EX-10 7 p13919_ex10-50.txt OFFICE LEASE AGREEMENT Exhibit 10.50 OFFICE LEASE between CALIFORNIA PLAZA OF WALNUT CREEK, INC., a Florida not-for-profit corporation (Landlord) and ELECTRONIC ARTS, INC. a Delaware corporation (Tenant) TABLE OF CONTENTS OFFICE LEASE Article Title Page ------- ----- ---- 1 Definitions 1 2 Premises 4 3 Lease Term 5 4 Rental 9 5 Security Deposit 17 6 Use of Premises 17 7 Utilities and Services 19 8 Maintenance and Repairs 22 9 Alterations, Additions and Improvements 22 10 Indemnification and Insurance 25 11 Damage or Destruction 28 12 Condemnation 29 13 [Intentionally Deleted] 29 14 Assignment and Subletting 30 15 Default and Remedies 33 16 Attorneys' Fees; Costs of Suit 36 17 Subordination and Attornment 37 18 Quiet Enjoyment 39 19 Rules and Regulations 39 20 Estoppel Certificates 39 21 Entry by Landlord 40 22 Landlord's Lease Undertakings; Transfer of Landlord's Interest 40 23 Holdover Tenancy 41 24 Notices 42 25 Brokers 42 26 Communications and Computer Lines 42 27 Parking 43 28 Miscellaneous 44 EXHIBITS Exhibit "A" Floor Plan Exhibit "B" Work Letter Agreement Exhibit "C" Rules and Regulations Exhibit "D" Suite Acceptance Letter Exhibit "E" Special Suite 600 Period Operating Expenses Exhibit "F" Schedule of Janitorial Specifications (i) OFFICE LEASE THIS OFFICE LEASE ("Lease"), dated for reference purposes as of February 1, 2001, is made and entered into by and between CALIFORNIA PLAZA OF WALNUT CREEK, lNC., a Florida not-for-profit corporation ("Landlord") and ELECTRONIC ARTS, INC., a Delaware corporation ("Tenant"), upon the following terms and conditions: ARTICLE 1 DEFINITIONS Unless the context otherwise specifies or requires, the following terms shall have the meanings specified herein; 1.01 Building. The term "Building" means the office building and related common areas located at 2121 North California Boulevard, Walnut Creek, California 94956 and commonly known as CALIFORNIA PLAZA together with any related land, improvements, parking facilities, common areas, driveways, sidewalks and landscaping. 1.02 Premises. The term "Premises" means Suite 600 (consisting of Suite 600, and the former Suites 680 and 690) on the sixth (6th) floor of the Building (hereinafter together referred to as "Suite 600") and Suite 700 on the seventh (7th) floor of the Building), all as more particularly outlined on the drawing attached hereto as Exhibit "A" and incorporated herein by reference. Provided, however, the Premises do not include any storage area in the Building, any such storage area used by Tenant will be the subject of a separate lease or rental agreement. 1.03 Net Rentable Area of Building; Rentable Area of the Premises. The phrase "Net Rentable Area of the Building" means three hundred sixty eight thousand two hundred ninety (368,290) rentable square feet. The phrase "Rentable Area of the Premises" shall mean a total of seventy-nine thousand two hundred thirty two (79,232) rentable square feet as follows: (A) With respect to Suite 600, forty-two thousand three hundred ninety-eight (42,398) rentable square feet, and (B) With respect to Suite 700, thirty-six thousand eight hundred thirty-four (36,834) rentable square feet. Landlord and Tenant hereby stipulate and agree as to the Net Rentable Area of the Building and the Rentable Area of the Premises, and any subsequent remeasurement of the Building or the Premises shall not affect Tenant's monetary obligations under this Lease. Tenant acknowledges that the Net Rentable Area of the Building and the Rentable Area of the Premises includes the usable area, without deduction for columns or projections, multiplied by a load factor to reflect a share of certain areas, which may include lobbies, corridors, mechanical, utility, janitorial, boiler and service rooms and closets, restrooms and other public, common and service areas of the Building. 1 1.04 Initial Lease Term; Lease Year. The phrase "Lease Term" and/or "Initial Lease Term" shall mean the period between the Commencement Date and the Expiration Date (as such terms are hereinafter defined), unless sooner terminated as otherwise provided in this Lease. Each consecutive twelve (12) month period following the Commencement Date shall constitute a "Lease Year." The Initial Lease Term shall consist of eight (8) Lease Years. 1.05 Commencement Date. The "Commencement Date" means February 1, 2001. 1.06 Expiration Date. The "Expiration Date" means the date which is the last day of the eighth (8th) Lease Year (the "Expiration Date"). On the Expiration Date, the Initial Lease Term will terminate and expire. 1.07 Monthly Base Rent. Subject to adjustment as provided in Article 4, the phrase "Monthly Base Rent" shall be in the monthly amounts set forth below, and shall be due and owing on the first (1st) day of each month during each Lease Year of the Initial Lease Term: Monthly Monthly Total Base Rent Base Rent Monthly Lease Year Suite 600 Suite 700 Base Rent ---------- --------- --------- --------- First Lease Year: 2/1/01 - 7/31/01: $61,577.24 + $122,657.22 = $184,234.46 8/1/01 - 11/30/01: $62,287.34 + $122,657.22 = $184,944.56 12/1/01 - 1/31/02: $62,749.04 + $122,657.22 = $185,406.26 Second Lease Year: 2/1/02 - 11/30/02: $62,749.04 + $127,563.51 = $190,312.55 12/1/02 - 1/31/03: $141,185.34 + $127,563.51 = $268,748.85 Third Lease Year (2/1/03 - 1/31/04): $146,832.75 + $132,666.05 = $279,498.80 Fourth Lease Year (2/1/04 - 1/31/05): $152,706.06 + $137,972.69 = $290,678.75 Fifth Lease Year (2/1/05 - 1/31/06): $158,814.31 + $143,491.59 = $302,305.90 Sixth Lease Year (2/1/06 - 1/31/07): $165,166.88 + $149,231.25 = $314,398.13 Seventh Lease Year (2/1/07 - 1/31/08): $171,773.55 + $155,200.50 = $326,974.05 Eighth Lease Year (2/1/08 - 1/31/09): $178,644.50 + $161,408.52 = $340,053.02 2 Within three (3) business days from the date Tenant executes this Lease, Tenant shall pay to Landlord the amount of One Hundred Twenty Two Thousand Six Hundred Fifty Seven and 22/100 Dollars ($122,657.22) as and for an advance payment of Monthly Base Rent for Suite 700 for the first full month of the First Lease Year. 1.08 Property Taxes and Operating Expenses; Tenant's Percentage Share. (A) Suite 600: In connection with Suite 600 only, the phrase "Tenant's Percentage Share (Suite 600)" shall mean eleven and fifty-one hundredths percent (11.51%) with respect to Property Taxes and Operating Expenses for the Building. Tenant shall pay Tenant's Percentage Share (Suite 600) of Property Taxes and Operating Expenses as follows: (i) Special Suite 600 Period (Commencement Date to November 30, 2002). During the period from the Commencement Date up to and including November 30, 2002 (the "Special Suite 600 Period"), Tenant shall pay (on a monthly basis as additional Rent for Suite 600) Tenant's Percentage Share (Suite 600) of Property Taxes and Operating Expenses paid or incurred by Landlord during said Special Suite 600 Period, in estimated monthly installments as determined by Landlord. Provided, however, during the Special Suite 600 Period, Operating Expenses shall only include the items set forth in the "Schedule of Special Suite 600 Operating Expenses" listed in Exhibit "E" attached hereto, and shall be subject to the limitations and adjustments set forth in Exhibit "E". (ii) December 1, 2002 to December 31, 2002. During the period from December 1, 2002 to December 31,2002, Tenant shall pay (on a monthly basis as additional Rent for Suite 600) Tenant's Percentage Share (Suite 600) of Property Taxes and Operating Expenses paid or incurred by Landlord during said period in the same manner and pursuant to the same formula as set forth in Section 1 .08(A)(i) above. (iii) January 1, 2003 to December 31, 2003. During this period, Tenant shall not be charged for any share of the Property Taxes or Operating Expenses for the Building. (iv) January 1, 2004 to the Expiration Date. Starting on January 1,2004 and during each and every month thereafter during the Initial Lease Term, Tenant shall pay Tenant's Percentage Share (Suite 600) of Property Taxes and Operating Expenses in excess of the Property Taxes and Operating Expenses paid or incurred by Landlord during the Suite 600 Base Year (defined in Section 4.01(A)). (B) Suite 700: In connection with Suite 700 only, the phrase "Tenant's Percentage Share (Suite 700)" shall mean ten percent (10.00%) with respect to Property Taxes and Operating Expenses for the Building. (i) January 1, 2002 to the Expiration Date. Starting on January 1, 2002 and during each and every month thereafter during the Initial Lease Term, Tenant shall pay Tenant's Percentage Share (Suite 700) of Property Taxes and Operating Expenses in excess of the 3 Property Taxes and Operating Expenses paid or incurred by Landlord during the Suite 700 Base Year (defined in Section 4.01 (A)). (C) All references in this Lease to "Tenant's Percentage Share" shall mean either Tenant's Percentage Share (Suite 600) or Tenant's Percentage Share (Suite 700) as determined during the applicable period set forth above. (D) Landlord may redetermine Tenant's Percentage Share from time to time to reflect reconfigurations, additions or modifications to the Building. 1.90 Security Deposit. The phrase "Security Deposit" shall mean Seventy-Five Thousand Fifty-Nine and 50/100 dollars ($75,059.50). 1.10 Tenant's Permitted Use. The phrase "Tenant's Permitted Use" shall mean general office use including sales, training, and research and development of software products (with related functions). 1.11 Business Hours. The phrase "Business Hours" shall mean the hours of 7:00 A.M. to 6:00 P.M., Monday through Friday, and 7:00 A.M. to 1:00 P.M. on Saturdays (federal and state holidays excepted). Holidays are defined as the following: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and to the extent of utilities or services provided by union members engaged at the Building, such other holidays observed by such unions. 1.12 Landlord's Address For Notices. The phrase "Landlord's Address for Notices" shall mean Transwestern Commercial Services, 2121 North California Boulevard, Suite 230, Walnut Creek, California 94596, Attn: Property Manager, telephone: (925)932-3700; facsimile: (925)932-7971. 1.13 Tenant's Address For Notices. The term "Tenant's Address for Notices" shall mean 2121 North California Boulevard, Suite 600, Walnut Creek, California 94596, Attn: Office Manager, telephone: (925)927-3778; facsimile: (925)927-3769 (with a copy to, but which copy shall not constitute notice: Electronic Arts, Inc., 209 Redwood Shores Parkway, Redwood City, California 94065, Attn: General Counsel). 1.14 Brokers. The term "Brokers" means as follows: Cornish & Carey, which represents only the interests of Landlord; and Cushman Realty Corporation, which represents only the interests of Tenant. ARTICLE 2 PREMISES 2.01 Lease of Premises. Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises from Landlord, upon all of the terms, covenants and conditions contained in this Lease. On the Commencement Date, Landlord shall deliver the Premises to 4 Tenant in substantial conformance with the Work Letter Agreement attached hereto as Exhibit "B." 2.02 Acceptance of Premises. Tenant acknowledges that Landlord has not made any representation or warranty with respect to the condition of the Premises or the Building or with respect to the suitability or fitness of either for the conduct of Tenant's Permitted Use or for any other purpose except as expressly set forth herein. To the best of Landlord's knowledge, without inquiry, the Building and Premises comply with Applicable Laws (as defined in Section 6.02(A)). Tenant currently occupies Suite 600 pursuant to a prior lease agreement ("Prior Lease") which will be terminated on the Commencement Date and replaced by this Lease. Prior to the Commencement Date, Landlord or its designee and Tenant will walk Suite 700 for the purpose of reviewing the condition of the same (and the condition of completion and workmanship of any tenant improvements in the Premises which Landlord is required to construct in the Premises pursuant to this Lease); after such review, Tenant shall execute a Suite Acceptance Letter, in the form of Exhibit "D" attached hereto, accepting the Premises. Except as is expressly set forth in this Section 2.02 or the Work Letter Agreement attached hereto, if any, or as may be expressly set forth in Suite Acceptance Letter, Tenant agrees to accept the Premises and the Building in their respective "as is" physical condition without any agreements, representations, understandings or obligations on the part of Landlord to perform any alterations, repairs or improvements (or to provide any allowance for same). ARTICLE 3 LEASE TERM 3.01 Lease Term. Except as otherwise provided in this Lease, the Lease Term shall be for the period described in Section 1.04 of this Lease, commencing on the Commencement Date described in Section 1.05 of this Lease and ending on the Expiration Date described in Section 1.06 of this Lease; provided, however, that, if, for any reason, Landlord is unable to deliver possession of Suite 700 on the date described in Section 1.05 of this Lease, Landlord shall not be liable for any damage caused thereby, nor shall the Lease be void or voidable, but, rather, the Commencement Date shall nonetheless commence on the date set forth in Section 1.05 but Monthly Base Rent for Suite 700 shall not be due or payable until Suite 700 is so tendered to Tenant (except for Tenant-caused delays which shall not be deemed to delay payment of Monthly Base Rent). 