SEAVIEW CORPORATE CENTER
SUMMARY OF BASIC LEASE INFORMATION

This Summary of Basic Lease Information (the “ Summary ”) is hereby incorporated by reference into and made a part of the attached Office Lease.  Each reference in the Office Lease to any term of this Summary shall have the meaning as set forth in this Summary for such term.  In the event of a conflict between the terms of this Summary and the Office Lease, the terms of the Office Lease shall prevail.  Any initially capitalized terms used herein and not otherwise defined herein shall have the meaning as set forth in the Office Lease.

 

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SEAVIEW CORPORATE CENTER

TABLE OF CONTENTS

 

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ARTICLE 25

MISCELLANEOUS PROVISIONS

 

 

EXHIBITS:
A	FLOOR PLAN OF PREMISES
B	RULES AND REGULATIONS
C	AMENDMENT TO LEASE
D	TENANT WORK LETTER
E	ESTOPPEL CERTIFICATE
F	GUARANTY OF LEASE

 

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SEAVIEW CORPORATE CENTER

INDEX OF DEFINED TERMS

“Tenant’s Parties	32
Affiliate	21
Alterations	13
Amendment	Exhibit C
Approved Working Drawings	Exhibit D
Architect	Exhibit D
Base Rent	4
Base Year	5
Base, Shell, and Core	Exhibit D
BOMA	1
Brokers	31
Building	Summary
Building Complex	1
Building Complex Parking Area	1
Building Hours	11
Child Care Facilities	29
Child Care Provider	29
Claims	15
Code	Exhibit D
Construction Drawings	Exhibit D
Contractor	Exhibit D
Control	21
Cost Pools	6
Cost Proposal	Exhibit D
Cost Proposal Delivery Date	Exhibit D
Direct Expenses	5
Effective Date	Summary
Engineers	Exhibit D
Environmental Claims	32
Environmental Law	31
Environmental Permits	31
Estimate	9
Estimate Statement	9
Estimated Excess	9
Estimated Utilities Costs	9
Excess	9
Excluded Changes	27
Expense Year	5
Final Space Plan	Exhibit D
Final Working Drawings	Exhibit D
Force Majeure	30
Holidays	11
HVAC	11
Insurance Start Date	15
Interest Notice	3
Interest Rate	5
Landlord	1
Landlord Indemnified Parties	32

 

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Landlord Parties	15
Landlord Supervision Fee	Exhibit D
Lease	1
Lease Commencement Date	2
Lease Expiration Date	2
Lease Term	2
Lease Year	2
Notices	30
number of days	Exhibit D
Operating Expenses	5
Option Notice	2
Option Rent	2
Option Rent Notice	3
Option Term	2
Original Tenant	2
Other Buildings	1
Other Improvements	33
Outside Agreement Date	3
Over–Allowance Amount	Exhibit D
Partial Cost Proposal	Exhibit D
PCBs	32
Permits	Exhibit D
personal goods or services vendors	Exhibit B
Premises	1
Proposition 13	7
Ready for Occupancy	Exhibit D
Real Property	1
Renovations	33
rent	25
rentable square feet	1
Restricted Areas	27
Review Period	10
Rules and Regulations	1
Statement	9
Subject Space	18
Subleasing Costs	20
Substantial Completion	2, Exhibit D
Summary	Summary
Tax Expenses	7
Tenant	1
Tenant Delays	Exhibit D
Tenant Improvement Allowance	Exhibit D
Tenant Improvement Allowance Items	Exhibit D
Tenant Improvements	Exhibit D
Tenant Indemnified Parties	32
Tenant Work	2
Tenant Work Letter	Exhibit D
Tenant’s Project Manager	Exhibit D
Tenant’s Utilities	8
Tenant’s Share	9
Time Deadlines	Exhibit D
Transfer Notice	18
Transfer Premium	20

 

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Transferee	18
Transfers	18
Utilities Costs	8

 

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SEAVIEW CORPORATE CENTER
OFFICE LEASE

This Office Lease, which includes the preceding Summary attached hereto and incorporated herein by this reference (the Office Lease and Summary to be known sometimes collectively hereafter as the “ Lease ”), dated as of the date set forth in Section 1 of the Summary, is made by and between AGRRI SEAVIEW, L.L.C., a Delaware limited liability company (“ Landlord ”) and ACCELRYS INC., a Delaware corporation (“ Tenant ”).

ARTICLE 1
BUILDING COMPLEX, BUILDING AND PREMISES

1.1           Building Complex, Building and Premises .  Upon and subject to the terms set forth in this Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 6.1 of the Summary (the “ Premises ”), which Premises are located in the Building defined in Section 6.2 of the Summary.  The outline of the Premises is set forth in Exhibit A attached hereto.  The Building, which is the first phase of a multiple–building office building complex commonly known as Seaview Corporate Center, is located at 10188 Telesis Court, San Diego, California 92121.  The complex also includes the buildings located at 10180, 10182, 10184, and 10190 Telesis Court, San Diego, California and such other buildings as may be constructed in the complex, if and when such buildings are constructed in such complex (collectively, the “ Other Buildings ”).  The Building, the Other Buildings, the parking facilities (which currently consist of a surface parking area and may subsequently consist of either and/or both surface parking area(s) and/or parking structure(s), as determined by Landlord) located within such complex (the “ Building Complex Parking Area ”), any outside plaza areas, land and other improvements surrounding the Building and such other future buildings (if any), and the land upon which all of the foregoing are situated, are herein sometimes collectively referred to herein as the “ Building Complex ” or “ Real Property .”  Tenant acknowledges that Landlord has made no representation or warranty that other office buildings will be constructed in the Complex, and Landlord may at its sole discretion, elect to construct or not construct any such additional office buildings or phases within the Complex.  Tenant further acknowledges that Landlord has made no representation or warranty regarding the condition of the Real Property except as specifically set forth in this Lease or the Tenant Work Letter.  Tenant is hereby granted the right to the nonexclusive use of the common corridors and hallways, stairwells, elevators, restrooms and other public or common areas located on the Real Property (including the existing pool, workout facilities and tennis facility as long as Landlord, in its sole discretion, maintains same); provided, however, that the manner in which such public and common areas are maintained and operated shall be at the sole discretion of Landlord and the use thereof shall be subject to the rules, regulations and restrictions attached hereto as Exhibit B (the “ Rules and Regulations ”), as the same may be modified by Landlord from time to time.  Landlord reserves the right to make alterations or additions to or to change the location of elements of the Building Complex and the common areas thereof.

1.2           Condition of Premises .  Except as expressly set forth in this Lease and in the Tenant Work Letter attached hereto as Exhibit D , Landlord shall not be obligated to provide or pay for any improvements, work or services related to the improvement, remodeling or refurbishment of the Premises, and Tenant shall accept the Premises in its “AS IS” condition on the Lease Commencement Date.  Tenant also acknowledges that Landlord has made no representation or warranty regarding the condition of the Premises or the Building Complex, except as specifically set forth in this Lease and the Tenant Work Letter.

