty (20) days
thereafter, the appraiser will review each party’s submittal (and such other
information as the appraiser deems necessary) and will select
one party’s submittal as representing the most reasonable approximation of the
Market Rental Rate for the Premises. The rate so selected will be used for the
applicable Renewal Term as the Base Rent rate. Subject to the previous
sentence, if the appraiser timely receives one party’s submittal, but not both,
the appraiser must designate the submitted rent rate as the Market Rental Rate
for the applicable Renewal Term. Landlord and Tenant will each pay, directly to
the appraiser selecting the Market Rental Rate, one-half of all fees, costs and
expenses of such appraiser. Landlord and Tenant will each separately pay all
costs, fees and expenses of their respective additional appraiser (if any)
appointed to determine the deciding appraiser.

 

(c)                    In addition to paying Base
Rent determined pursuant to this Section 2.4, Tenant will
continue to pay Additional Rent and all other sums required under this Lease
during all Renewal Terms.

 

(d)                   If this Lease or Tenant’s
right to possession of the Premises shall expire or terminate for any reason
whatsoever before Tenant exercises all Renewal Options, then immediately upon
such expiration or termination, all Renewal Options shall simultaneously
terminate and become null and void. In addition, Tenant may not exercise a
Renewal Option if it is subletting or has assigned all or any portion of the
Premises other than to a Tenant Affiliate (as defined below) at the time Tenant
seeks to exercise such Renewal Option. The Renewal Options are personal to
Tenant and its Tenant Affiliates, and under no circumstances shall a subtenant
or an assignee other than a Tenant Affiliate have the right to exercise any
Renewal Option. Until such time as Tenant properly exercises a Renewal Option,
all references to the “Term” of this Lease will mean the Initial Term only. If
Tenant properly exercises its right to renew this Lease for a Renewal Term,
then all references to the “Term” of this Lease will include such Renewal Term.

 

6

 

3.                                       RENT; SECURITY
DEPOSIT.

 

3.1                                 Base Rent. Tenant shall
pay to Landlord annual rent (“Base Rent”) in
the amount set forth in the Basic Lease Information, without prior notice or
demand, in monthly installments equal to one-twelfth (1/12) of the Base Rent,
on or before the first day of each and every calendar month during the Term, except
that Base Rent for the first full calendar month in which Base Rent is payable
shall be paid upon Tenant’s execution of this Lease and Base Rent for any
partial month at the beginning of the Term shall be paid on the Commencement
Date. Base Rent for any partial month at the beginning or end of the Term shall
be prorated based on the actual number of days in the month.

 

3.2                                 Additional Rent: Operating
Costs and Taxes.

 

(a)          Definitions.

 

1)              “Operating
Costs” means all Taxes (as defined below) and other costs of
managing, operating, maintaining and repairing the Property in good condition
and repair, including, without limitation, all costs,
expenditures, fees and charges set forth below. Operating Costs include:

 

(A) operation,
maintenance and repair of the Property (including maintenance, repair and
replacement of glass, the roof covering or membrane, the parking lot and
driveways (including re-painting, re-striping, seal-coating, cleaning,
sweeping, resurfacing, patching and repairing parking areas and other paved
surfaces), sidewalks, exterior light fixtures, common signage, other common
areas and elements, regular painting of the exterior of the Building and lawn
care and landscaping). The terms “repair” or “repairs” shall include reasonable
replacements or renewals when necessary.

 

(B) utilities and
services (including, without limitation, electricity, water, sewer, gas (if
used at the Project), telecommunications facilities and equipment, recycling
programs and trash removal), and associated supplies and materials.

 

(C) wages, benefits and
other compensation (including employment taxes and fringe benefits) for persons
who perform duties in connection with the operation, management, maintenance
and repair of the Property up to, and including, level of Building Manager (or
equivalent), such compensation to be appropriately allocated for persons who
also perform duties unrelated to the Property.

 

(D) property (including
coverage for earthquake and flood if carried by Landlord), liability, rental
income and other insurance relating to the Property, and expenditures for
deductible amounts paid under such insurance.

 

7

 

(E) licenses, permits
and inspections.

 

(F) complying with the
requirements of any law, statute, ordinance or governmental rule or
regulation or any orders pursuant thereto (collectively “Laws”), but only to the extent such
Laws are enacted and enforceable from and after the date of this Lease.

 

(G) amortization of
capital improvements required to comply with Laws, or which are intended to
reduce Operating Costs or improve the utility, efficiency or capacity of any
of the Building Systems, with interest on the unamortized balance at the rate
paid by Landlord on funds borrowed to finance such capital improvements (or, if
Landlord finances such improvements out of Landlord’s funds without borrowing,
the rate that Landlord would have paid to borrow such funds, as reasonably determined by Landlord),
over such useful life as Landlord shall reasonably determine, but in no event
greater than ten percent (10%) per annum.

 

(H) an office in
the Project for the management of the Property, including expenses of
furnishing and equipping such office and the rental value of any space occupied
for such purposes.

 

(I) commercially
reasonable property management fees not to exceed three percent (3%) of Landlord’s
gross rental revenue received for that fiscal year for the Property.

 

(J) fees and costs
for accounting, legal and other professional services incurred in connection
with the operation of the Property and the calculation of Operating Costs.

 

(K) a reasonable
allowance for depreciation on machinery and equipment used to maintain the
Property and on other personal property owned by Landlord in the Property
(including window coverings and carpeting in common areas).

 

(L) fees and costs
incurred in contesting the validity or applicability of any Laws that may
affect the Property to the extent that contesting the Law results in a savings
to Tenant. “Savings” under this section would mean, by example, if any
Operating Expense is reduced (or if a proposed increase is avoided or reduced)
because a Law was contested, Landlord may include in its computation of
Operating Expenses the costs of any fees and costs incurred in connection with
such contest up to the amount of any Operating Expense reduction obtained in
connection with the contest or any Operating Expense increase avoided or
reduced in connection with the contest, as the case may be.

 

8

 

(M) the Building’s
or Property’s share of any shared or common area maintenance fees and expenses,
property association fees, dues and assessments, and all payments under any
recorded documents (excluding mortgages and deeds of trust) affecting the
Property (including costs and expenses of operating, managing, owning and
maintaining the common areas of the Project and any fitness center or
conference center in the Project).

 

(N) janitorial
services, window washing, cleaning, rubbish removal and other services
provided to the Property.

 

(o) security and access
control equipment and services.

 

(P) subject to the
remaining provisions of this Section 3.2(a)(l),  any  other cost,
expenditure, fee or charge, whether or not hereinbefore described, which in
accordance with generally accepted property management practices would be
considered an expense of managing, operating, maintaining and repairing the
Property.

 

Operating
Costs shall not include:

 

(i) capital
improvements (except as otherwise provided above).

 

(ii) costs of special
services rendered to individual tenants (including Tenant) for which a special
charge is made.

 

(iii) interest and
principal payments on loans or indebtedness secured by the Building.

 

(iv) costs of interior
improvements for Tenant or other tenants of the Building.

 

(v) costs of services
or other benefits of a type which are not available to Tenant but which are
available to other tenants or occupants, and costs for which Landlord is
reimbursed by other tenants of the Building other than through payment of
tenants’ shares of Operating Costs.

 

(vi) leasing
commissions, attorneys’ fees and other expenses incurred in connection with
leasing space in the Building or enforcing such leases.

 

9

 

(vii) depreciation or
amortization, other than as specifically enumerated in the definition of
Operating Costs above.

 

(viii) costs, fines or
penalties incurred due to Landlord’s violation of any Law.

 

(ix) commercially
unreasonable contributions to employee pension plans.

 

(x) Any other
exclusions from Operating Costs specifically described on Exhibit F attached hereto
and incorporated herein.

 

2)              “Taxes”  means all real
property taxes and general, special or district assessments or other governmental
impositions, of whatever kind, nature or origin, imposed on or by reason of the
ownership or use of the Property; any state, county
or municipal governmental property lease excise tax or the equivalent thereof;
service payments in lieu of taxes and taxes and assessments of every kind and
nature whatsoever levied or assessed in addition to, in lieu of or in
substitution for existing or additional real or personal property taxes on the
Property or the personal property described above; and the reasonable cost of
contesting by appropriate proceedings the amount or validity of any taxes,
assessments or charges described above. Taxes shall include all Taxes either
payable in, or attributable to, each calendar year or portion thereof during
the Term.

 

3)              “Tenant’s Share”  means the Rentable Area of the Premises divided by
the Rentable Area of the Building. If the Rentable Area of the Premises is
increased by Tenant’s leasing of additional space hereafter, Tenant’s Share
shall be increased accordingly.

 

(b)         Additional Rent.

 

1)              Tenant shall pay Landlord as
“Additional
Rent”  for each
calendar year during the Term Tenant’s Share of the amount by which Operating
Costs for such year exceed the Operating Costs Expense Stop, which amount shall
be prorated for the last year of the Term if such year is less than a full
calendar year. Both Landlord and Tenant acknowledge that basing the Operating
Costs Expense Stop on expenses for 2006, the intent is to base such Expense
Stop on the actual Operating Expenses that Tenant would have incurred had the
Building been fully occupied the entire year. Therefore, Tenant will not incur
any costs associated with Tenant’s Share of Operating Costs until
January 2007. In addition, in determining the Operating Costs Expense
Stop, the actual Operating Costs incurred in 2006 that vary with occupancy
shall be adjusted to an amount reasonably determined by Landlord to be the
Operating Costs that would have been incurred and paid had such occupancy been
at least ninety-five percent (95%) during all of 2006.

 

10

 

2)              Prior to the beginning of
the Term and each calendar year thereafter, Landlord shall notify Tenant of
Landlord’s estimate of Operating Costs and Tenant’s Additional Rent for the
remaining and following calendar year, as applicable. Commencing on the first
day of the Term and continuing on the first day of every month thereafter,
Tenant shall pay to Landlord one-twelfth (1/12th) of the estimated Additional
Rent. If Landlord thereafter estimates that Operating Costs for any year will
vary from Landlord’s prior estimate, Landlord may, by notice to Tenant, revise
the estimate for such year (and Additional Rent shall thereafter be payable
based on the revised estimate).

 

3)              As soon as reasonably
practicable after the end of each calendar year during the
Term, Landlord shall furnish Tenant a reconciliation statement with respect to
such year, showing Operating Costs and Additional Rent for the year, and the
total payments made by Tenant with respect thereto. Unless Tenant raises any
objections to Landlord’s statement within thirty (30) days after receipt of the
same, such statement shall presumptively be deemed correct and Tenant shall
have no right thereafter to dispute such statement or any item therein or the
computation of Additional Rent based thereon, subject only to Tenant’s right of audit. If Tenant does
object to such statement, then Landlord shall provide Tenant with reasonable
verification of the figures shown on the statement and the parties shall
negotiate in good faith to resolve any disputes. Any objection of Tenant to
Landlord’s statement and resolution of any dispute shall not postpone the time
for payment of any amounts due Tenant or Landlord based on Landlord’s
statement, nor shall any failure of Landlord to deliver Landlord’s statement in
a timely manner relieve Tenant of Tenant’s obligation to pay any amounts due
Landlord based on Landlord’s statement.

 

4)              If Tenant’s Additional Rent
as finally determined for any calendar year exceeds the total payments made by
Tenant on account thereof, Tenant shall pay Landlord the deficiency within
fifteen (15) business days of Tenant’s receipt of Landlord’s statement. If the
total payments made by Tenant on account thereof exceed Tenant’s Additional
Rent as finally determined for such year, Tenant’s excess payment shall be
credited toward the rent next due from Tenant under this Lease. For any partial
calendar year at the beginning or end of the Term, Additional Rent shall be
prorated on the basis of a 365-day year by computing Tenant’s Share of
Operating Costs for the entire year and then prorating such amount for the
number of days during such year included in the Term. Notwithstanding the
termination of this Lease, Landlord shall pay to Tenant or Tenant shall pay to
Landlord, as the case may be, within fifteen (15) business days after Tenant’s
receipt of Landlord’s final statement for the calendar year in which this Lease
terminates, the difference between Tenant’s Additional Rent for that year, as
finally determined by Landlord, and the total amount previously paid by Tenant
on account thereof.

 

5)              Tenant shall have the right
at any time during Landlord’s normal business hours and upon reasonable prior
notice to Landlord, which shall not be

 

11

 

given later than the first anniversary of Tenant’s receipt of
Landlord’s reconciliation statement for the preceding year, to audit Landlord’s
books and records with respect to such reconciliation statement, at Tenant’s
sole expense. Should the audit disclose an overcharge to Tenant or an
underpayment to Landlord, the party owing an amount to the other party shall
reimburse the other party within fifteen (15) business days after the results
of the audit are known to Landlord and Tenant. Additionally, if the audit
report shows that Tenant was overcharged by five percent (5%) or more, Landlord
shall reimburse Tenant for its reasonable out of pocket costs of conducting the
audit, not to exceed $3,000.00 per audit.

 

3.3                                 Payment of Rent. All amounts
payable or reimbursable by Tenant under this Lease,
including late charges and interest, shall constitute “Rent”
and shall be payable and recoverable as Rent in the manner provided in this
Lease. All sums payable to Landlord on demand under the terms of this Lease
shall be payable within ten (10) days after notice from Landlord of the
amounts due. Except as specifically provided for in this Lease to the contrary,
all Rent shall be paid without offset, recoupment or deduction in lawful money
of the United States of America to Landlord at Landlord’s Address for Payment
of Rent as set forth in the Basic Lease Information, or to such other person or
at such other place as Landlord may from time to time designate.

 

3.4                                 Intentionally
Deleted.

 

4.                                       RENTAL TAXES.
Tenant shall pay to Landlord with each installment of Rent the amount of any
gross receipts, transaction privilege, sales, excise or similar tax, exclusive
of any income tax, payable by Landlord on account of this Lease or Tenant’s
payment of such items to, or on behalf of, Landlord.

 

5.                                       USE AND
COMPLIANCE WITH LAWS.

 

5.1                                 Use. The Premises
shall be used and occupied solely for general business office purposes for
Tenant’s mortgage and information technology departments and for no other use
or purpose. Tenant shall comply with all present and future Laws relating to
Tenant’s use or occupancy of the Premises (and make any repairs, alterations or
improvements as required to comply with all such Laws), and shall observe the
Building Rules (as defined in Section 27 - Rules and
Regulations). Tenant shall not do, bring, keep or sell anything
in or about the Premises that is prohibited by, or that will cause a
cancellation of or an increase in the existing premium for, any insurance policy
covering the Property or any part thereof. Tenant shall not permit the Premises
to be occupied or used in any manner that will constitute waste or a nuisance,
or disturb the quiet enjoyment of or otherwise annoy other tenants in the
Building. Except as may be provided in the Construction Rider, Tenant shall
not, without the prior consent of Landlord, (i) bring into the Building or
the Premises anything that may cause substantial noise, odor or vibration,
overload the floors in the Premises or the Building or any of the heating,
ventilating and air-conditioning (“HVAC”),
mechanical, elevator, plumbing, electrical, fire protection, life safety,
security or other systems in the Building (“Building Systems”), or
jeopardize the structural integrity of the Building or any part thereof;
(ii) connect to the utility systems of the Building any apparatus,
machinery or

 

12

 

 

other
equipment other than typical office equipment; or (iii) connect to any
electrical circuit in the Premises any equipment or other load with aggregate
electrical power requirements in excess of 80% of the rated capacity of the
circuit.

 

5.2                                 Hazardous Materials.

 

(a)          Definitions.

 

1)              “Hazardous
Materials” shall mean any substance: (A) that now or in
the future is regulated or governed by, requires investigation or remediation under, or is defined as a
hazardous waste, hazardous substance, pollutant or contaminant under, any
governmental statute, code, ordinance, regulation, rule or order, and any
amendment thereto, including the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.  §9601 et  seq.,
and the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et
seq., or (B) that is toxic, explosive, corrosive, flammable,
radioactive, carcinogenic, dangerous or otherwise hazardous, including
gasoline, diesel fuel, petroleum hydrocarbons, polychlorinated biphenyls
(PCBs), asbestos, radon and urea formaldehyde foam insulation.

 

2)              “Environmental
Requirements” shall mean all present and future Laws, orders,
permits, licenses, approvals, authorizations and other requirements of any kind
applicable to Hazardous Materials.

 

3) “Handled by Tenant” and “Handling by Tenant” shall mean and refer to any installation,
handling, generation, storage, use, disposal, discharge, release, abatement,
removal, transportation, or any other activity of any type by Tenant or its
agents, employees, contractors, licensees, assignees, sublessees, transferees
or representatives (collectively, “Representatives”)
or its guests, customers, invitees, or visitors (collectively, “Visitors”), at or about the Premises in connection with or
involving Hazardous Materials.

 

4) “Environmental
Losses” shall mean all costs and expenses of any kind, damages
(including foreseeable and unforeseeable consequential damages), fines and
penalties incurred in connection with any violation of or compliance with
Environmental Requirements, and all losses of any kind attributable to the
diminution of value, loss of use or adverse effects on marketability or use of
any portion of the Premises or the Property.

 

(b)                     Tenant’s
Covenants. No Hazardous Materials shall be Handled by Tenant
at or about the Premises or Property without Landlord’s prior written consent,
which consent may be granted, denied, or conditioned upon compliance with
Landlord’s requirements, all in Landlord’s absolute discretion. Notwithstanding
the foregoing, normal quantities and use of those Hazardous Materials
customarily used in the conduct of general office activities, such as copier

 

13

 

fluids and cleaning supplies (“Permitted Hazardous
Materials”), may be used and stored at the Premises without
Landlord’s prior written consent, provided that Tenant’s activities at or about
the Premises and Property and the Handling by Tenant of all Hazardous Materials
shall comply at all times with all Environmental Requirements. At the
expiration or termination of the Lease, Tenant shall promptly remove from the
Premises and Property all Hazardous Materials Handled by Tenant at the Premises
or the Property. Tenant shall keep Landlord fully and promptly informed of all
Handling by Tenant of Hazardous Materials other than Permitted Hazardous
Materials. Tenant shall be responsible and liable for the compliance with all
of the provisions of this Section by all of Tenant’s Representatives and
Visitors, and all of Tenant’s obligations under this Section (including
its indemnification obligations under paragraph (e) below) shall survive
the expiration or termination of this Lease.

 

(c)                      Compliance. Tenant shall
at Tenant’s expense promptly take all actions required by any governmental
agency or entity in connection with or as a result of the Handling by Tenant of
Hazardous Materials at or about the Premises or the Property, including
inspection and testing, performing all cleanup, removal and remediation work
required with respect to those Hazardous Materials, complying with all closure
requirements and post-closure monitoring, and filing all required reports or
plans. All of the foregoing work and all Handling by Tenant of all Hazardous
Materials shall be performed in a good, safe and workmanlike manner by
consultants qualified and licensed to undertake such work and in a manner that
will not interfere with any other tenant’s quiet enjoyment of the Property or
Landlord’s use, operation, leasing and sale of the Property. Tenant shall
deliver to Landlord prior to delivery to any governmental agency, or promptly
after receipt from any such agency, copies of all permits, manifests, closure
or remedial action plans, notices, and all other documents relating to the
Handling by Tenant of Hazardous Materials at or about the Premises or the
Property. If any lien attaches to the Premises or the Property in connection
with or as a result of the Handling by Tenant of Hazardous Materials, and if
Tenant does not cause the same to be released, by payment, bonding or
otherwise, within ten (10) days after the attachment thereof, Landlord
shall have the right but not the obligation to cause the same to be released
and any sums expended by Landlord (plus Landlord’s administrative costs) in
connection therewith shall be payable by Tenant on demand.

 

(d)                     Landlord’s
Rights. Landlord shall have the right, but not the obligation, to enter the
Premises at any reasonable time (i) to confirm Tenant’s compliance with
the provisions of this Section 5.2, and (ii) to perform Tenant’s
obligations under this Section if Tenant has failed to do so after
reasonable notice to Tenant. Landlord shall also have the right to engage
qualified Hazardous Materials consultants to inspect the Premises and review
the Handling by Tenant of Hazardous Materials, including review of all permits,
reports, plans, and other documents regarding same. Tenant shall pay to
Landlord on demand the costs of Landlord’s consultants’ fees and all costs
incurred by Landlord in performing Tenant’s obligations under this

 

14

 

Section. Landlord shall use reasonable efforts to minimize any
interference with Tenant’s business caused by Landlord’s entry into the
Premises, but Landlord shall not be responsible for any interference caused
thereby.

 

(e)                      Tenant’s
Indemnification. Tenant agrees to indemnify, defend, protect and
hold harmless Landlord and its partners or members and its or their partners,
members, directors, officers, shareholders, employees and agents from all Environmental
Losses and all other claims, actions, losses, damages, liabilities, costs and
expenses of every kind, including reasonable attorneys’, experts’ and
consultants’ fees and costs, incurred at any time and arising from or in
connection with the Handling by Tenant of Hazardous Materials at or about the Property or Tenant’s
failure to comply in full with all Environmental Requirements with respect to
the Premises.

 

(f)                        Landlord’s
Representations. Landlord represents to Tenant that the Base
Building does not contain any Hazardous Materials other than insubstantial
amounts, if any, in quantities not having any materially adverse effect on
Tenant’s health and safety, and that Landlord has not released any Hazardous
Materials onto the Property in violation of Environmental Requirements.
Landlord is making no further representations to Tenant with respect to
Hazardous Materials.

 

5.3                                Americans With
Disabilities Act. The parties agree that the liabilities and
obligations of Landlord and Tenant under that certain federal statute commonly
known as the Americans With Disabilities Act, as well as the regulations and
accessibility guidelines promulgated thereunder, as each of the foregoing is
supplemented or amended from time to time (collectively, the “ADA”), shall be apportioned as follows:

 

(a)                      Except as
otherwise provided in (c) below, if the structural
elements of the Premises or any other portion of the Base Building (as defined
in the Construction Rider) are not in compliance with the public accommodations
provisions of the ADA on the Commencement Date, including lavatory facilities,
such nonconformity shall be promptly made to comply by Landlord.

 

(b)                     Except as otherwise provided
in (c) below, from and after the commencement date of the
Lease, Tenant covenants and agrees to conduct its operations within the
Premises in compliance with the ADA. If any of the Premises fails to comply
with the ADA, such nonconformity shall be promptly made to comply by Tenant. In
the event that Tenant elects to undertake any alterations to, for or within the
Premises, including initial build-out work, Tenant agrees to cause such
alterations to be performed and constructed in compliance with the ADA.

 

(c)                      Notwithstanding
the foregoing, Tenant shall cause all parts of the Premises, the Building or
the Project designed by Tenant or its own architects, space planners and
designers (“Tenant  Design”)  to comply with the ADA, and
Landlord

 

15

 

shall have no responsibility therefor or liability for any
noncompliance resulting from Tenant Design.

 

6.                                       TENANT
IMPROVEMENTS AND ALTERATIONS.

 

6.1                                 Landlord and
Tenant shall perform their respective obligations with respect to design and
construction of any improvements to be constructed and installed in the
Premises as provided in the Construction Rider attached hereto as
Exhibit C. Except for (i) any improvements to be constructed by
Tenant as provided in the Construction Rider and (ii) non-structural
alterations not affecting the Building Systems and costing less than $50,000.00
in the aggregate (for which no Landlord consent shall be required), Tenant
shall not make any alterations, improvements or changes to the
Premises, including installation of any security system or telephone or data
communication wiring (“Alterations”),
without Landlord’s prior written consent, not to be unreasonably withheld,
conditioned or delayed; provided, however, that it shall in all events be
reasonable for Landlord to withhold such consent if the proposed Alterations
affect the structure of the Building and/or any of the Building Systems. Any
such Alterations shall be completed by Tenant at Tenant’s sole cost and
expense: (i) with due diligence, in a good and workmanlike manner, using
new materials; (ii) in compliance with plans and
specifications approved by Landlord; (iii) in compliance with the
construction rules and regulations promulgated by Landlord from
time to time; (iv) in accordance with all applicable Laws (including all
work, whether structural or non-structural, inside or outside the Premises,
required to comply fully with all applicable Laws and necessitated by Tenant’s
work); and (v) subject to all conditions which Landlord may in Landlord’s
reasonable discretion impose. Such conditions may include requirements for
Tenant to: (i) provide payment or performance bonds or additional
insurance (from Tenant or Tenant’s contractors, subcontractors or design
professionals); (ii) use contractors or subcontractors designated by
Landlord (provided that such contractors or sub-contractors priced
competitively with others chosen by Tenant); and (iii) remove all or part
of the Alterations prior to or upon expiration or termination of the Term, as
designated by Landlord prior to the commencement of such Alterations. If any work
outside the Premises, or any work on or adjustment to any of the Building
Systems, is required in connection with or as a result of Tenant’s work, such
work shall be performed at Tenant’s expense by contractors designated by
Landlord (provided that such contractors or sub-contractors are priced
competitively with market rates). Landlord’s right to review and approve (or
withhold approval of) Tenant’s plans, drawings, specifications,
contractor(s) and other aspects of construction work proposed by Tenant is
intended solely to protect Landlord, the Property and Landlord’s interests. No
approval or consent by Landlord shall be deemed or construed to be a
representation or warranty by Landlord as to the adequacy, sufficiency, fitness
or suitability of the proposed Alterations or compliance thereof with
applicable Laws or other requirements. Except as otherwise provided in
Landlord’s consent, all Alterations shall upon installation become part of the
realty and be the property of Landlord.

 

6.2                                 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 proposed by Tenant to make the
Alterations, and a copy of the contractor’s license. Tenant shall reimburse
Landlord upon demand for any reasonable expenses incurred by

 

16

 

Landlord in connection with any Alterations made by Tenant, including
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. Tenant
shall obtain all applicable permits, authorizations and governmental approvals
and deliver copies of the same to Landlord before commencement of any
Alterations.

 

6.3                                 Tenant shall
keep the Premises and the Property free and clear of all mechanics’,
materialmen’s, contractors’ or other liens arising out of any work performed,
materials furnished or obligations incurred by Tenant. If any such lien
attaches to the Premises or the Property, and Tenant does not cause the same to
be released by payment, bonding or otherwise within ten (10) days after notice of the
attachment thereof, Landlord shall have the right but not the obligation to
cause the same to be released, and any sums expended by Landlord (plus
Landlord’s administrative costs) in connection therewith shall be payable by
Tenant on demand with interest thereon from the date of expenditure by Landlord
at the Interest Rate (as defined in Section 16.2 -Interest). Tenant shall
give Landlord at least ten (10) business days’ notice prior to the
commencement of any Alterations and cooperate with Landlord in posting and
maintaining notices of non-responsibility in connection therewith.

 

6.4                                 Subject to the
provisions of Section 5 - Use  and
Compliance with  Laws and
the foregoing provisions of this Section, Tenant may install and maintain
furnishings, equipment, movable partitions, business equipment and other trade
fixtures (“Trade Fixtures”)  in
the Premises, provided that the Trade Fixtures do not become an integral part
of the Premises or the Building, without first obtaining approval from
Landlord. Tenant shall promptly repair any damage to the Premises or the
Building caused by any installation or removal of such Trade Fixtures.

 

7.                                       MAINTENANCE AND
REPAIRS.

 

7.1                                 By taking
possession of the Premises, Tenant agrees that the Premises are then in a good
and tenantable condition. During the Term, Tenant at Tenant’s expense but under
the direction of Landlord, shall repair and maintain the Premises, including
the interior walls, floor coverings, ceiling (ceiling tiles and grid), Tenant
Improvements, Alterations, fire extinguishers, outlets and fixtures, and any
appliances (including dishwashers, hot water heaters and garbage disposers) in
the Premises, in a first class condition, and keep the Premises in a clean,
safe and orderly condition.

 

7.2                                 Landlord shall
maintain or cause to be maintained in reasonably good order, condition and
repair, the structural portions of the roof, foundations, floor slab and
exterior walls of the Building, the Building Systems, and the public and common
areas of the Property; provided, however, that Tenant shall pay the cost of
repairs for any damage occasioned by Tenant’s use of the Premises or the
Property or any act or omission of Tenant or Tenant’s Representatives or
Visitors, to the extent (if any) not covered by Landlord’s property insurance.
Landlord shall be under no obligation to inspect the Premises. Tenant shall
promptly report in writing to Landlord any defective condition known to Tenant
which Landlord is required to repair.