3.02 Option to Extend Term. Tenant is hereby granted the one-time right and option to extend the Initial Lease Term ("Option to Extend Term") for a single additional period of five (5) consecutive Lease Years ("Extension Period") from and after the Expiration Date. The terms and conditions applicable to the Extension Period shall be the same terms and conditions in effect under the Lease immediately prior to the Extension Period, with the following exceptions: (i) if the Option to Extend Term is exercised for less than all of the Premises, then the exercise must include at least one (1) full floor in the Building (i.e., either the entire Suite 600 and/or the entire Suite 700); (ii) if the Option to Extend Term is exercised for more than one (1) full floor but for less than all of the Premises, then (a) the exercise must include all of Suite 700 and a portion of Suite 600, and (b) Tenant must obtain Landlord's prior written consent as to which portion of Suite 600 is included and which portion of Suite 600 is excluded from the 5 exercise, which consent shall not be unreasonably nor untimely withheld; (iii) Tenant shall have no further options to extend the Lease Term; (iv) the Monthly Base Rent for each month of each Lease Year during the Extension Period shall be increased to that amount which is equal to the Fair Market Rent (defined below) for each month of each Lease Year during the Extension Period; and (v) if the Option to Extend Term is exercised for less than all of the Premises, then (a) at commencement of the Extension Period the definition of Premises shall be revised to include only the portion of the Premises which was included in the exercise, and (b) the Monthly Base Rent shall be reduced to that amount which is equal to the number of rentable square feet in the portion of the Premises included in the exercise multiplied by the Monthly Rental Rate Per Square Foot. For purposes of this Lease, the phrase "Monthly Rental Rate Per Square Foot" means the amount which is equal to the monthly Fair Market Rent (defined below) as calculated for the entire Premises pursuant to this Section 3.02 divided by seventy-nine thousand two hundred thirty two (79,232). In order for the Lease Term to be extended to include the Extension Period, Tenant must timely exercise the Option to Extend Term pursuant to the provisions set forth in Section 3.02(A) below. If Tenant timely exercises the Option to Extend Term, then Monthly Base Rent for the Premises during each month of each Lease Year during the Extension Period shall be the Fair Market Rent (defined in Section 3.02(B)) for each month of each Lease Year during the Extension Period (which shall in any event not be less than the Monthly Base Rent charged Tenant during the Lease Year preceding commencement of the Extension Period). However, any attempt by Tenant to exercise the Option To Extend shall, at Landlord's election, be null and void if Tenant is in default under the Lease (which default remains uncured following expiration of any applicable notice and cure period) as of the date of attempted exercise or at any time thereafter and prior to commencement of the Extension Period. Following timely exercise of the Option to Extend Term, (x) Tenant and Landlord shall during the Rent Negotiation Period (defined in Section 3.02(C)) meet and confer and in good faith, using commercially reasonable standards, attempt to agree on what Fair Market Rent will be for each month of each Lease Year during the Extension Period, and (y) the Lease Term shall be extended to include the Extension Period and each and every term and condition of this Lease shall remain in full force and effect until the date the Extension Period expires ("Extended Expiration Date"). If by expiration of the Rent Negotiation Period Landlord and Tenant agree on what the Fair Market Rent will be for each month of each Lease Year during the Extension Period, they shall within ten (10) business days following said agreement execute and deliver to one another an amendment to this Lease which extends the Lease Term through the Extension Period, states the number of rentable square feet in the Premises, and what the Monthly Base Rent for the Premises shall be during each month of each Lease Year during the Extension Period. Thereafter, all references in this Lease to the Expiration Date shall automatically mean the Extended Expiration Date, and all references to "Lease Year" shall mean each consecutive twelve (12) month period commencing with the first (1st) day of the Extension Period, without regard to calendar years. If, however, Tenant shall fail to timely exercise the Option to Extend Lease Term, then the Option to Extend Term shall itself terminate and expire, shall be null and void and shall have no further force and effect. Tenant's exercise of the Option to Extend Term shall not operate to cure any default by Tenant of any of the terms or provisions in the Lease, nor to extinguish or impair any rights or remedies of Landlord arising by virtue of such default. If the Lease, the Initial Lease Term or Tenant's right to possession of the Premises shall terminate in any manner whatsoever before the date Tenant timely exercises the Option to Extend Term, or if Tenant shall have subleased or assigned all or any portion of the Premises without Landlord's 6 prior written consent (where such consent was required), then immediately upon such termination, sublease or assignment, the Option to Extend Term shall simultaneously terminate and become null and void. The Option to Extend Term is personal to Tenant, however, if Landlord consents in writing to an assignment pursuant to this Lease, said assignee shall have the right to exercise the Option to Extend Term. Except as provided in the immediately preceding sentence, in no circumstance shall the assignee under a complete or partial assignment of the Lease, or a subtenant under a sublease of the Premises, have the right to exercise the Option to Extend Term. Any purported assignment of this Lease by Tenant without Landlord's prior written consent (where such consent was required), or any purported sublease by Tenant of any part of the Premises without Landlord's prior written consent (where such consent was required), after the date Tenant has exercised the Option to Extend Term and before commencement of the Extension Period, shall automatically and retroactively cause said exercise to become null and void and of no force or effect, in which event the original Expiration Date set forth in Section 1.07 of the Lease shall be reinstated. Time is of the essence of this provision. (A) Exercise of Option to Extend Term. In order to timely exercise the Option to Extend Term, Tenant must deliver unequivocal and unconditional written notice thereof to Landlord ("Notice of Exercise of Option to Extend Term") at least two hundred seventy (270) calendar days prior to the Expiration Date but not more than three hundred sixty (360) calendar days prior to the Expiration Date. (B) Definition of Fair Market Rent. The phrase "Fair Market Rent" shall mean the average per square foot net monthly base rental rate per month for all leases for periods approximately as long as the Extension Period, executed by new tenants (not renewing tenants) for similar uses and lengths of time for comparable space in buildings similar to the Building in size, age, amenities and condition which are located either in the downtown Walnut Creek business district or in the Pleasant Hill BART business district during the six (6) months immediately prior to commencement of the Extension Period, subject to reasonable adjustments for comparable space on more or less desirable floors or areas of the Building, as determined in accordance with Section 3.02(C) below. If no such comparable space has been leased during such six (6) month period, then Fair Market Rent shall be determined pursuant to the provisions set forth in Section 3.02(C) hereof, and shall be determined based on a so-called "modified face rate" of such comparable new leases, i.e. without regard to any free rent periods, take-over lease obligations or other economic incentives but taking into consideration any tenant improvement allowances provided with such comparable new leases. If such comparable leases include base years, stop levels, or other provisions respecting taxes or operating expenses, or include any other economic provisions (such as but not limited to consumer price provisions, utility reimbursements, or fixed rent increases), the same shall be included in Tenant's renewal terms. (C) Determination Fair Market Rent. The period which commences on the date which is one hundred eighty (180) calendar days prior to the Expiration Date and which ends on the date which is ninety (90) calendar days prior to the Expiration Date shall be referred to as the "Rent Negotiation Period." On condition that Tenant timely exercises the Option to Extend Term, then during the Rent Negotiation Period Landlord and Tenant shall meet and confer and in good faith, using commercially reasonable standards, attempt to agree on what the Fair Market Rent shall be for each month during each Lease Year of the Extension Period for the Premises. 7 However, if by expiration of the Rent Negotiation Period Landlord and Tenant are for any reason unable to agree on the Fair Market Rent, then Fair Market Rent shall be determined as follows: (i) If less then the entire Premises will be leased by Tenant during the Extension Period, then the parties shall (a) determine the monthly Fair Market Rent for the entire Premises, (b) then determine the Monthly Rental Rate Per Square Foot by dividing the monthly Fair Market Rent for the entire Premises by 79,232, and (c) then determine the monthly Fair Market Rent for the reduced Premises by multiplying the Monthly Rental Rate Per Square Foot by the number of rentable square feet in the reduced Premises. (ii) Within ten (10) business days from expiration of the Rent Negotiation Period, Landlord and Tenant shall (a) each place in a separate sealed envelope their final determination as to what the Fair Market Rent shall be during each month of each Lease Year during the Extension Period, and (b) meet with each other, exchange the sealed envelopes and then open such envelopes in each other's presence. If within one (1) business day of the exchange, Landlord and Tenant do not mutually agree upon the Fair Market Rent for each month of each Lease Year during the Extension Period, then within ten (10) business days of said exchange and opening of envelopes Landlord shall appoint an individual ("Landlord's Appointment"), and Tenant shall appoint an individual ("Tenant's Appointment"). Landlord's Appointment and Tenant's Appointment shall each by profession be duly licensed real estate brokers in good standing in the State of California who shall have been active during the most recent ten (10) year period in the leasing of comparable commercial properties in the vicinity of the Building (together, the "Initial Brokers"). The Initial Brokers shall then select one of the Landlord's or Tenant's determination of Fair Market Rent (which were in the sealed envelopes) which most closely approximates their good faith determination of the Fair Market Rent for the Premises. The Initial Brokers shall not have the authority to modify or change either of the Landlord's or Tenant's determination of Fair Market Rent, nor shall the Initial Brokers have the authority to select a middle ground or compromise position. The Initial Broker's authority shall be limited solely to determining which of Landlord's or Tenant's submitted Fair Market Rent determinations for the Premises most closely approximate his/her determination of Fair Market Rent during each month of each Lease Year during the Extension Period. The Initial Brokers may hold such hearings and require such briefs as they determine necessary. In addition, Landlord or Tenant may submit to the Initial Brokers (with a copy concurrently delivered to the other party) within five (5) business days after the appointment of the Initial Brokers any market data and additional information that such party deems relevant to the determination of Fair Market Rent for each month during each Lease Year of the Extension Period and the other party may submit a reply in writing within five (5) business days after receipt of such market data. (iii) The Initial Brokers shall, within thirty (30) calendar days of their appointment, reach a decision as to whether the parties shall use Landlord's or Tenant's submitted Fair Market Rent, and shall notify Landlord and Tenant of such determination. The decision of the Initial Brokers shall be final and binding upon Landlord and Tenant. (iv) If the Initial Brokers fail to timely agree upon whether Landlord's or Tenant's submitted Fair Market Rent shall constitute the Fair Market Rent for each month of 8 each Lease Year during the Extension Period, then within forty (40) calendar days following appointment of the Initial Brokers, Landlord and Tenant shall meet, confer and attempt to agree on the appointment of a third qualified individual ("Third Broker"). However, if Landlord and Tenant are unable to timely agree on selection of a Third Broker, then one or both of said parties may apply to the Presiding Judge of the Contra Costa County Superior Court for appointment of the Third Broker. (v) The role of the Third Broker shall be to review and analyze the results of the hearings held by the Initial Brokers, review the briefs, information, testimony and data presented to the Initial Brokers, and review any reports submitted by the Initial Brokers. The Third Broker shall not have the authority to modify or change either of the Landlord's or Tenant's determination of Fair Market Rent, nor shall the Third Broker have the authority to select a middle ground or compromise position. The Third Broker's authority shall be limited solely to determining which of Landlord's or Tenant's submitted Fair Market Rent determinations for the Premises most closely approximate his/her determination of Fair Market Rent during each month of each Lease Year during the Extension Period. Within thirty (30) calendar days of his/her appointment, the Third Broker shall decide whether the parties shall use Landlord's or Tenant's submitted Fair Market Rent, and shall notify Landlord and Tenant of such determination. The decision of the Third Broker shall be final and binding upon Landlord and Tenant. (vi) The cost of the proceedings and any fee or charge payable to the Initial Brokers and, if applicable, to the Third Broker, shall be paid by Landlord and Tenant equally. ARTICLE 4 RENTAL 4.01 Definitions. As used herein: (A) "Base Year" shall have the following meaning: (i) Suite 600: For Suite 600, the phrase "Suite 600 Base Year" shall mean as follows: a. During the Special Suite 600 Period (Commencement Date to November 30, 2002), there shall be no Suite 600 Base Year, instead Tenant shall pay Tenant's Percentage Share (Suite 600) of Property Taxes and Operating Costs pursuant to the provisions set forth in Section 1.08(A)(i). b. During the period December 1,2002 to December 31, 2002, Tenant shall pay Tenant's Percentage Share (Suite 600) of Property Taxes and Operating Costs pursuant to the provisions set forth in Section 1.08(A)(ii). c. Following expiration of the Special Suite 600 Period, the phrase "Suite 600 Base Year" shall mean calendar year 2003, and Tenant shall pay Tenant's 9 Percentage Share (Suite 600) of Property Taxes and Operating Costs pursuant to the provisions set forth in Sections 1.08(A)(iii) and (iv). (ii) Suite 700. For Suite 700, the phrase "Suite 700 Base Year" shall mean calendar year 2001. All references in this