1.3           Rentable Square Feet .  The rentable square feet of the Premises are approximately as set forth in Section 6.1 of the Summary.  For purposes hereof, the “ rentable square feet ” of the Premises and the Building and other buildings in the Building Complex shall be calculated by Landlord pursuant to the Standard Method for Measuring Floor Area in Office Buildings, ANSI Z65.1–1996 (“ BOMA ”).  The rentable square feet of the Premises and the rentable square feet of the Building and other buildings constructed in the Building Complex are subject to verification from time to time by Landlord’s planner/designer and such verification shall be made in accordance with the provisions of this Section 1.3.  Tenant’s architect may

 

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consult with Landlord’s planner/ designer regarding such verification, except to the extent it relates to the rentable square feet of the Building and other buildings in the Building Complex; provided, however, the determination of Landlord’s planner/designer shall be conclusive and binding upon the parties.  In the event that Landlord’s planner/designer determines that the rentable square footage shall be different from those set forth in this Lease, all amounts, percentages and figures appearing or referred to in this Lease based upon such incorrect rentable square feet (including, without limitation, the amount of the Base Rent and Tenant’s Share) shall be modified in accordance with such determination.  If such determination is made, it will be confirmed in writing by Landlord to Tenant.

1.4           Right of First Offer .  In the event those 6,000 rentable square feet of space on the first (1 ^st ) floor of the Building known as Suite 130 shall become available for lease to third parties during the Term, Landlord shall notify Tenant of such availability, the anticipated date on which such space shall be vacated and the fair market rental rate for such space.  For a period of ten (10) days following receipt of Landlord’s written notice containing such information, Tenant shall have, on a one–time basis only, the right of first offer to lease such space at the fair market rental rate and on fair market terms and conditions.  If Tenant fails to elect to lease the space within the ten (10) day period, then Landlord shall be entitled to place the space on the open market for lease by third parties and this right of first offer shall be of no further force and effect.

ARTICLE 2
LEASE TERM

2.1           Lease Term .  The terms and provisions of this Lease shall be effective as of the date of this Lease.  The term of this Lease (the “ Lease Term ”) shall be as set forth in Section 5.1 of the Summary, shall commence on the date which is the earlier to occur of (i) the date Tenant occupies the Premises, or (ii)  the date the Premises is Ready for Occupancy, as that term is defined in this Article 2, of the Premises by Landlord (“ Lease Commencement Date ”), and shall terminate on the date set forth in Section 7.4 of the Summary (the “ Lease Expiration Date ”) unless this Lease is sooner terminated as hereinafter provided.  For purposes of this Lease, the term “ Lease Year ” shall mean each consecutive twelve (12) month period during the Lease Term; provided, however, that the first Lease Year shall commence on the Lease Commencement Date and end on the last day of the eleventh month thereafter and the second and each succeeding Lease Year shall commence on the first day of the next calendar month; and further provided that the last Lease Year shall end on the Lease Expiration Date.  For purposes of this Lease, and if applicable, “ Substantial Completion ” of the Premises shall occur upon the completion of construction, as reasonably determined by Landlord, of the “Tenant Improvements,” as that term is defined in the Tenant Work Letter, in the Premises pursuant to the plans and drawings which are prepared pursuant to the terms of the Tenant Work Letter, with the exception of any punch list items and any tenant fixtures, work–stations, built–in furniture, or equipment to be installed by Tenant in the Premises pursuant to the terms of the Tenant Work Letter or to be installed under the supervision of “Contractor” as that term is defined in the Tenant Work Letter (the “ Tenant Work ”).  At any time during the Lease Term, Landlord may deliver to Tenant a notice in the form as set forth in Exhibit C , attached hereto which notice Tenant shall execute and return to Landlord within five (5) days of receipt thereof.

2.2           Option Term .  Landlord hereby grants to the Tenant originally named in the Lease and any Affiliate to which this Lease has been assigned pursuant to Section 14.7 (collectively, “ Original Tenant ”) the number of options to extend the Lease Term for the period of years set forth in the Summary of Basic Lease Information (the “ Option Term ”), which option shall be exercisable only by written notice (“ Option Notice ”) delivered by Tenant to Landlord as provided in Section 2.2.2 below, provided that, as of the date of delivery of such notice and, at Landlord’s option, as of the last day of the initial Lease Term, Tenant is not in default under this Lease after expiration of applicable cure periods.  The right contained in this Section 2.2 shall be personal to the Original Tenant and may only be exercised by the Original Tenant (and not any assignee, sublessee or other transferee of the Original Tenant’s interest in this Lease) if the Original Tenant occupies the entire Premises as of the date of the Option Notice.

2.2.1        Option Rent .  The Rent payable by Tenant during the Option Term (the “ Option Rent ”) shall be equal to the then prevailing fair market rent for the Premises as of the commencement date of

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the Option Term.  The then prevailing fair market rent shall be the rental rate, including all escalations, at which new, non–renewal tenants, as of the commencement of the Option Term, are leasing non–sublease, non–encumbered space comparable in size, location and quality to the Premises for a comparable term, which comparable space is located in comparable buildings in the Sorrento Mesa submarket, taking into consideration only the following concessions:  tenant improvements or allowances provided or to be provided for such comparable space, taking into account, and deducting the cost of the existing improvements in the Premises, and based upon the fact that the precise tenant improvements existing in the Premises are specifically suitable to Tenant.

2.2.2        Exercise of Option .  The option contained in this Section 2.2 shall be exercised by Tenant, if at all, only in the following manner:  (i) Tenant shall deliver written notice (“ Interest Notice ”) to Landlord on or before the date which is nine (9) months prior to the expiration of the initial Lease Term, stating that Tenant is interested in exercising its option; (ii) Landlord, after receipt of Tenant’s notice, shall deliver notice (the “ Option Rent Notice ”) to Tenant not less than seven (7) months prior to the expiration of the initial Lease Term, setting forth the Option Rent; and (iii) if Tenant wishes to exercise such option, Tenant shall, on or before the earlier of (A) the date occurring six (6) months prior to the expiration of the initial Lease Term, and (B) the date occurring thirty (30) days after Tenant’s receipt of the Option Rent Notice, exercise the option by delivering the Option Notice to Landlord and upon, and concurrent with, such exercise, Tenant may, at its option, object to the Option Rent determined by Landlord.  Failure of Tenant to deliver the Interest Notice to Landlord on or before the date specified in (i) above or to deliver the Option Notice to Landlord on or before the date specified in (iii) above shall be deemed to constitute Tenant’s failure to exercise its option to extend.  If Tenant timely and properly exercises its option to extend, the Lease Term shall be extended for the Option Term upon all of the terms and conditions set forth in this Lease, except that the Rent shall be as indicated in the Option Rent Notice unless Tenant, concurrently with its exercise, objects to the Option Rent contained in the Option Rent Notice, in which case the parties shall follow the procedure as set forth in Section 2.2.3 below.

2.2.3        Determination of Option Rent .  In the event Tenant exercises its option to extend but objects to Landlord’s determination of the Option Rent concurrently with its exercise of the option to extend, Landlord and Tenant shall attempt to agree in good faith upon the Option Rent.  If Landlord and Tenant fail to reach agreement within thirty (30) days following Tenant’s delivery of the Option Notice (the “ Outside Agreement Date ”), then each party shall make a separate determination of the Option Rent within five (5) business days after the Outside Agreement Date, concurrently exchange such determinations and such determinations shall be submitted to arbitration in accordance with Sections 2.2.3.1 through 2.2.3.7 below.