 

17

 

7.3                                 Landlord hereby
reserves the right, at any time and from time to time, without liability to
Tenant, and without constituting an eviction, constructive or otherwise, or
entitling Tenant to any abatement of rent or to terminate this Lease or
otherwise releasing Tenant from any of Tenant’s obligations except as may be
specifically provided for under this Lease:

 

(a)                      To make
alterations, additions, repairs, improvements to or in, or to decrease the size
of area of, all or any part of the Building, the fixtures and equipment
therein, and the Building Systems, so long as such alterations, additions,
repairs and improvements do not alter the size of the Premises or materially
interfere with Tenant’s use and enjoyment of the Premises, excepting only
temporary inconvenience or interference reasonably necessary and unavoidable as
a result of the necessity of such alterations, additions, repairs or
improvements;

 

(b)                     To change the Building’s name,
provided that the name shall not be the name of a competitor of Tenant or a
Tenant Affiliate;

 

(c)                      To install and
maintain any and all signs on the exterior and interior of the Building,
subject to the provisions of this Lease;

 

(d)                     To reduce, increase, enclose
or otherwise change at any time and from time to time the size, number,
location, lay-out and nature of the common areas and other tenancies and
premises in the Property, and to create additional rentable areas through use
or enclosure of common areas; and

 

If any governmental authority promulgates or revises any Law or imposes
mandatory or voluntary controls or guidelines on Landlord or the Property
relating to the use or conservation of energy or utilities or the reduction of
automobile or other emissions or reduction or management of traffic or parking
on the Property (collectively “Controls”), to
comply with such Controls, whether mandatory or voluntary, or make any
alterations to the Property related thereto.

 

8.                                      TENANT’S
PERSONAL PROPERTY TAXES. Tenant shall pay prior to delinquency all taxes levied
by any governmental authority on Tenant’s personal property including, but not
limited to, unsecured personal property taxes.

 

9.                                      UTILITIES AND
SERVICES.

 

9.1                                 Description of
Services. Landlord shall furnish to the Premises: reasonable
amounts of heat, ventilation and air-conditioning during the Business Hours
specified in the Basic Lease Information (“Business Hours”)
on weekdays and Saturday except public holidays (“Business
Days”); reasonable amounts of electricity; janitorial services five
days a week (except public holidays); and hot and cold water from standard
outlets for lavatory, restroom and drinking purposes. Landlord shall also
provide the Building with normal fluorescent lamp replacement, window washing,
elevator service, and common area toilet room supplies. Any additional
utilities or services that Landlord may agree to provide (including lamp or
tube replacement for other than Building Standard lighting fixtures) shall be
at Tenant’s sole expense. Landlord will provide the

 

18

 

following utility connections: 1600 AMPS at 277/480, 3 phase, 4 wire, 50,000
A.I.C. NEMA 1, which will be provided to the second (2nd) floor of the Building via
the Project’s SES and distributed to such second (2nd) floor at Distribution Panel #2, which is located
on such second (2nd) floor.
Notwithstanding the foregoing, all step-down transformers shall be provided by
Tenant, at Tenant’s sole cost and expense, in order to distribute the available
power per the Tenant Improvements as defined in the Construction Rider.

 

9.2                                 Payment for
Additional Utilities and Services.

 

(a)                      Upon request by
Tenant in accordance with the procedures established by Landlord from time to
time for furnishing HVAC service at times other
than Business Hours on Business Days, Landlord shall furnish such service to
Tenant and Tenant shall pay for such services on an hourly basis at the then
prevailing rate established for the Building by Landlord (which rate is $8.00
per hour per zone as of the date of this Lease), which usage by Tenant shall be
reasonably estimated by Landlord.

 

(b)                     If the temperature otherwise
maintained in any portion of the Premises by the HVAC systems of the Building
is affected as a result of (i) any lights, machines or
equipment used by Tenant in the Premises, or (ii) the occupancy of the
Premises by more than one person per 150 square feet of rentable area, then
Landlord shall have the right to install any machinery or equipment reasonably
necessary to restore the temperature, including modifications to the standard
air-conditioning equipment. The cost of any such equipment and modifications,
including the cost of installation and any additional cost of operation and
maintenance of the same, shall be paid by Tenant to Landlord upon demand.

 

(c)                      If Tenant’s
usage of electricity, water or any other utility service exceeds the use of
such utility Landlord determines to be typical, normal and customary for the
Building, Landlord may determine the amount of such excess use by any
reasonable means (including the installation at Landlord’s request but at
Tenant’s expense of a separate meter or other measuring device) and charge
Tenant for the cost of such excess usage. In addition, Landlord may impose a
reasonable charge for the use of any additional or unusual janitorial services
required by Tenant because of any unusual Tenant Improvements or Alterations,
the carelessness of Tenant or the nature of Tenant’s business (including hours
of operation).

 

9.3                                Interruption of
Services. Subject to Section 9.4 below, in the event of
an interruption in or failure or inability to provide any services or utilities
to the Premises or Building for any reason (a “Service
Failure”), such Service Failure shall not, regardless of its
duration, impose upon Landlord any liability whatsoever, constitute an eviction
of Tenant, constructive or otherwise, entitle Tenant to an abatement of rent or
to terminate this Lease or otherwise release Tenant from any of Tenant’s
obligations under this Lease. Tenant waives the protection of any statute or
rule of law that gives or purports to give Tenant any right to terminate
this Lease or surrender possession of the Premises upon a Service Failure.

 

19

 

9.4                                 Abatement.
Notwithstanding the foregoing, if there is a Service Failure which is
(a) specific to the Building and/or Property (as opposed to an
interruption or curtailment in essential services which extends beyond the Building
or Property), (b) causes the Premises to be untenantable, (c) is
caused solely by Landlord, and (d) lasts for more than five
(5) consecutive Business Days after Landlord has notice of such Service
Failure or otherwise prevents Tenant from reasonably being able to access the
Premises for more than five (5) consecutive Business Days after notice to
Landlord, then Tenant will be entitled to an abatement of Basic Rent as
provided in this Section 9.4. If Tenant properly delivers such an abatement
notice to Landlord, and the untenantability caused by the interruption is not
remedied within such five (5) Business Day period, then, subject to the following sentence,
Tenant shall thereafter be entitled to an abatement of Basic Rent and
Additional Rent (in proportion to the portion of the Premises rendered
untenantable by Service Failure) until such service is restored.
Notwithstanding the foregoing, if Basic Rent and Additional Rent are abated
pursuant to the preceding sentence for a period of ninety (90) consecutive
days, then, unless otherwise mutually agreed to in writing between Landlord and
Tenant, Tenant shall elect, in writing delivered to Landlord within ten
(10) Business Days following the expiration of such 90-day period, to
either terminate this Lease as of the date of such notice or commence paying
full Basic Rent and Additional Rent from and after the date of such notice as
otherwise provided under this Lease. In the event Tenant fails to provide such
written notice within the aforementioned 10-Business Day period, then in that
event Tenant will be deemed to have elected not to terminate this Lease and,
unless otherwise mutually agreed to in writing between Landlord and Tenant,
will immediately return to paying full Basic Rent and Additional Rent as otherwise
provided under this Lease.

 

10.                                 EXCULPATION AND
INDEMNIFICATION.

 

10.1                           Landlord’s
Indemnification of Tenant. Landlord shall indemnify, protect, defend
and hold Tenant harmless from and against any claims, actions, liabilities,
damages, costs or expenses, including reasonable attorneys’ fees and costs
incurred in defending against the same (“Claims”), asserted by any third party
against Tenant which arise out of (i) any bodily injury, death or property
damage occurring to such third parties at the Project (other than within the
Premises) to the extent caused by the willful misconduct or negligent acts of
Landlord or its authorized representatives and are not caused in whole or in
part by Tenant and (ii) Landlord’s uncured breach of any representation, warranty
or obligation under this Lease.

 

10.2                           Tenant’s
Indemnification of Landlord. Tenant shall indemnify,
protect, defend and hold Landlord and Landlord’s authorized representatives
harmless from and against Claims arising from (a) the acts or omissions of
Tenant or Tenant’s Representatives or Visitors in or about the Property, or
(b) any construction or other work undertaken by Tenant on the Premises
(including any design defects), or (c) any
breach or default or occurrence of Tenant Delay under this Lease by Tenant, or
(d) any loss, injury or damage, howsoever and by whomsoever caused, to any
person or property, occurring in or about the Premises during the Term,
excepting only Claims described in this clause (d) to the extent they are
caused by the willful misconduct or negligent acts of Landlord or its
authorized representatives.

 

20

 

10.3                           Damage to
Tenant and Tenant’s Property. Landlord shall not be
liable to Tenant for any loss, injury or other damage to Tenant or to Tenant’s
property in or about the Premises or the Property from any cause (including
defects in the Property or in any equipment in the Property; fire, explosion or
other casualty; bursting, rupture, leakage or overflow of any plumbing or other
pipes or lines, sprinklers, tanks, drains, drinking fountains or washstands in,
above, or about the Premises or the Property; or acts of other tenants in the
Property) unless caused by the gross negligence or willful misconduct of
Landlord or its employees or agents. Notwithstanding any other provision of
this Lease to the contrary, in no event shall Landlord be liable to Tenant for
any punitive or consequential damages or damages for loss of business by
Tenant.

 

10.4                           Survival. The
obligations of the parties under this Section 10 shall survive the
expiration or termination of this Lease.

 

11.                                INSURANCE.

 

11.1                          Tenant’s
Insurance.

 

(a)                      Liability
Insurance. Tenant shall maintain in full force throughout the
Term commercial general liability insurance providing coverage on an occurrence
form basis with limits of not less than Two Million Dollars ($2,000,000.00)
each occurrence for bodily injury and property damage combined, Two Million
Dollars ($2,000,000.00) annual general aggregate, and Two Million Dollars ($2,000,000.00)
products and completed operations annual aggregate. Tenant’s liability
insurance policy or policies shall: (i) include premises and operations
liability coverage, products and completed operations liability coverage, broad
form property damage coverage, including completed operations, blanket
contractual liability coverage, including, to the maximum extent possible,
coverage for the indemnification obligations of Tenant under this Lease, and
personal and advertising injury coverage; (ii) provide that the insurance
company has the duty to defend all insureds under the policy;
(iii) provide that defense costs are paid in addition to and do not
deplete any of the policy limits; and (iv) cover liabilities arising out
of or incurred in connection with Tenant’s use or occupancy of the Premises or
the Property. Each policy of liability insurance required by this
Section shall: (i) contain a cross liability endorsement or
separation of insureds clause; (ii) provide that any waiver of subrogation
rights or release prior to a loss does not void coverage; (iii) provide
that it is primary to and not contributing with, any policy of insurance
carried by Landlord covering the same loss; (iv) provide that any failure
to comply with the reporting provisions shall not affect coverage provided to
Landlord or its partners, property managers or Mortgagees (as defined below);
and (v) name Landlord and its partners, the Property Manager identified in
the Basic Lease Information (the “Property Manager”),
and such other parties in interest as Landlord may from time to time designate
to Tenant in writing, as additional insureds. Such additional insureds shall be
provided at least the same extent of coverage as is provided to Tenant under
such policies. All endorsements effecting such additional insured

 

21

 

 

status shall be at least as broad as additional insured endorsement
form number CG 20 11 11 85 promulgated by the Insurance Services Office.

 

(b)                     Property
Insurance. Tenant shall at all times maintain in effect with
respect to any Alterations and Tenant’s Trade Fixtures and personal property,
commercial property insurance providing coverage, on an “all risk” or “special
form” basis, in an amount equal to at least 90% of the full replacement cost of
the covered property. Tenant may carry such insurance under a blanket policy,
provided that such policy provides coverage equivalent to a separate policy.
During the Term, the proceeds from any such policies of insurance shall be used
for the repair or replacement of the Alterations, Trade Fixtures and personal
property so insured. Landlord shall be provided coverage under such insurance
to the extent of its insurable interest and, if requested by Landlord, both
Landlord and Tenant shall sign all documents reasonably necessary or proper in
connection with the settlement of any claim or loss under such insurance.
Landlord will have no obligation to carry insurance on any Alterations or on
Tenant’s Trade Fixtures or personal property.

 

(c)                      Requirements
For All Policies. Each policy of insurance required under this
Section 11.1 shall: (i) be in a form, and written by an insurer,
reasonably acceptable to Landlord, (ii) be maintained at Tenant’s sole
cost and expense, and (iii) require at least thirty (30) days’ written
notice to Landlord prior to any cancellation, nonrenewal or modification of
insurance coverage. Insurance companies issuing such policies shall have rating
classifications of “A” or better and financial size category ratings of “VII”
or better according to the latest edition of the A.M. Best Key Rating
Guide. All insurance companies issuing such policies shall be admitted carriers
licensed to do business in the state where the Property is located. To the
extent Tenant does not self-insure as permitted under subsection (f) below, any
deductible amount under such insurance shall not exceed $5,000. Tenant shall
provide to Landlord, upon request, evidence that the insurance required to be
carried by Tenant pursuant to this Section, including any endorsement effecting
the additional insured status, is in full force and effect and that premiums
therefor have been paid.

 

(d)                     Updating
Coverage. Tenant shall increase the amounts of insurance as
required by any Mortgagee and, not more frequently than once every three
(3) years, as recommended by Landlord’s insurance broker, if, in the
opinion of either of them, the amount of insurance then required under this
Lease is not adequate. Any limits set forth in this Lease on the amount or type
of coverage required by Tenant’s insurance shall not limit the liability of
Tenant under this Lease.

 

(e)                      Certificates of
Insurance. Prior to occupancy of the Premises by Tenant, and
not less than thirty (30) days prior to expiration of any policy thereafter,
Tenant shall furnish to Landlord a certificate of insurance reflecting that the
insurance required by this Section is in force, accompanied by an
endorsement showing the required additional insureds satisfactory to Landlord
in substance and

 

22

 

form. Notwithstanding the requirements of this paragraph, Tenant shall
at Landlord’s request provide to Landlord a certified copy of each insurance
policy required to be in force at any time pursuant to the requirements of this
Lease or its Exhibits.

 

(f)                                    Self-Insurance. Subject to
the provisions of this subsection (f), Tenant may
self-insure under a commercially reasonable self-insurance program with respect
to the insurance coverages set forth in subsection (b) above. Tenant must
demonstrate to Landlord’s satisfaction at the beginning of each calendar year
of such self insurance that Tenant maintains a tangible net financial worth of
at least $100,000,000. Tenant will, to the fullest
extent allowable under the applicable laws, indemnify, protect, defend (with
counsel reasonably acceptable to Landlord) and hold harmless Landlord from and
against any and all claims that would have been covered by the insurance
replaced by the self-insurance. Such self-insurance will not affect any
waivers, releases or limitations of liability of Landlord set forth in this
Lease. If Tenant elects to self-insure, Tenant will deliver written notice to
Landlord (a) detailing the coverages being self insured; (b) setting forth the amount, limits,
and scope of the self insurance for each such coverage (which will not be
less than those required herein); (c) demonstrating such tangible net
worth; and (d) describing Tenant’s self-insurance program (including,
without limitations, its funding, claim defense policies, coverage provisions,
and other relevant matters). Upon Landlord’s request, Tenant will provide a
certificate reasonably satisfactory to any mortgagee or assignee of Landlord
setting forth the self-insured coverages and naming (as applicable) such party
as an additional insured and/or loss payee, as its interests may appear.

 

11.2                         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 least 90% of the replacement cost
thereof, 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.

 

11.3                         Mutual Waiver
of Right of Recovery and Waiver of Subrogation. Landlord and Tenant each
hereby waive any right of recovery against each other and the partners,
managers, members, shareholders, officers, directors and authorized
representatives of each other for any loss or damage that is covered by any
policy of property insurance maintained by either party (or required by this
Lease to be maintained) with respect to the Premises or the Property or any
operation therein, regardless of cause, including negligence (active or
passive) of the party benefiting from the waiver. If any such policy of
insurance relating to this Lease or to the Premises or the Property does not
permit the foregoing waiver, or if the coverage under any such policy would be
invalidated as a result of such waiver, the party maintaining such policy shall
obtain from the insurer under such policy a waiver of all right of recovery by
way of subrogation against either party in connection with any claim, loss or
damage covered by such policy.

 

23

 

 

12.           DAMAGE OR DESTRUCTION.

 

12.1         Landlord’s Duty
to Repair.

 

(a)  If all or a
substantial part of the Premises are rendered untenantable or inaccessible by
damage to all or any part of the Property from fire or other casualty then,
unless either party is entitled to and elects to terminate this Lease pursuant
to Sections 12.2 - Landlord’s Right to Terminate and 12.3 - Tenant’s
Right to Terminate, Landlord shall, at its expense, use reasonable
efforts to repair and restore the Premises and/or the Property, as the case may
be, to substantially their former 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 Landlord for such repair or restoration, or for any of Tenant’s
personal property, Trade Fixtures or Alterations.

 

(b)  If Landlord is
required or elects to repair damage to the Premises and/or the Property, this
Lease shall continue in effect, but Tenant’s Base Rent and Additional Rent
shall be abated with regard to any portion of the Premises that Tenant is
prevented from using by reason of such damage or its repair from the date of
the casualty until substantial completion of Landlord’s repair of the affected
portion of the Premises as required under this Lease. In no event shall
Landlord be liable to Tenant by reason of any injury to or interference with
Tenant’s business or property arising from fire or other casualty or by reason
of any repairs to any part of the Property necessitated by such casualty.

 

12.2         Landlord’s
Right to Terminate. Landlord may elect to terminate this Lease
following damage by fire or other casualty under the following circumstances:

 

(a)  If, in the
reasonable judgment of Landlord, the Premises and the Property cannot be
substantially repaired and restored under applicable Laws within one hundred
eighty (180) days from the date of the casualty;

 

(b)  If, in the
reasonable judgment of Landlord, adequate proceeds are not, for any reason,
made available to Landlord from Landlord’s insurance policies (and/or from
Landlord’s funds made available for such purpose, at Landlord’s sole option) to
make the required repairs;

 

(c)  If the
Building is damaged or destroyed to the extent that, in the reasonable judgment
of Landlord, the cost to repair and restore the Building would exceed
twenty-five percent (25%) of the full replacement cost of the Building, whether
or not the Premises are at all damaged or destroyed; or

 

(d)  If the fire
or other casualty occurs during the last year of the Term.

 

24

 

If
any of the circumstances described in subparagraphs (a), (b), (c) or
(d) of this Section 12.2 occur or arise, Landlord shall give Tenant
notice within thirty (30) days after the date of the casualty, specifying
whether Landlord elects to terminate this Lease as provided above and, if not,
Landlord’s estimate of the time required to complete Landlord’s repair
obligations under this Lease.

 

12.3         Tenant’s Right
to Terminate. If all or a substantial part of the Premises are
rendered untenantable or inaccessible by damage to all or any part of the
Property from fire or other casualty, and Landlord does not elect to terminate
as provided above, then Tenant may elect to terminate this Lease if
(a) Landlord’s estimate of the time required to complete Landlord’s repair
obligations under this Lease is greater than one hundred eighty (180) days, or
(b) Tenant receives a certified, written statement from a contractor
stating that repairs cannot be executed in one hundred eighty (180) days, in
which event Tenant may elect to terminate this Lease by giving Landlord notice
of such election to terminate within thirty (30) days after Landlord’s notice
to Tenant pursuant to Section 12.2 - Landlord’s
Right to Terminate or within thirty (30) days of receiving the
contractor’s statement under this Section 12.3 – Tenant’s
Right to Terminate.

 

12.4         Waiver of
Statutory Rights. Tenant waives any statutory right to terminate
this Lease or abate Rent because of any damage or destruction to the Premises
due to fire or other casualty.

 

13.           CONDEMNATION.

 

13.1         Definitions.

 

(a)  “Award” shall mean all compensation, sums, or anything of
value awarded, paid or received on a total or partial Condemnation.

 

(b)  “Condemnation” shall mean (i) a permanent taking (or a temporary
taking for a period extending beyond the end of the Term) pursuant to the
exercise of the power of condemnation or eminent domain by any public or
quasi-public authority, private corporation or individual having such power (“Condemnor”), whether by legal proceedings or otherwise, or
(ii) a voluntary sale or transfer by Landlord to any such authority,
either under threat of condemnation or while legal proceedings for condemnation
are pending.

 

(c)  “Date of Condemnation” shall mean the earlier of the date
that title to the property taken is vested in the Condemnor or the date the
Condemnor has the right to possession of the property being condemned.

 

13.2         Effect on Lease.

 

(a)  If the
Premises are totally taken by Condemnation, this Lease shall terminate as of
the Date of Condemnation. If a portion but not all of the Premises is taken by
Condemnation, this Lease shall remain in effect; provided, however, that if the
portion of the Premises remaining after the Condemnation will be unsuitable for

 

25

 

Tenant’s continued use, then, upon notice to Landlord within thirty
(30) days after Landlord notifies Tenant of the Condemnation, Tenant may
terminate this Lease effective as of the Date of Condemnation.

 

(b)  If
twenty-five percent (25%) or more of the Project or of the parcel(s) of
land on which the Building is situated or of the floor area in the Building is
taken by Condemnation, or if as a result of any Condemnation the Building is no
longer reasonably suitable for use as an office building, whether or not any
portion of the Premises is taken, Landlord may elect to terminate this Lease,
effective as of the Date of Condemnation, by notice to Tenant within thirty
(30) days after the Date of Condemnation.

 

(c)  If all or a
portion of the Premises is temporarily taken by a Condemnor for a period not
extending beyond the end of the Term, this Lease shall remain in full force and
effect.

 

13.3         Restoration. If this Lease
is not terminated as provided in Section 13.2 - Effect
on Lease, Landlord, at its expense, shall diligently proceed
to repair and restore the Premises to substantially its former condition (to
the extent permitted by then applicable Laws) and/or repair and restore the
Building to an architecturally complete office building; provided, however,
that Landlord’s obligations to so repair and restore shall be limited to the
amount of any Award received by Landlord and not required to be paid to any
Mortgagee. In no event shall Landlord have any obligation to repair or replace
any improvements in the Premises beyond the amount of any Award received by
Landlord for such repair or to repair or replace any of Tenant’s personal property,
Trade Fixtures, or Alterations.

 

13.4         Abatement and
Reduction of Rent. If any portion of the Premises is taken in a
Condemnation or is rendered permanently untenantable by repairs necessitated by
the Condemnation, and this Lease is not terminated, the Base Rent and
Additional Rent payable under this Lease shall be proportionally reduced as of
the Date of Condemnation based upon the percentage of rentable square feet in
the Premises so taken or rendered permanently untenantable. In addition, if this
Lease remains in effect following a Condemnation and Landlord proceeds to
repair and restore the Premises, the Base Rent and Additional Rent payable
under this Lease shall be abated during the period of such repair or
restoration to the extent such repairs prevent Tenant’s use of the Premises.

 

13.5         Awards. Any Award
made shall be paid to Landlord, and Tenant hereby assigns to Landlord, and
waives all interest in or claim to, any such Award, including any claim for the
value of the unexpired Term; provided, however, that Tenant shall be entitled
to receive, or to prosecute a separate claim for, an Award for a temporary
taking of the Premises or a portion thereof by a Condemnor where this Lease is
not terminated (to the extent such Award relates to the unexpired Term), or an
Award or portion thereof separately designated for relocation expenses or the
interruption of or damage to Tenant’s business or as compensation for Tenant’s
personal property, Trade Fixtures or Alterations.

 

26

 

14.           ASSIGNMENT AND SUBLETTING.

 

14.1         Landlord’s
Consent Required. Tenant shall not assign this Lease or any interest
therein, or sublet or license or permit the use or occupancy of the Premises or
any part thereof by or for the benefit of anyone other than Tenant or a Tenant
Affiliate, or in any other manner transfer all or any part of Tenant’s interest
under this Lease (each and all a “Transfer”),
without the prior written consent of Landlord, which consent (subject to the
other provisions of this Section 14) shall not be unreasonably
conditioned, withheld or delayed. The term “Tenant
Affiliate” shall mean an entity controlling, controlled by, or under
common control with Tenant, or a successor to Tenant by reason of merger or
consolidation. If Tenant is a business entity, any direct or indirect transfer
of twenty five percent (25%) or more of the ownership interest of the entity
(whether in a single transaction or in the aggregate through more than one
transaction) shall be deemed a Transfer. Notwithstanding any provision in this
Lease to the contrary, Tenant shall not mortgage, pledge, hypothecate or
otherwise encumber this Lease or all or any part of Tenant’s interest under
this Lease.

 

14.2         Reasonable
Consent.

 

(a)  Prior to any proposed Transfer,
Tenant shall submit in writing to Landlord (i) the name and legal
composition of the proposed assignee, subtenant, user or other transferee (each
a “Proposed Transferee”); (ii) the
nature of the business proposed to be carried on in the Premises;
(iii) such reasonable financial and other information concerning the
Proposed Transferee as Landlord may request; and (iv) a copy of the
proposed assignment, sublease or other agreement governing the proposed
Transfer. Within fifteen (15) Business Days after Landlord receives all such
information, it shall notify Tenant whether it approves or disapproves such
Transfer or if it elects to proceed under Section 14.6 - Landlord’s
Right to Space.

 

(b)  Tenant
acknowledges and agrees that, among other circumstances for which Landlord
could reasonably withhold consent to a proposed Transfer, it shall be
reasonable for Landlord to withhold consent where (i) the Proposed
Transferee does not intend itself to occupy the entire portion of the Premises
that is the subject of such Transfer, (ii) Landlord disapproves of the
Proposed Transferee’s business operating ability or history, reputation or
creditworthiness or the character of the business to be conducted by the
Proposed Transferee at the Premises, (iii) the proposed Transfer would
violate any “exclusive” rights of any tenants in the Project or any use
restrictions governing the Project, (iv) Landlord or Landlord’s agent has
shown space in the Building to the Proposed Transferee, or responded to any
inquiries from the Proposed Transferee or the Proposed Transferee’s agent
concerning availability of space in the Building, at any time within the
preceding nine months and space remains available within the Building which is
substantially as large as the portion of the Premises contemplated to be
occupied by the Proposed Transferee, or (v) Landlord otherwise determines
that the proposed Transfer would have the effect of decreasing the value of the
Building or increasing the expenses associated with operating, maintaining and
repairing the Property. In no event may

 

27

 

Tenant publicly offer or advertise all or any portion of the Premises
for assignment or sublease at a rental less than that then sought by Landlord
for a direct lease (non-sublease) of comparable space in the Project.

 

14.3         Excess
Consideration. If Landlord consents to a Transfer, Tenant shall
pay to Landlord as additional rent, within ten (10) days after receipt by
Tenant, any consideration paid by any transferee (the “Transferee”)
for the Transfer, including, in the case of a sublease, fifty percent (50%) of
the excess of the rent and other consideration payable by the subtenant (net of
Tenant’s reasonable, documented out-of-pocket leasing costs and commissions
incurred in connection with the sublease) over the amount of Base Rent and
Additional Rent payable hereunder applicable to the subleased space.

 

14.4         No Release Of
Tenant. No Transfer (nor any consent by Landlord to any Transfer), including,
without limitation, a Transfer to a Tenant Affiliate, shall relieve Tenant of
any obligation to be performed by Tenant under this Lease, whether occurring
before or after such Transfer. Each Transferee shall be jointly and
severally liable with Tenant (and Tenant shall be jointly and severally liable
with each Transferee) for the payment of Rent (or, in the case of a sublease,
rent in the amount set forth in the sublease) and for the performance of all
other terms and provisions of this Lease. The consent by Landlord to any
Transfer shall not relieve Tenant or any such Transferee from the obligation to
obtain Landlord’s express prior written consent to any subsequent Transfer by
Tenant or any Transferee. The acceptance of rent by Landlord from any other
person (whether or not such person is an occupant of the Premises) shall not be
deemed to be a waiver by Landlord of any provision of this Lease or a consent
to any Transfer.