Lease to "Base Year" shall mean either the Suite 600 Base Year or the Suite 700 Base Year, as the context dictates. (B) "Property Taxes" shall mean the aggregate amount of all real estate taxes, assessments (whether they be general or special), sewer rents and charges, transit taxes, taxes based upon the receipt of rent and any other federal, state or local govermnental charge, general, special, ordinary or extraordinary (but not including income or franchise taxes, capital stock, inheritance, estate, gift, or any other taxes imposed upon or measured by Landlord's gross income or profits, unless the same shall be imposed in lieu of real estate taxes or other ad valorem taxes), which Landlord shall pay or become obligated to pay in connection with the Building or any part thereof. Property Taxes shall also include all reasonable fees and costs, including attorneys' fees, appraisals and consultants' fees, reasonably incurred by Landlord in seeking to obtain a reassessment, reduction of, or a limit on the increase in, any Property Taxes, regardless of whether any reduction or limitation is obtained. Property Taxes for any calendar year shall be Property Taxes which are due for payment or paid in such year, rather than Property Taxes which are assessed or become a lien during such year. Property Taxes shall include any tax, assessment, levy, imposition or charge imposed upon Landlord and measured by or based in whole or in part upon the Building or the rents or other income from the Building, to the extent that such items would be payable if the Building was the only property of Landlord subject to same and the income received by Landlord from the Building was the only income of Landlord. Property Taxes shall also include any personal property taxes imposed upon the furniture, fixtures, machinery, equipment, apparatus, systems and appurtenances of Landlord used in connection with the Building. (B) Subject to the provisions set forth in Section 1.08(A) with respect to the Special Suite 600 Period, "Operating Expenses" shall mean all costs, fees, disbursements and expenses paid or incurred by or on behalf of Landlord (excluding Property Taxes) in the operation, ownership, maintenance, insurance, management, replacement and repair of the Building including without limitation: (i) Premiums for property, casualty, liability, rent interruption or other types of insurance carried by Landlord. (ii) Salaries, wages and other amounts paid or payable for personnel including the Building manager, superintendent, operation and maintenance staff, and other employees of Landlord involved in the maintenance and operation of Building, including contributions and premiums towards fringe benefits, unemployment, disability and worker's compensation insurance, pension plan contributions and similar premiums and contributions and the total charges of any independent contractors or property managers engaged in the operation, repair, care, maintenance and cleaning of any portion of the Building. 10 (iii) Cleaning expenses, including without limitation janitorial services, window cleaning, and garbage and refuse removal. (iv) Landscaping expenses, including without limitation irrigating, trimming, mowing, fertilizing, seeding, and replacing plants. (v) Heating, ventilating, air conditioning and steam/utilities expenses, including fuel, gas, electricity, water, sewer, telephone, and other services. (vi) Subject to the provisions of Section 4.01(C)(xii) below, the cost of maintaining, operating, repairing and replacing components of equipment or machinery, including without limitation heating, refrigeration, ventilation, electrical, plumbing, mechanical, elevator, escalator, sprinklers, fire/life safety, security and energy management systems, including service contracts, maintenance contracts, supplies and parts. (vii) All items of repair or maintenance of the Building not mentioned elsewhere in this Section. (viii) The costs of policing and providing security and supervision of the Building. (ix) Fair market rental with respect to the management office for the Building. (x) The cost of the rental of any machinery or equipment and the cost of supplies used in the maintenance and operation of the Building. (xi) Audit fees and the cost of accounting services incurred in the preparation of statements referred to in this Lease and financial statements, and in the computation of the rents and charges payable by tenants of the Building. (xii) Capital expenditures (a) made to reduce Operating Expenses, (b) in connection with Suite 600, to comply with any laws or other governmental requirements enacted after June 1, 1995; (c) in connection with Suite 700, to comply with any laws or other governmental requirements enacted after February 1, 2001; or (d) for replacements and repairs (as opposed to additions or new improvements) of non-structural items located in the Building or its common areas required to keep such areas in good condition and repair; provided, all such permitted capital expenditures (together with reasonable financing charges) shall be amortized for purposes of this Lease over their useful lives as reasonably determined by Landlord's independent certified public accountants. (xiii) Legal fees and expenses. (xiv) Payments under any easement, operating agreement, declaration, restrictive covenant, or instrument pertaining to the sharing of costs in any planned development. 11 (xv) A commercially reasonable fee for the administration and management of the Building generally consistent with other comparable Class A office buildings in the Walnut Creek area. (xvi) The cost to remove, remediate or encapsulate hazardous materials or substances which are located anywhere in the Building (excluding the Premises) or Common Areas but only if said removal, remediation or encapsulation is related to the repair and maintenance of the Building and/or Common Areas. Notwithstanding the foregoing, Operating Expenses shall not include the following: any ground lease or underlying lease rental; repair of damage to the Building or its equipment and/or systems, to the extent Landlord is reimbursed by insurance proceeds, warranties or guaranties; construction and installation of tenant improvements, renovations, or decorations made for tenants or other occupants in the Building or for vacant tenant suites within the Building, including, without limitation, fees and costs for space planning, architectural drawings, construction, permits, licenses and inspection; costs incurred in connection with negotiations and transactions with present or prospective tenants or other occupants of the Building for leases, subleases, assignments and other related transactions, including, without limitation, attorneys' fees for such negotiations and transactions; interest, principal, points and fees on debts or amortization on any mortgage or any other financing instrument encumbering the Building; Landlord's general corporate overhead; all items and services for which Tenant or any other tenant in the Building directly reimburses to Landlord; leasing commissions; electric power costs for which any tenant directly contracts with the local public service company and which are paid for by any such tenant; (i) the cost to remove, remediate or encapsulate hazardous materials or substances located in the Premises, and (ii) unless the same is related to the repair and maintenance of the Building and/or Common Areas (in which case the cost shall be included in Operating Expenses), the cost to remove, remediate or encapsulate hazardous materials or substances located anywhere in the Building or Common Areas; Landlord's charitable or political contributions; costs to remediate Hazardous Materials (defined below) which were deposited, released or discharged in Suite 600 prior to June 1, 1995 (in connection with Suite 600) or which were deposited, released or discharged in Suite 700 prior to February 1, 2001; and legal fees and expenses incurred in connection with the enforcement of any leases. 4.02 Monthly Base Rent. During the Lease Term, Tenant shall pay to Landlord as rental for the Premises the Monthly Base Rent described in Section 1.07 above, subject to the following adjustments (herein called the "Rent Adjustments"): (A) Suite 600. (i) Special Suite 600 Period (Commencement Date to November 30. 2002). During the Special Suite 600 Period, the Monthly Base Rent for Suite 600 payable by Tenant to Landlord, as adjusted pursuant to Section 1.07 and subject to the provisions set forth in Section 1.08(A) above, shall be increased by that amount which is equal to (i) Tenant's Percentage Share (Suite 600) of all Property Taxes paid or incurred by Landlord during each calendar year, and (ii) 12 Tenant's Percentage Share (Suite 600) of the Operating Expenses paid or incurred by Landlord during each calendar year. (ii) December 1, 2002 to December 31, 2002. During the period December 1, 2002 to December 31, 2002, the Monthly Base Rent for Suite 600 payable by Tenant to Landlord shall be determined in the same manner and pursuant to the same formula as set forth in Section 4.02(A)(i) above. (iii) January 1, 2003 to December 31. 2003. During the period January 1, 2003 to December 31, 2003, Tenant shall have no obligation to pay any share of Property Taxes or Operating Expenses with respect to Suite 600. (iv) January 1, 2004 to Expiration Date. Starting on January 1,2004 and during each calendar year thereafter during the Initial Lease Term, the Monthly Base Rent for Suite 600 payable by Tenant to Landlord, as adjusted pursuant to Section 1.07 above (but no longer subject to the provisions set forth in Section 1.08(A)), shall be increased by (a) Tenant's Percentage Share (Suite 600) of the total dollar increase, if any, in Property Taxes for such year over Property Taxes for the Suite 600 Base Year; and (b) Tenant's Percentage Share (Suite 600) of the total dollar increase, if any, in Operating Expenses paid or incurred by Landlord during such year over Operating Expenses paid or incurred by Landlord during the Suite 600 Base Year. A decrease in Property Taxes or Operating Expenses below the Suite 600 Base Year amounts shall not decrease the amount of the Monthly Base Rent due hereunder or give rise to a credit in favor of Tenant. (B) Suite 700. Starting on January 1, 2002 and during each calendar year thereafter during the Initial Lease Term, the Monthly Base Rent for Suite 700 payable by Tenant to Landlord, as adjusted pursuant to Section 1.07 above, shall be increased by (a) Tenant's Percentage Share (Suite 700) of the total dollar increase, if any, in Property Taxes for such year over Property Taxes for the Suite 700 Base Year; and (b) Tenant's Percentage Share (Suite 700) of the total dollar increase, if any, in Operating Expenses paid or incurred by Landlord during such year over Operating Expenses paid or incurred by Landlord during the Suite 700 Base Year. A decrease in Property Taxes or Operating Expenses below the Suite 700 Base Year amounts shall not decrease the amount of the Monthly Base Rent due hereunder or give rise to a credit in favor of Tenant. (C) In each case during the Initial Lease Term where Monthly Base Rent has been subject to a Rent Adjustment pursuant to the provisions of this Section 4.02, each specific Rent Adjustment shall be referred to as a "Tax and Operating Expense Adjustment." 4.03 Adjustment Procedure; Estimates. The Tax and Operating Expense Adjustments specified in Section 4.02 shall be determined and paid as follows: (A) During each calendar year of the Lease Term, Landlord shall give Tenant written notice of its reasonable estimate of the amounts payable under Section 4.02(A) for that calendar year. On or before the first day of each calendar month during the calendar year in question, Tenant shall pay to Landlord one-twelfth (1/12th) of such estimated amounts; provided, however 13 that, not more often than once per calendar year, Landlord may, by written notice to Tenant, revise its estimate for such year, and subsequent payments by Tenant for such year shall be based upon such revised estimate. (B) Within one hundred twenty (120) days after the close of each calendar year or as soon thereafter as is practicable, Landlord shall deliver to Tenant a statement of that year's Property Taxes and Operating Expenses, and the actual Tax and Operating Expense Adjustment to be made pursuant to Section 4.02 for such calendar year, as determined by Landlord (the "Landlord's Statement") and such Landlord's Statement shall be binding upon Tenant, except as provided in Section 4.04 below. If the final amount of the Tax and Operating Expense Adjustment as shown in Landlord's Statement is more than the estimated Tax and Operating Expense Adjustment payments actually paid by Tenant for such calendar year, Tenant shall pay the deficiency to Landlord within thirty (30) calendar days from receipt of Landlord's Statement. However, if the final amount of the Tax and Operating Expense Adjustment as shown in Landlord's Statement is less than the estimated Tax and Operating Adjustment payments actually paid by Tenant for such calendar year, any excess shall be credited against Rent (as hereinafter defined) next payable by Tenant under this Lease or, if the Lease Term has expired, any excess shall be paid to Tenant within thirty (30) calendar days after the date the same has been determined by Landlord. No delay in providing Landlord's Statement described in this subparagraph (B) shall act as a waiver of Landlord's right to payment under Section 4.02 above. (C) If this Lease shall terminate on a day other than the end of a calendar year, the amount of the Tax and Operating Expense Adjustment to be paid pursuant to Section 4.02 that is applicable to the calendar year in which such termination occurs shall be prorated on the basis of the number of days from January 1 of the calendar year in question to the termination date bears to 365. The termination of this Lease shall not affect the obligations of Landlord and Tenant pursuant to Section 4.03(B) to be performed after such termination. 