2.2.3.1         Landlord and Tenant shall each appoint one arbitrator who shall by profession be a real estate broker or appraiser who shall have been active over the five (5) year period ending on the date of such appointment in the leasing (or appraisal, as the case may be) of commercial high–rise properties in the Pasadena, California area.  The determination of the arbitrators shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Option Rent is the closest to the actual Option Rent, as determined by the arbitrators, taking into account the requirements of Section 2.2.1 of this Lease (i.e., the arbitrators may only select Landlord’s or Tenant’s determination and shall not be entitled to make a compromise determination).  Each such arbitrator shall be appointed within fifteen (15) business days after the applicable Outside Agreement Date.

2.2.3.2         The two (2) arbitrators so appointed shall within five (5) days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two (2) arbitrators.

2.2.3.3         The three (3) arbitrators shall within five (5) days of the appointment of the third arbitrator reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted Option Rent and shall notify Landlord and Tenant thereof.

2.2.3.4         The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant.

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2.2.3.5         If either Landlord or Tenant fails to appoint an arbitrator within fifteen (15) business days after the applicable Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator’s decision shall be binding upon Landlord and Tenant.

2.2.3.6         If the two (2) arbitrators fail to agree upon and appoint a third arbitrator, or both parties fail to appoint an arbitrator, then the appointment of the third arbitrator or any arbitrator shall be dismissed and the Option Rent be decided shall be forthwith submitted to arbitration under the provisions of the American Arbitration Association, but subject to the instruction set forth in this Section 2.2.3.

2.2.3.7         The cost of arbitration shall be paid by Landlord and Tenant equally.

ARTICLE 3
BASE RENT

3.1           Base Rent .  Tenant shall pay, without notice or demand, to Landlord at the management office of the Building Complex, or, at Landlord’s option, such other place as Landlord may from time to time designate in writing, in currency or a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent ( “ Base Rent ”) as set forth in Section 8 of the Summary, payable in equal monthly installments as set forth in Section 8 of the Summary in advance on or before the first day of each and every calendar month during the Lease Term, without any setoff or deduction whatsoever.  The Base Rent for the first full calendar month of the Lease Term shall be paid at the time of Tenant’s execution of this Lease.  If any rental payment date (including the Lease Commencement Date) falls on a day of a calendar month other than the first day of such calendar month or if any Rent payment is for a period which is shorter than one calendar month (such as during the last month of the Lease Term), the Rent for any fractional calendar month shall be the proportionate amount of a full calendar month’s rental based on the proportion that the number of days in such fractional month bears to the number of days in the calendar month during which such fractional month occurs.  All other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis.

3.2           Rent Abatement .  Provided Tenant is not in default under the Lease (or would be in default under the Lease but for the passage of time or giving of notice, or both), Landlord hereby agrees to abate Tenant’s obligation to pay Monthly Base Rent for the first (1 ^st ) month through and including the sixth (6 ^th ) month of the Lease Term (such total amount of abated Monthly Base Rent being hereinafter referred to as the “ Abated Amount ”).  During such abatement period, Tenant shall still be responsible for the payment of all of its other monetary obligations under the Lease, including, without limitation, Tenant’s Percentage of Operating Expenses and any expenses relative to Tenant’s use and occupancy of the Premises.  In the event of a default by Tenant under the terms of this Lease which results in early termination of this Lease, then as a part of the recovery elsewhere expressly permitted under this Lease, Landlord shall be entitled to a pro–rata recovery of the Abated Amount.  The formula for determining the percentage of the Abated Amount recoverable is (X–Y) ÷X, where X equals the number of months in the Lease Term and Y equals the number of months the Premises was leased prior to termination.  By way of illustration only (but not as a limitation of the foregoing), if a default by Tenant resulted in termination of this Lease at the end of month fifteen (15) of the Lease Term, and the Lease Term was sixty (60) months, then Landlord would be entitled to recover (60–15) ÷60 or seventy–five percent (75%) of the Abated Amount.  Any such amount which Landlord is entitled to recover hereinabove shall become immediately due and payable as unpaid rent which had been earned at the date of Lease termination.

ARTICLE 4
ADDITIONAL RENT

4.1           Additional Rent .  In addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay as additional rent:

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(i)            Tenant’s Share of the annual “Direct Expenses,” as those terms are defined in Sections 4.2.7 and 4.2.2 of this Lease, respectively, which are in excess of the amount of Direct Expenses applicable to the “Base Year,” as that term is defined in Section 4.2.1 of this Lease; and

(ii)           Tenant’s Share of the annual Utilities Costs, as that term is defined in Section 4.2.6 of this Lease.

4.2           Definitions .  As used in this Article 4, the following terms shall have the meanings hereinafter set forth:

4.2.1  “ Base Year ” shall mean the year set forth in Section 9.1 of the Summary.

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

4.2.3  “ Expense Year ” shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires; provided, that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any twelve (12) consecutive month period, and, in the event of any such change, Tenant’s Share of the Direct Expenses and Tenant’s Share of the Utilities Costs shall be equitably adjusted for any Expense Year involved in any such change.

4.2.4  “ Operating Expenses ” shall mean all expenses, costs and amounts of every kind and nature which Landlord shall pay or incur during any Expense Year because of or in connection with the ownership, management, maintenance, repair, replacement, restoration or operation of the Real Property, including, without limitation, any amounts paid or incurred for:  (i) all Utilities Costs; (ii) the cost of janitorial service, alarm and security service, window cleaning, and trash removal, the cost of operating, maintaining, repairing, replacing, renovating, managing and complying with conservation measures in connection with the utility systems, mechanical systems, sanitary and storm drainage systems, and escalator and elevator systems, and the cost of supplies, tools, and equipment and maintenance and service contracts in connection therewith; (iii) the cost of licenses, certificates, permits and inspections and the cost of contesting the validity or applicability of any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with the implementation and operation of a transportation system management program or similar program; (iv) the cost of insurance carried by Landlord in connection with the Real Property, in such amounts as Landlord may reasonably determine, or as may be required by any mortgagees, or the lessor of any underlying or ground lease affecting the Real Property; (v) the cost of landscaping, relamping, supplies, tools, equipment (including equipment rental agreements) and materials, and all fees, charges and other costs, including management fees (or amounts in lieu thereof), consulting fees, legal fees and accounting fees, incurred in connection with the management, operation, administration, maintenance and repair of the Real Property; (vi) the cost of parking area repair, restoration and maintenance, including, but not limited to, resurfacing, repainting, restriping, and cleaning; (vii) fees, charges and other costs, including consulting fees, legal fees and accounting fees, of all contractors and consultants; (viii) payments under any equipment rental agreements or management agreements (including the cost of any management fee and the fair rental value of any office space provided thereunder); (ix) wages, salaries and other compensation and benefits of all persons engaged in the operation, management, maintenance or security of the Real Property, and employer’s Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits; (x) payments under any easement, license, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs by the Real Property; (xi) amortization (including interest on the unamortized cost at a rate equal to the floating commercial loan rate announced from time to time by Bank of America, a national banking association, or its successor, as its prime rate, plus 2% per annum (the “ Interest Rate ”)) of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Real Property; (xii) the cost (including rent) of Landlord’s property management office for the Real Property and all utilities, supplies and materials used in connection therewith; and (xiii) the cost of any capital alterations, capital additions, or capital improvements made to the Real Property or any portion thereof (A) which relate to the operation, repair, maintenance and replacement of all systems, equipment or facilities which serve the Real Property in the whole or in part (including replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies,