 

14.5         Effectiveness
of Transfer. Prior to the date on which any permitted Transfer
(whether or not requiring Landlord’s consent) becomes effective, Tenant shall
deliver to Landlord a counterpart of the fully executed Transfer document and
Landlord’s standard form of Consent to Assignment or Consent to Sublease
executed by Tenant and the Transferee in which each of Tenant and the
Transferee confirms its obligations pursuant to this Lease. Failure or refusal
of a Transferee to execute any such instrument shall not release or discharge
the Transferee from liability as provided herein. The voluntary, involuntary or
other surrender of this Lease by Tenant, or a mutual cancellation by Landlord
and Tenant, shall not work a merger, and any such surrender or cancellation
shall, at the option of Landlord, either terminate all or any existing
subleases or operate as an assignment to Landlord of any or all of such
subleases.

 

14.6         Intentionally
Deleted.

 

14.7         Assignment of
Sublease Rents. Subject to Section 14.3, Tenant hereby
absolutely and irrevocably assigns to Landlord any and all rights to receive
rent and other consideration from any sublease and agrees that Landlord, as
assignee or as attorney-in-fact for Tenant for purposes hereof, or a receiver
for Tenant appointed on Landlord’s application may (but shall not be obligated
to) collect such rents and other consideration and apply the same toward
Tenant’s obligations to Landlord under this Lease; provided, however, that
Landlord grants to Tenant at all times prior to occurrence of any breach or
default by Tenant a revocable license to

 

28

 

collect such rents (which license shall automatically and without
notice be and be deemed to have been revoked and terminated immediately upon
any Event of Default).

 

14.8         Costs. Tenant will
pay to Landlord, as additional rent, all costs and expenses Landlord actually
incurs in connection with any proposed Transfer, including, without limitation,
reasonable attorneys’ fees and costs, regardless whether Landlord consents to
the Transfer.

 

15.           DEFAULT AND REMEDIES.

 

15.1         Events of Default
by Tenant. The occurrence of any of the
following shall constitute an “Event of Default” by
Tenant:

 

(a)  Tenant fails
to make any payment of Rent when due, or any amount required to replenish the
Security Deposit, if payment in full is not received by Landlord within five
(5) days after written notice to Tenant that it is due; provided, however,
that such failure will not constitute an Event of Default hereunder on the
first late payment in any calendar year during the Term so long as that payment
is made within five (5) days of Tenant’s receipt of a follow-up
notice of nonpayment from Landlord.

 

(b)  Intentionally
Deleted.

 

(c)  Tenant fails
timely to deliver any subordination document, estoppel certificate or financial
statement requested by Landlord within the applicable time period specified in
Sections 20 - Encumbrances
- and 21 - Estoppel
Certificates and Financial Statements - below.

 

(d)  Tenant
violates the restrictions on Transfer set forth in Section 14 - Assignment
and Subletting.

 

(e)  Tenant ceases
doing business as a going concern; makes an assignment for the benefit of
creditors; is adjudicated an insolvent, files a petition (or files an answer
admitting the material allegations of a petition) seeking relief under any
state or federal bankruptcy or other statute, law or regulation affecting
creditors’ rights; all or substantially all of Tenant’s assets are subject to
judicial seizure or attachment and are not released within 30 days, or Tenant
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator for Tenant or for all or any substantial part of Tenant’s assets; or
there is a material adverse change in Tenant’s financial condition.

 

(f)  Tenant fails,
within thirty (30) days after the commencement of any proceedings against
Tenant seeking relief under any state or federal bankruptcy or other statute,
law or regulation affecting creditors’ rights, to have such proceedings
dismissed, or Tenant fails, within thirty (30) days after an appointment,
without

 

29

 

Tenant’s consent or acquiescence, of any trustee, receiver or
liquidator for Tenant or for all or any substantial part of Tenant’s assets, to
have such appointment vacated.

 

(g)  Tenant fails
to perform or comply with any provision of this Lease other than those
described in (a) through (f) above, and does not fully cure such
failure within fifteen (15) days after notice to Tenant.

 

15.2         Landlord’s
Remedies. Upon the occurrence of an Event of Default,
Landlord shall have the following rights and remedies, which rights and
remedies shall be cumulative and not exclusive, and which shall be in addition
to all other rights and remedies now or hereafter allowed by law or in equity,
and which may be exercised without further notice or demand:

 

(a)  Landlord may
cure the Event of Default at Tenant’s expense. If Landlord pays any sum or
incurs any expense in curing the Event of Default, Tenant shall reimburse
Landlord upon demand for the amount of such payment or expense with interest at
the Interest Rate from the date the sum is paid or the expense is incurred
until Landlord is reimbursed by Tenant.

 

(b)  Landlord may
terminate Tenant’s right to possess the Premises by any lawful means.

 

(c)  Landlord may,
by giving written notice to Tenant, terminate this Lease.

 

(d)  Upon a
termination of Tenant’s right to possess the Premises or a termination of this
Lease, (i) Tenant shall immediately surrender possession of the Premises
to Landlord and shall remove all of its property therefrom, (ii) Landlord
may re-enter the Premises in the manner provided by law, (iii) Landlord
may relet all or any portion of the Premises to one or more third parties on
such terms as Landlord determines in its sole and unfettered discretion, and
(iv) Landlord may, at its election, remove all or any portion of Tenant’s
property from the Premises and place the same in storage at the sole expense
and risk of Tenant.

 

(e)  If Landlord
exercises any of the remedies stated above, Landlord shall be entitled to recover
from Tenant, and Tenant shall pay to Landlord, as current damages for the
applicable Event of Default, all damages incurred by Landlord by reason of the
Event of Default, which shall include, without limitation, (i) an amount
equal to the Rent payable under this Lease by Tenant for the remainder of the
Term (assuming this Lease had not been terminated), less (ii) the net
proceeds of any reletting of the Premises by Landlord after deducting all of
Landlord’s expenses in connection with such reletting, which shall include,
without limitation, repossession costs, repairs, redecorating, refurbishments
and improvements to the Premises, brokerage commissions, attorneys’ fees, and
legal expenses (such expenses in connection with such reletting only to be deducted
from net proceeds of such reletting if this Lease is terminated as a result of
an Event of Default prior to

 

30

 

the final eighteen (18) months of the Term). Tenant shall pay such
current damages to Landlord, in the amount set forth in the preceding sentence
(hereinafter called the “Deficiency”),
in monthly installments on the days on which Base Rent would have been payable
under this Lease if this Lease were still in effect.

 

(f)  If Landlord exercises any of
the remedies stated above, and regardless of whether Landlord has collected any
Deficiency, Landlord shall be entitled to recover from Tenant, and Tenant shall
pay to Landlord, on demand, as final damages for the applicable Event of
Default, the sum of (i) the then present worth of (A) the aggregate
of the Rent payable under this Lease by Tenant for the remainder of the Term
(assuming this Lease had not been terminated), less (B) the amount of such loss
Tenant proves could have been reasonably avoided, plus (ii) repossession
costs, Landlord’s expenses in connection with any attempts it may have made to
relet the Premises (which shall include, without limitation, repairs,
redecorating, refurbishments and improvements to the Premises and brokerage
commissions if this Lease is terminated as a result of an Event of Default
prior to the final eighteen (18) months of the Term), attorneys’ fees, legal
expenses, and all other damages incurred by Landlord as a result of such Event
of Default. For purposes of determining such present worth, Landlord will use a discount equal
to the Federal Reserve rate of the Federal Reserve Bank in San Francisco in
effect at the time of the award plus one percent (1%).

 

(g)  Landlord may
exercise its statutory lien rights and remove Tenant’s property from the
Premises, which may be stored by Landlord in a public warehouse or elsewhere at
the sole cost and for the account of Tenant and sold pursuant to law. If
Landlord does not elect to store any or all of Tenant’s property left in the
Premises, Landlord may consider such property to be abandoned by Tenant, and
Landlord may thereupon dispose of such property in any manner deemed
appropriate by Landlord. Any proceeds realized by Landlord on the disposal of
any such property shall be applied first to offset all expenses of storage and
sale, then credited against Tenant’s outstanding obligations to Landlord under
this Lease, and any balance remaining after satisfaction of all obligations of
Tenant under this Lease shall be delivered to Tenant.

 

(h)  No action of
Landlord shall be construed as an election to terminate this Lease or to accept
a surrender of the Premises unless written notice of such intention is given by
Landlord to Tenant. Tenant shall pay all attorneys’ fees, costs and expenses
incurred by Landlord in enforcing Tenant’s obligations under this Lease.

 

31

 

(i)  Acceptance of
payment of Rent or partial payment of Rent or other partial performance, with
or without Landlord’s knowledge of an Event of Default by Tenant, or failure of
Landlord to take action on account of an Event of Default by Tenant or to
enforce its rights under this Lease, shall not be deemed a waiver by Landlord
of any Event of Default by Tenant.

 

15.3         Landlord’s
Default.

 

(a) Landlord shall not
be in default of this Lease unless and until Tenant has given Landlord written
notice of a breach of this Lease by Landlord and Landlord shall have failed to
cure such breach within thirty (30) days after Landlord’s receipt of Tenant’s
notice; provided, however, that if such breach cannot reasonably be cured
within such 30-day period, Landlord will have such additional time as may be
reasonably necessary to cure the breach.

 

(b)  Upon a
default by Landlord under this Lease, Tenant may pursue its rights and remedies
under this Lease and Arizona law, excepting only the right of offset, deduction
or termination of this Lease, unless such remedy is expressly conferred by this
Lease.

 

16.           LATE CHARGE AND INTEREST.

 

16.1         Late Charge. If any
payment of Rent is not received by Landlord ten (10) days after due, Tenant
shall pay to Landlord, as a late charge, a sum equal to four percent (4%) of
the payment(s) of Rent overdue. A late charge shall not be imposed more
than once on any particular installment not paid when due, but imposition of a
late charge on any payment not made when due does not eliminate or supersede
late charges imposed on other (prior) payments not made when due or preclude
imposition of a late charge on other installments or payments not made when
due. Notwithstanding the foregoing, Tenant will not be assessed the late charge
described above on the first late Rent payment in any calendar year during the
Term so long as that payment is made within five (5) days of Tenant’s
receipt of notice of nonpayment from Landlord.

 

16.2         Interest. In addition
to the late charges referred to above, which are intended to defray Landlord’s
costs resulting from late payments, any payment from Tenant to Landlord not
paid ten (10) days after due shall bear interest from the date due until
paid to Landlord by Tenant at the rate of eighteen percent (18%) per annum or
the legal rate of interest in Arizona, whichever is less (the “Interest
Rate”).  Acceptance
of any late charge and/or interest shall not constitute a waiver of Tenant’s
default with respect to the overdue sum or prevent Landlord from exercising any
of its other rights and remedies under this Lease.

 

17.           WAIVER. No provisions of this Lease shall be deemed
waived unless such waiver is in writing. The waiver of any breach of any
provision of this Lease shall not be deemed a waiver of such provision or of
any subsequent breach of the same or any other provision of this Lease. No
delay or omission in the exercise of any right or remedy upon any default shall
impair such right or remedy or be construed as a waiver. Landlord’s acceptance
of any payments of Rent due under this

 

32

 

Lease shall not be deemed a waiver by Landlord of any default by Tenant
under this Lease (including Tenant’s recurrent failure to timely pay Rent), and
no endorsement or statement on any check or payment or in any letter or
document accompanying any check or payment shall be deemed an accord and
satisfaction. Landlord’s consent to or approval of any act by Tenant requiring
Landlord’s consent or approval shall not be deemed to waive or render
unnecessary Landlord’s consent to or approval of any subsequent act by Tenant.

 

18.           ENTRY, INSPECTION AND CLOSURE. Upon reasonable oral
or written notice to Tenant (and without notice in emergencies), Landlord and
its authorized representatives may enter the Premises at all reasonable times
to: (a) determine whether the Premises are in good condition,
(b) determine whether Tenant is complying with its obligations under this
Lease, (c) perform any maintenance or repair of the Premises or the
Building that Landlord has the right or obligation to perform, (d) install
or repair improvements for other tenants where access to the Premises is
required for such installation or repair, (e) serve, post or keep posted
any notices required or allowed under the provisions of this Lease, (f) show the
Premises to prospective brokers, agents, buyers, transferees, Mortgagees, or,
in the case of prospective tenants, no earlier than one (1) year prior to
the Expiration Date, or (g) do any other act or thing necessary for the
safety or preservation of the Premises or the Building. When reasonably
necessary Landlord may temporarily close entrances, doors, corridors, elevators
or other facilities in the Building without liability
to Tenant by reason of such closure. Landlord shall conduct its activities
under this Section in a manner that will minimize inconvenience to Tenant
without incurring additional expense to Landlord. In no event shall Tenant be
entitled to an abatement of Rent on account of any entry by Landlord, and
Landlord shall not be liable in any manner for any inconvenience, loss of
business or other damage to Tenant or other persons arising out of Landlord’s
entry on the Premises in accordance with this Section. Subject to the remaining
provisions of this paragraph, no action by Landlord pursuant to this paragraph
shall constitute an eviction of Tenant, constructive or otherwise, entitle Tenant
to an abatement of Rent or to terminate this Lease or otherwise release Tenant
from any of Tenant’s obligations under this Lease. Notwithstanding the
foregoing, if any such entry or closure under this Section causes the
Premises to be reasonably untenantable and lasts for more than five
(5) consecutive Business Days after Landlord is notified of such
untenantability or otherwise prevents Tenant from being able to access the
Premises for more than five (5) consecutive Business Days after notice to
Landlord, Tenant will be entitled to an abatement of Basic Rent. If Tenant
properly delivers such an abatement notice to Landlord, and the untenantability
caused by the entry or closure is not remedied within such five (5) Business
Day period, then, subject to the following sentence, Tenant shall thereafter be
entitled to an abatement of Basic Rent and Additional Rent (in proportion to
the portion of the Premises rendered untenantable by the entry or closure)
until the Premises are again rendered tenantable. Notwithstanding the
foregoing, if Basic Rent and Additional Rent are abated pursuant to the
preceding sentence for a period of ninety (90) consecutive days, then, unless
otherwise mutually agreed to in writing between Landlord and Tenant, Tenant
shall elect, in writing delivered to Landlord within ten (10) Business
Days following the expiration of such 90-day period, to either terminate this
Lease as of the date of such notice or commence paying full Basic Rent and
Additional Rent from and after the date of such notice as otherwise provided
under this Lease. In the event Tenant fails to provide such written notice
within the aforementioned 10-Business Day period, then in that event Tenant
will be deemed to have elected not to terminate this Lease and, unless otherwise
mutually agreed to

 

33

 

in writing between Landlord and Tenant, will immediately return to
paying full Basic Rent and Additional Rent as otherwise provided under this
Lease.

 

19.           SURRENDER AND HOLDING OVER.

 

19.1         Surrender. Upon the
expiration or termination of this Lease, Tenant shall surrender the Premises
and all Tenant Improvements and Alterations to Landlord broom-clean and in
their original condition, except for reasonable wear and tear, damage from casualty
or condemnation and any changes resulting from approved Alterations; provided,
however, that prior to the expiration or termination of this Lease, Tenant
shall remove all telephone and other cabling installed in the Building by
Tenant and remove from the Premises all Tenant’s personal property and any
Trade Fixtures and all Alterations that Landlord has elected to require Tenant
to remove as provided in Section 6.1 - Tenant
Improvements and Alterations, and repair any damage
caused by such removal. If such removal is not completed before the expiration
or termination of the Term, Landlord shall have the right (but no obligation)
to remove the same, and Tenant shall pay Landlord on demand for all costs of
removal and storage thereof and for the rental value of the Premises for the
period from the end of the Term through the end of the time reasonably required
for such removal. Landlord shall also have the right to retain or dispose of
all or any portion of such property if Tenant does not pay all such costs and
retrieve the property within ten (10) days after notice from Landlord (in
which event title to all such property described in Landlord’s notice shall be
transferred to and vest in Landlord). Tenant waives all Claims against Landlord
for any damage or loss to Tenant resulting from Landlord’s removal, storage,
retention, or disposition of any such property. Upon expiration or termination
of this Lease or of Tenant’s possession, whichever is earliest, Tenant shall
surrender all keys to the Premises or any other part of the Building and shall
deliver to Landlord all keys for or make known to Landlord the combination of
locks on all safes, cabinets and vaults that may be located in the Premises.
Tenant’s obligations under this Section shall survive the expiration or
termination of this Lease.

 

19.2         Holding Over. If Tenant
(directly or through any Transferee or other successor-in-interest of Tenant)
remains in possession of the Premises after the expiration or termination of
this Lease, Tenant’s continued possession shall be at the sufferance of
Landlord and Tenant shall be deemed to be occupying the Premises without claim
of right. In such event, Tenant shall continue to comply with or perform all
the terms and obligations of Tenant under this Lease, except that the Base Rent
during Tenant’s holding over shall be at one hundred fifty percent (150%) of
the then-current Base Rent (on a daily basis) payable immediately prior to the
expiration or termination of this Lease. In the event of any holdover without
Landlord’s prior written consent, Tenant shall indemnify, defend and hold
Landlord harmless from and against all Claims arising or resulting directly or
indirectly from Tenant’s failure to timely surrender the Premises, including,
without limitation, (i) any rent payable by or any loss, cost, or damages
claimed by any tenant or prospective tenant of the Premises, and
(ii) Landlord’s damages as a result of such tenant or prospective tenant
rescinding its lease or refusing to enter into the prospective lease of the
Premises by reason of Tenant’s failure to timely surrender the Premises.

 

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20.           ENCUMBRANCES.

 

20.1         Subordination. This Lease is expressly
made subject and subordinate to any mortgage, deed of trust, ground lease,
development agreement, underlying lease or other encumbrance affecting any part
of the Property or any interest of Landlord therein which is now existing or
hereafter executed or recorded (“Encumbrance”);
provided, however, that this Lease shall survive the termination of the
Encumbrance by lapse of time, foreclosure or otherwise so long as Tenant is not
in default under this Lease. Tenant shall execute and deliver to Landlord,
within ten (10) business days after written request therefor by Landlord
at any time during this Lease, any additional documents evidencing the
foregoing self-effectuating subordination of this Lease and nondisturbance
protection, which documents may contain such other terms as may be requested by
the Mortgagee. Tenant will also execute and deliver to Landlord, promptly
following Tenant’s execution of this Lease and delivery thereof to Landlord, a
subordination, non-disturbance and attornment agreement in the form of
Exhibit E attached hereto (“SNDA Agreement”).
Landlord will use its commercially reasonable efforts to cause the Mortgagee to
execute the SNDA Agreement. Upon receipt from the Mortgagee of the executed
SNDA Agreement, Landlord shall promptly provide Tenant with a fully executed
copy of the SNDA Agreement. If the interest of Landlord in the Property is
transferred pursuant to or in lieu of proceedings for enforcement of any
Encumbrance, Tenant shall immediately and automatically attorn to the new
owner, and this Lease shall continue in full force and effect as a direct lease
between the transferee and Tenant on the terms and conditions set forth in this
Lease. Tenant waives the protection of any statute or rule of law that
gives or purports to give Tenant any right to terminate this Lease or surrender
possession of the Premises upon the transfer of Landlord’s interest.

 

20.2         Mortgagee Protection. Tenant agrees to give any
holder of any Encumbrance covering any part of the Property (“Mortgagee”), by registered mail, a copy of any notice of
default served upon Landlord, provided that prior to such notice Tenant has
been notified in writing (by way of notice of assignment of rents and leases or
otherwise) of the address of such Mortgagee. If Landlord shall have failed to
cure such default within thirty (30) days from the effective date of such
notice of default, then the Mortgagee shall have an additional thirty (30) days
within which to cure such default or if such default cannot be cured within
that time, then such additional time as may be necessary to cure such default
(including the time necessary to foreclose or otherwise terminate its
Encumbrance, if necessary to effect such cure), and Tenant shall not pursue any
remedy against Landlord so long as such cure is being diligently pursued.

 

21.           ESTOPPEL CERTIFICATES. Within ten (10) 
business days after written request therefor, Tenant shall execute and deliver
to Landlord, in a form provided by or satisfactory to Landlord, a certificate
stating that this Lease is in full force and effect, describing any amendments
or modifications hereto, acknowledging that this Lease is subordinate or prior,
as the case may be, to any Encumbrance and stating any other information
Landlord may reasonably request, including the Term, the monthly Base Rent, the
date to which Rent has been paid, the amount of any security deposit or prepaid
rent, whether either party hereto is in default under the terms of the Lease,
and whether Landlord has completed its construction obligations hereunder (if
any). Tenant irrevocably constitutes, appoints and authorizes Landlord as
Tenant’s special attorney-in-fact for such purpose to complete, execute and
deliver such certificate if Tenant fails timely to execute and deliver such

 

35

 

certificate as provided
above. Any person or entity purchasing, acquiring an interest in or extending
financing with respect to the Property shall be entitled to rely upon any such
certificate. If Tenant fails to deliver such certificate within ten (10) 
business days after Landlord’s second written request therefor, Tenant shall be
liable to Landlord for any damages incurred by Landlord including any profits
or other benefits from any financing or attempted financing of the Property or
any interest therein which are lost or made unavailable as a result, directly
or indirectly, of Tenant’s failure or refusal to timely execute or deliver such
estoppel certificate.

 

22.           NOTICES. Any notice, demand, request, consent or
approval that either party desires or is required to give to the other party
under this Lease shall not be effective unless it is in writing and served
personally, delivered by messenger or courier service, or sent by U.S.
certified mail, return receipt requested, postage prepaid, addressed to the
other party at the party’s address for notices set forth in the Basic Lease
Information. Any notice required pursuant to any Laws may be incorporated into,
given concurrently with or given separately from any notice required under this
Lease. Notices shall be deemed to have been given and be effective on the
earlier of (a) receipt (or refusal of delivery or receipt); or
(b) one (1) day after acceptance by the independent service for
delivery, if sent by independent messenger or courier service, or three
(3) days after mailing if sent by mail in accordance with this Section.
Either party may change its address for notices hereunder, effective fifteen
(15) days after notice to the other party complying with this Section. If
Tenant sublets the Premises, notices from Landlord shall be effective on the
subtenant when given to Tenant pursuant to this Section.

 

23.           ATTORNEYS’ FEES. In the event of any dispute between
Landlord and Tenant in any way related to this Lease, and whether involving
contract and/or tort claims, the non-prevailing party shall pay to the
prevailing party all reasonable attorneys’ fees and costs and expenses of any
type, without restriction by statute, court rule or otherwise, incurred by
the prevailing party in connection with any action or proceeding (including any
appeal and the enforcement of any judgment or award), whether or not the
dispute is litigated or prosecuted to final judgment (collectively, “Fees”).  The “prevailing party” shall
be determined based upon an assessment of which party’s major arguments or
positions taken in the action or proceeding could fairly be said to have
prevailed (whether by compromise, settlement, abandonment by the other party of
its claim or defense, final decision, after any appeals, or otherwise) over the
other party’s major arguments or positions on major disputed issues. Any Fees
incurred in enforcing a judgment shall be recoverable separately from any other
amount included in the judgment and shall survive and not be merged in the
judgment. The Fees shall be deemed an “actual pecuniary loss” within the
meaning of Bankruptcy Code Section 365(b)(l)(B) and, notwithstanding
the foregoing, all Fees incurred by either party in any bankruptcy case filed
by or against the other party, from and after the order for relief until this
Lease is rejected or assumed in such bankruptcy case, will be “obligations of
the debtor” as that phrase is used in Bankruptcy Code Section 365(d)(3).

 

24.           QUIET POSSESSION. Subject to Tenant’s full and
timely performance of all of Tenant’s obligations under this Lease and subject
to the terms of this Lease, including Section 20 - Encumbrances,
Tenant shall have the right to occupy the Premises throughout the Term
as against any persons or entities lawfully claiming by, through or under
Landlord.

 

36

 

25.           SECURITY
MEASURES. Landlord may, but shall be under no obligation to, implement security
measures for the Property, such as the registration or search of all persons
entering or leaving the Building, requiring identification for access to the
Building, evacuation of the Building for cause, suspected cause, or for drill
purposes, the issuance of magnetic pass cards or keys for Building or elevator
access, and other actions that Landlord deems necessary or appropriate to
prevent any threat of property loss or damage, bodily injury or business
interruption; provided, however, that such measures shall be implemented in a
way as not to inconvenience tenants of the Building unreasonably. If Landlord
uses an access card system, Landlord may require Tenant to pay Landlord a
deposit for each after-hours Building access card issued to Tenant. Tenant shall
be responsible for any loss, theft or breakage of any such cards, which must be
returned by Tenant to Landlord upon expiration or earlier termination of the
Lease. Landlord may retain the deposit for any card not so
returned. Landlord shall at all times have the right to change, alter or reduce
any such security services or measures. Tenant shall cooperate and comply with,
and cause Tenant’s Representatives and Visitors to cooperate and comply with,
such security measures. Landlord and its agents and employees shall have no
liability to Tenant or its Representatives or Visitors for the implementation
or exercise of, or the failure to implement or exercise, any such security
measures or for any resulting disturbance of Tenant’s use or enjoyment of the Premises.

 

26.           FORCE MAJEURE. “Force Majeure”  shall mean Landlord’s
inability to obtain equipment or building materials despite the timely and
diligent effort by Landlord or its contractors to obtain such equipment and
materials, acts of God, fire, earthquake, flood, rainfall or other
weather-caused delays which interfere with construction, vandalism, acts or
delays of public agencies or governmental bodies, or the authority under the
covenants, conditions and restrictions, any moratorium on the issuance of governmental
approvals or utility service connections or other similar government actions,
strikes, union labor disputes or other union work stoppages, freight embargoes
or inability to obtain basic materials, supplies or fuels, uncommon or unusual
delays in the issuance of governmental permits or approvals, or other events
beyond the reasonable control of Landlord or its contractors.

 

27.           RULES AND REGULATIONS. Tenant shall be bound by and
shall comply with the rules and regulations attached to and made a part of
this Lease as Exhibit D, as well as any reasonable rules and
regulations hereafter adopted by Landlord for all tenants of the Building, upon
notice to Tenant thereof (collectively, the “Building Rules”). Landlord
shall not be responsible to Tenant or to any other person for any violation of,
or failure to observe, the Building Rules by any other tenant or person.

 

28.           LANDLORD’S LIABILITY. The term “Landlord,” as used
in this Lease, shall mean only the owner or owners of the Building at the time
in question. In the event of any conveyance of title to the Building, then from
and after the date of such conveyance, the transferor Landlord shall be
relieved of all liability with respect to Landlord’s obligations to be
performed under this Lease after the date of such conveyance. Notwithstanding
any other term or provision of this Lease, the liability of Landlord for its
obligations under this Lease is limited solely to Landlord’s interest in the
Building as the same may from time to time be encumbered, and no personal
liability shall at any time be asserted or enforceable against any other assets
of Landlord or against Landlord’s partners or members or its or their
respective partners, shareholders, members,

 

37

 

directors, officers or managers on account of any of Landlord’s
obligations or actions under this Lease.

 

29.           CONSENTS AND APPROVALS.

 

29.1         Determination in Good Faith. Wherever the
consent, approval, judgment or determination of Landlord is required or
permitted under this Lease, Landlord may, in its sole and unfettered
discretion, exercise its good faith business judgment in granting or
withholding such consent or approval or in making such judgment or
determination without reference to any extrinsic standard of reasonableness,
unless the specific provision contained in this Lease providing for such
consent, approval, judgment or determination specifies that Landlord’s consent
or approval is not to be unreasonably withheld, or that such judgment or determination
is to be reasonable, or otherwise specifies the standards under which Landlord
may withhold its consent. If it is determined that Landlord failed to give its
consent where it was required to do so under this Lease, Tenant shall be
entitled to injunctive relief, or other relief as may be provided for under
this Lease, but shall not to be entitled to monetary damages or to
terminate this Lease for such failure.