4.04 Review of Landlord's Statement. Provided that Tenant is not in default beyond any applicable cure period under this Lease, and provided further that Tenant strictly complies with the provisions of this Section 4.04, Tenant shall have the right to reasonably review supporting data for any portion of a Landlord's Statement for the calendar year to which said Statement pertains plus the calendar year preceding that calendar year if the same has not previously been audited (for a possible total look-back period of two (2) calendar years); provided, however, Tenant may not audit any calendar year more than once. Further, Tenant may not have the right to audit all documentation relating to all Building operations as this would far exceed the relevant information necessary to properly document a pass-through billing statement, but real estate tax statements, and information on utilities, repairs, maintenance and insurance will be available), in accordance with the following procedure: (A) Tenant shall, within sixty (60) calendar days after delivery of any Landlord's Statement, deliver a written notice to Landlord specifying the portions of the Landlord's Statement that are claimed to be incorrect, and Tenant shall simultaneously pay to Landlord all amounts due from Tenant to Landlord as specified in the Landlord's Statement. Except as expressly set forth in subsection (C) below, in no event shall Tenant be entitled to withhold deduct, or offset any monetary obligation of Tenant to Landlord under the Lease (including, 14 without limitation, Tenant's obligation to make all payments of Monthly Base Rent including the annual adjustments required by Section 1.07 and all payments of Tenant's Tax and Operating Expense Adjustment) pending the completion of and regardless of the results of any review of records under this Section 4.04. The right of Tenant under this Section 4.04 may only be exercised once for any Landlord's Statement, and if Tenant fails to meet any of the above conditions as a prerequisite to the exercise of such right, the right of Tenant under this Section 4.04 for a particular Landlord's Statement shall be deemed waived. (B) Tenant acknowledges that Landlord maintains its records for the Building in Landlord's property manager's offices presently located at the address set forth in Section 1.12 and Tenant agrees that any review of records under this Section 4.04 shall be at the sole expense of Tenant and shall be conducted by an independent firm of certified public accountants of national standing which does not charge on a contingency-fee basis. Tenant acknowledges and agrees that any records reviewed under this Section 4.04 constitute confidential information of Landlord, which shall not be disclosed to anyone other than Tenant's attorneys, accountants, other employees and consultants performing the review, the principals of Tenant who receive the results of the review and other parties pursuant to court order, subpoena or Applicable Laws as defined below (collectively, "Permitted Recipients"). The disclosure of such information to any person other than a Permitted Recipient, whether or not caused by the conduct of Tenant, shall constitute a material breach of this Lease. (C) Any errors disclosed by the review shall be promptly corrected by Landlord, provided, however, that if Landlord disagrees with any such claimed errors, Landlord shall have the right to cause another review to be made by an independent firm of certified public accountants of national standing which does not charge on a contingency-fee basis. In the event of a disagreement between the two accounting firms, the review that discloses the least amount of deviation from Landlord's Statement shall be deemed to be correct. In the event that the results of the review of Landlord's records (taking into account, if applicable, the results of any additional review caused by Landlord) reveal that Tenant has overpaid obligations for a preceding period, the amount of such overpayment shall be credited against Tenant's subsequent installment obligations to pay the estimated Tax and Operating Expense Adjustment; and if the results demonstrate that Tenant overpaid obligations by more than ten percent (10%), Landlord shall pay Tenant's reasonable costs of the audit. In the event that the results of the review of Landlord's records (taking into account, if applicable, the results of any additional review caused by Landlord) reveal that Tenant has underpaid obligations for a preceding period, the amount of such underpayment shall be paid by Tenant to Landlord along with the next succeeding installment of estimated Tax and Operating Expense Adjustment; and if the results demonstrate that Tenant underpaid obligations by more than ten percent (10%), Tenant shall pay Landlord's reasonable costs of the audit. 4.05 Payment. Within three (3) business days from the date Tenant executes this Lease, Tenant shall pay Landlord the Monthly Base Rent for Suite 700 for the first full calendar month of the first Lease Year of Lease Term. Thereafter the Total Monthly Base Rent described in Section 1.07, as adjusted annually in accordance with Section 1.07 and by the Rent Adjustments set forth in Section 4.02, shall be payable in advance on the first day of each calendar month. All Rent, and all other amounts payable to Landlord by Tenant pursuant to the 15 provisions of this Lease, shall be paid to Landlord, without notice, demand, abatement (unless otherwise provided in this Lease), deduction or offset, in lawful money of the United States at Landlord's office in the Building or to such other person or at such other place as Landlord may designate from time to time by written notice given to Tenant. No payment by Tenant or receipt by Landlord of a lesser amount than the correct Rent due hereunder shall be deemed to be other than a payment on account; nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed to effect or evidence an accord and satisfaction; and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance or pursue any other remedy in this Lease or at law or in equity provided. 4.06 Late Charge; Interest. Tenant acknowledges that the late payment of Monthly Base Rent or any other amounts payable by Tenant to Landlord hereunder (all of which shall constitute additional rental to the same extent as Monthly Base Rent) will cause Landlord to incur administrative costs and other damages, the exact amount of which would be impracticable or extremely difficult to ascertain. Subject to the provisions of Section 4.06(A) below, Landlord and Tenant agree that if Landlord does not receive any such payment on or before five (5) calendar days after receipt of written notice from Landlord that such payment is overdue ("Notice of Late Payment"), Tenant shall pay to Landlord, as additional rent, a late charge equal to five percent (5%) of the overdue amount to cover such additional administrative costs. In addition, Landlord and Tenant agree that if Landlord does not receive any such payment on or before the date when due, Tenant shall pay to Landlord, as additional rent, interest on the delinquent amounts at the lesser of the maximum rate permitted by law if any or ten percent (10%) per annum from the date due to the date paid. (A) Notwithstanding the foregoing, Landlord shall only be required to deliver one (1) Notice of Late Payment to Tenant during any Lease Year. If, during any Lease Year, Landlord has delivered to Tenant one (1) Notice of Late Payment, thereafter Landlord and Tenant agree that if Landlord does not receive any such payment on or before five (5) calendar days after the date such payment is due, Tenant shall pay to Landlord, as additional rent, (a) a late charge equal to five percent (5%) of the overdue amount to cover such additional administrative costs; and (b) interest on the delinquent amounts at the lesser of the maximum rate permitted by law if any or ten percent (10%) per annum from the date due to the date paid. 4.07 Additional Rent. For purposes of this Lease, all amounts payable by Tenant to Landlord pursuant to this Lease, whether or not denominated as such, shall constitute additional rental hereunder. Such additional rental, together with the Monthly Base Rent and Rent Adjustments, shall sometimes be referred to in this Lease as "Rent". 4.08 Additional Taxes. Notwithstanding anything in Section 4.01(B) or Section 4.02 to the contrary, Tenant shall reimburse Landlord upon demand for any and all taxes payable by or imposed upon Landlord (and not charged to Tenant by Landlord as Property Taxes or Operating Expenses) upon or with respect to: any fixtures or personal property located in the Premises; any leasehold improvements made in or to the Premises by or for Tenant; the Rent payable hereunder, including, without limitation, any gross receipts tax, license fee or excise tax levied by any governmental authority; the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy of any portion of the Premises (including 16 without limitation any applicable possessory interest taxes); or this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises. ARTICLE 5 SECURITY DEPOSIT 5.01 Security Deposit. Tenant has already deposited with Landlord the Security Deposit described in Section 1.9 above as security for Tenant's performance under the Prior Lease. The Security Deposit is made by Tenant and shall be retained and used by Landlord to secure the faithful performance of all the terms, covenants and conditions of this Lease to be performed by Tenant. If Tenant shall default with respect to any covenant or provision hereof, Landlord may use, apply or retain all or any portion of the Security Deposit to cure such default or to compensate Landlord for any loss or damage which Landlord may suffer thereby. If Landlord so uses or applies all or any portion of the Security Deposit, Tenant shall within five (5) business days after receipt of written demand deposit cash with Landlord in an amount sufficient to restore the Security Deposit to the full amount hereinabove stated. Landlord shall not be required to keep the Security Deposit separate from its general accounts and Tenant shall not be entitled to interest on the Security Deposit. Within thirty (30) days after the expiration of the Lease Term and the vacation of the Premises by Tenant, the Security Deposit, or such part as has not been applied to cure the default, shall be returned to Tenant. ARTICLE 6 USE OF PREMISES 6.01 Tenant's Permitted Use. Tenant shall use the Premises only for Tenant's Permitted Use as set forth in Section 1.10 above and shall not use or permit the Premises to be used for any other purpose. Tenant shall, at its sole cost and expense, obtain all governmental licenses and permits required to allow Tenant to conduct Tenant's Permitted Use. Landlord disclaims any warranty that the Premises are suitable for Tenant's intended use and Tenant acknowledges that it has had a full opportunity to make its own determination in this regard. 6.02 Compliance With Laws and Other Requirements. (A) Tenant shall cause the Premises to comply in all material respects with all laws, ordinances, regulations and directives of any governmental authority having jurisdiction including, without limitation, any certificate of occupancy and any law, ordinance, regulation, covenant, condition or restriction affecting the Building or the Premises which in the future may become applicable to the Premises (collectively "Applicable Laws"), but only to the extent such compliance obligation arises from changes in Applicable Laws after June 1, 1995 with respect to Suite 600 or from changes in Applicable Laws after the Commencement Date with respect to Suite 700, and in each instance the same relate either to (i) Tenant's use of the Premises which is other than a Permitted Use, or (i) any alterations, additions or changes made by Tenant to the Premises (whether or not with the consent of Landlord) or by Landlord at the request of Tenant. 17 (B) Tenant shall not use the Premises, or permit the Premises to be used, in any manner which: (i) violates any Applicable Law; (ii) causes or is reasonably likely to cause damage to the Building or the Premises; (iii) violates a requirement or condition of any fire and extended insurance policy covering the Building or the Premises, or increases the cost of such policy; (iv) constitutes or is reasonably likely to constitute a nuisance, annoyance or inconvenience to other tenants or occupants of the Building or its equipment, facilities or systems; (v) interferes with, or is reasonably likely to interfere with, the transmission or reception of microwave, television, radio, telephone or other communication signals by antennae or other facilities located in the Building; or (vi) violates the Rules and Regulations described in Article 19. (C) Subject and subordinate to Tenant's obligations to comply with Applicable Laws set forth in Section 6.02(A) and (B), Landlord agrees to and shall cause the Premises to comply with Applicable Laws. 6.03 Hazardous Materials. (A) No Hazardous Materials, as defined herein, shall be Handled, as also defined herein, upon, about, above or beneath the Premises or any portion of the Building by or on behalf of Tenant, its subtenants or its assignees, or their respective contractors, clients, officers, directors, employees, agents, or invitees. Any such Hazardous Materials so Handled shall be known as Tenant's Hazardous Materials. Notwithstanding the foregoing, normal quantities of Tenant's Hazardous Materials customarily used in the conduct of the Permitted Uses (e.g., copier fluids and cleaning supplies) may be Handled at the Premises without Landlord's prior written consent. Tenant's Hazardous Materials shall be Handled at all times in compliance with the manufacturer's instructions therefor and all applicable Environmental Laws, as defined herein. (B) Notwithstanding the obligation of Tenant to indemnify Landlord pursuant to this Lease, Tenant shall, at its sole cost and expense, promptly take all actions required by any Regulatory Authority, as defined herein, which requirements or necessity arises from the Handling of Tenant's Hazardous Materials upon, about, above or beneath the Premises or any portion of the Building. To the extent required by any Regulatory Authority, such actions shall include, but not be limited to, the investigation of the environmental condition of the Premises or any affected portion of the Building, the preparation of any feasibility studies or reports and the performance of any cleanup, remedial, removal or restoration work. Tenant shall take all actions necessary to restore the Premises or any affected portion of the Building to the condition existing prior to the introduction of Tenant's Hazardous Materials, notwithstanding any less stringent standards or remediation allowable under applicable Environmental Laws. Tenant shall nevertheless obtain Landlord's written approval prior to undertaking any actions required by this Section, which approval shall not be unreasonably withheld so long as such actions would not potentially have a material adverse long-term or short-term effect on the Premises or any affected portion of the Building. (C) Tenant agrees to execute affidavits, representations, and the like from time to time at Landlord's request stating Tenant's actual knowledge regarding the presence of Hazardous Materials on the Premises. 