 

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corridors, restrooms and other common or public areas or facilities, maintenance and replacement of curbs, walkways and parking areas, and repairs to roofs and reroofing of improvements), (B) which are intended as a labor–saving device or to effect other economies in the operation or maintenance of the Real Property, or any portion thereof, or (C) that are required under any governmental law or regulation that is then being enforced by a federal, state or local governmental agency; provided, however, that each such permitted capital expenditure shall be amortized (including interest on the unamortized cost at the Interest Rate in effect at the time such expenditure is placed in service) over its useful life as Landlord shall reasonably determine.  If Landlord is not furnishing any particular work or service (the cost of which, if performed or provided by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant.  If the Building (and any additional buildings constructed in the Building Complex) are not one hundred percent (100%) occupied during all or a portion of any Expense Year (including the Base Year), Landlord shall make an appropriate adjustment to the variable components of Operating Expenses for such Expense Year (including the Base Year) as reasonably determined by Landlord employing sound accounting and management principles, to determine the amount of Operating Expenses that would have been paid had such building(s) been one hundred percent (100%) occupied, and the amount so determined shall be deemed to have been the amount of Operating Expenses for such Expense Year.  Notwithstanding anything to the contrary set forth in this Article 4, when calculating Direct Expenses for the Base Year, Operating Expenses shall exclude market–wide labor–rate increases due to extraordinary circumstances, including, but not limited to, boycotts and strikes, utility rate increases due to extraordinary circumstances, including, without limitation, conservation surcharges, boycotts, embargoes or other shortages, and costs relating to capital improvements or expenditures.

Landlord shall have the right, from time to time, to equitably allocate and prorate some or all of the Direct Expenses and/or Utilities Costs among different tenants and/or different buildings of the Building Complex and/or on a building–by–building basis (the “ Cost Pools ”).  Such Cost Pools may include, without limitation, the office space tenants and retail space tenants of the buildings in the Building Complex and may be modified to take into account the addition of any additional office buildings within the Building Complex.

Notwithstanding the foregoing, Operating Expenses shall not, however, include (A) costs of repairs or other work occasioned by fire, windstorm or other casualty to the extent Landlord is reimbursed by insurance proceeds (other than those amounts within the deductible limits of insurance policies actually carried by Landlord, which amounts shall be includable as Operating Expenses so long as such deductibles are within the generally prevailing range of deductibles to policies carried by landlords of comparable first class office buildings located in the vicinity of the Building, but specifically excluding as Operating Expenses the amount within the deductible limits of any earthquake or flood damage insurance policies); (B) costs of leasing commissions, attorneys’ fees and other costs and expenses incurred in connection with negotiations or disputes with present or prospective tenants or other occupants of the Building; (C) except as otherwise specifically provided in this Section, costs incurred by Landlord in the repairs, capital additions, alterations or replacements made or incurred to rectify or correct defects in design, materials or workmanship in connection with any portion of the Building; (D) costs (including permit, license and inspection costs) incurred in renovating or otherwise improving, decorating or redecorating rentable space for other tenants or vacant rentable space; (E) cost of utilities or services sold to Tenant or others for which Landlord is entitled to and actually receives reimbursement (other than through any operating cost reimbursement provision identical or substantially similar to the provisions set forth in this Lease); (F) except as otherwise specifically provided in this Section, costs incurred by Landlord for alterations to the Project which are considered capital improvements and replacements under generally accepted accounting principles, consistently applied; (G) costs of depreciation and amortization, except on materials, small tools and supplies purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with a third party, where such depreciation and amortization would otherwise have been included in the charge for such third party services, all as determined in accordance with generally accepted accounting principles, consistently applied; (H) costs of services or other benefits which are not available to Tenant but which are provided to other tenants of the Building; (I) costs incurred due to the violation by Landlord or any other tenant of the terms and

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conditions of any lease of space in the Building; (J) costs of overhead or profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for services in or in connection with the Project to the extent the same exceeds the cost of such services which could be obtained from third parties on a competitive basis; (K) except as otherwise specifically provided in this Section, costs of interest on debt or amortization on any mortgages, and rent and other charges, costs and expenses payable under any mortgage, if any; (L) costs of general overhead and general administrative expenses, not including management fees and Project office expenses which are included in operating expenses by Landlords of other comparable first class office buildings located in the vicinity of the Building; (M) costs of advertising and promotion; (N) costs of electrical power for which Tenant directly contracts with and pays a local public service company; and (O) janitorial expenses for the Premises, to the extent provided by Tenant.

4.2.5  “ Tax Expenses ” shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary (including, without limitation, real estate taxes, general and special assessments, transit taxes or charges, business or license taxes or fees, annual or periodic license or use fees, open space charges, housing fund assessments, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Building Complex), which Landlord shall pay or incur during any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing and operation of the Real Property or Landlord’s interest therein.

4.2.5.1  Tax Expenses shall include, without limitation:

(i)            any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June 1978 election (“ Proposition 13 ”) and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, conservation, refuse removal and for other governmental services formerly provided without charge to property owners or occupants, and, in further recognition of the decrease in the level and quality of governmental services and amenities as a result of Proposition 13, Tax Expenses shall also include any governmental or private assessments or the contribution of the Building Complex towards a governmental or private cost–sharing agreement for the purpose of augmenting or improving the quality of services and amenities normally provided by governmental agencies.  It is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies, and charges and all similar assessments, taxes, fees, levies and charges be included within the definition of Tax Expenses for purposes of this Lease;

(ii)           any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the Rent payable hereunder, including, without limitation, any gross income tax with respect to the receipt of such Rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof;

(iii)          any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises;

(iv)          any possessory taxes charged or levied in lieu of real estate taxes; and

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(v)           any expenses incurred by Landlord in attempting to protest, reduce or minimize Tax Expenses.

4.2.5.2  In no event shall Tax Expenses for any Expense Year be less than the component of Tax Expenses comprising a portion of the Base Year.

4.2.5.3  Notwithstanding anything to the contrary contained in this Section 4.2.5, there shall be excluded from Tax Expenses:  (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlord’s general or net income (as opposed to rents, receipts or income attributable to operations at the Building Complex); and (ii) any items paid by Tenant under Section 4.4 of this Lease.

4.2.6  “ Utilities Costs ” shall mean the cost of all utilities supplied for the Building Complex (including, without limitation, water, sewer, electricity, telephone and HVAC), other than those utilities which are paid directly by Tenant and other tenants of the Building Complex for excess consumption and after–hours HVAC pursuant to Section 6.2 of this Lease or similar provisions in other tenants’ leases.  Notwithstanding anything herein to the contrary, and in addition to Tenant’s obligations to pay items of Additional Rent as described in this Lease, throughout Tenant’s occupancy of the Premises, whether prior to, during or after the Lease Term, Tenant shall pay directly for all utilities and services supplied to the Premises, including but not limited to electricity, telephone, water and/or gas, together with any taxes thereon (“ Tenant’s Utilities ”).  If any of Tenant’s Utilities are not separately metered or billed to the Premises, Tenant shall pay to Landlord, as Additional Rent, a reasonable proportion to be determined by Landlord of all such charges jointly metered or billed with other premises in the Building, in the manner and within the time periods set forth above for Additional Rent.  The responsibility for providing and the cost of any such Tenant’s Utilities delivered to or consumed on the Premises (except for standard air conditioning and heating) shall be controlled by the terms and conditions of this Article 4.  Tenant agrees to provide all, and Landlord shall not provide any, of such utilities to the Premises.