 

29.2         No Liability Imposed on Landlord. The review
and/or approval by Landlord of any item or matter to be reviewed or approved by
Landlord under the terms of this Lease or any Exhibits or Addenda hereto shall
not impose upon Landlord any liability for the accuracy or sufficiency of any
such item or matter or the quality or suitability of such item for its intended
use. Any such review or approval is for the sole purpose of protecting
Landlord’s interest in the Property, and no third parties, including Tenant or
the Representatives and Visitors of Tenant or any person or entity claiming by,
through or under Tenant, shall have any rights as a consequence thereof.

 

30.           WAIVER OF RIGHT TO JURY TRIAL. Landlord and Tenant waive their respective rights to
trial by jury of any contract or tort claim, counterclaim, cross-complaint, or
cause of action in any action, proceeding, or hearing brought by either party
against the other on any matter arising out of or in any way connected with
this Lease, the relationship of Landlord and Tenant, or Tenant’s use or
occupancy of the Premises, including any claim of injury or damage or the
enforcement of any remedy under any current or future law, statute, regulation,
code, or ordinance.

 

31.           BROKERS. With the exception of the Landlord’s Broker
and the Tenant’s Broker designated in the Basic Lease Information, Landlord and
Tenant each represents and warrants to the other that it has not had any
dealings with any other realtors, brokers, finders or agents in connection with
this Lease and each releases and agrees to indemnify the other from and against
any claim or claims, including, without limitation, costs, expenses and
reasonable attorney’s fees incurred by the other in connection with such claim
or claims, based on the failure or alleged failure to pay any realtors,
brokers, finders or agents (other than Landlord’s Broker and the Tenant’s
Broker) and from any cost, expense or liability for any compensation,
commission or charges claimed by any realtors, brokers, finders or agents
(other than Landlord’s Broker and the Tenant’s Broker) claiming by, through or
on behalf of it with respect to this Lease or the negotiation of this

 

38

 

Lease.
Landlord will pay the Landlord’s Broker and the Tenant’s Broker in accordance
with a separate agreement between Landlord and the applicable broker.

 

32.           INTENTIONALLY DELETED.

 

33.           PARKING. Tenant is entitled to use the number of
Covered Reserved Parking Spaces specified in the Basic Lease Information.
Landlord will either designate such spaces as reserved spaces or will mark
Tenant’s name thereon, and Landlord will not grant any other tenant the right
to use such spaces; provided, however, that Landlord will have no obligation to
prevent unauthorized persons from using such Covered Reserved Parking Spaces.
During the Initial Term, Tenant will pay to Landlord, concurrently with each
payment of Base Rent, a fee of $35.00 per month for each Covered Reserved
Parking Space. Upon the expiration of the Initial Term, the fee for the Covered
Reserved Parking Spaces will be adjusted from time to time by Landlord to an
amount equal to Landlord’s then-standard fee for covered reserved parking
spaces at the Property, provided that such fee will not increase at a rate of
more than three percent (3%) per year, compounded annually, over the $35.00 per
month per Covered Reserved Parking Space fee initially charged hereunder and
provided further that such cap is cumulative. Tenant is also entitled to use,
on a non-exclusive basis, those parking spaces within the Property that are
made available by Landlord for the common use of the tenants of
the Property (“Unreserved Parking Spaces”).  Landlord will designate the
initial locations of the Covered Reserved Parking Spaces and the Unreserved
Parking Spaces, and Landlord reserves the right to designate and redesignate
such locations and to grant other parties the exclusive right to use parking
spaces at the Property. The use of Covered Reserved Parking Spaces and
Unreserved Parking Spaces by Tenant and its Representatives and Visitors shall
be equal to five (5) spaces for each 1,000 rentable square feet of space
in the Premises. Tenant agrees not to use, nor permit the use by its employees,
Representatives, or Visitors of, the driveways or parking lot for overnight or
other storage, or for the maintenance, repair or cleaning of automobiles or
other vehicles. Tenant shall not place or store goods, materials, supplies,
equipment, or other property of Tenant in the driveways or parking lot or
anywhere else in the Property or in the Building, excepting the Premises. Landlord
is not responsible for any theft, loss or damage with respect to vehicles at
the Property or the contents thereof.

 

34.           ENTIRE AGREEMENT. This Lease, including the Exhibits
and any Addenda attached hereto, and the documents referred to herein, if any,
constitute the entire agreement between Landlord and Tenant with respect to the
leasing of space by Tenant in the Building, and supersede all prior or
contemporaneous agreements, understandings, proposals and other representations
by or between Landlord and Tenant, whether written or oral, all of which are
merged herein. Neither Landlord nor Landlord’s agents have made any
representations or warranties with respect to the Premises, the Building, the
Project or this Lease except as expressly set forth herein, and no rights,
easements or licenses shall be acquired by Tenant by implication or otherwise
unless expressly set forth herein. The submission of this Lease for examination
does not constitute an option for the Premises and this Lease shall become effective
as a binding agreement only upon execution and delivery thereof by Landlord to
Tenant.

 

39

 

35.           MISCELLANEOUS. This Lease may not be amended or
modified except by a writing signed by Landlord and Tenant. Subject to
Section 14 - Assignment
and Subletting and Section 28 - Landlord’s
Liability, this Lease shall be binding on and shall inure to
the benefit of the parties and their respective successors, assigns and legal
representatives. The determination that any provisions hereof may be void,
invalid, illegal or unenforceable shall not impair any other provisions hereof
and all such other provisions of this Lease shall remain in full force and
effect. The unenforceability, invalidity or illegality of any provision of this
Lease under particular circumstances shall not render unenforceable, invalid or
illegal other provisions of this Lease, or the same provisions under other
circumstances. This Lease shall be construed and interpreted in accordance with
the laws (excluding conflict of laws principles) of the State of Arizona. The
provisions of this Lease shall be construed in accordance with the fair meaning
of the language used and shall not be strictly construed against either party,
even if such party drafted the provision in question. When required by the
context of this Lease, the singular includes the plural. Wherever the term
“including” is used in this Lease, it shall be interpreted as meaning
“including, but not limited to” the matter or matters thereafter enumerated.
The captions contained in this Lease are for purposes of convenience
only and are not to be used to interpret or construe this Lease. If more than
one person or entity is identified as Tenant hereunder, the obligations of each
and all of them under this Lease shall be joint and several. Time is of the
essence with respect to this Lease, except as to the conditions relating to the
delivery of possession of the Premises to Tenant. Neither Landlord nor Tenant
shall record this Lease.

 

36.           AUTHORITY. If Tenant is a corporation, partnership,
limited liability company or other form of business entity, each of the persons
executing this Lease on behalf of Tenant warrants and represents that Tenant is
a duly organized and validly existing entity, that Tenant has full right and
authority to enter into this Lease and that the persons signing on behalf of
Tenant are authorized to do so and have the power to bind Tenant to this Lease.
Tenant shall provide Landlord upon request with evidence reasonably satisfactory
to Landlord confirming the foregoing representations.

 

37.           SIGNAGE. Provided Tenant, at its cost, receives all
necessary governmental and quasi-governmental approvals therefor as well as
Landlord’s and the Kierland Master Association’s prior written consent in
connection therewith, Landlord shall allow Tenant to erect Tenant’s sign in two
(2) locations on the exterior of the Building as depicted on
Exhibit G attached hereto and incorporated herein, which sign shall be
Tenant’s name, “subordinate” to Landlord’s building designation sign, if any.
Tenant shall pay all annual and other permit fees therefor, shall pay all costs
of installation and maintenance thereof, shall keep the same in good condition,
order and repair at its sole cost and expense, shall remove the same prior to
termination of this Lease, and shall repair and restore any damage to the
Building caused by such installation and/or removal. Any such sign, and the
display of Tenant’s name thereon, shall be subject to the terms of any restrictive
covenants and/or sign criteria applicable thereto and all applicable laws,
ordinances and regulations. Landlord hereby approves Tenant’s signage depicted
on Exhibit G-1 attached hereto and incorporated herein.

 

38.           RIGHT OF FIRST OFFER. So
long as no Event of Default then exists under this Lease, Tenant will have the
first right (“First Right”) to be offered by
Landlord the opportunity to lease all remaining space (other than the Premises)
within the Building (the “First Right Space”).

 

40

 

The First Right is subject to the terms and conditions set forth in
this Section 38, and is further subject to any prior rights to such space
granted to any other tenants in the Building. If at any time after the Commencement
Date while this First Right is in effect Landlord intends to lease all or any
part of the First Right Space, then Landlord will first notify Tenant that such
First Right Space is available for lease (the “Available
Space”). Tenant must notify Landlord in writing within five (5) days of
receiving Landlord’s notice whether Tenant desires to lease the Available Space
from Landlord. If Tenant notifies Landlord that Tenant does not desire to lease
the Available Space, or if Tenant does not respond in writing to Landlord’s
notice within such five (5) day period, then Landlord may freely lease the
Available Space without restriction. If Tenant notifies Landlord in writing
within such five (5)  day period that Tenant
desires to lease the Available Space, the parties will thereafter negotiate for
Tenant’s lease of the Available Space from Landlord. If Landlord and
Tenant fail to mutually agree upon the terms of Tenant’s lease of the Available
Space and to execute a written amendment to this Lease within ten (10) days
after Tenant delivers Tenant’s offer notice to Landlord, then Landlord’s
obligations under this Section 38 shall automatically terminate and be of
no further force or effect at the end of such ten (10) day period. The purpose
of this Section 38 is to provide notice to Tenant so that Tenant may be in
a position to offer to lease such space on a competitive basis with others,
and, notwithstanding anything to the contrary contained in this
Section 38, nothing in this Section 38 shall be deemed to be an option
or right of first refusal.

 

39.           LEASE CONTINGENCY. Tenant acknowledges that, as of
the date of this Lease, Landlord is presently leasing portions of the Premises
to two (2) tenants (the “Existing Tenants”)
pursuant to two (2) separate leases (the “Existing
Leases”). All obligations of Landlord hereunder are contingent upon
Landlord’s receipt of written terminations of both of the Existing Leases
executed by the Existing Tenants (the “Termination Agreements”),
wherein the Existing Tenants each agree to vacate their respective premises
within the Building on or before March 31, 2006. In the event that
Landlord has not received both of the fully executed Termination Agreements on
or before March 1, 2006 (the “Contingency Date”),
then in that event Landlord or Tenant may terminate this Lease by delivery of
written notice to the other party within fifteen (15) days thereafter, in which
event this Lease will terminate and neither party will have any further rights
or obligations hereunder.

 

40.           LENDER APPROVAL CONTINGENCY. Tenant acknowledges
that Landlord’s existing Mortgagee must consent to this Lease as a condition to
its effectiveness. Promptly following the full execution of this Lease,
Landlord will submit a signed copy of this Lease to such Mortgagee for approval
of the same. Upon receipt of such approval, Landlord will notify Tenant of the
same. In the event that such Mortgagee fails to consent to this Lease and
Landlord fails to notify Tenant of such consent on or before the Contingency
Date, then in that event this Lease shall terminate automatically, and without
further action of the parties, unless Landlord and Tenant mutually agree in
writing to extend the Contingency Date. If this Lease terminates in accordance
with this Section 40, then neither party will have any further rights or
obligations hereunder from and after such termination.

 

[SIGNATURES APPEAR ON NEXT PAGE]

 

41

 

IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as
of the date first above written.

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  PCCP
  HC KIERLAND, LLC, a Delaware limited

  
	
   

  	
  liability
  company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  PCCP
  HC Kierland Owner, LLC, a Delaware

  
	
   

  	
   

  	
  limited liability company

  
	
   

  	
   

  	
  Its
  Sole Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  PCCP
  LB Hibernia LLC, a Delaware limited

  
	
   

  	
   

  	
   

  	
  liability
  company

  
	
   

  	
   

  	
   

  	
  Its
  Managing Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  PCCP
  Equities II, LLC, a Delaware

  
	
   

  	
   

  	
   

  	
   

  	
  limited
  liability company

  
	
   

  	
   

  	
   

  	
   

  	
  Its
  Co-Managing Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  [ILLEGIBLE]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its
  

  	
  [ILLEGIBLE]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  THE
  RYLAND GROUP, INC.,

  
	
   

  	
  a
  Maryland corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Daniel Schreiner

  
	
   

  	
  Name:

  	
  Daniel
  Schreiner

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  
								

 

42

 

EXHIBIT A

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF              
, 2006, 

BETWEEN

PCCP HC KIERLAND, LLC, A DELAWARE LIMITED LIABILITY COMPANY,

AS LANDLORD,

AND

THE RYLAND GROUP, INC., A MARYLAND CORPORATION, 

AS TENANT

 

LEGAL DESCRIPTION OF THE LAND

 

A
portion of Lot 4, KIERLAND COMMERCE SOUTH, according to Book 465 of Maps,
page 10, records of Maricopa County, Arizona, being more particularly
described as follows:

 

COMMENCING
at the Centerline intersection of Kierland Boulevard with Marilyn Road, as
recorded on the plat of Kierland Commerce South, according to Book 465 of Maps,
page 10, records of Maricopa County, Arizona; thence along said centerline
of Marilyn Road North 89 degrees 44 minutes 11 seconds East, a distance of
485.24 feet;

 

thence
South 00 degrees 15 minutes 52 seconds East, leaving said centerline, a distance
of 30.00 feet to a point on the Southern right-of-way of said Marilyn Road,
said point also being the Point of Beginning of the parcel herein described;

 

thence
South 00 degrees 15 minutes 52 seconds East, leaving said Southern right-of-way
a distance of 213.49 feet;

 

thence
South 44 degrees 57 minutes 48 seconds East a distance of 357.95 feet to a
point on the Western right-of-way of 71st Street;

 

thence
South 45 degrees 02 minutes 42 seconds West, along said western right-of-way of
7lst Street a distance of 201.40 feet;

 

thence
North 44 degrees 57 minutes 48 seconds West leaving said Western right-of-way a
distance of 26.96 feet;

 

thence
North 12 degrees 32 minutes 47 seconds West, a distance of 64.48 feet;

 

thence
South 89 degrees 44 minutes 08 seconds West, a distance of 324.50 feet to a
point of curvature of a non-tangent curve concave to the Northwest whose radius
bears North 75 degrees 28 minutes 55 seconds West, a distance 72.91 feet;

 

A-1

 

thence
Southwesterly along the arc of said curve through a central angle of 37 degrees
08 minutes 40 seconds, a distance of 47.27 feet to a point of tangency; 

 

thence
South 51 degrees 23 minutes 17 seconds West, a distance of 107.98 feet to a
point on the Eastern right-of-way of said Kierland Boulevard, said point also
being a point of curvature of a non-tangent curve concave to the Northeast,
whose center bears North 53 degrees 11 minutes 17 seconds East, a distance of
465.00 feet; 

 

thence
Northerly, along the arc of said curve and along said Eastern right-of-way
through a central angle of 36 degrees 32 minutes 51 seconds, a distance of
296.61 feet; 

 

thence
North 00 degrees 15 minutes 52 seconds West, along said Eastern right-of-way, a
distance of 192.21 feet; 

 

thence
North 01 degrees 46 minutes 52 seconds West, along said Eastern right-of-way, a
distance of 138.17 feet; 

 

thence
North 45 degrees 45 minutes 30 seconds East, leaving said Eastern right-of-way,
a distance of 37.42 feet to a point on said Southern right-of-way of Marilyn
Road; 

 

thence
North 89 degrees 44 minutes 11 seconds East, along said Southern right-of-way,
a distance of 418.38 feet to the Point of Beginning of the parcel herein
described. 

 

[END OF LEGAL DESCRIPTION]

 

A-2

 

EXHIBIT B

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF               
, 2006,

BETWEEN

PCCP HC KIERLAND, LLC, A DELAWARE LIMITED LIABILITY COMPANY,

AS LANDLORD, 

AND

THE RYLAND GROUP, INC., A MARYLAND CORPORATION, 

AS TENANT

 

THE PREMISES

 

[See attached page]

 

B-1

 

 

B-2

 

EXHIBIT C

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF           ,
2006, 

BETWEEN

PCCP HC KIERLAND, LLC, A DELAWARE LIMITED LIABILITY COMPANY,

AS LANDLORD, 

AND

THE RYLAND GROUP, INC., A MARYLAND
CORPORATION, 

AS TENANT

 

CONSTRUCTION RIDER

 

This Construction Rider describes Landlord’s obligations regarding the
Base Building and Tenant’s obligations regarding the initial Tenant
Improvements which Tenant is obligated to construct or install in the Premises.
This Construction Rider is a part of the
Lease and all actions and obligations hereunder are subject to all terms and
conditions of the Lease unless expressly provided otherwise herein. Capitalized
terms which are not otherwise defined in this Construction Rider have the
meanings set forth in the Lease. Any breach or default by either party
hereunder also constitutes a default by such party under the Lease.

 

1.            Base Building.
The core and shell of the Building and all lavatories are referred to in this
Lease as “Base Building”. Landlord represents and
warrants that the Base Building has been built in compliance with (a) the
applicable building code; (b) the Americans with Disabilities Act of 1990
(“ADA”); and (c) other applicable laws, in each case as such matters in
(a)-(c) are enforced, interpreted and applied to the Project as of the
date of this Lease. Such compliance shall be conclusively established by the
issuance of all governmental permits necessary for the initial occupancy of the
Building.

 

2.            Tenant
Improvements; Space Plan. Tenant will engage a licensed architect
reasonably acceptable to Landlord (“Architect”) to
develop and design a space plan (“Space Plan”)
for the initial improvements to be installed by Tenant in the Premises (“Tenant Improvements”). Tenant will provide Landlord with the
Space Plan for Landlord’s approval, which shall not be unreasonably
conditioned, withheld or delayed. The Space Plan must (a) be compatible
with the Building and the mechanical components of the Building (as reasonably
determined by Landlord); (b) show, in reasonable detail, the design and
appearance of the finishing material Tenant will use in connection with
installing Tenant Improvements; and (c) conform to all applicable
governing codes, ordinances and other Laws. All Space Plan drawings must be not
less than 1/8” scale. Without limiting those general requirements, the Space
Plan must expressly specify and include (without limitation) all of the
following: (1) wall types and heights and insulation, if needed; (2) door
types and hardware groups; (3) door frames types; (4) ceiling
heights; (5) ceiling materials; (6) floor finishes and locations; (7) wall
finishes and locations; (8) any appliances, special systems or equipment
to be furnished as a part of the construction; (9) any mechanical requirements
beyond

 

C-1

 

that
provided in the base building; (10) any fire
protection requirements beyond that provided in the base building; (11) any plumbing
requirements; (12) all power and data locations; (13) any power required other
than building standard power distribution; (14) any power requirements for
modular furniture; (15) any emergency power
requirement; (16) any lighting requirements
beyond that provided in the base building; and (17) millwork elevations and
details. The Space Plan must include enlarged sketch layouts for any
non-standard rooms, including reflected ceiling plans, and must state the
approximate usable/rentable square footage of the Premises.

 

3.            Construction
Drawings and Specifications. After Landlord receives and has approved
Tenant’s Space Plan, Tenant will cause the Architect to prepare the
construction drawings and specifications for the Tenant Improvements (“Construction Drawings and Specifications”). Tenant will
provide Landlord with the Construction Drawings and Specifications for
Landlord’s approval, which shall not be unreasonably conditioned, withheld or
delayed. If Landlord disapproves the Construction Drawings and Specifications,
Tenant will provide appropriately revised Construction Drawings and
Specifications to Landlord for approval (or disapproval) until Landlord has
approved the Construction Drawings and Specifications. All revisions to the
Construction Drawings and Specifications will be clouded, blacklined, or otherwise
clearly marked to highlight such revisions for easy
identification as a revised item.

 

4.            Changes to
Construction Drawings and Specifications. After Landlord’s approval, no
significant changes, modifications or alterations may be made to the Construction
Drawings and Specifications without Landlord’s prior written consent, which
shall not be unreasonably conditioned, withheld or delayed.

 

5.            Building
Standard. Tenant will utilize items designated by Landlord
as “Building Standard” or items of equal or
higher quality, in Landlord’s reasonable opinion, to assure the consistent
quality and appearance of the Building. No deviation from the Building Standard
will be permitted in the Space Plan and Construction Drawings and
Specifications without Landlord’s consent, which may be withheld in Landlord’s
sole discretion. However, Landlord will not unreasonably withhold approval of
deviations from the Building Standard as to partitions, floor coverings, wall
finishes, or special lighting fixtures, provided that no such deviation is of
lesser quality than the Building Standard. Landlord will not approve any
deviations which Landlord believes (a) do not conform to applicable codes,
ordinances and other Laws or are disapproved by any governmental agency, (b) require
services beyond the level normally provided to other tenants in the Building,
or (c) are of a nature or quality that are inconsistent with Landlord’s
overall plan or objectives for the Building. No approval by Landlord of any
deviation constitutes an acknowledgment by Landlord that such deviations are in
conformance with applicable codes, ordinances and other Laws.

 

6.            Landlord’s
Approval Rights. Landlord may withhold its approval of the Space Plan,
Construction Drawings and Specifications, and/or any change orders in
connection therewith requested by Tenant if they require work which: (a) exceeds
or adversely affects the structural integrity of the Building; (b) adversely
affects, or exceeds Tenant’s pro rata capacity of, any part of the heating,
ventilating, air conditioning, plumbing, mechanical, electrical, communication
or other systems of the Building; (c) is not approved by the holder of any

 

C-2

 

mortgage
or deed of trust encumbering the Building at the time the work is proposed; (d) would
not be approved by a prudent owner of property similar to the Building; (e) violates
any agreement which affects the Building or binds Landlord; (f) Landlord
reasonably believes will increase the cost of operation or maintenance of any
of the systems of the Building; (g) Landlord reasonably believes will
reduce the market value of the Premises or Building; (h) does not conform
to applicable codes, ordinances and other Laws or is not approved by any
governmental authority with jurisdiction over the Building; (i) in
Landlord’s determination detrimentally affects the uniform exterior appearance
of the Project; or (j) is reasonably disapproved by
Landlord for any other reason not set forth herein.

 

7.            Improvement
Allowance. Landlord has agreed to contribute a one-time Improvement
Allowance against the Total Costs (defined below) of the Tenant Improvements in
an amount equal to $35.00  multiplied by the Usable
Area of the Premises, subject to reduction based upon the costs incurred by
Landlord in connection with the Data Room Floor Construction as provided
under Section 25  of this Exhibit C (as
reduced, the “Improvement Allowance”). Tenant shall
be solely responsible for any and all costs of constructing the Tenant
Improvements in excess of the Improvement Allowance. Not more than once per
month prior to Substantial Completion of the Tenant Improvements, Tenant may
deliver to Landlord a request for payment of a portion of the Improvement
Allowance, accompanied by all of the following in form and substance
satisfactory to Landlord: (i) a copy of each invoice evidencing a payment
made by Tenant to any contractor, subcontractor or supplier for which Tenant is
then requesting reimbursement from the Improvement Allowance and (ii) full,
final and unconditional lien waivers from any contractor, subcontractor or
supplier for which Tenant is then requesting reimbursement from the Improvement
Allowance, specifying in such lien waivers the amount paid in consideration for
such release; provided, however, that Tenant’s election not to make any such
monthly payment requests shall not operate as a waiver of Tenant’s right to
receive any portion of the Improvement Allowance as otherwise provided in the
remaining provisions of this Section 7. Promptly
following Substantial Completion of the Tenant Improvements, Tenant will
deliver to Landlord a request for payment of the remaining portion of the
Improvement Allowance, if any, not paid to Tenant in accordance with the
preceding sentence, accompanied by all of the following in form and substance
satisfactory to Landlord: (a) a Certificate of Substantial Completion duly
executed by the Architect certifying that the Tenant Improvements are
Substantially Completed; (b) a final Certificate of Occupancy for the
Premises; (c) duly executed unconditional lien waivers and such other
affidavits, certificates, information, and data as may be requested by Landlord
from all general contractors, subcontractors and materialmen performing work on
the Premises; (d) such documentation as Landlord deems reasonably
necessary to obtain an endorsement to the policy of title insurance insuring
Landlord’s lender, if any; (e) copies of all warranties and guaranties
relating to the Tenant Improvements together with duly executed assignments
thereof to Landlord; (1) an itemized computation of
the actual Total Costs incurred by Tenant (“Actual Costs”);
(g) final as-built plans and specifications for the Tenant Improvements;
and (h) such other information and documentation as Landlord may
reasonably request to evidence the proper, lien-free Substantial Completion of
the Tenant Improvements. Unless Landlord reasonably disputes Tenant’s assertion
that Substantial Completion has occurred, upon Landlord’s receipt, review and
reasonable approval of all of the foregoing, Landlord will pay to Tenant the
amount of the Actual Costs, up to the maximum amount of the Improvement
Allowance, less any portion

 

C-3

 

of the Improvement Allowance previously paid to Tenant by way of any
monthly payment requests therefor as provided above. Landlord may retain from
such final payment, if any, an amount equal to 150% of the estimated cost of
completing all “punch list” items identified as provided in Section 17 below,
which retained amount will be paid to Tenant when all such punch list items are
completed to Landlord’s satisfaction. If the Actual Costs are less than the
Improvement Allowance, Tenant may credit the amount by which the Improvement
Allowance exceeds the Actual Costs against future refurbishments made to the
Premises by Tenant during the Lease Term until all such excess funds have been
credited; provided, however, that Tenant will receive no payment or credit for
any amount by which the Improvement Allowance exceeds the sum of the Actual
Costs plus the costs of any and all such future refurbishments.

 

8.            Total Costs. “Total Costs” means all costs reasonably incurred by Tenant
in connection with (a) the construction and installation of the Tenant
Improvements, and (b) any other measures taken by Tenant which may be
reasonably required to accomplish the construction of the Tenant Improvements,
including without limitation, Tenant’s procurement of bonds, insurance and
governmental permits.

 

9.            Cost Quotation.
Promptly after Landlord’s approval of the Construction Drawings and
Specifications, Tenant will provide to Landlord a
computation, along with reasonable supporting documentation, setting forth
Tenant’s estimate of the Total Costs relating to the Tenant Improvements (“Cost Quotation”) based upon the approved Construction
Drawings and Specifications. If the Cost Quotation exceeds the Improvement
Allowance, Tenant will, within five (5) business days of Landlord’s
receipt thereof, either: (a) agree in writing to pay the cost by which the
Cost Quotation exceeds the Improvement Allowance (“Excess Costs”),
or (b) revise the Construction Drawings and Specifications (subject to
Landlord’s approval as set forth above) so that the Cost Quotation is either (i) no
more than the Improvement Allowance, or (ii) in excess of the Improvement
Allowance by an amount of Excess Costs which Tenant agrees in writing to pay.
The failure of Tenant to so respond within the five business day period shall
be deemed to be Tenant’s agreement to pay all of the Excess Costs. Any
agreement by Tenant to pay Excess Costs is subject to Landlord’s reasonable
approval, which may (without limitation) be conditioned upon Tenant’s providing
Landlord with satisfactory assurance of payment.

 

10.          Construction of
Tenant Improvements. Tenant will hire a general contractor with
demonstrated expertise and experience in the construction of tenant improvement
projects similar to the Tenant Improvements and otherwise reasonably acceptable
to Landlord in all respects (“Tenant’s General
Contractor”). Tenant will cause Tenant’s General Contractor to
construct the Tenant Improvements in accordance with the approved Construction
Drawings and Specifications. All of the Tenant Improvements and Tenant Work
(defined below) must be undertaken and performed in strict accordance with the
provisions of the Lease and this Construction Rider. All subcontractors and
suppliers utilized by Tenant’s General Contractor must also have demonstrated
expertise and experience in the construction of tenant improvement projects
similar to the Tenant Improvements and be otherwise reasonably acceptable to
Landlord.