18 (D) "Environmental Laws" means and includes all now and hereafter existing statutes, laws, ordinances, codes, regulations, rules, rulings, orders, decrees, directives, policies and requirements by any Regulatory Authority regulating, relating to, or imposing liability or standards of conduct concerning public health and safety or the environment. (E) "Hazardous Materials" means: (i) any material or substance: (a) which is defined or becomes defined as a "hazardous substance", "hazardous waste," "infectious waste," "chemical mixture or substance," or "air pollutant" under Environmental Laws; (b) containing petroleum, crude oil or any fraction thereof; (c) containing polychlorinated biphenyls (PCB's); (d) containing asbestos; (e) which is radioactive; or (f) which is infectious; or (ii) any other material or substance displaying toxic, reactive, ignitable or corrosive characteristics, as all such terms are used in their broadest sense, and are defined, or become defined by Environmental Laws. (F) "Handle," "handle," "Handled," "handled," "Handling," or "handling" shall mean any installation, handling, generation, storage, treatment, use, disposal, discharge, release, manufacture, refinement, presence, migration, emission, abatement, removal, transportation, or any other activity of any type in connection with or involving Hazardous Materials. (G) "Regulatory Authority" shall mean any federal, state or local governmental agency, commission, board or political subdivision. ARTICLE 7 UTILITIES AND SERVICES 7.01 Building Services. As long as Tenant is not in default under this Lease, Landlord agrees to furnish or cause to be furnished to the Premises the following utilities and services, subject to the conditions and standards set forth herein: (A) Non-attended automatic elevator service (if the Building has such equipment serving the Premises), in common with Landlord and other tenants and occupants and their agents and invitees. (B) During Business Hours, such air conditioning, heating and ventilation as, in Landlord's reasonable judgment and which is consistent with other Class A office buildings in the downtown Walnut Creek area, are required for the comfortable use and occupancy of the Premises; provided, however, that if Tenant shall require heating, ventilation or air conditioning in excess of that which Landlord shall be required to provide hereunder, Landlord may provide such additional heating, ventilation or air conditioning and electricity service at the following rates: (i) $85 per hour for heating, ventilation and air conditioning service, and (ii) $2.50 per hour for electricity for every 10,000 square feet for after-Business Hour lighting; subject however, to Landlord's right to reasonably increase said rates from time to time. (C) Water for drinking and rest room purposes. 19 (D) Janitorial and cleaning services five (5) days per week (consistent with the "Schedule of Janitorial Specifications" attached hereto as Exhibit "F"), provided that the Premises are used exclusively for the Permitted Uses and are kept reasonably in order by Tenant. If the Premises are not used exclusively as offices, Landlord, at Landlord's sole discretion, may require that the Premises be kept clean and in order by Tenant, at Tenant's expense, to the satisfaction of Landlord and by persons approved by Landlord; and, in all events, Tenant shall pay to Landlord the cost of removal of Tenant's refuse and rubbish, to the extent that the same exceeds the refuse and rubbish attendant to normal office usage. (E) At all reasonable times, electric current as required for building standard lighting and fractional horsepower machines generally used in the conduct of the Permitted Uses; provided, however, that: (i) without Landlord's consent, Tenant shall not install, or permit the installation, in the Premises of any computers, word processors, electronic data processing equipment or other type of equipment or machines which will increase Tenant's use of electric current in excess of that which Landlord is obligated to provide hereunder (provided, however, that the foregoing shall not preclude the use of personal computers or similar office equipment generally used in the conduct of the Permitted Uses); (ii) if Tenant shall require electric current which may disrupt the provision of electrical service to other tenants, Landlord may refuse to grant its consent or may condition its consent upon Tenant's payment of the cost of installing and providing any additional facilities required to furnish such excess power to the Premises and upon the installation in the Premises of electric current meters to measure the amount of electric current consumed, in which latter event Tenant shall pay for the cost of such meter(s) and the cost of installation, maintenance and repair thereof, as well as for all excess electric current consumed at the rates charged by the applicable local public utility, plus a reasonable amount to cover the additional expenses incurred by Landlord in keeping account of the electric current so consumed; and (iii) if Tenant's increased electrical requirements will materially affect the temperature level in the Premises or the Building, Landlord's consent may be conditioned upon Tenant's requirement to pay such amounts as will be incurred by Landlord to install and operate any machinery or equipment necessary to restore the temperature level to that otherwise required to be provided by Landlord, including but not limited to the cost of modifications to the air conditioning system. Landlord shall not, in any way, be liable or responsible to Tenant for any loss or damage or expense which Tenant may incur or sustain if, for any reasons beyond Landlord's reasonable control, either the quantity or character of electric service is changed or is no longer available or suitable for Tenant's requirements. Tenant covenants that at all times its use of electric current shall never exceed the capacity of the feeders, risers or electrical installations as currently existing in the Building. If submetering of electricity in the Building will not be permitted under future laws or regulations, the Rent will then be equitably and periodically adjusted to include an additional payment to Landlord reflecting the cost to Landlord for furnishing electricity to Tenant in the Premises. (F) Security for the Building as reasonably determined by Landlord from time to time. The parties acknowledge that safety and security devices, services and programs provided by Landlord, if any, while intended to deter crime and ensure safety, may not in given instances prevent theft or other criminal acts, or ensure safety of persons or property. The risk that any safety or security device, service or program may not be effective, or may malfunction, or be circumvented by a criminal, is assumed by Tenant with respect to Tenant's 20 property and interests, and Tenant shall obtain insurance coverage to the extent Tenant desires protection against such criminal acts and other losses, as further described in this Lease. Tenant agrees to cooperate in any reasonable safety or security program developed by Landlord or required by Applicable Laws. Any amounts which Tenant is required to pay to Landlord pursuant to this Section 7.01 shall be payable upon demand by Landlord and shall constitute additional rent. 7.02 Interruption of Services. Landlord shall not be liable for any failure to furnish, stoppage of, or interruption in furnishing any of the services or utilities described in Section 7.01, when such failure is caused by accident, breakage, repairs, strikes, lockouts, power shortages, labor disputes, labor disturbances, governmental regulation, civil disturbances, acts of war, moratorium or other governmental action, or any other cause beyond Landlord's reasonable control, and, in such event, Tenant shall not be entitled to any damages nor (except as otherwise provided in Section 7.02(A) below) shall any failure or interruption abate or suspend Tenant's obligation to pay Monthly Base Rent and Additional Rent required under this Lease or constitute or be construed as a constructive or other eviction of Tenant. Further, in the event any governmental authority or public utility promulgates or revises any law, ordinance, rule or regulation, or issues mandatory controls or voluntary controls relating to the use or conservation of energy, water, gas, light or electricity, the reduction of automobile or other emissions, or the provision of any other utility or service, Landlord may take any reasonably appropriate action to comply with such law, ordinance, rule, regulation, mandatory control or voluntary guideline and Tenant's obligations hereunder shall not be affected by any such action of Landlord. Notwithstanding the foregoing: (A) If (i) during the Lease Term Landlord is unable to furnish to the Premises any of the utilities and services described in Section 7.0 1(A)-(E) hereinabove (a "Service Failure") for a continuous period of fifteen (15) or more business days ("15-Day Period"), and (ii) during said 15-Day Period the Service Failure renders the Premises substantially unusable for the Permitted Uses, then (iii) commencing at expiration of the 15-Day Period and ending on the date that the Service Failure ends, the Monthly Base Rent for the Premises shall be abated pro rata in proportion to the portion of the Premises rendered substantially unusable as a consequence of the Service Failure. (B) If (i) during the Lease Term a Service Failure occurs and continues for a continuous period of ninety (90) or more calendar days ("90-Day Period"), and (ii) during said 90-Day Period the Service Failure renders the Premises substantially unusable for the Permitted Uses, then (iii) commencing at expiration of the 90-Day Period and ending thirty (30) calendar days thereafter (the "Window Period"), Landlord and Tenant shall each have the right and option to terminate this Lease. Landlord and/or Tenant shall exercise this termination right, if at all, by delivery of written notice thereof to the other Landlord prior to expiration of the Window Period, in which event this Lease shall terminate, expire and have no further force or effect, said termination to be effective thirty (30) calendar days after delivery of the termination notice. However, if prior to expiration of the Window Period neither Landlord or Tenant exercise their right to terminate the Lease as provided in this Section 7.02, then the right to terminate herein granted shall itself terminate, expire and have no further force or effect. 21 ARTICLE 8 MAINTENANCE AND REPAIRS 8.01 Landlord's Obligations. Except as provided in Section 8.02 and Section 8.03 below, Landlord shall maintain the Building, the common areas and the utility delivery systems to the point of entry into the Premises in good order and repair throughout the Lease Term; provided, however, that Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after written notice of the need for such repairs or maintenance is given to Landlord by Tenant. Except as provided in Article 11, there shall be no abatement of Rent, nor shall there be any liability of Landlord, by reason of any injury or inconvenience to, or interference with, Tenant's business or operations arising from the making of, or failure to make, any maintenance or repairs in or to any portion of the Building. Subject to the foregoing, Landlord agrees to use commercially reasonable efforts to perform any necessary repairs and maintenance to the Building. 8.02 Tenant's Obligations. During the Lease Term, Tenant shall, at its sole cost and expense, maintain the Premises in good order and repair (including, without limitation, the carpet, wall-covering, doors, plumbing and other fixtures, equipment, alterations and improvements, whether installed by Landlord or Tenant). Further, Tenant shall be responsible for, and upon demand by Landlord shall promptly reimburse Landlord for, any damage to any portion of the Building or the Premises caused by (a) Tenant's activities in the Building or the Premises; (b) the performance or existence of any alterations, additions or improvements made by Tenant in or to the Premises; (c) the installation, use, operation or movement of Tenant's property in or about the Building or the Premises; or (d) any actively negligent act or wilful omission by Tenant or its officers, directors, shareholders, members, partners, employees, agents, representatives, agents, contractors, and (while on, in or about the Building or Premises) invitees of Tenant. 