4.2.6.1  To the extent possible at the Premises, Tenant, at its sole expense, shall maintain separate meters for Tenant’s use of Tenant’s Utilities.  Tenant shall contract directly with the appropriate utility companies and/or public entities for the provision of such utilities, and shall pay directly such companies’ charges and any governmental fees, taxes or other charges payable in connection with such utility service.

4.2.6.2  Tenant agrees that the heating, ventilation and air conditioning systems within the Premises are adequate for Tenant’s use.  Tenant shall use its best efforts to conserve energy in the operation of its heating, ventilation and air conditioning systems, and shall cooperate with Landlord in any energy conservation programs.

4.2.6.3  Tenant agrees that the lighting systems within the Premises are adequate for Tenant’s use.  Tenant shall use commercially reasonable efforts to conserve energy in the operation of its lighting systems, and shall cooperate with Landlord in any energy conservation programs.

4.2.6.4  If Tenant fails to provide any of the utility or other services as required by this Section 4.2.6 or is, in Landlord’s reasonable judgment, about to so fail, Landlord may, but shall not be required to, provide such services on Tenant’s account.  Any costs incurred by Landlord in providing such services shall be deemed Additional Rent hereunder, and shall be billed as set forth in this Lease.  If Tenant fails to make any such payment of Additional Rent that includes the cost of utility or other services, then without prejudice to any other remedy that Landlord may have by reason of such failure to pay, Landlord may discontinue any such utility service to the Premises, without thereby incurring any liability to Tenant.  Any such discontinuance of utility or other service shall not be deemed an eviction (constructive or otherwise), a disturbance of possession, nor an election by Landlord to terminate the Lease.

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4.2.7  “ Tenant’s Share ” shall mean the percentage set forth in Section 9.2 of the Summary.  Tenant’s Share was calculated by multiplying the number of rentable square feet of the Premises by 100 and dividing the product by the total rentable square feet in the Building.  Landlord shall have the right from time to time, in its discretion, to include or exclude existing or future buildings in the Building Complex in the calculation of the total rentable square feet of the Building Complex, for purposes of determining the Building’s Share of Direct Expenses, Utilities Costs and/or the provision of various services and amenities thereto, including equitable allocation of Direct Expenses and/or Utilities Costs in Cost Pools (as described in Section 4.2.4 above); in such event, Tenant’s Share shall include such allocation of the Building’s Share of Direct Expenses and Utilities Costs in the calculation of Tenant’s Share.  In addition, in the event either the rentable square feet of the Premises and/or the Building and other buildings in the Building Complex is changed, Tenant’s Share and/or the Building’s Share shall be appropriately adjusted, and, as to the Expense Year in which such change occurs, Tenant’s Share and/or the Building’s Share for such year shall be determined on the basis of the number of days during such Expense Year that each such Tenant’s Share and/or the Building’s Share was in effect.

4.3           Calculation and Payment of Additional Rent .

4.3.1  Calculation of Excess .  For each Expense Year ending or commencing within the Lease Term, Tenant shall pay to Landlord, in the manner set forth in Section 4.3.2, below, and as Additional Rent:  (i) the amount by which Tenant’s Share of Direct Expenses for such Expense Year exceeds Tenant’s Share of the Direct Expenses for the Base Year (Tenant’s Share of such excess amount is hereinafter referred to as the “ Excess ”); and (ii) Tenant’s Share of the Utilities Costs incurred for such Expense Year.

4.3.2  Statement of Actual Direct Expenses and Utilities Costs and Payment by Tenant .  Following the end of each Expense Year, Landlord shall give to Tenant a statement (the “ Statement ”), which shall indicate:  (i) the Direct Expenses incurred or accrued for such preceding Expense Year, and which shall indicate the amount, if any, of any Excess; and (ii) the amount of the Utilities Costs incurred for such preceding Expense Year.  Upon receipt of the Statement for each Expense Year ending during the Lease Term, Tenant shall pay, with its next installment of Base Rent due, but in no event later than thirty (30) days after receipt of such Statement, (A) the full amount of any Excess for such Expense Year, less the amounts, if any, paid during such Expense Year as “Estimated Excess,” as that term is defined in Section 4.3.3, below, plus (B) the full amount of Tenant’s Share of the Utilities Costs for such Expense Year, less the amounts, if any, paid by Tenant during the Expense Year as “Estimated Utilities Costs”, as that term is defined in Section 4.3.3 below.  The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord from enforcing its rights under this Article 4; provided, however, that Landlord agrees to use commercially reasonable efforts to furnish the Statement by April 30 of the Lease Year.  Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of the Direct Expenses and Utilities Costs for the Expense Year in which this Lease terminates, taking into consideration that the Lease Expiration Date may have occurred prior to the final day of the applicable Expense Year, Tenant shall immediately pay to Landlord an amount as calculated pursuant to the provisions of Section 4.3.1 of this Lease as Tenant’s Share of the Excess and Utilities Costs for such final Expense Year.  The provisions of this Section 4.3.2 shall survive the expiration or earlier termination of the Lease Term.

4.3.3  Statement of Estimated Direct Expenses and Utilities Costs .  In addition, Landlord shall give Tenant a yearly expense estimate statement (the “ Estimate Statement ”) which shall set forth Landlord’s reasonable estimate (the “ Estimate ”) of (i) what the total amount of Direct Expenses for the then–current Expense Year shall be and the estimated Excess (the “ Estimated Excess ”) as calculated by comparing Tenant’s Share of Direct Expenses for such then–current Expense Year, which shall be based upon the Estimate, to Tenant’s Share of Direct Expenses for the Base Year, and (ii) what the total amount of Tenant’s Share of the Utilities Costs for the then–current Expense Year shall be (the “ Estimated Utilities Costs ”).  The Estimate Statement may be revised and reissued by Landlord from time to time.  The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Excess or Estimated Utilities Costs under this Article 4; provided, however, that Landlord agrees to use commercially reasonable efforts to furnish the Estimated Statement by April 30 of the Lease Year.  Within thirty (30) days after receipt of such Estimate Statement, Tenant shall pay

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to Landlord an amount equal to (A) a fraction of the Estimated Excess (or the increase in the Estimated Excess if pursuant to a revised Estimate Statement) for the then–current Expense Year (reduced by any amounts paid as Estimated Excess pursuant to the last sentence of this Section 4.3.3), plus (B) a fraction of the Estimated Utilities Costs (or the increase in the Estimated Utilities Costs if pursuant to a revised Estimate Statement) for the then–current Expense Year (reduced by the amounts paid as Estimated Utilities Costs pursuant to the last sentence of this Section 4.3.3).  Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year to the month of such payment, both months inclusive, and shall have twelve (12) as its denominator.  Until a new Estimate Statement is furnished, Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to the sum of (x) one–twelfth (1/12) of the total Estimated Excess plus (y) one–twelfth (1/12) of the total Estimated Utilities Costs set forth in the previous Estimate Statement delivered by Landlord to Tenant.