 

11.          Tenant’s General
Obligations. Tenant will, before commencing construction or delivering (or
accepting delivery of) any materials to be used in connection with Tenant

 

C-4

 

Improvements,
deliver to Landlord copies of all contracts, copies of all contractor safety
programs, copies of all necessary permits and licenses and such other
information relating to the construction as Landlord reasonably requests.
Tenant will also deliver to Landlord (a) reasonable evidence that Tenant
or Tenant’s General Contractor have in force builder’s “all risk” insurance in
an amount at least equal to the Cost Quotation and naming Landlord as a loss
payee as its interest may appear; and (b) reasonable evidence that Tenant
and each of Tenant’s contractors have in force liability insurance insuring
against construction related risks in at least the form, amounts and coverages
required of Tenant under the Lease and naming Landlord and Property Manager as
additional insureds (specifically including coverage for completed operations).
Tenant will not commence construction before Landlord has, in Landlord’s reasonable
discretion, provided Landlord’s written approval of the foregoing deliveries.
Tenant will cause the Tenant Improvements and any Tenant Work to be constructed
and performed (i) during times and in a manner reasonably determined by
Landlord to minimize interference with other tenants’ use and enjoyment of the
Property, and (ii) in compliance with Landlord’s rules/regulations
applicable to third party contractors, subcontractors and suppliers performing
work at the Property.

 

12.           Substantial
Completion of Tenant Improvements. With regard to the Tenant Improvements,
“Substantial Completion” or “Substantially Completed” as used in this Construction Rider
(and as used in the Lease) means completion of construction of the Tenant
Improvements in accordance with the approved Construction Drawings and
Specifications with the exception of minor details of construction,
installation, decoration, or mechanical adjustments and other such punch list
items as certified by Architect and/or as may be determined by Landlord during
an inspection of the Premises. Substantial Completion of the Tenant
Improvements will be deemed to have occurred notwithstanding the requirement to
complete “punch list” items or similar minor work of correction or completion.

 

13.          Post Substantial
Completion Delivery Requirements. Promptly following
Substantial Completion of the Tenant Improvements, Tenant will deliver to
Landlord the following in form and substance satisfactory to Landlord: (a) a
Certificate of Substantial Completion duly executed by the Architect certifying
that the Tenant Improvements are Substantially Completed; (b) a final
Certificate of Occupancy for the Premises; (c) duly executed unconditional
lien waivers and such other affidavits, certificates, information, and data as
may be requested by Landlord from all general contractors, subcontractors and
materialmen performing work on the Premises; (d) such documentation as
Landlord deems reasonably necessary to obtain an endorsement to the policy of
title insurance insuring Landlord’s lender, if any; (e) copies of all
warranties and guaranties relating to the Tenant Improvements together with
duly executed assignments thereof to Landlord; (f) an itemized
computation of the actual Total Costs incurred by Tenant (“Actual Costs”);
(g) final as-built plans and specifications for the Tenant Improvements;
and (h) such other information and documentation as Landlord may
reasonably request to evidence the proper, lien-free Substantial Completion of
the Tenant Improvements.

 

14.          Liens and
Claims. Tenant will keep the Property free from any mechanics’,
materialmens’, designers’ or other liens arising out of any work performed,
materials furnished or obligations incurred by or for Tenant or any person or
entity claiming by, through or under Tenant. Tenant will upon request record
and post notices of non-responsibility or such similar

 

C-5

 

protective
notices as Landlord may reasonably request. If any such liens are filed and
Tenant, within 15 days after Tenant’s notice of such filing, does not release
the same of record or provide Landlord with a bond or other surety satisfactory
to Landlord protecting Landlord and the Property against such liens, Landlord
may, without waiving its rights and remedies based upon such breach by Tenant
and without releasing Tenant from any obligation under the Lease, cause such
liens to be released by any means Landlord deems proper, including, but not
limited to, paying the claim giving rise to the lien or posting security to
cause the discharge of the lien. In such event, Tenant will reimburse Landlord,
as Additional Rent, for all amounts Landlord pays (including, without
limitation, reasonable attorneys’ fees and costs). To the fullest extent
allowable under the Laws, Tenant releases and will indemnify, protect, defend
(with counsel reasonably acceptable to Landlord) and hold harmless the Landlord
Parties and the Property from and against any Claims in any manner relating to
or arising out of the Tenant Improvements, any Tenant Work or any other work
performed, materials furnished or obligations incurred by or for Tenant or any
person or entity claiming by, through or under Tenant, provided that such Claim
does not arise from the gross negligence or willful misconduct of Landlord, its
employees or agents.

 

15.          Tenant Work. “Tenant
Work”  means all
finish work and decoration and other work desired by Tenant and not included
within the Tenant Improvements as set forth in the approved
Construction Drawings and Specifications, including specifically, without
limitation, all computer systems, telephone systems, telecommunications
systems, fixtures, furnishings, equipment and any Alterations. All Tenant Work
will be designed, furnished and installed by Tenant at Tenant’s sole expense
and shall not be included in Total Costs or chargeable against the Improvement
Allowance. If any Tenant Work is not submitted and approved with the
Construction Drawings and Specifications, Tenant will secure Landlord’s prior
consent for such Tenant Work in the same manner and following the same
procedures provided for in the Lease for Alterations which require Landlord’s
consent.

 

16.          Conformance with
Laws. All Tenant Improvements and Tenant Work must be done in conformance
with all applicable codes, ordinances and other Laws. Valid building permits
and other necessary authorizations from appropriate governmental agencies (when
required) must be obtained by Tenant for the Tenant Improvements and Tenant
Work at Tenant’s expense. Any Tenant Improvements or Tenant Work not acceptable
to the applicable governmental authority or otherwise not in conformance with
all applicable codes, ordinances and other Laws must be promptly corrected,
replaced, or brought into compliance with such applicable codes, ordinances and
other Laws at Tenant’s expense. No failure by Landlord to object to any such
nonconforming Tenant Improvements or Tenant Work relieves Tenant from its
obligations or imposes any responsibility or liability therefor upon Landlord.

 

17.          Landlord’s
Inspections. Landlord shall have the right to inspect and observe all work
during construction and to inspect the Premises and develop a “punch list”  for the Tenant Improvements upon
Substantial Completion. Notwithstanding such rights, Landlord is under no
obligation to inspect or supervise construction of any of the Tenant
Improvements or Tenant Work, and no inspection by Landlord shall be construed
as a representation that the Tenant Improvements or Tenant Work (a) are in
compliance with the Construction Drawings and

 

C-6

 

Specifications;
(b) are or will be free from faulty or defective materials or workmanship;
or (c) are in conformance with any applicable codes, ordinances or other
Laws.

 

18.          Responsibility
for Function and Operation. Tenant will be responsible
for the function and operation of all Tenant Improvements whether or not
approved by Landlord or installed by Landlord at Tenant’s request. Landlord’s
preparation, review and/or approval of any design or construction documents
will not constitute any representation or warranty as to the adequacy,
efficiency, performance or desirability of the Tenant Improvements in the
Premises.

 

19.          Construction
Warranty. Tenant shall cause Tenant’s General Contractor and
its subcontractors and suppliers to fully warrant and guaranty the Tenant
Improvements to both Tenant and Landlord for a period of not less than one (1) year after
Substantial Completion thereof.

 

20.          Tenant’s
Representative. Tenant has designated Dan Schreiner as its sole
representative with respect to the matters set forth in this Construction
Rider, who shall have full authority and responsibility to act on behalf of
Tenant as required in this Construction Rider. Tenant may change its representative
under this Construction Rider at any time by providing five days prior
written notice to Landlord. All inquiries, requests, instructions,
authorizations and other communications with respect to matters covered by this
Construction Rider from Landlord may be made by Landlord to Tenant’s
Representative.

 

21.          Landlord’s
Representative. Landlord has designated Rich O’Brien as its
representative with respect to the matters set forth in this Construction
Rider, who shall have full authority and responsibility to act on behalf of
Landlord as required in this Construction Rider. Landlord may change its
representative under this Construction Rider at any time by providing five days
prior written notice to Tenant. All inquiries, requests, instructions,
authorizations and other communications with respect to the matters covered by
this Construction Rider from Tenant will be made to Landlord’s representative.
Tenant will communicate solely with Landlord’s Representative and will not make
any inquiries of or requests to, and will not give any instructions or
authorizations to, any other employee or agent of Landlord, including
Landlord’s architect, engineers, and contractors or any of their agents or
employees, with regard to matters covered by this Construction Rider.

 

22.          Applicability. This
Construction Rider shall not be deemed applicable to: (a) any additional
space added to the original Premises at any time, whether by the exercise of
any options under the Lease or otherwise, or (b) any portion of the
original Premises or any additions thereto in the event of a renewal or
extension of the original Term of the Lease, whether by the exercise of any
options under the Lease or any amendment or supplement thereto. The
construction of any additions or improvements to the Premises not contemplated
by this Construction Rider may only be performed pursuant to the provisions of
the Lease governing Alterations unless Landlord elects to prepare a separate
work letter agreement, in the form then being used by Landlord and specifically
addressed to such construction.

 

C-7

 

23.          Risk of Loss. All
materials, work, installations and decorations of any nature brought upon or
installed in the Premises prior to final completion of the Tenant Improvements
and the payment of the Improvement Allowance by Landlord as provided herein
shall be at the risk of the party who brought such materials or items onto the
Premises. Neither Landlord nor any party acting on Landlord’s behalf shall be
responsible for any damage or loss or destruction of such items brought to or
installed in the Premises by Tenant prior to such date, except if caused solely
by Landlord’s gross negligence or willful misconduct.

 

24.          Ownership of
Tenant Improvements. All Tenant Improvements shall become a part of the
Premises, shall be the property of Landlord, and, subject to the provisions of
the Lease, shall be surrendered by Tenant with the Premises without any
compensation to Tenant at the expiration or
termination of the Lease in accordance with the provisions of the Lease.

 

25.          Data
Room Floor Construction. On or before the later to
occur of (i) the Contingency Date or (ii) the satisfaction and
removal of the Lease contingencies set forth in Sections 39 and 40 of the
Lease, Landlord will commence (or cause to be commenced) structural
reinforcement of the floor area of the “Data Room” portion of the Premises (the
“Data Room Floor
Construction”) based upon Data Room load specifications
to be provided by Tenant and reasonably approved by Landlord within five (5) Business
Days following Tenant’s full execution and delivery of
the Lease to Landlord. Landlord will cause the Data Room Floor
Construction to be completed on or before April 1, 2006, subject to
day-for-day extension to the extent the Data Room Floor Construction is
delayed as a result of Force Majeure events and/or delays caused by Tenant
(including, without limitation, Tenant’s failure to provide the Data Room load
specifications on a timely basis as provided above). Landlord will pay for the
costs of the Data Room Floor Construction; provided, however, that the
Improvement Allowance to be paid from Landlord to Tenant in accordance with Section 7 of this Exhibit C
will be reduced in the amount of such costs.

 

C-8

 

EXHIBIT D

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF             ,
2006, 

BETWEEN

PCCP HC KIERLAND, LLC, A DELAWARE LIMITED LIABILITY COMPANY,

AS LANDLORD,

AND

THE RYLAND GROUP, INC., A MARYLAND CORPORATION, 

AS TENANT

 

BUILDING RULES

 

The following Building Rules are additional
provisions of the foregoing Lease to which they are attached. The capitalized
terms used herein have the same meanings as these terms are given in the Lease.

 

1.            Use of Common Areas. Tenant will not obstruct the
sidewalks, halls, passages, exits, entrances, elevators or stairways of the
Building (“Common Areas”), and Tenant will
not use the Common Areas for any purpose other than ingress and egress to and
from the Premises. The Common Areas, except for the sidewalks, are not open to
the general public and Landlord reserves the right to control and prevent
access to the Common Areas of any person whose presence, in Landlord’s opinion,
would be prejudicial to the safety, reputation and interests of the Building
and its tenants.

 

2.             No Access to
Roof. Tenant has no right of access to the roof of the Building and will
not install, repair or replace any antenna, aerial, aerial wires, fan,
air-conditioner or other device on the roof of the Building without the prior
written consent of Landlord. Any such device installed without such written
consent is subject to removal at Tenant’s expense without notice at any time.
Tenant will be liable for any damages or repairs incurred or required as a
result of its installation, use, repair, maintenance or removal of such devices
on the roof and agrees to indemnify and hold harmless Landlord from any
liability, loss, damage, cost or expense, including reasonable attorneys’ fees,
arising from any activities of Tenant or of Tenant’s Representatives on the
roof of the Building.

 

3.             Signage. No
sign, placard, picture, name, advertisement or notice visible from the exterior
of the Premises will be inscribed, painted, affixed or otherwise displayed by
Tenant on or in any part of the Building without the prior written consent of
Landlord. Landlord reserves the right to adopt and furnish Tenant with general
guidelines relating to signs in or on the Building. All approved signage will
be inscribed, painted or affixed at Tenant’s expense by a person approved by
Landlord, which approval will not be unreasonably withheld.

 

D-1

 

4.             Prohibited Uses. The Premises
will not be used for manufacturing, for the storage of merchandise held for
sale to the general public, for lodging or for the sale of goods to the general
public. Tenant will not permit any food preparation on the Premises, except
that Tenant may use Underwriters’ Laboratory approved equipment for brewing
coffee, tea, hot chocolate and similar beverages so long as such use is in
accordance with all applicable federal, state and city laws, codes, ordinances,
rules and regulations.

 

5.             Janitorial
Services. Tenant will not employ any person for the purpose
of cleaning the Premises nor permit any person to enter the Building for such
purpose other than Landlord’s janitorial service, except with Landlord’s prior
written consent. Tenant will not necessitate, and will be liable for the cost
of, any undue amount of janitorial labor by reason of Tenant’s
carelessness in or indifference to the preservation of good order and
cleanliness in the Premises. Janitorial service will not be furnished to areas
in the Premises on nights when such areas are occupied after 9:30 p.m., unless such
service is extended by written agreement to a later hour in specifically
designated areas of the Premises.

 

6.             Keys and Locks. Landlord will furnish
Tenant, free of charge, two keys to each door or lock in the Premises. Landlord
may make a reasonable charge for any additional or replacement keys. Tenant will
not duplicate any keys, alter any locks or install any new or
additional lock or bolt on any door of its Premises or on any other part of the
Building without the prior written consent of Landlord and, in any event, Tenant
will provide Landlord with a key for any such lock. On the termination of the
Lease, Tenant will deliver to Landlord all keys to any locks or doors in the
Building which have been obtained by Tenant.

 

7.             Freight. Upon not less
than twenty-four hours prior notice to Landlord, which notice may be oral, an
elevator will be made available for Tenant’s use for transportation of freight,
subject to such scheduling as Landlord in its discretion deems appropriate.
Tenant shall not transport freight in loads exceeding the weight limitations of
such elevator. Landlord reserves the right to prescribe the weight, size and
position of all equipment, materials, furniture or other property brought into
the Building, and no property will be received in the Building or carried up or
down the freight elevator or stairs except during such hours and along such
routes and by such persons as may be designated by Landlord. Landlord reserves
the right to require that heavy objects will stand on wood strips of such
length and thickness as is necessary to properly distribute the weight.
Landlord will not be responsible for loss of or damage to any such property
from any cause, and Tenant will be liable for all damage or injuries caused by
moving or maintaining such property.

 

8.             Nuisances and Dangerous Substances. Tenant will
not conduct itself or permit Tenant’s Representatives or Visitors to conduct
themselves in the Premises or anywhere on or in the Property in a manner which
is offensive or unduly annoying to any other Tenant or Landlord’s property
managers. Tenant will not install or operate any phonograph, radio receiver,
musical instrument, or television or other similar device in any part of the
Common Areas and shall not operate any such device installed in the Premises in
such manner as to disturb or annoy other tenants of the Building. Tenant will
not use or keep in the Premises or the Property any kerosene, gasoline or other
combustible fluid or material other than limited quantities thereof

 

D-2

 

reasonably necessary for the maintenance of office
equipment, or, without Landlord’s prior written approval, use any method of
heating or air conditioning other than that supplied by Landlord. Tenant will
not use or keep any foul or noxious gas or substance in the Premises or permit
or suffer the Premises to be occupied or used in a manner offensive or
objectionable to Landlord or other occupants of the Building by reason of
noise, odors or vibrations, or interfere in any way with other tenants or those
having business therein. Tenant will not bring or keep any animals in or about
the Premises or the Property.

 

9.             Building Name
and Address. Without Landlord’s prior written consent, Tenant
will not use the name of the Building in connection with or in promoting or
advertising Tenant’s business except as Tenant’s address.

 

10.            Building
Directory. A directory for the Building will be provided for
the display of the name and location of tenants. Landlord reserves the right to
approve any additional names Tenant desires to place in the directory and, if
so approved, Landlord may assess a reasonable charge for adding such additional
names.

 

11.          Window
Coverings. No curtains, draperies, blinds, shutters, shades,
awnings, screens or other coverings, window ventilators, hangings, decorations
or similar equipment shall be attached to, hung or placed in, or used in or
with any window of the Building without the prior written consent of Landlord,
and Landlord shall have the right to control all lighting within the Premises
that may be visible from the exterior of the Building.

 

12.          Floor Coverings.
Tenant will not lay or otherwise affix linoleum, tile, carpet or any other
floor covering to the floor of the Premises in any manner except as approved in
writing by Landlord. Tenant will be liable for the cost of repair of any damage
resulting from the violation of this rule or the removal of any floor
covering by Tenant or its contractors, employees or invitees.

 

13.          Wiring and Cabling
Installations. Landlord will direct Tenant’s electricians and other vendors
as to where and how data, telephone, and electrical wires and cables are to be
installed. No boring or cutting for wires or cables will be allowed without the
prior written consent of Landlord. The location of burglar alarms, smoke
detectors, telephones, call boxes and other office equipment affixed to the
Premises shall be subject to the written approval of Landlord.

 

14.           Office Closing
Procedures. Tenant will see that the doors of the Premises are
closed and locked and that all water faucets, water apparatus and utilities are
shut off before Tenant or its employees leave the Premises, so as to prevent
waste or damage. Tenant will be liable for all damage or injuries sustained by
other tenants or occupants of the Building or Landlord resulting from Tenant’s
carelessness in this regard or violation of this rule. Tenant will keep the
doors to the Building corridors closed at all times except for ingress and
egress.

 

15.          Plumbing Facilities. The toilet rooms, toilets,
urinals, wash bowls and other apparatus shall not be used for any purpose other
than that for which they were constructed, and

 

D-3

 

no
foreign substance of any kind whatsoever shall be disposed of therein. Tenant
will be liable for any breakage, stoppage or damage resulting from the
violation of this rule by Tenant, its employees or invitees.

 

16.          Use of Hand
Trucks. Tenant will not use or permit to be used in the Premises or in the
Common Areas any hand trucks, carts or dollies except those equipped with
rubber tires and side guards or such other equipment as Landlord may approve.

 

17.          Refuse. Tenant shall store all Tenant’s trash and
garbage within the Premises or in other facilities designated by Landlord for
such purpose. Tenant shall not place in any trash box or receptacle any
material which cannot be disposed of in the ordinary and customary manner of
removing and disposing of trash and garbage in the city in which the Building is
located without being in violation of any law or ordinance governing such
disposal. All trash and garbage removal shall be made in accordance with
directions issued from time to time by Landlord, only through such Common Areas
provided for such purposes and at such times as Landlord may designate. Tenant
shall comply with the requirements of any recycling program adopted by Landlord
for the Building.

 

18.          Soliciting. Canvassing, peddling, soliciting and
distribution of handbills or any other written materials in the Building are
prohibited, and Tenant will cooperate to prevent the same.

 

19.            Parking. Tenant will use, and cause Tenant’s
Representatives and Visitors to use, any parking spaces to which Tenant is
entitled under the Lease in a manner consistent with Landlord’s directional
signs and markings in the parking area. Specifically, but without limitation,
Tenant will not park, nor permit Tenant’s Representatives or Visitors to park,
in a manner that impedes access to and from the Building or the parking area or
that violates space reservations for handicapped drivers or other parties
registered as such. Landlord may use such reasonable means as may be necessary
to enforce the directional signs and markings in the parking area, including
towing services, and Landlord will not be liable for any damage to vehicles
towed as a result of non-compliance with such parking regulations.

 

20.             Fire,
Security and Safety Regulations. Tenant will comply with all safety,
security, fire protection and evacuation measures and procedures established by
Landlord or any governmental agency.

 

21.           Responsibility for Theft. Tenant assumes any and all
responsibility for protecting the Premises from theft, robbery and pilferage,
which includes keeping doors locked and other means of entry to the Premises
closed.

 

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

 

D-4

 

23.           Smoking. Tenant will
not permit its employees, Representatives or Visitors to smoke at the Property
other than within designated smoking areas located outside of the Building.
Such smoking areas will be designated and redesignated by Landlord from time to
time.

 

24.           Waiver of Rules. Landlord may
waive any one or more of these Building Rules for the benefit of any
particular tenant or tenants, but no such waiver by Landlord will be construed
as a waiver of such Building Rules in favor of any other tenant or tenants
nor prevent Landlord from thereafter enforcing these Building Rules against
any or all of the tenants of the Building.

 

25.             Effect on Lease. These
Building Rules are in addition to, and shall not be construed to in any
way modify or amend, in whole or in part, the terms, covenants, agreements and
conditions of the Lease. Violation of these Building Rules constitutes a
failure to fully perform the provisions of the Lease, as referred to in Section 15.1 - “Events of Default”.

 

26.           Non-Discriminatory
Enforcement. Subject to the provisions of the Lease (and the
provisions of other leases with respect to other tenants), Landlord shall use
reasonable efforts to enforce these Building Rules in a non-discriminatory
manner, but in no event shall Landlord
have any liability for any failure or refusal to do so (and Tenant’s sole and
exclusive remedy for any such failure or refusal shall be injunctive relief
preventing Landlord from enforcing any of the Building Rules against
Tenant in a manner that discriminates against Tenant).

 

27.           Additional and
Amended Rules. Landlord reserves the right to rescind or amend
these Building Rules and/or adopt any other and reasonable rules and
regulations as in its judgment may from time to time be needed for the safety,
care and cleanliness of the Building and for the preservation of good order
therein.

 

D-5

 

EXHIBIT E

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF           
, 2006, 

BETWEEN

PCCP HC KIERLAND, LLC, A DELAWARE LIMITED LIABILITY COMPANY,

AS LANDLORD,
  AND

THE RYLAND GROUP, INC., A MARYLAND CORPORATION,

AS TENANT

 

SUBORDINATION, NON-DISTURBANCE
  AND ATTORNMENT AGREEMENT

 

 

[See attached pages]

 

E-1

 

RECORDING
REQUESTED BY AND

AFTER RECORDING, RETURN TO:

 

GMAC Commercial Mortgage
Corporation

200 Witmer Road

Horsham, PA 19044-8015

Attn: Executive Vice
President — Servicing Administration

 

 

SPACE ABOVE THIS LINE RESERVED
FOR RECORDER’S USE

 

SUBORDINATION,
NON-DISTURBANCE

AND ATTORNMENT AGREEMENT

 

This Subordination, Non-Disturbance and Attornment
Agreement (“Agreement”), is made as of this     
day of         , 200  
among LaSalle National Association, not individually, but solely as Trustee
for the Certificate Holders of GMAC Commercial Mortgage               ,
Series      -      under
certain [Pooling/Trust and Servicing Agreement] dated as of                ,               
(“Lender”), by and through GMAC Commercial Mortgage Corporation, a California corporation,
its [Master] Servicer under said [Pooling/Trust] and Servicing Agreement,                     ,
an                      (“Landlord”),
and                             ,
a                                 
(“Tenant”).

 

Background

 

A.         Lender
is the owner and holder of a deed of trust or mortgage or other similar
security instrument (either, the “Security Instrument”), covering, among other
things, the real property commonly known and described as One International
Plaza, and further described on Exhibit “A” attached hereto and made a
part hereof for all purposes, and the building and improvements thereon
(collectively, the “Property”).

 

B.         Tenant
is the lessee under that certain lease agreement between Landlord and Tenant
dated                 ,
200    (“Lease”), demising a portion of the
Property described more particularly in the Lease (“Leased Space”).

 

C.         Landlord,
Tenant and Lender desire to enter into the following agreements with respect to
the priority of the Lease and Security Instrument.

 

NOW,
THEREFORE, in consideration of the mutual promises of this Agreement, and
intending to be legally bound hereby, the parties hereto agree as follows:

 

1.        Subordination. Tenant agrees that the Lease, and all
estates, options and rights created under the Lease, hereby are subordinated
and made subject to the lien and effect of the Security Instrument, as if the
Security Instrument had been executed and recorded prior to the Lease.

 

2.        Nondisturbance. Lender agrees that no foreclosure
(whether judicial or nonjudicial), deed-in-lieu of foreclosure, or other sale
of the Property in connection with enforcement of the Security Instrument or
otherwise in satisfaction of the underlying loan shall operate to terminate the
Lease or Tenant’s rights thereunder to possess and use the leased space
provided, however, that (a) the term of the Lease has commenced, (b) Tenant
is in possession of the premises demised pursuant to the Lease, and (c) the
Lease is in full force and effect and no uncured default exists under the Lease.

 

3.        Attornment. Tenant agrees to attorn to and
recognize as its landlord under the Lease each party acquiring legal title to
the Property by foreclosure (whether judicial or nonjudicial) of the Security
Instrument, deed-in-lieu of foreclosure, or other sale in connection with
enforcement of the Security Instrument or otherwise in satisfaction of the
underlying loan (“Successor Owner”).
Provided that the conditions set forth in Section 2 above are met at the
time Successor Owner becomes owners of the Property, Successor Owner shall
perform all obligations of the landlord under the Leases arising from and after
the date title to the Property was transferred to Successor Owner. In no event,
however, will any Successor Owner be: (a) liable for any default, act or
omission of any prior landlord under the Lease, (except that Successor Owner
shall not be relieved from the obligation to cure any defaults which are
non-monetary and

1

 

©GMACCM 2000. All Rights Reserved.

SNDA Agt. (existing lease) v. 6/2000

 

E-2

 

continuing in nature, and
such that Successor Owner’s failure to cure would constitute a continuing
default under the Lease); (b) subject to any offset or defense which
Tenant may have against any prior landlord under the Lease; (c) bound by
any payment of rent or additional rent made by Tenant to Landlord more than 30
days in advance; (d) bound by any modification or supplement to the Lease,
or waiver of Lease terms, made without Lender’s written consent thereto; (e) liable
for the return of any security deposit or other prepaid charge paid by Tenant
under the Lease, except to the extent such amounts were actually received by
Lender; (f) liable or bound by any right of first refusal or option to
purchase all or any portion of the Property; or (g) liable for
construction or completion of any improvements to the Property or as required
under the Lease for Tenant’s use and occupancy (whenever arising). Although the
foregoing provisions of this Agreement are self-operative, Tenant agrees to
execute and deliver to Lender or any Successor Owner such further instruments
as Lender or a Successor Owner may from time to time request in order to
confirm this Agreement. If any liability of Successor Owner does arise pursuant
to this Agreement, such liability shall be limited to Successor Owner’s
interest in the Property.

 

4.        Rent
Payments; Notice to Tenant Regarding Rent Payments. Tenant agrees not to pay rent more than
one (1) month in advance unless otherwise specified in the Lease. After
notice is given to Tenant by Lender that Landlord is in default under the
Security Instrument and that the rentals under the Lease should be paid to
Lender pursuant to the assignment of leases and rents granted by Landlord to
Lender in connection therewith, Tenant shall thereafter pay to Lender all rent
and all other amounts due or to become due to Landlord under the Lease, and
Landlord hereby expressly authorizes Tenant to make such payments to Lender
upon reliance on Lender’s written notice (without any inquiry into the factual
basis for such notice or any prior notice to or consent from Landlord) and
hereby releases Tenant from all liability to Landlord in connection with Tenant’s
compliance with Lender’s written instructions.

 

5.        Lender
Opportunity to Cure Landlord Defaults. Tenant agrees that, until the Security Instrument is
released by Lender, it will not exercise any remedies under the Lease following
a Landlord default without having first given to Lender (a) written notice
of the alleged Landlord default and (b) the opportunity to cure such
default within the time periods provided for cure by Landlord, measured from
the time notice is given to Lender. Tenant acknowledges that Lender is not
obligated to cure any Landlord default, but if Lender elects to do so, Tenant
agrees to accept cure by Lender as that of Landlord under the Lease and will
not exercise any right or remedy under the Lease for a Landlord default.
Performance rendered by Lender on Landlord’s behalf is without prejudice to
Lender’s rights against Landlord under the Security Instrument or any other
documents executed by Landlord in favor of Lender in connection with the Loan.