8.03 Landlord's Rights. Landlord and its contractors shall have the right, at all reasonable times and upon prior oral or telephonic notice to Tenant at the Premises, other than in the case of any emergency in which case no notice shall be required, to enter upon the Premises to make any repairs to the Premises or Building reasonably required or deemed reasonably necessary by Landlord and to erect such equipment, including scaffolding, as is reasonably necessary to effect such repairs. Subject to the foregoing, when entering and working in the Premises Landlord agrees to use commercially reasonable efforts to minimize interference with Tenant's business operations. ARTICLE 9 ALTERATIONS, ADDITIONS AND IMPROVEMENTS 9.01 Landlord's Consent; Conditions. Subject to the provisions of Section 9.01(A) below, Tenant shall not make or permit to be made any alterations, additions, or improvements in or to the Premises ("Alterations") without the prior written consent of Landlord, which consent, with respect to non-structural alterations, shall not be unreasonably withheld. Landlord may impose as a condition to consenting to any Alterations such requirements as Landlord 22 reasonably deems necessary or desirable including without limitation: Tenant's submission to Landlord, for Landlord's prior written approval, of all plans and specifications relating to the Alterations; Landlord's prior written approval of the time or times when the Alterations are to be performed; Tenant's receipt of all necessary permits and approvals from all governmental authorities having jurisdiction over the Premises prior to the construction of the Alterations; Tenant's delivery to Landlord of such bonds and insurance as Landlord shall reasonably require; and Tenant's payment to Landlord of all reasonable costs and expenses paid or incurred by Landlord because of Tenant's Alterations, including but not limited to costs incurred in reviewing the plans and specifications for, and the progress of, the Alterations. All Alterations shall be performed by a general contractor and/or subcontractors that is/are duly licensed and in good standing by the State of California, who is/are bonded, reputable and who are approved by Landlord in the exercise of its reasonable discretion. Tenant is required to provide Landlord written notice of whether the Alterations include the Handling of any Hazardous Materials and whether these materials are of a customary and typical nature for industry practices. Upon completion of the Alterations, Tenant shall provide Landlord with two (2) copies of as-built plans. Neither the approval by Landlord of plans and specifications relating to any Alterations nor Landlord's supervision or monitoring of any Alterations shall constitute any warranty by Landlord to Tenant of the adequacy of the design for Tenant's intended use or the proper performance of the Alterations. (A) Notwithstanding the foregoing, without first receiving Landlord's consent Tenant shall have the right to construct and install Alterations in the Premises, but only on the following terms and conditions: (a) the cost of constructing and installing said Alterations do not in the aggregate exceed Fifteen Thousand and No/100 Dollars ($15,000.00); (b) the Alterations do not affect, involve, change or modify any heating, air conditioning, ventilating, electrical, gas, steam or other utility system in the Premises or Building; and (c) the Alterations do no affect, involve, change or modify any structural component or system in the Premises or Building (hereinafter, a "Small Alteration"). Provided, however, at least ten (10) calendar days prior to commencing the construction or installation of any Small Alteration in the Premises, Tenant shall first deliver written notice thereof to Landlord along with a true and correct copy of (i) all plans and specifications relating to the Small Alterations, and (ii) all necessary permits and approvals from all governmental authorities having jurisdiction over the Premises prior to the construction and installation of the Small Alterations. (B) All further references in this Lease to Alterations shall mean and include Small Alterations but shall exclude the Work described in the Work Letter Agreement attached hereto as Exhibit "B". 9.02 Performance of Alterations Work. All work relating to the Alterations shall be performed in compliance with the plans and specifications approved by Landlord, all Applicable Laws, ordinances, rules, regulations and directives of all governmental authorities having jurisdiction (including without limitation Title 24 of the California Administrative Code) and the requirements of all carriers of insurance on the Premises and the Building, the Board of Underwriters, Fire Rating Bureau, and similar organizations. All work shall be performed in a diligent, first class manner and so as not to unreasonably interfere with any other tenants or occupants of the Building. All costs incurred by Landlord relating to the Alterations shall be 23 payable to Landlord by Tenant within thirty (30) calendar days following receipt of written demand therefore (accompanied by reasonable supporting information documenting said costs). No asbestos-containing materials shall be used or incorporated in the Alterations. No lead-containing surfacing material, solder, or other construction materials or fixtures where the presence of lead might create a condition of exposure not in compliance with Environmental Laws shall be incorporated in the Alterations. 9.03 Liens. Tenant shall pay when due all costs for work performed and materials supplied to the Premises. Tenant shall keep Landlord, the Premises and the Building free from all liens, stop notices and violation notices relating to the Alterations or any other work performed for, materials furnished to or obligations incurred by or for Tenant and Tenant shall protect, indemnify, hold harmless and defend Landlord, the Premises and the Building of and from any and all loss, cost, damage, liability and expense, including attorneys' fees and costs, arising out of or related to any such liens or notices. Further, Tenant shall deliver to Landlord not less than ten (10) calendar days prior written notice before commencing any Alterations in or about the Premises to permit Landlord to post appropriate notices of non-responsibility. Tenant shall also secure, prior to commencing any Alterations, at Tenant's sole expense, a completion and lien indemnity bond satisfactory to Landlord for such work, but only if reasonably required by Landlord based on the size and scope of the contemplated Alteration project, the reputation of the contractor performing the work and the anticipated cost of the work. During the progress of such work, Tenant shall, upon Landlord's request, furnish Landlord with sworn contractor's statements and lien waivers covering all work theretofore performed. Tenant shall satisfy or otherwise discharge all liens, stop notices or other claims or encumbrances within thirty (30) calendar days after Landlord notifies Tenant in writing that any such lien, stop notice, claim or encumbrance has been filed. If Tenant fails to pay and remove such lien, claim or encumbrance within such thirty (30) calendar day period, Landlord, at its election, may pay and satisfy the same and in such event the sums so paid by Landlord, with interest from the date of payment at the rate set forth in Section 4.06 hereof for amounts owed Landlord by Tenant shall be deemed to be additional Rent due and payable by Tenant at once without notice or demand. 9.04 Lease Termination. Except as provided in this Section 9.04, upon expiration or earlier termination of this Lease Tenant shall surrender the Premises to Landlord in the same condition as existed on the date Tenant first occupied the Premises (whether pursuant to this Lease or an earlier Lease), subject to reasonable wear and tear. Unless otherwise agreed in writing by Landlord and Tenant prior to the expiration or earlier termination of this Lease, upon the expiration or earlier termination of this Lease Tenant shall remove all of the Alterations and shall promptly repair any resulting damage, all at Tenant's sole expense. All business and trade fixtures, machinery and equipment, furniture, movable partitions and items of personal property owned by Tenant or installed by Tenant at its expense in the Premises shall be and remain the property of Tenant; upon the expiration or earlier termination of this Lease, Tenant shall, at its sole expense, remove all such items and repair any damage to the Premises or the Building caused by such removal. If Tenant fails to remove any such Alterations, items or repair such damage promptly after the expiration or earlier termination of the Lease, Landlord may, but need not, do so with no liability to Tenant, and Tenant shall pay Landlord the cost thereof upon demand. Notwithstanding the foregoing, Tenant shall have no obligation to remove from the 24 Premises any Work constructed or installed in the Premises pursuant to the Work Letter Agreement attached hereto as Exhibit "B". ARTICLE 10 INDEMNIFICATION AND INSURANCE 10.01 Indemnification. (A) Tenant agrees to protect, indemnify, hold harmless and defend Landlord and any Mortgagee, as defined herein, and each of their respective partners, directors, officers, shareholders, agents, employees, successors and assigns (except to the extent the losses described below are caused by the active negligence or wilful misconduct of Landlord, its agents and employees), from and against: (i) any and all loss, cost, damage, liability or expense (including but not limited to reasonable attorneys' fees and legal costs) arising out of or related to any claim, suit or judgment brought by or in favor of any person or persons for damage, loss or expense due to, but not limited to, bodily injury, including death, or property damage sustained by such person or persons which arises out of, is occasioned by or is in any way attributable to the use or occupancy of the Premises or any portion of the Building by Tenant or the acts or omissions of Tenant or its agents, employees, contractors, clients, invitees or subtenants (except to the extent the losses are caused by the active negligence or willful misconduct of Landlord or its agents or employees). Such loss or damage shall include, but not be limited to, any injury or damage to, or death of, Landlord's employees or agents or damage to the Premises or any portion of the Building. (ii) any and all environmental damages which arise from: (a) the Handling of any Tenant's Hazardous Materials, as defined in Section 6.03 or (b) the breach of any of the provisions of this Lease. For the purpose of this Lease, "environmental damages" shall mean (1) all claims, judgments, damages, penalties, fines, costs, liabilities, and losses (including without limitation, diminution in the value of the Premises or the Building, damages for the loss of or restriction on use of rentable or usable space or of any amenity of the Premises or any portion of the Building, and from any adverse impact of Landlord's marketing of space); (2) all sums paid for settlement of claims, attorneys' fees, consultants' fees and experts' fees; and (3) all costs incurred by Landlord in connection with investigation or remediation relating to the Handling of Tenant's Hazardous Materials, whether or not required by Environmental Laws or otherwise required under this Lease. To the extent that Landlord is held strictly liable by a court or other governmental agency of competent jurisdiction under any Environmental Laws, Tenant's obligation to Landlord and the other indemnities under the foregoing indemnification shall likewise be without regard to fault on Tenant's part with respect to the violation of any Environmental Law which results in liability to the indemnitee. Tenant's obligations and liabilities pursuant to this Section 10.01 shall survive the expiration or earlier termination of this Lease. (B) Landlord agrees to protect, indemnify, hold harmless and defend Tenant from, and against any and all loss, cost, damage, liability or expense, including reasonable attorneys' fees, 25 with respect to any claim of damage or injury to persons or property at the Premises, caused by the active negligence or wilful misconduct of Landlord or its agents or employees. (C) Notwithstanding anything to the contrary contained herein, nothing shall be interpreted or used to in any way affect, limit, reduce or abrogate any insurance coverage provided by any insurers to either Tenant or Landlord. (D) Notwithstanding anything to the contrary contained in this Lease, nothing herein shall be construed to infer or imply that Tenant is a partner, joint venturer, agent, employee, or otherwise acting by or at the direction of Landlord. 10.02 Property Insurance. (A) At all times during the Lease Term, Tenant shall procure and maintain, at its sole expense, "all-risk" property insurance, for damage or other loss caused by fire or other casualty or cause including, but not limited to, vandalism and malicious mischief, theft, water damage of any type, including sprinkler leakage, bursting of pipes, explosion, in an amount not less than one hundred percent (100%) of the replacement cost covering (i) all Alterations made by or for Tenant in the Premises; and (ii) Tenant's trade fixtures, equipment and other personal property from time to time situated in the Premises. The proceeds of such insurance shall be used for the repair or replacement of the property so insured, except that if not so applied or if this Lease is terminated following a casualty, the proceeds applicable to the leasehold improvements pursuant to which Landlord contributed Landlord's Contribution (pursuant to the Work Letter Agreement attached hereto as Exhibit "B") shall be paid to Landlord and the proceeds applicable to Tenant's personal property shall be paid to Tenant. (B) At all times during the Lease Term, Landlord shall procure and maintain "all-risk" property insurance for damage and other loss caused by fire or other casualty to the Building, in such amounts and with such insurers as Landlord deems necessary or appropriate in the exercise of its discretion. (C) At all times during the Lease Term, Tenant shall procure and maintain business interruption insurance in such amount as will reimburse Tenant for direct or indirect loss of earnings attributable to all perils insured against in Section 10.02(A). 10.03 Liability Insurance. (A) At all times during the Lease Term, Tenant shall procure and maintain, at its sole expense, commercial general liability insurance applying to the use and occupancy of the Premises and the business operated by Tenant. Such insurance shall have a minimum combined single limit of liability of at least Two Million Dollars ($2,000,000) per occurrence and a general aggregate limit of at least Two Million Dollars ($2,000,000). All such policies shall be written to apply to all bodily injury, property damage, personal injury losses and shall be endorsed to include Landlord and its agents, beneficiaries, partners, employees, and any deed of trust holder or Mortgagee of Landlord or any ground lessor (whose names have been provided to Tenant) as additional insureds. Such liability insurance shall be written as primary policies, not excess or 26 contributing with or secondary to any other insurance as may be available to the additional insureds. (B) Prior to the sale, storage, use or giving away of alcoholic beverages on or from the Premises by Tenant or another person, Tenant, at its own expense, shall obtain a policy or policies of insurance issued by a responsible insurance company and in a form acceptable to Landlord saving harmless and protecting Landlord and the Premises against any and all damages, claims, liens, judgments, expenses and costs, including actual attorneys' fees, arising under any present or future law, statute, or ordinance of the State of California or other governmental authority having jurisdiction of the Premises, by reason of any storage, sale, use or giving away of alcoholic beverages on or from the Premises. Such policy or policies of insurance shall have a minimum combined single limit of two Million Dollars ($2,000,000) per occurrence and shall apply to bodily injury, fatal or nonfatal; injury to means of support; and injury to property of any person. Such policy or policies of insurance shall name Landlord and its agents, beneficiaries, partners, employees and any Mortgagee of Landlord or any ground lessor of Landlord as additional insureds. (C) Landlord shall, at all times during the Lease Term, procure and maintain commercial general liability insurance for the Building in which the Premises are located. Such insurance shall have minimum combined single limit of liability of at least Two Million Dollars ($2,000,000) per occurrence, and a general aggregate limit of at least Two Million Dollars ($2,000,000). 