4.4           Taxes and Other Charges for Which Tenant Is Directly Responsible .  Tenant shall reimburse Landlord, as Additional Rent, within ten (10) days after demand, for any and all taxes required to be paid by Landlord (except to the extent included in Tax Expenses by Landlord), excluding state, local and federal personal or corporate income taxes measured by the net income of Landlord from all sources and estate and inheritance taxes, whether or not now customary or within the contemplation of the parties hereto, when:

4.4.1  said taxes are measured by or reasonably attributable to the cost or value of Tenant’s equipment, furniture, fixtures and other personal property located in the Premises, or by the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, to the extent the cost or value of such leasehold improvements exceeds the cost or value of a building standard build–out as determined by Landlord regardless of whether title to such improvements shall be vested in Tenant or Landlord;

4.4.2  said taxes are assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Building Complex; or

4.4.3  said taxes are assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises.

4.5           Late Charges .  If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord’s designee within three (3) days of the due date therefor, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of the amount due plus any attorneys’ fees incurred by Landlord by reason of Tenant’s failure to pay Rent and/or other charges when due hereunder.  The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord’s other rights and remedies hereunder, at law and/or in equity and shall not be construed as liquidated damages or as limiting Landlord’s remedies in any manner.  In addition to the late charge described above, any Rent or other amounts owing hereunder which are not paid by the date they are due shall thereafter bear interest until paid at a rate equal to the lesser of (i) the Interest Rate set forth in Section 4.2.4 above, or (ii) the highest rate permitted by applicable law.

4.6           Audit Right .  Within one hundred eighty (180) days after receipt of a Statement by Tenant (“ Review Period ”), if Tenant disputes the amount set forth in the Statement, Tenant’s employees or an independent certified public accountant (which accountant is a member of a nationally or regionally recognized accounting firm) designated by Tenant, may, after written notice to Landlord and at reasonable times, inspect Landlord’s records (pertaining to Landlord’s calculation of Direct Expenses and/or Utilities Costs) at Landlord’s offices, provided that Tenant is not then in default after expiration of all applicable cure periods and provided further that Tenant and such accountant or representative shall, and each of them shall use their commercially reasonable efforts to cause their respective agents and employees to, maintain all information contained in Landlord’s records in strict confidence.  Notwithstanding the foregoing, Tenant shall only have the right to review Landlord’s records one (1) time during any twelve (12) month period.  Tenant’s failure to dispute the amounts set forth in any Statement within the Review Period shall be deemed to be Tenant’s approval of such Statement and Tenant, thereafter, waives the right or ability to dispute the amounts

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set forth in such Statement.  If after such inspection, but within thirty (30) days after the Review Period, Tenant notifies Landlord in writing that Tenant still disputes such amounts, a certification as to the proper amount shall be made, at Tenant’s expense, by an independent certified public accountant selected by Landlord, and reasonably acceptable to Tenant, who is a member of a nationally or regionally recognized accounting firm.  However, if such certification by the accountant proves that the total amount of Direct Expenses and/or Utilities Costs, as applicable, set forth in the Statement were overstated by more than five percent (5%), then the actual, documented and reasonable cost of the review, the accountant and such certification shall be paid for by Landlord.  Promptly following the parties receipt of such certification, the parties shall make such appropriate payments or reimbursements, as the case may be, to each other, as are determined to be owing pursuant to such certification.  In no event shall Landlord or its property manager be required to (i) photocopy any accounting records or other items or contracts (but Landlord will permit Tenant to make photocopies at Tenant’s own expense), (ii) create any ledgers or schedules not already in existence, (iii) incur any costs or expenses relative to such inspection (except as provided above), or (iv) perform any other tasks other than making available such accounting records as are described in this paragraph.  Landlord shall not be liable for the payment of any contingency fee payments to any auditor or consultant of Tenant.

ARTICLE 5
USE OF PREMISES

Tenant shall use the Premises solely for general office purposes (which shall include such activities as sales, software engineering, data entry, small parcel shipping and related functions) consistent with the character of the Building Complex as a first–class office building project, and Tenant shall not use or permit the Premises to be used for any other purpose or purposes whatsoever.  Tenant further covenants and agrees that it shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the Rules and Regulations, or in violation of the laws of the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Building Complex (including laws pertaining to Hazardous Materials, as defined below).  Tenant shall comply with the Rules and Regulations.  Landlord shall not be responsible to Tenant for the nonperformance of any of such Rules and Regulations by or otherwise with respect to the acts or omissions of any other tenants or occupants of the Building Complex.  Tenant shall comply with all recorded covenants, conditions, and restrictions now or hereafter affecting the Real Property.

ARTICLE 6
SERVICES AND UTILITIES

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

6.1.1  Subject to all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide heating, ventilation and air conditioning (“ HVAC ”) for normal office use in the Premises, from Monday through Friday, during the period from 7:00 a.m. to 6:00 p.m., and on Saturdays during the period from 8:00 a.m. to 12:00 p.m. (collectively, the “ Building Hours ”), except for nationally and locally recognized holidays as designated by Landlord (collectively, the “ Holidays ”).

6.1.2  Landlord shall provide adequate electrical wiring and facilities and power for normal general office use.  Tenant shall bear the cost of replacement of lamps, starters and ballasts for non–Building standard lighting fixtures within the Premises.

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

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6.1.4  Landlord shall provide janitorial services five (5) days per week, except the date of observation of the Holidays, in and about the Premises.

6.1.5  Landlord shall provide nonexclusive automatic elevator service at all times.

6.2           Overstandard Tenant Use .  Tenant shall not, without Landlord’s prior written consent, use heat–generating machines, machines other than normal fractional horsepower office machines, or equipment or lighting other than building standard lights in the Premises, which may adversely affect the temperature otherwise maintained by the air conditioning system or increase the water normally furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of this Lease.  If Tenant uses water or HVAC in excess of that typically supplied for office uses in similar buildings, or if Tenant’s consumption of electricity shall exceed an average of three (3) watts per useable square foot of the Premises, connected load, calculated on a monthly basis during the Building Hours set forth in Section 6.1.1 above, then Tenant shall pay to Landlord, within thirty (30) days after billing, the cost of such excess consumption, the cost of the installation, operation, and maintenance of equipment which is installed in order to supply such excess consumption, administrative and overhead costs incurred in connection with such excess consumption, and the cost of the increased wear and tear on existing equipment caused by such excess consumption; and Landlord may install devices to separately meter any increased use and in such event Tenant shall pay the increased cost directly to Landlord, within thirty (30) days after demand, including the cost of such additional metering devices.  If Tenant desires to use HVAC during hours other than the Building Hours, (i) Tenant shall give Landlord such prior notice, as Landlord shall from time to time establish as appropriate, of Tenant’s desired use, (ii) Landlord shall supply such after–hours HVAC to Tenant at such hourly cost (which shall include, without limitation, the cost of the use of such HVAC, administrative and overhead charges, and the cost of maintenance and increased wear and tear on equipment used to provide such after–hours HVAC) to Tenant as Landlord shall from time to time establish, and (iii) Tenant shall pay such cost within thirty (30) days after billing.