 

6.        Miscellaneous.

 

(a)        Notices. All notices under this Agreement will
be effective only if made in writing and addressed to the address for a party
provided below such party’s signature. A new notice address may be established
from time to time by written notice given in accordance with this Section. All
notices will be deemed received only upon actual receipt.

 

(b)        Entire
Agreement: Modification. This Agreement is the entire agreement between the parties relating
to the subordination and nondisturbance of the Lease, and supersedes and
replaces all prior discussions, representations and agreements (oral and
written) with respect to the subordination and nondisturbance of the Lease.
This Agreement controls any conflict between the terms of this Agreement and
the Lease. This Agreement may not be modified, supplemented or terminated, nor
any provision hereof waived, unless by written agreement of Lender and Tenant,
and then only to the extent expressly set forth in such writing.

 

(c)        Binding
Effect. This
Agreement binds and inures to the benefit of each party hereto and their
respective heirs, executors, legal representatives, successors and assigns,
whether by voluntary action of the parties or by operation of law. If the
Security Instrument is a deed of trust, this Agreement is entered into by the
trustee of the Security Instrument solely in its capacity as trustee and not
individually.

 

(d)        Unenforceability. Any provision of this Agreement which
is determined by a government body or court of competent jurisdiction to be
invalid, unenforceable or illegal shall be ineffective only to the extent of
such holding and shall not affect the validity, enforceability or legality of
any other provision, nor shall such determination apply in any circumstance or
to any party not controlled by such determination.

 

(e)        Construction
of Certain Terms.
Defined terms used in this Agreement may be used interchangeably in singular or
plural form, and pronouns cover all genders. Unless otherwise provided herein,
all days

2

 

©GMACCM 2000. All Rights Reserved.

SNDA Agt. (existing lease) v. 6/2000

 

E-3

 

from performance shall be
calendar days, and a “business day” is any day other than Saturday, Sunday and
days on which Lender is closed for legal holidays, by government order or
weather emergency.

 

(f)         Governing
Law. This
Agreement shall be governed by the laws of the State in which the Property is
located (without giving effect to its rules governing conflicts of laws).

 

(g)        WAIVER OF JURY TRIAL. TENANT, AS AN
INDUCEMENT FOR LENDER TO PROVIDE THIS AGREEMENT AND THE ACCOMODATIONS TO TENANT
OFFERED HEREBY, HEREBY WAIVES ITS RIGHT, TO THE FULL EXTENT PERMITTED BY LAW,
AND AGREES NOT TO ELECT, A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT
OF THIS AGREEMENT.

 

(h)        Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original and all of
which together constitute a fully executed agreement even though all signatures
do not appear on the same document. The failure of any party hereto to execute
this Agreement, or any counterpart hereof, shall not relieve the other
signatories from their respective obligations hereunder.

 

IN WITNESS WHEREOF, this Agreement is executed this    
day of        , 200  .

 

	
  LENDER:

  	
  TENANT:

  
	
   

  	
   

  
	
  [Insert Trustee Name]

  	
  [Insert Tenant Name]

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: GMAC Commercial
  Mortgage Corporation,

  its [Master] Servicer

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  Lender Notice Address: 

  	
  Tenant Notice Address:

  
	
   

  	
   

  
	
  [Insert Trustee name] 

  	
  Tenant Name

  
	
  c/o GMAC
  Commercial Mortgage Corporation

  	
   

  	
   

  
	
  200 Witmer Road

  	
   

  	
   

  
	
  Horsham, PA
  19044

  	
   

  	
   

  
	
  Attn: Executive Vice President — Servicing
  Administration 

  	
  Attn:

  	
   

  	
   

  
	
   

  	
   

  
	
  LANDLORD:

  	
   

  
	
  [Landlord Name]

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
  Landlord
  Notice Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attn:

  	
   

  	
   

  	
   

  
													

 

3

 

©GMACCM 2000. All Rights Reserved.

SNDA Agt. (existing lease) v. 6/2000

 

E-4

 

Notary Acknowledgement for
Lender:

 

	
  Commonwealth of Pennsylvania

  	
  :

  	
   

  
	
   

  	
  :ss

  	
   

  
	
  County of

  	
  :

  	
   

  

 

On this, the        
day of          , 200  ,
before me, the undersigned Notary Public, personally appeared                
known to me (or satisfactorily proven) to be the person whose name is
subscribed to the within instrument, and who acknowledged to me that he/she is
an officer of GMAC Commercial Mortgage Corporation in the capacity stated and
that he/she executed the within instrument in such capacity for the purposes
therein contained.

 

                IN WITNESS WHEREOF, I have hereunto set my hand and
official seal.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  	
   

  
	
   

  	
   

  	
  {seal}

  
	
   

  	
   

  	
   

  

 

Notary Acknowledgement for
Tenant:

 

	
  State of

  	
   

  	
   

  	
  :

  
	
   

  	
   

  	
   

  	
  :ss

  
	
  County of

  	
   

  	
   

  	
  :

  
						

 

On this, the      day
of                   ,
200  , before me, the undersigned Notary Public, personally
appeared                     
known to me (or satisfactorily proven) to be the person whose name is
subscribed to the within instrument and who acknowledged to me that he/she is
an officer of the Tenant in the capacity stated and that he/she executed the
within instrument in such capacity for the purposes therein contained.

 

                IN WITNESS WHEREOF, I have hereunto set my hand and
official seal.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  	
   

  
	
   

  	
   

  	
  {seal}

  
	
   

  	
   

  	
   

  

 

Notary Acknowledgement for Landlord:

 

	
  State of

  	
   

  	
   

  	
  :

  
	
   

  	
   

  	
   

  	
  :ss

  
	
  County of

  	
   

  	
   

  	
  :

  
						

 

On this, the        day
of                   ,
200  , before me, the undersigned Notary Public, personally
appeared                    
known to me (or satisfactorily proven) to be the person whose name is
subscribed to the within instrument and who acknowledged to me that he/she is
an officer of the Landlord in the capacity stated and that he/she executed the
within instrument in such capacity for the purposes therein contained.

 

                IN WITNESS WHEREOF, I have hereunto set my hand and
official seal.

 

	
   

  	
   

  	
   

  
	
   

  	
  Notary Public

  	
   

  
	
   

  	
   

  	
  {seal}

  
	
   

  	
   

  	
   

  

 

4

 

QMACCM 2000. All Right Reserved

SNDA Agt. (existing lease) v. 6/2000

 

E-5

 

Exhibit “A”

(Legal
Description of the Property)

 

Parcel A

 

 

5

 

QMACCM 2000. All Right Reserved

SNDA Agt. (existing lease) v. 6/2000

 

E-6

 

EXHIBIT F

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF                  ,
2006,

BETWEEN

PCCP HC KIERLAND, LLC, A DELAWARE LIMITED LIABILITY COMPANY,

AS LANDLORD,

AND

THE RYLAND GROUP, INC., A MARYLAND CORPORATION,

AS TENANT

 

OPERATING COSTS EXCLUSIONS

 

 

[See attached pages]

 

F-1

 

 

	
  EXCLUSIONS FROM ANNUAL

  
	
  OPERATING
  COSTS AND REAL ESTATE TAXES

  
	
   

  

 

1.             Any expenses, which under generally
accepted accounting principles and practice, would not be considered a normal
maintenance or operating expense:

 

2.             All costs
associated with the operation of the business of the ownership or entity which
constitutes “Landlord”, as distinguished from the costs Building operations,
including costs of partnership accounting and legal matters, costs of defending
any lawsuits with any mortgagee (except as the actions of Tenant may be an
issue), costs of selling, syndicating, financing, mortgaging, or hypothecating
any of the Landlord’s interest in the Building, the Project, and/or Common
Areas, costs of any disputes between Landlord and its employees, costs of
disputes of Landlord with Building management, or costs paid in connection with
disputes with Tenant or any other tenants;

 

3.             All costs
(including permit, license and inspection fees) incurred in renovating or
otherwise improving or decorating; painting or redecorating space for tenants
or other occupants or in renovating or redecorating vacant space, including the
cost of alterations or improvements to Tenant’s Premises or to the premises of
any other tenant or occupant of the Building, the Project or its Common Areas;

 

4.             Any cash or
other consideration paid by landlord on account of, with respect to, or in lieu
of the tenant improvement work or alterations described in clause (3) above;

 

5.             Costs incurred by Landlord
for alterations or additions, which are considered capital improvements and
replacement under generally accepted accounting principles;

 

6.             Costs incurred
by Landlord in connection with the initial construction of the Building, the
Project and related facilities, the correction of defects in construction, or
in the discharge of Landlord’s obligations under the construction Rider
attached to the Lease;

 

7.             Any improvement installed or
work performed or any other cost or expense incurred by Landlord in order to
comply with the requirements for obtaining or renewal of a certificate of
occupancy for the Building, the Project or any space therein;

 

8.             Cost of
replacement of capital equipment;

 

9.             Any reserves
for equipment of capital replacement;

 

10.           Costs of capital nature, including capital improvements,
capital repairs, capital equipment, and capital tools, all as determined in
accordance with generally accepted accounting principles;

 

F-2

 

	
  EXCLUSIONS FROM ANNUAL

  
	
  OPERATING
  COSTS AND REAL ESTATE TAXES

  
	
   

  

 

11.           Costs of any services sold or provided to tenants or
other occupants for which Landlord or Managing Agent is entitled to be
reimbursed by such tenants or other occupants as an additional charge or rental
over and above the basic rent (and escalations thereof);

 

12.           Expenses in connection with services or other
benefits of a type which are not provided Tenant but which are provided to
another tenant or occupant;

 

13.           Costs for all items and services for which Tenant
reimburses Landlord or pays to third parties or which Landlord provides
selectively or one or more tenants or occupants of the Building or the Project
(other than Tenant) without reimbursement;

 

14.           Depreciation and amortization;

 

15.           Costs incurred due to violation by Landlord or Managing
Agent or any tenant of the terms and conditions of any lease;

 

16.           Payments in respect to overhead or profit to
subsidiaries or affiliates of Landlord, or to any party as a result of
non-competitive selection process, for management or other services in or to
the Building or the Project, or for supplies or other materials to the extent
that the costs of such services, supplies, or materials exceed the costs that
would have been paid had the services, supplies or materials been provided by
parties unaffiliated with the Landlord on a competitive basis;

 

17.           Interest on debt or amortization payments on any
mortgages or deeds of trust;

 

18.           Landlord’s or Landlord’s Managing Agent’s general
corporate overhead and general administrative expenses (other than the
administrative fee provided for in the Lease);

 

19.           Any compensation paid to clerks, attendants,
concierges or other persons working in or managing commercial concession
operated by Landlord or Landlord’s Managing Agent;

 

20.           Rental Payments and other related expenses incurred
in leasing air conditioning systems, elevators or other equipment ordinarily
considered to be of capital nature, except equipment which is used in providing
janitorial services and which is not affixed to the Building or the Project;

 

21.           Advertising and promotional costs;

 

22.           Costs incurred in owning operating
maintaining and repairing any underground or above ground parking garage and/or
any other parking facilities associated with the Building and Common Areas
including, but not limited to any expenses for parking equipment, tickets,
supplies, signage/signs, claims insurance, cleaning, resurfeeing,

 

F-3

 

	
  EXCLUSIONS FROM ANNUAL

  
	
  OPERATING
  COSTS AND REAL ESTATE TAXES

  
	
   

  

 

 restriping, business taxes, management fees
and costs structural maintenance utilities insurance of any form, real estate
taxes and the wages salaries employee benefits and taxes for personnel working
connection with any such parking facilities.

 

23.           The cost of repairs or other work incurred by reason
of fire, windstorm or other casualty (except that deductibles paid to any
insurance shall be included as Building Operating costs), or by the exercise of
the right of eminent domain to the extent that Landlord is compensated
therefore through proceeds of insurance or condemnation awards, or would have
been so reimbursed if Landlord had in force all of the insurance required to be
carried by Landlord under the provisions of this Lease;

 

24.           Leasing commission, attorney fees, costs and
disbursements and other expenses incurred in connection with negotiations or
disputes with tenants or other occupants or prospective tenants or other
occupants, or associated with the enforcement of any leases or the defense of
Landlord’s title to or interest in the Building, the Project or any part
thereof or Common Areas or any part thereof;

 

25.           “Takeover” expenses, including the 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 or the Project;

 

26.           All administrative and other costs related to the
Building’s leasing, marketing and construction (tenant improvement or
otherwise) programs, including but not limited to the reasonable allocation
of the wages, salaries employee benefits and taxes for all personnal
involved in the management office expenses such as office supplies, office
equipment, telephone expenses and all other miscellaneous administrative
expenses;

 

27.           Landlord’s gross receipts taxes, personal and
corporate income taxes, inheritance and estate taxes and other business taxes
and assessments, franchise, gift and transfer taxes;

 

28.           Any real estate taxes payable by Tenant or any other
tenant in the Building or the Project under the applicable provisions in their
respective leases;

 

29.           Real estate taxes allocable to tenant improvements
of Tenant or other tenant or occupants in the Building or Common Areas which
are over and above the Landlord’s standard tenant improvement allowance;

 

30.           Any special assessments or taxes from any
city, county, state of federal government of agency, including, but not limited
to, such items as parking income taxes, metro rail assessments, etc;

 

F-4

 

	
  EXCLUSIONS FROM ANNUAL

  
	
  OPERATING
  COSTS AND REAL ESTATE TAXES

  
	
   

  

 

31.           Any increase of real estate taxes and
assessments due to any changes in ownership (as defined in the California
Revenue and Taxation Code) including but not limited to the sale or any other
form of transfer of title of the building and/or Common Areas or any part
thereof, or due to the transfer of title of any leases in the Building, or due
to any renovation or new construction in the Building or Common Areas or
related facilities;

 

32.           Costs of repair or replacement for any item covered
by a warranty to the extent of any recovery;

 

33.           Costs of which Landlord is reimbursed by its
insurance carrier or by any tenant’s insurance carrier or by any other entity;

 

34.           Costs of any “tap fees” or any sewer or water
connection fees of the Building, the Project or Common Areas;

 

35.           Costs of compliance with any fire, safety or other
governmental rules, regulations, laws, statutes, ordinances or requirements
imposed by any governmental authority or insurance company with respect to the
Building, the Project or Common Areas during the Term of the Lease, but only to
the extent the same were enacted and enforceable against the building prior to
the date of this Lease.

 

36.           Costs associated with the installation, maintenance
and removal of any signage associated with the Building, the Property, its
tenants and all related facilities and Common Areas.

 

37.           Any fines, costs, penalties or interest resulting
from the gross negligence or willful misconduct or the Landlord or its agents,
contractors, or employees;

 

38.           Rental payments of any related costs pursuant to any
ground lease of land underlying all or any portion of the Building, the Property
and Common Areas;

 

39.           Any costs or fees that are unreasonable in view of
the goods or services obtained for such costs or fees, but only to the extent
that such costs exceed what is reasonable;

 

40.           Any costs, fees, dues, contributions or similar
expenses for political, charitable, industry association or similar
organizations;

 

41.           Any rental and any associated costs, either
actual or not for the Landlord’s or Landlord’s Managing Agent’s management or
leasing office;

 

F-5

 

	
  EXCLUSIONS FROM ANNUAL

  
	
  OPERATING
  COSTS AND REAL ESTATE TAXES

  
	
   

  

 

42.           Any costs associated with the purchase or
rental of furniture and office equipment for the Landlord’s or Landlord’s
Managing Agent’s management, security, engineering, or other offices associated
with the Building, the Project and Common Areas.

 

43.           Any bad debt loss, rent loss, or reserves for bad
debt or rent loss;

 

44.           Any costs incurred in connection with the ground
floor or any other floor in the Building or the Project devoted to retail
operations;

 

45.           All assessments and special assessments due
to need restrictions, descriptions and/or owners associations which accrue
against the Building, the Project and Common Areas and

 

46.           Acquisition costs for sculptures, paintings, or
other objects of art, but only the extent such costs are unreasonable in light
of the circumstances;

 

47.           Costs of changes that are required by law of
government authorities enacted and enforceable against the building prior to
the date of this Lease because of any act or failure to act by Landlord, its agents,
servants or contractors, including, without limitation alterations required in
connection with the grant of any permit or approval to Landlord;

 

48.           Contributions to employee pension plans;

 

49.           Any category of expense which is not included
in the Operating Expenses for the Base Year.

 

50.           Tax penalties incurred as a result of Landlord’s
negligence or inability or unwillingness to make payments when due;

 

51.           All assessments and premiums which are not
specifically charged to Tenant because of what Tenant has done, which can be
paid by Landlord in installments, shall be paid by Landlord in installments and
shall be paid by Landlord in the maximum number of installments permitted by
law and not included as Operating Costs except in the year in which the
assessment installment is actually paid;

 

52.           Any entertaining dining or travel expenses for any
purpose; and

 

53.           The costs of providing or removing any cabling or
wining to the Building or the Project.

 

Under
no circumstances shall Landlord collect in excess of 100% of all Landlord’s
Operating Expenses or recover, through Operating Expenses, any item of cost
more than once nor shall Landlord include in Operating Expenses any costs in
excess of those that would be reasonably

 

F-6

 

	
  EXCLUSIONS FROM ANNUAL

  
	
  OPERATING
  COSTS AND REAL ESTATE TAXES

  
	
   

  

 

incurred
by prudent operators and managers of similar buildings in the area. Operating
Expenses shall be reduced by the amount of any reimbursement, recoupment,
payment, discount credit, reduction, allowance or the like received or
receivable by Landlord that is allocable to any Operating Expenses.

 

F-7

 

EXHIBIT G

 

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF              
, 2006,

BETWEEN

PCCP HC KIERLAND, LLC, A DELAWARE LIMITED LIABILITY COMPANY,

AS LANDLORD,

AND

THE RYLAND GROUP, INC., A MARYLAND CORPORATION,

AS TENANT

 

EXTERIOR BUILDING SIGNAGE LOCATIONS

 

 

[See attached page(s)]

 

G-1

 

EXHIBIT G-1

 

ATTACHED TO AND FORMING A
PART OF

LEASE AGREEMENT 

DATED AS OF              
, 2006, 

BETWEEN 

PCCP HC KIERLAND, LLC, A
DELAWARE LIMITED LIABILITY COMPANY,

AS LANDLORD, 

AND 

THE RYLAND GROUP, INC., A
MARYLAND CORPORATION, 

AS TENANT 

 

LANDLORD APPROVED SIGNAGE

 

 

[See attached page(s)]

 

G-1-1Exhibit 10.1

 

RIGEL
PHARMACEUTICALS, INC.

 

2000
EQUITY INCENTIVE PLAN

 

ADOPTED
JANUARY 27, 2000

APPROVED
BY STOCKHOLDERS MARCH 15, 2000

AMENDED
DECEMBER 13, 2002

AMENDED
AND RESTATED APRIL 24, 2003

APPROVED
BY STOCKHOLDERS JUNE 20, 2003

AMENDED
AND RESTATED APRIL 22, 2005

APPROVED
BY STOCKHOLDERS JUNE 2, 2005

AMENDED
AND RESTATED MARCH 10, 2006 AND APRIL 18, 2006

APPROVED
BY STOCKHOLDERS MAY 30, 2006

AMENDED
JANUARY 31, 2007

APPROVED
BY STOCKHOLDERS 29, 2007

AMENDED
FEBRUARY 21, 2008

APPROVED
BY STOCKHOLDERS MAY 29, 2008

AMENDED MAY 19,
2009

TERMINATION
DATE: APRIL 24, 2013

 

1.                                      PURPOSES.

 

(a)                                  The Plan is an amendment and restatement
of, and is intended to supersede and replace, the Company’s 1997 Stock Option
Plan.

 

(b)                                  The persons eligible to receive Stock Awards
are the Employees, Directors and Consultants of the Company and its Affiliates.

 

(c)                                  The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards:  (i) Incentive
Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses
and (iv) rights to acquire restricted stock.

 

(d)                                  The Company, by means of the Plan, seeks
to retain the services of the group of persons eligible to receive Stock
Awards, to secure and retain the services of new members of this group and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.

 

(e)                                  Any stock awards granted under the Rigel
Pharmaceuticals, Inc. 2001 Non-Officer Equity Incentive Plan (the “Non-Officer
Plan”) prior to April 24, 2003 shall be governed by the terms of the
Non-Officer Plan as in effect immediately prior to April 24, 2003, as set
forth in Appendix A to this Plan.  The
Common Stock that was reserved for issuance under the Non-Officer Plan,
including the Common Stock that may be issued pursuant to outstanding stock
awards granted under the Non-Officer Plan prior to April 24, 2003, shall
be included in the aggregate share reserve for this Plan, as set forth in
subsection 4(a).

 

1

 

2.                                      DEFINITIONS.

 

(a)                                  “Affiliate” means, at the time of determination, any
“parent” or “subsidiary” of the Company as such terms are defined in Rule 405
of the Securities Act.  The Board shall
have the authority to determine the time or times at which “parent” or “subsidiary”
status is determined within the foregoing definition.

 

(b)                                  “Board” means the Board of Directors of the
Company.

 

(c)                                  “Code” means the Internal Revenue Code of 1986,
as amended.

 

(d)                                  “Committee” means a committee of one or more members
of the Board appointed by the Board in accordance with subsection 3(c).

 

(e)                                  “Common Stock” means the common stock of the Company.

 

(f)                                    “Company” means Rigel Pharmaceuticals, Inc.,
a Delaware corporation.

 

(g)                                 “Consultant” means any person, including an advisor, (i) engaged
by the Company or an Affiliate to render consulting or advisory services and
who is compensated for such services or (ii) who is a member of the Board
of Directors of an Affiliate.  However,
the term “Consultant” shall not include either Directors who are not
compensated by the Company for their services as Directors or Directors who are
merely paid a director’s fee by the Company for their services as Directors.

 

(h)                                 “Continuous Service” means that the Participant’s service
with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
The Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that  there is no
interruption or termination of the Participant’s service.  For example, a change in status without
interruption from an Employee of the Company to a Consultant of an Affiliate or
a Director will not constitute an interruption of Continuous Service.  The Board or the chief executive officer of
the Company, in that party’s sole discretion, may determine whether Continuous
Service shall be considered interrupted in the case of any leave of absence
approved by that party, including sick leave, military leave or any other
personal leave.

 

(i)                                    “Covered Employee” means the chief executive officer and
the four (4) other highest compensated officers of the Company for whom
total compensation is required to be reported to stockholders under the
Exchange Act, as determined for purposes of Section 162(m) of the
Code.

 

(j)                                    “Director” means a member of the Board of Directors
of the Company.

 

(k)                                “Disability” means the permanent and total disability
of a person within the meaning of Section 22(e)(3) of the Code.

 

2

 

(l)                                    “Employee” means any person employed by the Company
or an Affiliate.  Mere service as a
Director or payment of a director’s fee by the Company or an Affiliate shall
not be sufficient to constitute “employment” by the Company or an Affiliate.

 

(m)                              “Exchange Act” means the Securities Exchange Act of
1934, as amended.

 

(n)                                 “Fair Market
Value”
means, as of any date, the value of the Common Stock determined as follows:

 

(i)                                    If the Common Stock is listed on any
established stock exchange or traded on the Nasdaq National Market or the
Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall
be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the Common Stock) on the last market trading
day prior to the day of determination, as reported in The Wall
Street Journal  or such other source
as the Board deems reliable.

 

(ii)                                In the absence of such markets for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Board.

 

(o)                                  “Incentive Stock Option” means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.

 

(p)                                  “Non-Employee Director”  means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or a subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities
Act (“Regulation S-K”)), does not possess an interest in any other transaction
as to which disclosure would be required under Item 404(a) of Regulation
S-K and is not engaged in a business relationship as to which disclosure would
be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a “non-employee director” for purposes of Rule 16b-3.

 

(q)                                  “Nonstatutory Stock Option” means an Option not intended to qualify
as an Incentive Stock Option.

 

(r)                                  “Officer” means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

 

(s)                                  “Option” means an Incentive Stock Option or a
Nonstatutory Stock Option granted pursuant to the Plan.

 

(t)                                    “Option Agreement” means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of an
individual Option grant.  Each Option
Agreement shall be subject to the terms and conditions of the Plan.

 

3

 

(u)                                 “Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

 

(v)                                   “Outside Director” means a Director who either (i) is
not a current employee of the Company or an “affiliated corporation” (within
the meaning of Treasury Regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an “affiliated
corporation” receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the Company or an “affiliated
corporation” at any time and is not currently receiving direct or indirect remuneration
from the Company or an “affiliated corporation” for services in any capacity
other than as a Director or (ii) is otherwise considered an “outside
director” for purposes of Section 162(m) of the Code.

 

(w)                                “Participant” means a person to whom a Stock Award is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

 

(x)                                  “Performance
Criteria”
means the one or more criteria that the Board shall select for purposes of
establishing the Performance Goals for a Performance Period.  The Performance Criteria that shall be used
to establish such Performance Goals may be based on any one of, or combination
of, the following: (i) earnings per share; (ii) earnings before
interest, taxes and depreciation; (iii) earnings before interest, taxes,
depreciation and amortization (EBITDA); (iv) net earnings; (v) total
shareholder return; (vi) return on equity; (vii) return on assets,
investment, or capital employed; (viii) operating margin; (ix) gross
margin; (x) operating income; (xi) net income (before or after taxes);
(xii) net operating income; (xiii) net operating income after tax; (xiv) pre-
and after-tax income; (xv) pre-tax profit; (xvi) operating cash flow; (xvii)
sales or revenue targets; (xviii) increases in revenue or product revenue;
(xix) expenses and cost reduction goals; (xx) improvement in or attainment of
expense levels; (xxi) improvement in or attainment of working capital levels;
(xxii) economic value added (or an equivalent metric); (xxiii) market share;
(xxiv) cash flow; (xxv) cash flow per share; (xxvi) share price performance;
(xxvii) debt reduction; (xxviii) implementation or completion of projects or
processes; (xxix) customer satisfaction; (xxx) total stockholder return; (xxxi)
stockholders’ equity; and (xxxii) other measures of performance selected by the
Board.  Partial achievement of the
specified criteria may result in the payment or vesting corresponding to the
degree of achievement as specified in the Stock Award Agreement.  The Board shall, in its sole discretion,
define the manner of calculating the Performance Criteria it selects to use for
such Performance Period.

 

(y)                                  “Performance
Goals” means,
for a Performance Period, the one or more goals established by the Board for
the Performance Period based upon the Performance Criteria. The Board is
authorized at any time in its sole discretion, to adjust or modify the
calculation of a Performance Goal for such Performance Period in order to
prevent the dilution or enlargement of the rights of Participants, (a) in
the event of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event or development; (b) in recognition of, or in
anticipation of, any other unusual or nonrecurring events affecting the
Company, or the financial statements of the Company, or in response to, or in
anticipation of, changes in applicable laws, regulations, accounting
principles, or business conditions; or (c) in view of the Board’s
assessment of the business strategy of the Company, performance of comparable
organizations, economic and business conditions, and any other circumstances
deemed relevant.  Specifically, the Board
is authorized to make adjustment in the method of calculating attainment of
Performance Goals and 

 

4

 

objectives for a Performance Period as follows: (i) to
exclude the dilutive effects of acquisitions or joint ventures; (ii) to
assume that any business divested by the Company achieved performance
objectives at targeted levels during the balance of a Performance Period
following such divestiture; and (iii) to exclude the effect of any change
in the outstanding shares of common stock of the Company by reason of any stock
dividend or split, stock repurchase, reorganization, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares or other similar
corporate change, or any distributions to common shareholders other than
regular cash dividends.  In addition, the
Board is authorized to make adjustment in the method of calculating attainment
of Performance Goals and objectives for a Performance Period as follows: (i) to
exclude restructuring and/or other nonrecurring charges; (ii) to exclude
exchange rate effects, as applicable, for non-U.S. dollar denominated net sales
and operating earnings; (iii) to exclude the effects of changes to
generally accepted accounting standards required by the Financial Accounting
Standards Board; (iv) to exclude the effects to any statutory adjustments
to corporate tax rates; (v) to exclude the impact of any “extraordinary
items” as determined under generally accepted accounting principles; and (vi) to
exclude any other unusual, non-recurring gain or loss or other extraordinary
item.