10.04 Workers' Compensation Insurance. At all times during the Lease Term, Tenant shall procure and maintain Workers' Compensation Insurance in accordance with the laws of the State of California, and Employer's Liability insurance with a limit not less than One Million Dollars ($1,000,000) Bodily Injury Each Accident; One Million Dollars ($1,000,000) Bodily Injury By Disease - Each Person; and One Million Dollars ($1,000,000) Bodily Injury to Disease - Policy Limit. 10.05 Policy Requirements. All insurance required to be maintained by Landlord and Tenant shall be issued by insurance companies authorized to do insurance business in the State of California and rated not less than A-VIII in Best's Insurance Guide. A certificate of insurance evidencing the insurance required under this Article 10 shall be delivered to Landlord prior to the Commencement Date. No such policy shall be subject to cancellation or modification without thirty (30) days prior written notice to Landlord and to any deed of trust holder, mortgagee or ground lessor designated by Landlord to Tenant. Tenant shall furnish Landlord with a replacement certificate with respect to any insurance not less than thirty (30) days prior to the expiration of the current policy. Tenant shall have the right to provide the insurance required by this Article 10 pursuant to blanket policies, but only if such blanket policies expressly provide coverage to the Premises and Landlord as required by this Lease. 10.06 Waiver of Subrogation. Each party hereby waives any right of recovery against the other for injury or loss due to hazards covered by insurance or required to be covered, to the extent of the injury or loss covered thereby. Any policy of insurance to be provided by Tenant 27 or Landlord pursuant to this Article 10 shall contain a clause denying the applicable insurer any right of subrogation against the other party. 10.07 Failure to Insure. If Tenant fails to maintain any insurance which Tenant is required to maintain pursuant to this Article 10, Tenant shall be liable to Landlord for any loss or cost resulting from such failure to maintain. Tenant may not self-insure against any risks required to be covered by insurance without Landlord's prior written consent, which Landlord may grant or deny in its reasonable discretion. ARTICLE 11 DAMAGE OR DESTRUCTION 11.01 Total Destruction. Except as provided in Section 11.03 below, this Lease shall automatically terminate if the Building is totally destroyed. 11.02 Partial Destruction of Premises. If the Premises are damaged by any casualty and, in Landlord's opinion, the Premises (exclusive of any Alterations made to the Premises by Tenant) can be restored to its pre-existing condition within two hundred seventy (270) calendar days after the date of the damage or destruction, Landlord shall, upon written notice from Tenant to Landlord of such damage, except as provided in Section 11.03, promptly and with due diligence repair any damage to the Premises (exclusive of any Alterations to the Premises made by Tenant, which shall be promptly repaired by Tenant at its sole expense) and, until such repairs are completed, the Rent shall be abated from the date of damage or destruction in the same proportion that the rentable area of the portion of the Premises which is unusable by Tenant in the conduct of its business bears to the total Rentable Area of the Premises. Provided, however, the Rent shall not be abated if either (a) the damage or destruction is repaired within five (5) business days after Landlord receives written notice from Tenant of the casualty, or (b) the damage or destruction is the result of the active negligence or wilful misconduct of Tenant, or any officers, partners, employees, agents or invitees of Tenant, or any assignee or subtenant of Tenant. (A) Notwithstanding the foregoing, if, within ninety (90) calendar days after the date of the damage or destruction, Landlord reasonably determines (and such determination is delivered to Tenant in writing) that such repairs cannot be made within said two hundred seventy (270) calendar day period, then either Landlord or Tenant shall have the right, by written notice given to the other within thirty (30) calendar days after receipt of Landlord's written determination, to terminate this Lease as of the date of the damage or destruction. (B) Notwithstanding the foregoing, if, within ninety (90) calendar days after the damage or destruction, Landlord either (i) fails to deliver to Tenant a written determination that such repairs cannot be made within said one hundred eighty (180) calendar day period, or (ii) fails to commence making the repairs, then either Landlord or Tenant shall have the right, by written notice given to the other within two hundred ten (210) calendar days after the date of the damage or destruction, to terminate this Lease as of the date of the damage or destruction. 28 11.03 Exceptions to Landlord's Obligations. Notwithstanding anything to the contrary contained in this Article 11, Landlord shall have no obligation to repair the Premises if either: (a) the Building is so damaged as to require repairs to the Building exceeding twenty percent (20%) of the full insurable value of the Building; or (b) the damage or destruction occurs within three hundred sixty-five (365) calendar days of the Expiration Date (inclusive of option periods which either have been exercised by Tenant or which remain capable of being exercised by Tenant). 11.04 Waiver. The provisions contained in this Lease shall supersede any contrary laws (whether statutory, common law or otherwise) now or hereafter in effect relating to damage, destruction, self-help or termination, including California Civil Code Sections 1932 and 1933. ARTICLE 12 CONDEMNATION 12.01 Taking. If the entire Premises or so much of the Premises as to render the balance unusable by Tenant shall be taken by condemnation, sale in lieu of condemnation or in any other manner for any public or quasi-public purpose (collectively "Condemnation"), and if Landlord, at its option, is unable or unwilling to provide substitute premises containing at least as much rentable area as described in Section 1.03 above, then this Lease shall terminate on the date that title or possession to the Premises is taken by the condemning authority, whichever is earlier. 12.02 Award. In the event of any Condemnation, the entire award for such taking shall belong to Landlord. Tenant shall have no claim against Landlord or the award for the value of any unexpired term of this Lease or otherwise. However, Tenant shall be entitled to independently pursue a separate award in a separate proceeding for Tenant's costs and expenses of relocation, the taking of any improvements and any other costs directly associated with the taking, and Landlord agrees to reasonably cooperate with Tenant so long as the same does not diminish Landlord's award. 12.03 Temporary Taking. No temporary taking of the Premises shall terminate this Lease or entitle Tenant to any abatement of the Rent payable to Landlord under this Lease; provided, however, that any award for such temporary taking shall belong to Tenant to the extent that the award applies to any time period during the Lease Term and to Landlord to the extent that the award applies to any time period outside the Lease Term. ARTICLE 13 [INTENTIONALLY DELETED] 29 ARTICLE 14 ASSIGNMENT AND SUBLETTING 14.01 Restriction. Without the prior written consent of Landlord, Tenant shall not, either voluntarily or by operation of law, assign, encumber, or otherwise transfer this Lease or any interest herein, or sublet the Premises or any part thereof, or permit the Premises to be occupied by anyone other than Tenant or Tenant's employees (any such assignment, encumbrance, subletting, occupation or transfer is hereinafter referred to as a "Transfer"). For purposes of this Lease, the term "Transfer" shall also include (a) if Tenant is a general partnership or limited partnership, the withdrawal or change, voluntary, involuntary or by operation of law, of a majority of the partners (limited or general), or a transfer of a majority of partnership interests (limited or general), within any twelve (12) month period, or the dissolution of the partnership, and (b) if Tenant is a corporation whose stock is not publicly held and not traded through an exchange or over the counter, or a limited liability company, the dissolution, merger, consolidation, division, liquidation or other reorganization of Tenant, or if any of the following occur within any twelve (12) month period: (i) the sale or other transfer of more than an aggregate of fifty percent (50%) of the voting securities of Tenant (other than to immediate family members by reason of gift or death) or (ii) the sale, mortgage, hypothecation or pledge of more than an aggregate of fifty percent (50%) of Tenant's net assets. Any Transfer without the prior written consent of Landlord shall be void and shall constitute a material breach of this Lease. (A) Notwithstanding the foregoing, Tenant shall have the right to assign this Lease or sublease the Premises, or any part thereof, to an "Affiliate" without the prior written consent of Landlord, but only if Tenant first delivers fifteen (15) business days' or more prior written notice to Landlord. For purposes of this provision, the term "Affiliate" shall mean any corporation or other entity controlling, controlled by, or under common control with (directly or indirectly) Tenant, including, without limitation, any parent corporation controlling Tenant or any subsidiary that Tenant controls. The term "control," as used herein, shall mean the power to direct or cause the direction of the management and policies of the controlled entity through the ownership of more than fifty percent (50%) of the voting securities in such controlled entity. (B) Notwithstanding the foregoing, Tenant expressly covenants and agrees not to enter into any lease, sublease, license, concession or other agreement for the use, occupancy or utilization of the Premises which provides for rental or other payment for such use, occupancy or utilization based in whole or in part on the net income or profits derived by any person from the property leased, used, occupied or utilized (other than an amount based on a fixed percentage or percentages of receipts or sales), and that any such purported lease, sublease, license, concession or other agreement shall be absolutely void and ineffective as a conveyance of any right or interest in the possession, use, occupancy or utilization of any part of the Premises. 14.02 Notice to Landlord; Request for Consent. If Tenant desires to assign this Lease or any interest herein to a third party or entity (including an Affiliate), or to sublet all or any part of the Premises to a third party or entity (including an Affiliate), or to otherwise engage in a Transfer, then at least thirty (30) days but not more than ninety (90) calendar days prior to the 30 effective date of the proposed assignment, subletting or Transfer, Tenant shall submit to Landlord in connection with Tenant's request for Landlord's consent: (A) A statement signed by the Tenant and by the proposed assignee, subtenant or transferee containing (i) the name and address of the proposed assignee, subtenant or transferee; (ii) a copy of the proposed assignee's, subtenant's or transferee's audited (if prepared, or if not prepared, unaudited) financial statements (including a balance sheet, a profit and loss statement and a statement of cash flows) for the fiscal year to date and for the immediately preceding three (3) fiscal years; (iii) if the transferee is an Affiliate, a certified statement as to how the ownership and control of the Affiliate complies with the provisions of Section 14.0 1(A), (v) the type of use proposed for the Premises; and (v) all of the principal terms of the proposed assignment, subletting or Transfer; and (B) If an assignment or sublease, one (1) true and correct copy of the proposed final document of assignment or sublease. Excluding a proposed assignment or sublet to an Affiliate, within fifteen (15) business days after Landlord's receipt of all (but not less than all) of the information and documents required by this Section 14.02, Landlord shall, at its option by written notice to Tenant, either: (1) in good faith acting reasonably, request such further or additional information that Landlord may require in order to make an informed decision (in which event the fifteen (15) business day period shall be reinstated upon Landlord's receipt of the requested information); or (2) consent to the proposed assignment, sublease or Transfer on the identical terms and conditions set forth in the information and documents delivered to Landlord; or (3) exercise its rights set forth in Section 14.03. If Landlord for any reason fails to deliver any written notice to Tenant, then Landlord shall be deemed to have reasonably withheld its consent. As a condition to granting consent to a proposed assignment or sublease, Landlord shall have the right to require that the Tenant and the proposed assignee or sublessee execute and deliver to one another Landlord's form of Consent to Sublease or Consent to Assignment of Lease, as appropriate. 14.03 Landlord's Recapture Rights. Excluding a proposed assignment or sublet to an Affiliate, at any time within fifteen (15) business days after Landlord's receipt of all (but not less than all) of the information and documents described in Section 14.02 above, Landlord may, at its option by written notice to Tenant, elect to: (a) if Tenant proposes to sublet all (100%) of the Premises, then Landlord shall have the right but not the obligation to terminate all (100%) of the Lease; (b) if Tenant proposes to sublet less than all of the Premises, then Landlord shall have the right but not the obligation to sublet the portion thereof proposed to be sublet by Tenant upon the same terms as those offered to the proposed subtenant; (c) if Tenant proposes to assign all (100%) of its interest in the Lease, then Landlord shall have the right but not the obligation to terminate all (100%) of the Lease. 