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

6.4           Additional Services .  Landlord shall also have the exclusive right, but not the obligation, to provide any additional services which may be required by Tenant, including, without limitation, locksmithing, additional janitorial service, and additional repairs and maintenance, provided that Tenant shall pay to Landlord, within thirty (30) days after billing, the sum of all costs to Landlord of such additional services plus an administration fee.  Charges for any utilities or service for which Tenant is required to pay from time to time hereunder, shall be deemed Additional Rent hereunder and shall be billed on a monthly basis.

ARTICLE 7
REPAIRS

7.1           Tenant’s Repairs .  Subject to Landlord’s repair obligations in Sections 7.2 and 11.1 below, Tenant shall, at Tenant’s own expense, keep the Premises, including all improvements, fixtures and furnishings therein, in good order, repair and condition at all times during the Lease Term, which repair obligations shall include, without limitation, the obligation to promptly and adequately repair all damage to the Premises and replace or repair all damaged or broken fixtures and appurtenances; provided however, that, at

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Landlord’s option, or if Tenant fails to make such repairs, Landlord may, but need not, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof, including a percentage of the cost thereof (to be uniformly established for the Building) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord’s involvement with such repairs and replacements forthwith within thirty (30) days of being billed for same.

7.2           Landlord’s Repairs .  Anything contained in Section 7.1 above to the contrary notwithstanding, and subject to Articles 11 and 12 of this Lease, Landlord shall repair and maintain the structural portions of the Building and the basic plumbing, heating, ventilating, air conditioning and electrical systems serving the Building and not located in the Premises; provided, however, if such maintenance and repairs are caused in part or in whole by the act, neglect, fault of or omission of any duty by Tenant, its agents, contractors, employees, licenses or invitees, Tenant shall pay to Landlord, as additional rent, the reasonable cost of such maintenance and repairs.  Landlord shall not be liable to Tenant for any failure to make any such repairs, or to perform any maintenance hereunder, and there shall be no abatement of Rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of a failure to make any repairs, alterations or improvements in or to any portion of the Premises or Building Complex or in or to fixtures, appurtenances and equipment therein.  Landlord may, but shall not be required to, enter the Premises at all reasonable times to make any repairs, alterations, improvements or additions to the Premises or to the Building Complex or to any equipment located in the Building Complex as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi–governmental authority or court order or decree.  Tenant hereby waives and releases its right to make repairs at Landlord’s expense under any law, statute, or ordinance now or hereafter in effect.

ARTICLE 8
ADDITIONS AND ALTERATIONS

8.1           Landlord’s Consent to Alterations .  Tenant may not make any improvements, alterations, additions or changes to the Premises (collectively, the “ Alterations ”) without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than thirty (30) days prior to the commencement thereof, and which consent shall not be unreasonably withheld by Landlord; provided, however, Landlord may withhold its consent in its sole and absolute discretion with respect to any Alterations which (i) may affect the structural components of the Building, or the Building’s mechanical, electrical, heating, ventilating, air–conditioning, or life safety systems, or (ii) are visible from outside the Premises.  Notwithstanding the foregoing, Tenant may make strictly cosmetic changes to the finish work in the Premises, not requiring any structural or other substantial modifications to the Premises, upon ten (10) days prior written notice to Landlord.  The construction of the initial improvements to the Premises shall be governed by the terms of the Tenant Work Letter, attached hereto as Exhibit D , and not the terms of this Article 8.

8.2           Manner of Construction .  Landlord may impose, as a condition of its consent to any and all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its sole discretion (as to any Alterations or repairs which may affect the Base, Shell and Core or the structural elements of the Building) and otherwise in its reasonable discretion may deem desirable, including, but not limited to, the requirement that upon Landlord’s request, Tenant shall, at Tenant’s expense, remove such Alterations upon the expiration or any early termination of the Lease Term (upon Tenant’s request, Landlord shall specify, at the time of its consent, which Alteration, if any, must be removed upon expiration or early termination of the Lease Term), and/or the requirement that Tenant utilize for such purposes only contractors, materials, mechanics and materialmen approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed.  Tenant shall construct such Alterations and perform such repairs in conformance with any and all applicable rules and regulations of any federal, state, county or municipal code or ordinance and pursuant to a valid building permit, issued by the City of San Diego in conformance with Landlord’s construction rules and regulations.  All work with respect to any Alterations must be done in a good and workmanlike manner and diligently prosecuted to completion to the end that the Premises shall at all times be a complete unit except during the period of work.  In performing the work of any such Alterations, Tenant shall have the work performed in such manner as not to obstruct access to the Building or Building

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Complex or the common areas by any other tenant of the Building Complex, and as not to obstruct the business of Landlord or other tenants in the Building Complex, or interfere with the labor force working in the Building Complex.  If Tenant makes any Alterations, Tenant agrees to carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon completion thereof.  In addition, Landlord may, in its discretion, require Tenant to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien–free completion of such Alterations and naming Landlord as a co–obligee if the cost of the proposed Alterations exceeds $500,000.  Upon completion of any Alterations, Tenant shall (i) cause a timely Notice of Completion to be recorded in the office of the Recorder of San Diego County in accordance with the terms of Section 3093 of the Civil Code of the State of California or any successor statute, (ii) deliver to the Building Complex management office a reproducible copy of the “as built” drawings of the Alterations, and (iii) deliver to Landlord evidence of payment, contractors’ affidavits and full and final waivers of all liens for labor, services or materials.

8.3           Payment for Alterations .  If Tenant orders any Alterations or repair work directly from Landlord, Tenant shall pay to Landlord, within thirty (30) days after demand, all charges for such work, including a percentage of the cost of such work (such percentage to be established on a uniform basis for the Building) sufficient to compensate Landlord for all overhead, general conditions, fees and other costs and expenses arising from Landlord’s involvement with such work.  If Tenant does not order any work directly from Landlord, Tenant shall reimburse Landlord, within thirty (30) days after demand, for Landlord’s out–of–pocket costs and expenses incurred in connection with Landlord’s review of such work, plus a Landlord administrative fee equal to five percent (5%) of the total cost of such work.

8.4           Landlord’s Property .  All Alterations, improvements and fixtures which may be installed or placed in or about the Premises, and all signs installed in, on or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord.  Notwithstanding the following, Landlord may, by written notice to Tenant given at the time Landlord consents to the Alteration, require Tenant at Tenant’s expense to remove any Alterations from the Premises and repair any damage to the Premises and Building caused by such removal.  If Tenant fails to complete such removal prior and/or to repair any damage caused by the removal of any Alterations by the end of the Lease Term, Landlord may do so and may charge the cost thereof to Tenant.