 

(z)                                  “Performance
Period” means
the one or more periods of time, which may be of varying and overlapping
durations, as the Board may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participant’s
right to and the payment of a Stock Award.

 

(aa)                            “Plan” means this Rigel Pharmaceuticals, Inc.
2000 Equity Incentive Plan.

 

(bb)                            “Rule 16b-3” means Rule 16b-3 promulgated under
the Exchange Act or any successor to Rule 16b-3, as in effect from time to
time.

 

(cc)                            “Securities Act” means the Securities Act of 1933, as
amended.

 

(dd)                            “Stock Award” means any right granted under the Plan,
including an Option, a stock bonus, a right to acquire restricted stock, a
stock unit award and a stock appreciation right.

 

(ee)                            “Stock Award Agreement” means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant.  Each Stock
Award Agreement shall be subject to the terms and conditions of the Plan.

 

(ff)                                “Ten Percent Stockholder” means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any of its Affiliates.

 

3.                                      ADMINISTRATION.

 

(a)                                  Administration by Board. 
The Board shall administer the Plan unless and until the Board delegates
administration to a Committee, as provided in subsection 3(c).

 

(b)                                  Powers of Board. 
The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:

 

5

 

(i)                                    To determine from time to time which of
the persons eligible under the Plan shall be granted Stock Awards; when and how
each Stock Award shall be granted; what type or combination of types of Stock
Award shall be granted; the provisions of each Stock Award granted (which need
not be identical), including the time or times when a person shall be permitted
to receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.

 

(ii)                                To construe and interpret the Plan and
Stock Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration.  The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.

 

(iii)                            To amend the Plan or a Stock Award as
provided in Section 12.

 

(iv)                               To terminate or suspend the Plan as
provided in Section 13.

 

(v)                                   Generally, to exercise such powers and to
perform such acts as the Board deems necessary or expedient to promote the best
interests of the Company which are not in conflict with the provisions of the
Plan.

 

(c)                                  Delegation to Committee.

 

(i)                                    General. 
The Board may delegate administration of the Plan to a Committee or
Committees of one (1) or more members of the Board, and the term “Committee”
shall apply to any person or persons to whom such authority has been
delegated.  If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board.  The Board may abolish the Committee at any
time and revest in the Board the administration of the Plan.

 

(ii)                                Committee Composition when Common
Stock is Publicly Traded.  At such time as the Common
Stock is publicly traded, in the discretion of the Board, a Committee may
consist solely of two or more Outside Directors, in accordance with Section 162(m) of
the Code, and/or solely of two or more Non-Employee Directors, in accordance
with Rule 16b-3.  Within the scope
of such authority, the Board or the Committee may (1) delegate to a
committee of one or more members of the Board who are not Outside Directors the
authority to grant Stock Awards to eligible persons who are either (a) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award or (b) not
persons with respect to whom the Company wishes to comply with Section 162(m) of
the Code and/or (2) delegate to a committee of one or more members of the
Board who are not Non-Employee Directors the authority to grant Stock Awards to
eligible persons who are not then subject to Section 16 of the Exchange
Act.

 

6

 

(d)                                  Effect of
Board’s Decision. All determinations, interpretations and constructions
made by the Board in good faith shall not be subject to review by any person
and shall be final, binding and conclusive on all persons.

 

(e)                                  Cancellation and
Re-Grant of Stock Awards.  Notwithstanding anything to
the contrary in the Plan, neither the Board nor any Committee shall have the
authority to: (i) reprice any outstanding Stock Awards under the Plan, (ii) cancel
and re-grant any outstanding Stock Awards under the Plan, or (iii) effect
any other action that is treated as a repricing under generally accepted
accounting principles unless, in each case, the stockholders of the Company
have approved such an action within twelve (12) months prior to such an event.

 

4.                                      SHARES
SUBJECT TO THE PLAN.

 

(a)                                  Share Reserve. 
Subject to the provisions of subsection 11(a) relating to
adjustments upon changes in Common Stock, the shares of Common Stock that may
be issued pursuant to Stock Awards shall not exceed in the aggregate 8,410,403 shares of Common Stock, which number
consists of (i) 1,058,333 shares of Common Stock initially reserved for
issuance under the Plan plus (ii) 1,600,000 shares of Common Stock
approved by the Board in April 2003 and subsequently approved by the
Company’s stockholders plus (iii) 388,889 shares of Common Stock that were
originally reserved for issuance under the Non-Officer Plan (prior to the
termination of such plan) as approved by the Board in April 2003 and subsequently
approved by the Company’s stockholders plus (iv) 296,022 shares and
392,159 shares of Common Stock made available for issuance on December 2,
2003 and 2004, respectively, pursuant to the evergreen provision that was
approved by the Board and the Company’s stockholders in April 2003 (and
subsequently terminated by the Board and stockholders in April 2005) plus (v) 2,275,000
shares of Common Stock approved by the Board in April 2005 and
subsequently approved by the Company’s stockholders plus (vi) 500,000
shares of Common Stock approved by the Board in April 2006 and
subsequently approved by the Company’s stockholders plus (vii) 1,900,000
shares of Common stock approved by the Board in January 2007 and
subsequently approved by the Company’s stockholders plus (viii) 3,350,000
shares of Common stock approved by the Board in February 2008 and
subsequently approved by the Company’s stockholders.

 

(b)                                  Subject to subsection 4(c), the number of
shares available for issuance under the Plan shall be reduced by: (i) one (1) share
for each share of stock issued pursuant to (A) an Option granted under Section 6,
or (B) a Stock Appreciation Right granted under subsection 7(d) with
respect to which the strike price is at least one hundred percent (100%) of the
Fair Market Value of the underlying Common Stock on the date of grant; and (ii) one and five tenths (1.5) shares for
each share of Common Stock issued pursuant to a Stock Bonus Award, Restricted
Stock Award, Stock Unit Award or Performance Stock Award.

 

(c)                                  Reversion of Shares to the Share
Reserve.

 

(i)                                    Shares Available For Subsequent
Issuance.  If any (i) Stock Award, including any
stock awards granted under the Non-Officer Plan prior to April 24, 2003,
shall for any reason expire or otherwise terminate, in whole or in part,
without having been exercised in full, (ii) shares of Common Stock issued
to a Participant pursuant to a Stock Award, including 

 

7

 

any shares of Common Stock issued pursuant to stock
awards under the Non-Officer Plan prior to April 24, 2003, are forfeited
to or repurchased by the Company, including any repurchase or forfeiture caused
by the failure to meet a contingency or condition required for the vesting of
such shares, or (iii) Stock Award is settled in cash, then the shares of
Common Stock not issued under such Stock Award, or forfeited to or repurchased
by the Company, shall revert to and again become available for issuance under
the Plan.  To the extent there is issued
a share of Common Stock pursuant to a Stock Award that counted as  one
and five tenths (1.5) shares against the number of shares available for
issuance under the Plan pursuant to subsection 4(b) and such share of
Common Stock again becomes available for issuance under the Plan pursuant to
this subsection 4(c)(i), then the number of shares of Common Stock available
for issuance under the Plan shall increase by one and five tenths (1.5) shares.

 

(ii)                                Shares Not Available For
Subsequent Issuance.  If any shares subject to a Stock Award are
not delivered to a Participant because the Stock Award is exercised through a
reduction of shares subject to the Stock Award (i.e.,
“net exercised”), the number of shares that are not delivered to the
Participant shall not remain available for issuance under the Plan.  If any shares subject to a Stock Award are
not delivered to a Participant because such shares are withheld in satisfaction
of the withholding of taxes incurred in connection with the exercise of an
Option or stock appreciation right, or the issuance of shares under a stock
bonus award, restricted stock award or stock unit award, the number of shares
that are not delivered to the Participant shall not remain available for
subsequent issuance under the Plan.  If
the exercise price of any Stock Award is satisfied by tendering shares of
Common Stock held by the Participant (either by actual delivery or
attestation), then the number of shares so tendered shall not remain available
for subsequent issuance under the Plan.

 

(d)                                  Source of Shares. 
The shares of Common Stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.

 

5.                                      ELIGIBILITY.

 

(a)                                  Eligibility for Specific Stock
Awards.  Incentive Stock Options may
be granted only to employees of the Company or a “parent corporation” or “subsidiary
corporation” thereof (as such terms are defined in Sections 424(e) and (f) of
the Code).  Stock Awards other than
Incentive Stock Options may be granted to Employees, Directors and Consultants;
provided, however, Nonstatutory
Stock Options and stock appreciation rights may not be granted to Employees,
Directors, and Consultants who are providing Continuous Services only to any “parent”
of the Company, as such term is defined in Rule 405 promulgated under the
Securities Act, unless such Stock Awards comply with the distribution
requirements of Section 409A of the Code.

 

(b)                                  Ten Percent Stockholders.  
A Ten Percent Stockholder shall not be granted an Incentive Stock Option
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of the Common Stock at the date of grant and
the Option is not exercisable after the expiration of five (5) years from
the date of grant.

 

(c)                                  Section 162(m) Limitation. 
Subject to the provisions of Section 11 relating to adjustments
upon changes in the shares of Common Stock, no Employee shall be eligible to be

 

8

 

granted Options covering more than one hundred
sixty-six thousand six hundred sixty-six (166,666) shares of Common Stock
during any calendar year.

 

(d)                                  Consultants.

 

(i)                                    A Consultant shall not be eligible for
the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act (“Form S-8”) is not
available to register either the offer or the sale of the Company’s securities
to such Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8,
unless the Company determines both (i) that such grant (A) shall be
registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration
under the Securities Act in order to comply with the requirements of the
Securities Act, if applicable, and (ii) that such grant complies with the
securities laws of all other relevant jurisdictions.

 

(ii)                                Form S-8 generally is available to
consultants and advisors only if (i) they are natural persons; (ii) they
provide bona fide services to the issuer, its parents, its majority-owned
subsidiaries or majority-owned subsidiaries of the issuer’s parent; and (iii) the
services are not in connection with the offer or sale of securities in a
capital-raising transaction, and do not directly or indirectly promote or
maintain a market for the issuer’s securities.

 

6.                                      OPTION
PROVISIONS.

 

Each Option shall be in such form and shall contain such terms and conditions
as the Board shall deem appropriate.  All
Options shall be separately designated Incentive Stock Options or Nonstatutory
Stock Options at the time of grant, and, if certificates are issued, a separate
certificate or certificates will be issued for shares of Common Stock purchased
on exercise of each type of Option.  The
provisions of separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the Option
or otherwise) the substance of each of the following provisions:

 

(a)                                  Term. 
Subject to the provisions of subsection 5(b) regarding Ten Percent
Stockholders, no Option shall be exercisable after the expiration of ten (10) years
from the date it was granted.

 

(b)                                  Exercise Price of an Incentive
Stock Option.  Subject to the provisions of subsection 5(b) regarding
Ten Percent Stockholders, the exercise price of each Incentive Stock Option
shall be not less than one hundred percent (100%) of the Fair Market Value of
the Common Stock subject to the Option on the date the Option is granted.  Notwithstanding the foregoing, an Incentive
Stock Option may be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section 424(a) of
the Code.

 

(c)                                  Exercise Price of a Nonstatutory
Stock Option.  The exercise price of each Nonstatutory Stock
Option shall be not less than one hundred percent (100%) of the Fair Market
Value of the Common Stock subject to the Option on the date the Option is
granted.  

 

9

 

Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section 424(a) of
the Code.

 

(d)                                  Consideration. 
The purchase price of Common Stock acquired pursuant to an Option shall
be paid, to the extent permitted by applicable statutes and regulations, either
(i) in cash at the time the Option is exercised or (ii) at the
discretion of the Board (1) by delivery to the Company of other Common
Stock; (2) according to a deferred payment or other similar arrangement
with the Optionholder; (3) by a “net exercise” arrangement pursuant to
which the Company will reduce the number of shares of Common Stock issued upon
exercise by the largest whole number of shares with a Fair Market Value that
does not exceed the aggregate exercise price; provided,
however, that the Company shall accept a cash or other payment from
the Participant to the extent of any remaining balance of the aggregate
exercise price not satisfied by such holding back of whole shares; provided, further, however, that shares of
Common Stock will no longer be outstanding under an Option and will not be
exercisable thereafter to the extent that (i) shares are used to pay the
exercise price pursuant to the “net exercise,” (ii) shares are delivered
to the Participant as a result of such exercise, and (iii) shares are
withheld to satisfy tax withholding obligations; or (4) in any other form
of legal consideration that may be acceptable to the Board.  At any time that the Company is incorporated
in Delaware, payment of the Common Stock’s “par value,” as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.

 

In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid (1) the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts stated to
be interest under the deferred payment arrangement and (2) the treatment
of the Option as a variable award for financial accounting purposes.

 

(e)                                  Transferability of Options. 
The Board may, in its sole discretion, impose such limitations on the
transferability of Options as the Board shall determine.  In the absence of such a determination by the
Board to the contrary, the following restrictions on the transferability of
Options shall apply:

 

(i)                                    Restrictions on Transfer. 
An Option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder; provided, however,
that the Board may, in its sole discretion, permit transfer of the Option in a
manner that is not prohibited by applicable tax and securities laws upon the
Optionholder’s request.  Except as
explicitly provided herein, an Option may not be transferred for consideration.

 

(ii)                                Domestic Relations Orders. 
Notwithstanding the foregoing, an Option may be transferred pursuant to
a domestic relations order; provided, however,
that if an Option is an Incentive Stock Option, such Option may be deemed to be
a Nonstatutory Stock Option as a result of such transfer.

 

10

 

(iii)                            Beneficiary Designation. 
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form provided by or otherwise satisfactory
to the Company and any broker designated by the Company to effect Option exercises,
designate a third party who, in the event of the death of the Optionholder,
shall thereafter be entitled to exercise the Option and receive the Common
Stock or other consideration resulting from such exercise.  In the absence of such a designation, the
executor or administrator of the Optionholder’s estate shall be entitled to
exercise the Option and receive the Common Stock or other consideration
resulting from such exercise.

 

(f)                                    Vesting Generally. 
The total number of shares of Common Stock subject to an Option may, but
need not, vest and therefore become exercisable in periodic installments that
may, but need not, be equal.  The Option
may be subject to such other terms and conditions on the time or times when it
may be exercised (which may be based on performance or other criteria) as the
Board may deem appropriate.  The vesting
provisions of individual Options may vary. 
The provisions of this subsection 6(g) are subject to any Option
provisions governing the minimum number of shares of Common Stock as to which
an Option may be exercised.

 

(g)                                 Termination of Continuous
Service.  In the event an Optionholder’s Continuous
Service terminates (other than upon the Optionholder’s death or Disability),
the Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i) the
date three (3) months following the termination of the Optionholder’s
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth
in the Option Agreement.  If, after
termination, the Optionholder does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate.

 

(h)                                 Extension of Termination Date. 
An Optionholder’s Option Agreement may also provide that if the exercise
of the Option following the termination of the Optionholder’s Continuous
Service (other than upon the Optionholder’s death or Disability) would be
prohibited at any time solely because the issuance of shares of Common Stock
would violate the registration requirements under the Securities Act, then the
Option shall terminate on the earlier of (i) the expiration of the term of
the Option set forth in the Option Agreement or (ii) the expiration of a
total period of three (3) months (that need not be consecutive) after the
termination of the Optionholder’s Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.

 

(i)                                    Disability of Optionholder. 
In the event that an Optionholder’s Continuous Service terminates as a
result of the Optionholder’s Disability, the Optionholder may exercise his or
her Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination), but only within such period of time
ending on the earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the Option
Agreement) or (ii) the expiration of the term of the Option as set forth
in the Option Agreement.  If, after
termination, the Optionholder does not exercise his or her Option within the
time specified herein, the Option shall terminate.

 

11

 

(j)                                    Death of Optionholder. 
In the event (i) an Optionholder’s Continuous Service terminates as
a result of the Optionholder’s death or (ii) the Optionholder dies within
the period (if any) specified in the Option Agreement after the termination of
the Optionholder’s Continuous Service for a reason other than death, then the
Option may be exercised (to the extent the Optionholder was entitled to
exercise such Option as of the date of death) by the Optionholder’s estate, by
a person who acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the Option upon the
Optionholder’s death pursuant to subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months
following the date of death (or such longer or shorter period specified in the
Option Agreement) or (2) the expiration of the term of such Option as set
forth in the Option Agreement.  If, after
death, the Option is not exercised within the time specified herein, the Option
shall terminate.

 

(k)                                Early Exercise. 
The Option may, but need not, include a provision whereby the
Optionholder may elect at any time before the Optionholder’s Continuous Service
terminates to exercise the Option as to any part or all of the shares of Common
Stock subject to the Option prior to the full vesting of the Option.  Any unvested shares of Common Stock so purchased
may be subject to a repurchase option in favor of the Company or to any other
restriction the Board determines to be appropriate.  The Company will not exercise its repurchase
option until at least six (6) months (or such longer or shorter period of
time required to avoid a charge to earnings for financial accounting purposes)
have elapsed following exercise of the Option unless the Board otherwise
specifically provides in the Option.

 

(l)                                    Non-Exempt Employees. 
No Option granted to an Employee who is a non-exempt employee for
purposes of the Fair Labor Standards Act of 1938, as amended, shall be first
exercisable for any shares of Common Stock until at least six months following
the date of grant of the Option. Notwithstanding the foregoing, consistent with
the provisions of the Worker Economic Opportunity Act, (i) in the event of the Participant’s death or
Disability, (ii) upon a Corporate Transaction (as defined in section
11(c)) in which such Option is not assumed, continued, or substituted, or (iii) upon
the Participant’s retirement (as such term may be defined in the Participant’s
Option Agreement or in another applicable agreement or in accordance with the
Company’s then current employment policies and guidelines), any such vested
Options may be exercised earlier than six months following the date of
grant.  The foregoing provision is
intended to operate so that any income derived by a non-exempt employee in
connection with the exercise or vesting of an Option will be exempt from his or
her regular rate of pay.

 

7.                                      PROVISIONS
OF STOCK AWARDS OTHER THAN OPTIONS.

 

(a)                                  Stock Bonus Awards. 
Each stock bonus agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate.  The terms and conditions of stock bonus agreements
may change from time to time, and the terms and conditions of separate stock
bonus agreements need not be identical, but each stock bonus agreement shall
include (through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:

 

(i)                                    Consideration.  A
stock bonus may be awarded in consideration for past services actually rendered
to the Company or an Affiliate for its benefit.

 

12

 

(ii)                                Vesting. 
Shares of Common Stock awarded under the stock bonus agreement may, but
need not, be subject to a share repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board.

 

(iii)                            Termination of Participant’s
Continuous Service.  In the event a Participant’s Continuous
Service terminates, the Company may reacquire any or all of the shares of
Common Stock held by the Participant which have not vested as of the date of
termination under the terms of the stock bonus agreement.

 

(iv)                               Transferability. 
Rights to acquire shares of Common Stock under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the stock bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.

 

(b)                                  Restricted Stock Awards. 
Each restricted stock purchase agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

 

(i)                                    Purchase Price. 
The purchase price under each restricted stock purchase agreement shall
be such amount as the Board shall determine and designate in such restricted
stock purchase agreement.  The purchase
price shall not be less than eighty-five percent (85%) of the Common Stock’s
Fair Market Value on the date such award is made or at the time the purchase is
consummated.

 

(ii)                                Consideration. 
The purchase price of Common Stock acquired pursuant to the restricted
stock purchase agreement shall be paid either: 
(i) in cash at the time of purchase; (ii) at the discretion of
the Board, according to a deferred payment or other similar arrangement with
the Participant; or (iii) in any other form of legal consideration that
may be acceptable to the Board in its discretion; provided,
however, that at any time that the Company is incorporated in
Delaware, then payment of the Common Stock’s “par value,” as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.

 

(iii)                            Vesting. 
Shares of Common Stock acquired under the restricted stock purchase
agreement may, but need not, be subject to a share repurchase option in favor
of the Company in accordance with a vesting schedule to be determined by the
Board.

 

(iv)                               Termination of Participant’s
Continuous Service.  In the event a Participant’s Continuous
Service terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of Common Stock held by the Participant that have not vested
as of the date of termination under the terms of the restricted stock purchase
agreement.

 

(v)                                   Transferability. 
Rights to acquire shares of Common Stock under the restricted stock
purchase agreement shall be transferable by the Participant only upon such
terms 

 

13

 

and conditions as are set forth in the restricted
stock purchase agreement, as the Board shall determine in its discretion, so
long as Common Stock awarded under the restricted stock purchase agreement
remains subject to the terms of the restricted stock purchase agreement.

 

(c)                                  Stock Unit Awards.  Each stock unit award agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem
appropriate.  The terms and conditions of
stock unit award agreements may change from time to time, and the terms and
conditions of separate stock unit award agreements need not be identical, provided, however, that each stock unit
award agreement shall include (through incorporation of the provisions hereof
by reference in the agreement or otherwise) the substance of each of the following
provisions:

 

(i)                                    Consideration. 
At the time of grant of a stock unit award, the Board will determine the
consideration, if any, to be paid by the Participant upon delivery of each
share of Common Stock subject to the stock unit award. The consideration to be
paid (if any) by the Participant for each share of Common Stock subject to a
stock unit award may be paid in any form of legal consideration that may be
acceptable to the Board in its sole discretion and permissible under applicable
law.

 

(ii)                                Vesting.  At the time of the grant of a stock unit award, the
Board may impose such restrictions or conditions to the vesting of the stock
unit award as it, in its sole discretion, deems appropriate.

 

(iii)                            Payment. 
A stock unit award may be settled by the delivery of shares of Common
Stock, their cash equivalent, any combination thereof or in any other form of
consideration, as determined by the Board and contained in the stock unit award
agreement.

 

(iv)                               Additional
Restrictions.  At the time of the grant of a stock unit
award, the Board, as it deems appropriate, may impose such restrictions or
conditions that delay the delivery of the shares of Common Stock (or their cash
equivalent) subject to a stock unit award after the vesting of such stock unit
award.

 

(v)                                   Dividend
Equivalents.  Dividend equivalents may be credited in
respect of shares of Common Stock covered by a stock unit award, as determined
by the Board and contained in the stock unit award agreement.  At the sole discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock covered by
the stock unit award in such manner as determined by the Board.  Any additional shares covered by the stock
unit award credited by reason of such dividend equivalents will be subject to
all the terms and conditions of the underlying stock unit award agreement to
which they relate.

 

(vi)                               Termination of
Participant’s Continuous Service.  Except as otherwise provided in the
applicable stock unit award agreement, such portion of the stock unit award
that has not vested will be forfeited upon the Participant’s termination of
Continuous Service.

 

(d)                                  Stock Appreciation
Rights.  Each stock appreciation right agreement shall be in
such form and shall contain such terms and conditions as the Board shall deem
appropriate.  The terms and conditions of
stock appreciation right agreements may change from time to time, and the terms
and conditions of separate stock appreciation right agreements need not be
identical; provided, however, that
each stock appreciation right agreement shall include (through 

 

14

 

incorporation of the provisions hereof by reference in
the agreement or otherwise) the substance of each of the following provisions:

 

(i)                                    Strike Price and
Calculation of Appreciation.  Each stock
appreciation right will be denominated in shares of Common Stock
equivalents.  The appreciation
distribution payable on the exercise of a stock appreciation right will be not
greater than an amount equal to the excess of (i) the aggregate Fair
Market Value (on the date of the exercise of the stock appreciation right) of a
number of shares of Common Stock equal to the number of shares of Common Stock
equivalents in which the Participant is vested under such stock appreciation
right, and with respect to which the Participant is exercising the stock
appreciation right on such date, over (ii) an amount (the strike price)
that will be determined by the Board at the time of grant of the stock
appreciation right.

 

(ii)                                Vesting.  At the time of the grant of a stock appreciation
right, the Board may impose such restrictions or conditions to the vesting of
such stock appreciation right as it, in its sole discretion, deems appropriate.

 

(iii)                            Exercise. 
To exercise any outstanding stock appreciation right, the Participant
must provide written notice of exercise to the Company in compliance with the
provisions of the stock appreciation right agreement evidencing such stock
appreciation right.

 

(iv)                               Payment. 
The appreciation distribution in respect to a stock appreciation right
may be paid in Common Stock, in cash, in any combination of the two or in any
other form of consideration, as determined by the Board and contained in the
stock appreciation right agreement evidencing such stock appreciation right.

 

(v)                                   Termination of
Continuous Service.  In the event that a Participant’s Continuous
Service terminates, the Participant may exercise his or her stock appreciation
right (to the extent that the Participant was entitled to exercise such stock
appreciation right as of the date of termination) but only within such period
of time ending on the earlier of (i) the date three (3) months
following the termination of the Participant’s Continuous Service (or such
longer or shorter period specified in the stock appreciation right agreement),
or (ii) the expiration of the term of the stock appreciation right as set
forth in the stock appreciation right agreement.  If, after termination, the Participant does
not exercise his or her stock appreciation right within the time specified
herein or in the stock appreciation right agreement (as applicable), the stock
appreciation right shall terminate.

 

8.                                      COVENANTS
OF THE COMPANY.

 

(a)                                  Availability of Shares. 
During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of Common Stock required to satisfy such
Stock Awards.

 

(b)                                  Securities Law Compliance. 
The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
grant Stock Awards and to issue and sell shares of Common Stock upon exercise
of the Stock Awards; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act the Plan, any Stock Award or any Common Stock issued or 

 

15

 

issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such
Stock Awards unless and until such authority is obtained.

 

(c)                                  No Obligation to Notify or
Minimize Taxes.  The Company shall have no duty or
obligation to any Participant to advise such holder as to the time or manner of
exercising such Stock Award.  Furthermore,
the Company shall have no duty or obligation to warn or otherwise advise such
holder of a pending termination or expiration of a Stock Award or a possible
period in which the Stock Award may not be exercised.  The Company has no duty or obligation to
minimize the tax consequences of a Stock Award to the holder of such Stock
Award.

 

9.                                      USE OF
PROCEEDS FROM STOCK.

 

Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.

 

10.                               MISCELLANEOUS.

 

(a)                                  Corporate Action
Constituting Grant of Stock Awards.  Corporate
action constituting a grant by the Company of a Stock Award to any Participant
shall be deemed completed as of the date of such corporate action, unless
otherwise determined by the Board, regardless of when the instrument,
certificate, or letter evidencing the Stock Award is communicated to, or
actually received or accepted by, the Participant.

 

(b)                                  Acceleration of Exercisability
and Vesting.  The Board shall have the power to accelerate
the time at which a Stock Award may first be exercised or the time during which
a Stock Award or any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Stock Award stating the time at which it
may first be exercised or the time during which it will vest.

 

(c)                                  Stockholder Rights. 
No Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to
such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.

 

(d)                                  No Employment or other Service
Rights.  Nothing in the Plan or any instrument
executed or Stock Award granted pursuant thereto shall confer upon any
Participant any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Stock Award was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the
service of a Consultant pursuant to the terms of such Consultant’s agreement
with the Company or an Affiliate or (iii) the service of a Director
pursuant to the Bylaws of the Company or an Affiliate, and any applicable
provisions of the corporate law of the state in which the Company or the
Affiliate is incorporated, as the case may be.

 

16

 

(e)                                  Incentive Stock Option $100,000
Limitation.  To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any Optionholder
during any calendar year (under all plans of the Company and its Affiliates)
exceeds one hundred thousand dollars ($100,000), the Options or portions
thereof which exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options.

 

(f)                                    Investment Assurances. 
The Company may require a Participant, as a condition of exercising or
acquiring Common Stock under any Stock Award, (i) to give written
assurances satisfactory to the Company as to the Participant’s knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring Common
Stock subject to the Stock Award for the Participant’s own account and not with
any present intention of selling or otherwise distributing the Common
Stock.  The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (1) the
issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws.  The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Common Stock.