14.04 Landlord's Consent; Standards. Excluding a proposed assignment or sublet to an Affiliate, Landlord's consent to a proposed assignment, subletting or other Transfer shall not be unreasonably withheld, conditioned or delayed; however, notwithstanding the foregoing and in addition to any other grounds for denial, Landlord's consent shall be deemed reasonably withheld if, in Landlord's good faith judgment: (a) the proposed assignee, subtenant or 31 transferee does not have the financial strength to perform its obligations under this Lease or any proposed sublease; (b) the business and operations of the proposed assignee, subtenant or transferee are not of comparable quality to the business and operations being conducted by other tenants in the Building; (c) the proposed assignee, subtenant or transferee intends to use any part of the Premises for a purpose not permitted under this Lease; (d) either the proposed assignee, subtenant or transferee, or any person which directly or indirectly controls, is controlled by, or is under common control with the proposed assignee, subtenant or transferee occupies space in the Building, or is negotiating with Landlord to lease space in the Building; (e) the use of the Premises or the Building by the proposed assignee, subtenant or transferee would, in Landlord's reasonable judgment, significantly impact the Building in a negative manner including but not limited to significantly increasing the pedestrian traffic in and out of the Building or requiring any substantial alterations to the Building to comply with Applicable Laws; (f) the subject space is not regular in shape with appropriate means of ingress and egress suitable for normal renting purposes; (g) the proposed assignee, subtenant or transferee is a government (or agency or instrumentality thereof); or (h) Tenant has failed to cure a breach or default of this Lease (and the same continues after expiration of any applicable cure periods) at the time Tenant requests consent to the proposed Transfer. 14.05 Additional Rent. Excluding a proposed assignment or sublet to an Affiliate, if Landlord consents to any such assignment, subletting or other Transfer, two-thirds (2/3's) of the amount by which all sums or other economic consideration received by Tenant in connection with such assignment, subletting or Transfer, whether denominated as rental or otherwise, exceeds, in the aggregate, the total sum which Tenant is obligated to pay Landlord under this Lease (prorated to reflect obligations allocable to less than all of the Premises under a sublease) after deduction for any improvement allowance or other economic concession (planning allowance, moving expenses, etc.) actually paid by Tenant to sublessees or assignees, broker's commissions, attorneys' fees, costs of advertising the space for sublease or assignment, etc. Said amount shall be paid by Tenant to Landlord promptly after receipt by Tenant as additional Rent under the Lease without affecting or reducing any other obligation of Tenant hereunder. 14.06 Landlord's Costs. If Tenant shall Transfer this Lease or all or any part of the Premises or shall request the consent of Landlord to any Transfer, Tenant shall pay to Landlord as additional rent Landlord's reasonable costs related thereto, including Landlord's reasonable attorneys' fees. Provided, however, Landlord's costs and it's attorneys' fees paid or incurred to review Tenant's request for a Transfer shall not exceed Two Thousand and No/100 Dollars ($2,000.00) per Transfer. 14.07 Continuing Liability of Tenant. Notwithstanding any assignment, subletting or other Transfer, Tenant shall remain as fully and primarily liable for the payment of Rent and for the performance of all other obligations of Tenant contained in this Lease to the same extent as if the assignment, subletting or Transfer had not occurred; provided, however, that any act or omission of any assignee, sublessee or transferee, other than Landlord, that violates the terms of this Lease shall be deemed a violation of this Lease by Tenant. 32 14.08 Non-Waiver. The consent by Landlord to any assignment, sublease or other Transfer shall not relieve Tenant, or any person claiming through or by Tenant, of the obligation to obtain the consent of Landlord, pursuant to this Article 14, to any further assignment, sublease or other Transfer. In the event of an assignment, subletting or other Transfer, and with Tenant's prior consent, Landlord may collect rent from the assignee, subtenant or transferee without waiving any rights hereunder and collection of the rent from a person other than Tenant shall not be deemed a waiver of any of Landlord's rights under this Article 14, an acceptance of the assignee, subtenant or transferee as Tenant, or a release of Tenant from the performance of Tenant's obligations under this Lease. If Tenant shall default under this Lease and fail to cure within the time permitted, then and only in such event Landlord (after written notice to Tenant) is irrevocably authorized to direct any assignee, sublessee or transferee to make all payments under or in connection with the Transfer directly to Landlord (which Landlord shall apply towards Tenant's obligations under this Lease) until such default is cured. ARTICLE 15 DEFAULT AND REMEDIES 15.01 Events of Default By Tenant. The occurrence of any of the following shall constitute a material default and breach of this Lease by Tenant: (A) The failure by Tenant to pay Monthly Base Rent, additional Rent or make any other payment required to be made by Tenant hereunder as and when due. (B) The failure by Tenant to execute and return to Landlord the Estoppel Certificate within the period of time required by Section 20.01 of this Lease. (C) The making by Tenant or its Guarantor of any general assignment for the benefit of creditors, the filing by or against Tenant or its Guarantor of a petition under any federal or state bankruptcy or insolvency laws (unless, in the case of a petition filed against Tenant or its Guarantor the same is dismissed within thirty (30) days after filing); the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets at the Premises or Tenant's interest in this Lease or the Premises, when possession is not restored to Tenant within thirty (30) days; or the attachment, execution or other seizure of substantially all of Tenant's assets located at the Premises or Tenant's interest in this Lease or the Premises, if such seizure is not discharged within thirty (30) days. (D) The making by Tenant of: (i) any material misrepresentation or omission in this Lease or in connection with negotiating or entering into this Lease; (ii) any material misrepresentation or omission in any financial statements or other materials provided at any time during the Lease Term by Tenant or by any Guarantor to Landlord; (iii) any material misrepresentation or omission in any Estoppel Certificate delivered by Tenant pursuant to Article 20 of this Lease; or (iv) any material misrepresentation or omission in connection with any proposed or actual assignment, subletting or other Transfer of this Lease. (E) The failure by Tenant to observe or perform any provision of this Lease to be observed or performed by Tenant or the breach by Tenant of any covenant in this Lease made by 33 Tenant, other than those described in Sections 15.01 (A), (B), (C) and (D) above, if such failure continues for twenty (20) calendar days after written notice thereof by Landlord to Tenant; provided, however, that if the nature of the failure is such that it cannot be cured within the twenty (20) calendar day period, no failure shall exist if (i) Tenant commences the curing of the failure within the twenty (20) calendar day period, (ii) thereafter diligently prosecutes the same to completion, and (iii) actually completes the cure within ninety (90) calendar days from receipt of notice of such failure. The twenty (20) calendar day notice described herein shall be in lieu of, and not in addition to, any notice required under Section 1161 of the California Code of Civil Procedure or any other law now or hereafter in effect requiring that notice of default be given prior to the commencement of an unlawful detainer or other legal proceeding. 15.02 Landlord's Right To Terminate Upon Tenant Default. In the event Tenant commits any default or breach of this Lease pursuant to Section 15.01 above, Landlord shall have the right to terminate this Lease and recover possession of the Premises by giving written notice to Tenant of Landlord's election to terminate this Lease, in which event Landlord shall be entitled to receive from Tenant: (A) The worth at the time of award of any unpaid Rent which had been earned at the time of such termination; plus (B) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss Tenant proves could have been reasonably avoided; plus (C) The worth at the time of award of the amount by which the unpaid Rent for the balance of the term after the time of award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided; plus (D) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom; and (E) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. As used in subparagraphs (A) and (B) above, "worth at the time of award" shall be computed by allowing interest on such amounts at the then highest lawful rate of interest, but in no event to exceed one percent (1%) per annum plus the rate established by the Federal Reserve Bank of San Francisco on advances made to member banks under Sections 13 and 13a of the Federal Reserve Act ("discount rate") prevailing at the time of the award. As used in paragraph (C) above, "worth at the time of award" shall be computed by discounting such amount by (i) the discount rate of the Federal Reserve Bank of San Francisco prevailing at the time of award plus (ii) one percent (1%). 15.03 Mitigation of Damages. Whether or not Landlord terminates this Lease or terminates Tenant's right to possession of the Premises, Landlord shall under no circumstance 34 have any obligation to mitigate Landlord's damages except to the extent required by applicable law. If Landlord is required by applicable law to mitigate damages as provided herein: (a) Landlord shall be required only to use reasonable efforts to mitigate, which shall not exceed such efforts as Landlord generally uses to lease other space in the Building, (b) Landlord will not be deemed to have failed to mitigate if Landlord or its affiliates lease any other portions of the Building or other projects owned by Landlord or its affiliates in the same geographic area, before reletting all or any portion of the Premises, and (c) any failure to mitigate as described herein with respect to any period of time shall only reduce the Rent and other amounts to which Landlord is entitled hereunder by the reasonable rental value of the Premises during such period. In recognition that the value of the Building depends on the rental rates and terms of leases therein, Landlord's rejection of a prospective replacement tenant based on an offer of rentals below Landlord's published rates for new leases of comparable space at the Building at the time in question, or at Landlord's option, below the rates provided in this Lease, or containing terms less favorable than those contained herein, shall not give rise to a claim by Tenant that Landlord failed to mitigate Landlord's damages. 15.04 Landlord's Right To Continue Lease Upon Tenant Default. In the event Tenant commits a default or breach of this Lease pursuant to Section 15.01 above and Tenant abandons the Premises, if Landlord does not elect to terminate this Lease as provided in Section 15.02 above, Landlord may from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease. Without limiting the foregoing, Landlord has the remedy described in California Civil Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant's default and abandonment and recover Rent as it becomes due, if Tenant has the right to Transfer, subject only to reasonable limitations). In the event Landlord re-lets the Premises, to the fullest extent permitted by law, the proceeds of any reletting shall be applied first to pay to Landlord all costs and expenses of such reletting (including without limitation, costs and expenses of retaking or repossessing the Premises, removing persons and property therefrom, securing new tenants, including expenses for redecoration, alterations and other costs in connection with preparing the Premises for the new tenant, and if Landlord shall maintain and operate the Premises, the costs thereof) and receivers' fees incurred in connection with the appointment of and performance by a receiver to protect the Premises and Landlord's interest under this Lease and any necessary or reasonable alterations; second, to the payment of any indebtedness of Tenant to Landlord other than Rent due and unpaid hereunder; third, to the payment of Rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of other or future obligations of Tenant to Landlord as the same may become due and payable, and Tenant shall not be entitled to receive any portion of such revenue. 15.05 Right of Landlord to Perform. All covenants and agreements to be performed by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost and expense. If Tenant shall fail to pay any sum of money, other than Rent, required to be paid by it hereunder or shall fail to perform any other act on its part to be performed hereunder beyond any applicable cure period, Landlord may, but shall not be obligated to, make any payment or perform any such other act on Tenant's part to be made or performed, without waiving or releasing Tenant of its obligations under this Lease. Any sums so paid by Landlord and all necessary incidental costs, together with interest thereon at the lesser of the maximum rate permitted by law if any or ten percent (10%) per annum from the date of such payment, shall be payable to Landlord as 35 additional rent on demand and Landlord shall have the same rights and remedies in the event of nonpayment as in the case of default by Tenant in the payment of Rent. 15.06 Non-Waiver. Nothing in this Article shall be deemed to affect Landlord's rights to indemnification for liability or liabilities arising prior to termination of this Lease for personal injury or property damages under the indemnification clause or clauses contained in this Lease. No acceptance by Landlord of a lesser sum than the Rent then due shall be deemed to be other than on account of the earliest installment of such rent due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landl