ARTICLE 9
COVENANT AGAINST LIENS

Tenant has no authority or power to cause or permit any lien or encumbrance of any kind whatsoever, whether created by act of Tenant, operation of law or otherwise, to attach to or be placed upon the Real Property or any portion thereof, and any and all liens and encumbrances created by Tenant shall attach to Tenant’s interest only.  Landlord shall have the right at all times to post and keep posted on the Premises any notice which it deems necessary for protection from such liens.  Tenant covenants and agrees not to suffer or permit any lien of mechanics or materialmen or others to be placed against the Real Property or any portion thereof, with respect to work or services claimed to have been performed for or materials claimed to have been furnished to Tenant or the Premises, and, in case of any such lien attaching or notice of any lien, Tenant covenants and agrees to cause it to be immediately released and removed of record.  Notwithstanding anything to the contrary set forth in this Lease, in the event that such lien is not released and removed on or before the date occurring ten (10) days after notice of such lien is delivered by Landlord to Tenant, Landlord, at its sole option, may immediately take all action necessary to release and remove such lien, without any duty to investigate the validity thereof, and all sums, costs and expenses, including reasonable attorneys’ fees and costs, incurred by Landlord in connection with such lien shall be deemed Additional Rent under this Lease and shall immediately be due and payable by Tenant.

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ARTICLE 10
INSURANCE

10.1         Indemnification and Waiver .  Tenant hereby assumes all risk of damage to property and injury to persons in, on or about the Premises from any cause whatsoever, and agrees that, to the extent not prohibited by law, Landlord, its partners and subpartners, and their respective officers, directors, shareholders, agents, property managers, employees and independent contractors (collectively, the “ Landlord Parties ”) shall not be liable for, and are hereby released from any responsibility for, any damage either to person or property or resulting from the loss of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant.  Tenant shall indemnify, defend, protect and hold harmless the Landlord Parties from and against any and all loss, cost, damage, expense, cause of action, claims and liability, including without limitation court costs and reasonable attorneys’ fees (collectively “ Claims ”) incurred in connection with or arising from any cause in, on or about the Premises, and/or any acts, omissions or negligence of Tenant or of any person claiming by, through or under Tenant, or of the contractors, agents, employees, licensees or invitees of Tenant or any such person in, on or about the Real Property, provided that the terms of the foregoing indemnity shall not apply to any Claims to the extent resulting from Landlord’s breach of this Lease or the negligence or willful misconduct of Landlord or the Landlord Parties and not insured (or required to be insured) by Tenant under this Lease.  Tenant’s agreement to indemnify Landlord pursuant to this Section 10.1 is not intended and shall not relieve any insurance carrier of its obligations under policies required to be carried by Tenant pursuant to the provision of this Lease.  The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any Claims occurring prior to such expiration or termination.

10.2         Tenant’s Compliance with Landlord’s Fire and Casualty Insurance .  Tenant shall, at Tenant’s expense, comply with all insurance company requirements pertaining to the use of the Premises.  If Tenant’s conduct or use of the Premises causes any increase in the premium for any insurance policies carried by Landlord, then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant’s expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body.

10.3         Tenant’s Insurance .  Tenant shall maintain the following coverages in the following amounts at all times following the date (the “ Insurance Start Date ”) which is the earlier of (i) Tenant’s entry into the Premises to perform any work therein, or (ii) the Lease Commencement Date, and continuing thereafter throughout the Lease Term:

10.3.1  Commercial General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage arising out of Tenant’s operations, assumed liabilities or use of the Premises, including a Commercial General Liability endorsement covering the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in Section 10.1 of this Lease, for limits of liability not less than:  (i) Bodily Injury and Property Damage Liability — $5,000,000 each occurrence and $5,000,000 annual aggregate, and (ii) Personal Injury Liability — $5,000,000 each occurrence and $5,000,000 annual aggregate.

10.3.2  Physical Damage Insurance covering (i) all office furniture, trade fixtures, office equipment, merchandise and all other items of Tenant’s property on the Premises installed by, for, or at the expense of Tenant, and (ii) all Alterations and other improvements and additions in and to the Premises whether owned by Landlord or Tenant pursuant to this Lease.  Such insurance shall be written on an “all risks” of physical loss or damage basis, for the guaranteed replacement cost value new without deduction for depreciation of the covered items and in amounts that meet any co–insurance clauses of the policies of insurance and shall include a vandalism and malicious mischief endorsement, sprinkler leakage coverage and earthquake sprinkler leakage coverage.

10.3.3  Business interruption, loss–of–income and extra–expense insurance in such amounts as will reimburse Tenant for direct or indirect loss of earnings attributable to all perils commonly insured

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against by prudent tenants or attributable to prevention of access to the Premises or to the Building as a result of such perils.

10.3.4  The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease.  Such insurance shall:  (i) name Landlord, and any other party it so specifies, as an additional insured; (ii) specifically cover the liability assumed by Tenant under this Lease, including, but not limited to, Tenant’s obligations under Section 10.1 of this Lease; (iii) be issued by an insurance company having a rating of not less than A–X in Best’s Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the State of California; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non–contributing with any insurance requirement of Tenant; (v) provide that said insurance shall not be canceled or coverage changed unless thirty (30) days’ prior written notice shall have been given to Landlord and any mortgagee of Landlord; and (vi) contain a cross–liability endorsement or severability of interest clause acceptable to Landlord.  Tenant shall deliver said policy or policies or certificates thereof to Landlord on or before the Insurance Start Date and at least thirty (30) days before the expiration dates thereof.  In the event Tenant shall fail to procure such insurance, or to deliver such certificate, Landlord may, at its option, procure such policies for the account of Tenant, and the costs of it shall be paid to Landlord as Additional Rent within five (5) days after delivery to Tenant of bills therefor.

10.4         Subrogation .  Tenant agrees to have its insurance company issuing property damage, loss of income and/or rental interruption and extra expense insurance waive any rights of subrogation that such company may have against Landlord.  Tenant hereby waives any right that Tenant may have against Landlord on account of any loss or damage to its property.    If Tenant fails to carry the amounts and types of insurance required to be carried by it pursuant to this Article 10, in addition to any remedies Landlord may have under this Lease, such failure shall be deemed to be a covenant and agreement by Tenant to self–insure with respect to the type and amount of insurance which Tenant so failed to carry, with full waiver of subrogation with respect thereto.

10.5         Additional Insurance Obligations .  Tenant shall carry and maintain during the entire Lease Term, at Tenant’s sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant to this Article 10, and such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant’s operations therein, as may be reasonably requested by Landlord, but in no event shall such increased amounts of insurance or such other reasonable types of insurance be in excess of that required by landlords of comparable Class “A” buildings located in the Sorrento Mesa area.

10.6         Landlord’s Insurance .  During the Term, Landlord shall maintain casualty insurance covering the Building (excluding the property which Tenant is obligated to insure pursuant to the terms hereof).  Such insurance shall provide protection against any peril generally included within the classification “Fire and Extended Coverage”.  Landlord shall also maintain comprehensive general liability and property damage insurance with respect to the operation of the Building.  Such insurance shall be in such amounts and with such deductibles as Landlord reasonably deems appropriate.  Landlord may, but shall not be obligated to, obtain and carry any other form or forms of insurance as it or Landlord’s mortgagees or deed of trust beneficiaries may determine advisable.  Notwithstanding any contribution by Tenant to the cost of insurance premiums as provided in this Lease. Tenant acknowledges that it has no right to receive any proceeds from any insurance policies maintained by Landlord and will not be named as an additional insured thereunder.

ARTICLE 11
DAMAGE AND DESTRUCTION

11.1         Repair of Damage to Premises by Landl