 

(g)                                 Withholding Obligations. 
To the extent provided by the terms of a Stock Award Agreement, the
Participant may satisfy any federal, state or local tax withholding obligation
relating to the exercise or acquisition of Common Stock under a Stock Award by
any of the following means (in addition to the Company’s right to withhold from
any compensation paid to the Participant by the Company) or by a combination of
such means:  (i) tendering a cash
payment; (ii) authorizing the Company to withhold shares of Common Stock
from the shares of Common Stock otherwise issuable to the Participant as a
result of the exercise or acquisition of Common Stock under the Stock Award, provided, however, that no shares of Common Stock are
withheld with a value exceeding the minimum amount of tax required to be
withheld by law (or such lesser amount as may be necessary to avoid variable
award accounting); or (iii) delivering to the Company (either by actual
delivery or attestation) owned and unencumbered shares of Common Stock of the
Company.

 

(h)                                 Performance Stock Awards.  A Stock Award
may be granted, may vest, or may be exercised based upon service conditions,
upon the attainment during a Performance Period of certain Performance Goals,
or both.  The length of any Performance
Period, the Performance Goals to be achieved during the Performance Period, and
the measure of whether and to what degree such Performance Goals have been
attained shall be conclusively determined by the Board in its sole
discretion.  The maximum benefit to be
received by any individual in any calendar year attributable to Stock Awards
described in this subsection 10(g) shall not exceed the 

 

17

 

value of one hundred sixty-six thousand six hundred
sixty-six (166,666) shares of Common Stock.

 

(i)                                    Electronic Delivery. 
Any reference herein to a “written” agreement or document shall include
any agreement or document delivered electronically or posted on the Company’s
intranet.

 

(j)                                    Compliance with Section 409A.  To the extent that the Board determines that any Stock
Award granted hereunder is subject to Section 409A of the Code, the Stock
Award Agreement evidencing such Stock Award shall incorporate the terms and
conditions necessary to avoid the consequences specified in Section 409A(a)(1) of
the Code.  To the extent applicable, the Plan and Stock
Award Agreements shall be interpreted in accordance with Section 409A of
the Code.  Notwithstanding anything to
the contrary in this Plan (and unless the Stock Award Agreement specifically
provides otherwise), if the Shares are publicly traded and a Participant
holding a Stock Award that constitutes “deferred compensation” under Section 409A
of the Code is a “specified employee” for purposes of Section 409A of the
Code, no distribution or payment of any amount shall be made upon a “separation from service” before a date
that is six (6) months following the date of such Participant’s “separation
from service” (as defined in Section 409A of the Code without regard to
alternative definitions thereunder) or, if earlier, the date of the Participant’s
death.

 

11.                               ADJUSTMENTS
UPON CHANGES IN STOCK.

 

(a)                                  Capitalization Adjustments. 
If any change is made in the Common Stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Board shall appropriately and
proportionately adjust: (i) the class(es) and maximum number of securities
subject to the Plan pursuant to subsection 4(a) and the maximum number of
securities subject to award to any person pursuant to subsection 5(c) and
10(g) and (ii) the class(es) and number of securities and price per
share of Common Stock subject to such outstanding Stock Awards.  The Board shall make such adjustments, and
its determination shall be final, binding and conclusive.  (The conversion of any convertible securities
of the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.)

 

(b)                                  Dissolution or Liquidation. 
In the event of a dissolution or liquidation of the Company, then all
outstanding Stock Awards shall terminate immediately prior to such event, and
shares of Common Stock subject to the Company’s repurchase option may be
repurchased by the Company notwithstanding the fact that the holder of such
stock is still in Continuous Service. 
Notwithstanding the foregoing, Options granted under the 1997 Stock
Option Plan shall be subject to subsection 11(c) below in the event of a
dissolution or liquidation of the Company.

 

(c)                                  Corporate Transaction. 
In the event of (i) a sale, lease or other disposition of all or
substantially all of the securities or assets of the Company, (ii) a
merger or consolidation in which the Company is not the surviving corporation
or (iii) a reverse merger in which the 

 

18

 

Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then any surviving corporation or acquiring corporation may
assume any Stock Awards outstanding under the Plan or may substitute similar
stock awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c)) for those
outstanding under the Plan.  In the event
any surviving corporation or acquiring corporation does not assume such Stock
Awards or substitute similar stock awards for those outstanding under the Plan,
then with respect to Stock Awards held by Participants whose Continuous Service
has not terminated, the vesting of such Stock Awards (and, if applicable, the
time during which such Stock Awards may be exercised) shall be accelerated in
full, and the Stock Awards shall terminate if not exercised (if applicable) at
or prior to such event.  With respect to
any other Stock Awards outstanding under the Plan, such Stock Awards shall
terminate if not exercised (if applicable) prior to such event.

 

12.                               AMENDMENT
OF THE PLAN AND STOCK AWARDS.

 

(a)                                  Amendment of Plan. 
The Board at any time, and from time to time, may amend the Plan.  However, except as provided in Section 11
relating to adjustments upon changes in Common Stock, no amendment shall be
effective unless approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy the requirements of Section 422
of the Code, Rule 16b-3 or any Nasdaq or securities exchange listing
requirements.

 

(b)                                  Stockholder Approval. 
The Board may, in its sole discretion, submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the
Code and the regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

 

(c)                                  Contemplated Amendments. 
It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of
the Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under
it into compliance therewith.

 

(d)                                  No Impairment of Rights. 
Rights under any Stock Award granted before amendment of the Plan shall
not be impaired by any amendment of the Plan unless (i) the Company
requests the consent of the Participant and (ii) the Participant consents
in writing.

 

(e)                                  Amendment of Stock Awards. 
The Board at any time, and from time to time, may amend the terms of any
one or more Stock Awards; provided, however, that
the rights under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.

 

13.                               TERMINATION
OR SUSPENSION OF THE PLAN.

 

(a)                                  Plan Term. 
Unless sooner terminated by the Board pursuant to Section 3, the
Plan shall automatically terminate on the day before the tenth (10th)
anniversary of the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is 

 

19

 

earlier.  No
Stock Awards may be granted under the Plan while the Plan is suspended or after
it is terminated.

 

(b)                                  No Impairment of Rights. 
Suspension or termination of the Plan shall not impair rights and
obligations under any Stock Award granted while the Plan is in effect except
with the written consent of the Participant.

 

14.                               EFFECTIVE
DATE OF PLAN.

 

The Plan shall become
effective upon its adoption by the Board, but no Stock Award shall be exercised
(or, in the case of a stock bonus, shall be granted) unless and until the Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board.

 

15.                               CHOICE OF
LAW.

 

The law of the State of Delaware shall govern all
questions concerning the construction, validity and interpretation of this
Plan, without regard to such state’s conflict of laws rules.

 

20

 

Appendix A

 

RIGEL PHARMACEUTICALS, INC.

 

2001
NON-OFFICER EQUITY INCENTIVE PLAN

 

ADOPTED
JULY 19, 2001

AMENDED
DECEMBER 13, 2002

STOCKHOLDER
APPROVAL NOT REQUIRED

 

1.                                      PURPOSES.

 

(a)                                  Eligible Stock Award Recipients. 
The persons eligible to receive Stock Awards are the Employees (other
than Officers) and Consultants of the Company and its Affiliates.

 

(b)                                  Available Stock Awards. 
The purpose of the Plan is to provide a means by which eligible
recipients of Stock Awards may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of the following
Stock Awards: (i) Nonstatutory Stock Options, (ii) stock bonus awards
and (iii) rights to acquire restricted stock.

 

(c)                                  General Purpose. 
The Company, by means of the Plan, seeks to retain the services of the
group of persons eligible to receive Stock Awards, to secure and retain the
services of new members of this group and to provide incentives for such
persons to exert maximum efforts for the success of the Company and its
Affiliates.

 

2.                                      DEFINITIONS.

 

(a)                                  “Affiliate” means any parent corporation or
subsidiary corporation of the Company, whether now or hereafter existing, as
those terms are defined in Sections 424(e) and (f), respectively, of the
Code.

 

(b)                                  “Board” means the Board of Directors of the
Company.

 

(c)                                  “Code” means the Internal Revenue Code of 1986,
as amended.

 

(d)                                  “Committee” means a committee of one or more members
of the Board appointed by the Board in accordance with Section 3(c).

 

(e)                                  “Common Stock” means the common stock of the Company.

 

(f)                                    “Company” means Rigel Pharmaceuticals, Inc.,
a Delaware corporation.

 

(g)                                 “Consultant” means any person, including an advisor,
engaged by the Company or an Affiliate to render consulting or advisory
services and who is compensated for such services.  However, the term “Consultant” shall not
include either Directors who are not 

 

1

 

compensated by the Company for their services as
Directors or Directors who are merely paid a director’s fee by the Company for
their services as Directors.

 

(h)                                 “Continuous Service” means that the Participant’s service
with the Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. 
The Participant’s Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the
Participant’s Continuous Service.  For
example, a change in status from an Employee of the Company to a Consultant of
an Affiliate or a Director will not constitute an interruption of Continuous
Service.  The Board or the chief
executive officer of the Company, in that party’s sole discretion, may
determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including sick leave,
military leave or any other personal leave.

 

(i)                                    “Director” means a member of the Board of Directors
of the Company.

 

(j)                                    “Disability” means the inability of a person, in the
opinion of a qualified physician acceptable to the Company, to perform the
major duties of such person’s position with the Company or with an Affiliate
because of the sickness or injury of such person.

 

(k)                                “Employee” means any person employed by the Company
or an Affiliate.  Mere service as a
Director or payment of a director’s fee by the Company or an Affiliate shall
not be sufficient to constitute “employment” by the Company or an Affiliate.

 

(l)                                    “Exchange Act” means the Securities Exchange Act of
1934, as amended.

 

(m)                              “Fair Market Value” means, as of any date, the value of the
Common Stock determined as follows:

 

(i)                                    If the Common Stock is listed on any
established stock exchange or traded on the Nasdaq National Market or the
Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall
be the closing sales price for such stock (or the closing bid if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the Common Stock) on the day before the date
of grant (the “determination date”, or if the determination date is not a
market trading day, then the last market trading day prior to the
determination, as reported in The Wall Street Journal  or such other source as the Board deems
reliable.

 

(ii)                                In the absence of such markets for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Board.

 

(n)                                 “Non-Employee Director”  means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or a subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated under the federal
securities laws (“Regulation S-K”)), does not possess an interest in any other
transaction 

 

2

 

as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as
to which disclosure would be required under Item 404(b) of Regulation S-K;
or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

 

(o)                                  “Nonstatutory Stock Option” means an Option not intended to qualify
as an “incentive stock option” within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

 

(p)                                  “Officer” means a person who possesses the
authority of an “officer” as that term is used in Rule 4460(i)(1)(A) of
the Rules of the National Association of Securities Dealers, Inc.  For purposes of the Plan, a person employed
by the Company in the position of “Vice President” or higher shall be
classified as an “Officer” unless the Board or Committee expressly finds that
such person does not possess the authority of an “officer” as that term is used
in Rule 4460(i)(1)(A) of the Rules of the National Association
of Securities Dealers, Inc.

 

(q)                                  “Option” means a Nonstatutory Stock Option granted
pursuant to the Plan.

 

(r)                                  “Option Agreement” means a written agreement between the
Company and an Optionholder evidencing the terms and conditions of an
individual Option grant.  Each Option
Agreement shall be subject to the terms and conditions of the Plan.

 

(s)                                  “Optionholder” means a person to whom an Option is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Option.

 

(t)                                    “Participant” means a person to whom a Stock Award is
granted pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.

 

(u)                                 “Plan” means this Rigel Pharmaceuticals, Inc.
2001 Non-Officer Equity Incentive Plan.

 

(v)                                   “Rule 16b-3” means Rule 16b-3 promulgated under
the Exchange Act or any successor to Rule 16b-3, as in effect from time to
time.

 

(w)                                “Securities Act” means the Securities Act of 1933, as
amended.

 

(x)                                  “Stock Award” means any right granted under the Plan,
including an Option, a restricted stock purchase award and a stock bonus award.

 

(y)                                  “Stock Award Agreement” means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant.  Each Stock
Award Agreement shall be subject to the terms and conditions of the Plan.

 

3.                                      ADMINISTRATION.

 

(a)                                  Administration by Board. 
The Board shall administer the Plan unless and until the Board delegates
administration to a Committee, as provided in Section 3(c).

 

3

 

(b)                                  Powers of Board.  The
Board shall have the power, subject to, and within the limitations of, the
express provisions of the Plan:

 

(i)                                    To determine from time to time which of
the persons eligible under the Plan shall be granted Stock Awards; when and how
each Stock Award shall be granted; what type or combination of types of Stock
Award shall be granted; the provisions of each Stock Award granted, including
the time or times when a person shall be permitted to receive Common Stock
pursuant to a Stock Award; and the number of shares of Common Stock with
respect to which a Stock Award shall be granted to each such person.

 

(ii)                                To construe and interpret the Plan and
Stock Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration.  The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Stock Award Agreement, in a manner and to
the extent it shall deem necessary or expedient to make the Plan fully
effective.

 

(iii)                            To effect, at any time and from time to
time, with the consent of any adversely affected Optionholder, (1) the
reduction of the exercise price of any outstanding Option under the Plan, (2) the
cancellation of any outstanding Option under the Plan and the grant in substitution
therefor of (A) a new Option under the Plan covering the same or a
different number of shares of Common Stock, (B) a stock bonus, (C) the
right to acquire restricted stock, and/or (D) cash, or (3) any other
action that is treated as a repricing under generally accepted accounting
principles.

 

(iv)                               To amend the Plan or a Stock Award as
provided in Section 12.

 

(v)                                   Generally, to exercise such powers and to
perform such acts as the Board deems necessary or expedient to promote the best
interests of the Company which are not in conflict with the provisions of the
Plan.

 

(c)                                  Delegation to Committee.

 

(i)                                    General. 
The Board may delegate administration of the Plan to a Committee or
Committees of one (1) or more members of the Board, and the term “Committee”
shall apply to any person or persons to whom such authority has been
delegated.  If administration is
delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board, including
the power to delegate to a subcommittee any of the administrative powers the
Committee is authorized to exercise (and references in this Plan to the Board
shall thereafter be to the Committee or subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. 
The Board may abolish the Committee at any time and revest in the Board
the administration of the Plan.

 

(ii)                                Committee Composition when Common
Stock is Publicly Traded.  At such time as the Common
Stock is publicly traded, in the discretion of the Board, a Committee may
consist solely of two or more Non-Employee Directors, in accordance with Rule 16b-3.  Within the scope of such authority, the Board
or the Committee may delegate to a committee of 

 

4

 

one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.

 

(d)                                  Effect of Board’s Decision. 
All determinations, interpretations and constructions made by the Board
in good faith shall not be subject to review by any person and shall be final,
binding and conclusive on all persons.

 

4.                                      SHARES SUBJECT TO THE PLAN.

 

(a)                                  Share Reserve. 
Subject to the provisions of Section 11 relating to adjustments
upon changes in Common Stock, the Common Stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate three million five hundred
thousand (3,500,000) shares of Common Stock.

 

(b)                                  Reversion of Shares to the Share
Reserve.  If any Nonstatutory Stock Option shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such
Nonstatutory Stock Option shall revert to and again become available for
issuance under the Plan.

 

(c)                                  Source of Shares. 
The shares of Common Stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.

 

5.                                      ELIGIBILITY.

 

(a)                                  Eligibility for Specific Stock
Awards.  Stock Awards may be granted to Employees, who
are not Officers, and Consultants; provided, however, that
Officers who are not previously employed by the Company may be granted Stock
Awards as an inducement essential to such individuals entering into employment
contracts with the Company.

 

(b)                                  Consultants.

 

(i)                                    A Consultant shall not be eligible for
the grant of a Stock Award if, at the time of grant, a Form S-8 Registration
Statement under the Securities Act (“Form S-8”) is not available to
register either the offer or the sale of the Company’s securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8,
unless the Company determines both (i) that such grant (A) shall be
registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require
registration under the Securities Act in order to comply with the requirements
of the Securities Act, if applicable, and (ii) that such grant complies
with the securities laws of all other relevant jurisdictions.

 

(ii)                                Form S-8 generally is available to
consultants and advisors only if (i) they are natural persons; (ii) they
provide bona fide services to the issuer, its parents, its majority-owned
subsidiaries or majority-owned subsidiaries of the issuer’s parent; and (iii) the
services are not in connection with the offer or sale of securities in a
capital-raising transaction, and do not directly or indirectly promote or
maintain a market for the issuer’s securities.

 

5

 

6.                                      OPTION PROVISIONS.

 

Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. 
The provisions of separate Options shall include (through incorporation
of provisions hereof by reference in the Option or otherwise) the substance of
each of the following provisions:

 

(a)                                  Term. 
The term of an Option shall not exceed 10 years, either at the time of
grant of the Option or as the Option may be amended thereafter.

 

(b)                                  Exercise Price of a Nonstatutory
Stock Option.  The exercise price of each Nonstatutory Stock
Option shall be not less than the Fair Market Value of the Common Stock subject
to the Option on the date the Option is granted.

 

(c)                                  Consideration. 
The purchase price of Common Stock acquired pursuant to an Option shall
be paid, to the extent permitted by applicable statutes and regulations, either
(i) in cash or by check at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option or at any
time prior to the time of exercise in the case of a Nonstatutory Stock Option (1) by
delivery to the Company of other Common Stock, (2) according to a deferred
payment or other similar arrangement with the Optionholder or (3) in any
other form of legal consideration that may be acceptable to the Board.  Unless otherwise specifically provided in the
Option, the purchase price of Common Stock acquired pursuant to an Option that
is paid by delivery to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock
of the Company that have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).  At any
time that the Company is incorporated in Delaware, payment of the Common Stock’s
“par value,” as defined in the Delaware General Corporation Law, shall not be
made by deferred payment.

 

In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the market rate of
interest necessary to avoid a charge to earnings for financial accounting
purposes.

 

(d)                                  Transferability of a Nonstatutory
Stock Option. A
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime
of the Optionholder only by the Optionholder. 
Notwithstanding the foregoing, the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.

 

(e)                                  Vesting Generally. 
Each Option shall be evidenced by an Option Agreement executed by the
Company and the Optionholder.  The total
number of shares of Common Stock subject to an Option may vest and therefore
become exercisable as set-forth in the Option Agreement. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board
may deem appropriate.   The provisions of
this Section 6(e) are subject to any Option provisions 

 

6

 

governing the minimum number of shares of Common Stock
as to which an Option may be exercised.

 

(f)                                    Termination of Continuous
Service.  In the event an Optionholder’s Continuous
Service terminates for any reason other than upon the Optionholder’s death or
Disability, the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination or as otherwise permitted by the Company) but only within such
period of time ending on the earlier of (i) the three (3) months
following such termination (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement.  If, after
termination, the Optionholder does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate.

 

(g)                                 Extension of Termination Date. 
An Optionholder’s Option Agreement may also provide that if the exercise
of the Option following the termination of the Optionholder’s Continuous
Service (other than upon the Optionholder’s death or Disability) would be
prohibited at any time solely because the issuance of shares of Common Stock
would violate the registration requirements under the Securities Act or similar
requirements of applicable law of another jurisdiction to which the Option is
subject, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the Option Agreement, or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder’s Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements or similar requirements.

 

(h)                                 Disability of Optionholder. 
In the event that an Optionholder’s Continuous Service terminates as a
result of the Optionholder’s Disability, the Optionholder may exercise his or
her Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination or as otherwise permitted by the Company),
but only within such period of time ending on the earlier of (i) the
twelve (12) months following such termination (or such longer or shorter period
specified in the Option Agreement) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement.  If, after termination, the Optionholder does
not exercise his or her Option within the time specified herein, the Option
shall terminate.

 

(i)                                    Death of Optionholder. 
In the event (i) an Optionholder’s Continuous Service terminates as
a result of the Optionholder’s death or (ii) the Optionholder dies within
the period (if any) specified in the Option Agreement after the termination of
the Optionholder’s Continuous Service for a reason other than death, then the
Option may be exercised (to the extent the Optionholder was entitled to
exercise such Option as of the date of death or as otherwise permitted by the
Company) by the Optionholder’s estate, by a person who acquired the right to exercise
the Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder’s death pursuant to Section 6(d), but only
within the period ending on the earlier of (1) the date eighteen (18)
moths following the date of death (or such longer or shorter period specified
in the Option Agreement) or (2) the expiration of the term of such Option
as set forth in the Option Agreement. 
If, after death, the Option is not exercised within the time specified
herein, the Option shall terminate.

 

7

 

(j)                                    Early Exercise. 
The Option may include a provision whereby the Optionholder may elect at
any time before the Optionholder’s Continuous Service terminates to exercise
the Option as to any part or all of the shares of Common Stock subject to the
Option prior to the full vesting of the Option. 
Any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate.

 

7.                                      PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

 

(a)                                  Stock Bonus Awards. 
Each stock bonus agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate.  The terms and conditions of stock bonus
agreements may change from time to time, and the terms and conditions of
separate stock bonus agreements shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

 

(i)                                    Consideration.  A
stock bonus award may be awarded in consideration for past services actually
rendered to the Company or an Affiliate for its benefit.

 

(ii)                                Vesting. 
Shares of Common Stock awarded under the stock bonus agreement may be
subject to a share repurchase option in favor of the Company in accordance with
a vesting schedule to be determined by the Board.

 

(iii)                            Termination of Participant’s
Continuous Service.  In the event a Participant’s Continuous
Service terminates, the Company shall automatically reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.

 

(iv)                               Transferability. 
Rights to acquire shares of Common Stock under the stock bonus agreement
shall be transferable by the Participant only upon such terms and conditions as
are set forth in the stock bonus agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the stock bonus agreement
remains subject to the terms of the stock bonus agreement.

 

(b)                                  Restricted Stock Purchase Awards. 
Each restricted stock purchase agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

 

(i)                                    Purchase Price. 
The purchase price under each restricted stock purchase agreement shall
be such amount as the Board shall determine and designate in such restricted
stock purchase agreement.

 

(ii)                                Consideration. 
The purchase price of Common Stock acquired pursuant to the restricted
stock purchase agreement shall be paid either: 
(i) in cash at the time of 

 

8

 

purchase; (ii) at the discretion of the Board,
according to a deferred payment or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be
acceptable to the Board in its discretion; provided, however, that at any time
that the Company is incorporated in Delaware, then payment of the Common Stock’s
“par value,” as defined in the Delaware General Corporation Law, shall not be
made by deferred payment.

 

(iii)                            Vesting. 
Shares of Common Stock acquired under the restricted stock purchase
agreement may be subject to a share repurchase option in favor of the Company
in accordance with a vesting schedule to be determined by the Board.

 

(iv)                               Termination of Participant’s
Continuous Service.  In the event a Participant’s Continuous
Service terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the restricted stock purchase
agreement.

 

(v)                                   Transferability. 
Rights to acquire shares of Common Stock under the restricted stock
purchase agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as Common
Stock awarded under the restricted stock purchase agreement remains subject to
the terms of the restricted stock purchase agreement.

 

8.                                      COVENANTS OF THE COMPANY.

 

(a)                                  Availability of Shares. 
During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of Common Stock required to satisfy such
Stock Awards.

 

(b)                                  Securities Law Compliance. 
The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
grant Stock Awards and to issue and sell shares of Common Stock upon exercise
of the Stock Awards; provided, however, that this undertaking shall not require
the Company to register under the Securities Act the Plan, any Stock Award or
any Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to grant Stock Awards in compliance with applicable law
or to issue and sell Common Stock upon exercise of such Stock Awards unless and
until such authority is obtained.

 

9.                                      USE OF PROCEEDS FROM STOCK.

 

Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.

 

10.                               MISCELLANEOUS.

 

(a)                                  Stockholder Rights. 
No Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to
such 

 

9

 

Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

 

(b)                                  No Employment or other Service
Rights.  Nothing in the Plan or any instrument executed
or Stock Award granted pursuant thereto shall confer upon any Participant any
right to continue to serve the Company or an Affiliate in the capacity in
effect at the time the Stock Award was granted or shall affect the right of the
Company or an Affiliate to terminate (i) the employment of an Employee
with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant’s agreement with the
Company or an Affiliate or (iii) the service of a Director pursuant to the
Bylaws of the Company or an Affiliate, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.

 

(c)                                  Investment Assurances. 
The Company may require a Participant, as a condition of exercising or
acquiring Common Stock under any Stock Award, (i) to give written
assurances satisfactory to the Company as to the Participant’s knowledge and
experience in financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring Common
Stock subject to the Stock Award for the Participant’s own account and not with
any present intention of selling or otherwise distributing the Common
Stock.  The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (1) the
issuance of the shares of Common Stock upon the exercise or acquisition of
Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws.  The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Common Stock.

 

(d)                                  Withholding Obligations. 
To the extent provided by the terms of a Stock Award Agreement, the
Participant may satisfy any federal, state or local tax withholding obligation
relating to the exercise or acquisition of Common Stock under a Stock Award by
any of the following means (in addition to the Company’s right to withhold from
any compensation paid to the Participant by the Company) or by a combination of
such means:  (i) tendering a cash
payment; (ii) authorizing the Company to withhold shares of Common Stock
from the shares of Common Stock otherwise issuable to the Participant as a
result of the exercise or acquisition of Common Stock under the Stock Award,
provided, however, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering
to the Company owned and unencumbered shares of Common Stock.

 

10

 

11.                               ADJUSTMENTS UPON CHANGES IN STOCK.

 

(a)                                  Capitalization Adjustments. 
If any change is made in the Common Stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
type, class(es) and maximum number of securities subject to the Plan pursuant
to Section 4(a), and the outstanding Stock Awards will be appropriately
adjusted in the type, class(es) and number of securities and price per share of
securities subject to such outstanding Stock Awards.  The Board shall make such adjustments, and
its determination shall be final, binding and conclusive.  (The conversion of any convertible securities
of the Company shall not be treated as a transaction “without receipt of
consideration” by the Company.)

 

(b)                                  Dissolution or Liquidation. 
In the event of a dissolution or liquidation of the Company, then all
outstanding Stock Awards shall terminate immediately prior to such event.

 

(c)                                  Asset Sale, Merger, Consolidation
or Reverse Merger.  In the event of (i) a sale, exchange,
lease or other disposition of all or substantially all of the assets of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is
the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise
(individually, a “Corporate Transaction”), then any surviving corporation or
acquiring corporation shall assume or continue any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the Corporate
Transaction) for those outstanding under the Plan.  In the event any surviving corporation or
acquiring corporation refuses to assume or continue such Stock Awards or to
substitute similar stock awards for those outstanding under the Plan, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full,
and the Stock Awards shall terminate if not exercised (if applicable) at or
prior to the Corporate Transaction.  With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to the Corporate
Transaction.

 

12.                               AMENDMENT OF THE PLAN AND STOCK AWARDS.

 

(a)                                  Amendment of Plan. 
The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 11 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy any Nasdaq or securities exchange listing
requirements.  The Board may in its sole
discretion submit such amendment to the Plan for stockholder approval.

 

11

 

(b)                                  No Impairment of Rights. 
Rights under any Stock Award granted before amendment of the Plan shall
not be materially impaired by any amendment of the Plan unless (i) the
Company requests the consent of the Participant and (ii) the Participant
consents in writing.

 

(c)                                  Amendment of Stock Awards. 
The Board at any time, and from time to time, may amend the terms of any
one or more Stock Awards; provided, however, that the rights under any Stock
Award shall not be materially impaired by any such amendment unless (i) the
Company requests the consent of the Participant and (ii) the Participant
consents in writing.

 

13.                               TERMINATION OR SUSPENSION OF THE PLAN.

 

(a)                                  Plan Term. 
The Board may suspend or terminate the Plan at any time.  No Stock Awards may be granted under the Plan
while the Plan is suspended or after it is terminated.

 

(b)                                  No Impairment of Rights. 
Suspension or termination of the Plan shall not impair rights and
obligations under any Stock Award granted while the Plan is in effect except
with the written consent of the Participant.

 

14.                               EFFECTIVE DATE OF PLAN.

 

The Plan shall become
effective immediately upon its adoption by the Board.

 

15.                               CHOICE OF LAW.

 

The law of the State of California shall govern all
questions concerning the construction, validity and interpretation of this
Plan, without regard to such state’s conflict of laws rules.

 

12

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