Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________________________
 
FORM 10-Q
______________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 000-53649
______________________________________________________
 
KBS REAL ESTATE INVESTMENT TRUST II, INC.
(Exact Name of Registrant as Specified in Its Charter)
______________________________________________________
 
Maryland
 
26-0658752
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
620 Newport Center Drive, Suite 1300
Newport Beach, California
 
92660
(Address of Principal Executive Offices)
 
(Zip Code)
(949) 417-6500
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
 
¨
 
  
Accelerated Filer
  
¨
Non-Accelerated Filer
 
x
(Do not check if a smaller reporting company)
  
Smaller reporting company
  
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Yes   ¨   No   x
As of November 7, 2014 , there were 190,692,544 outstanding shares of common stock of KBS Real Estate Investment Trust II, Inc.

Table of Contents

KBS REAL ESTATE INVESTMENT TRUST II, INC.
FORM 10-Q
September 30, 2014
INDEX  
PART I.
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
Item 3.
 
Item 4.
PART II.
 
Item 1.
 
Item 1A.
 
Item 2.
 
Item 3.
 
Item 4.
 
Item 5.
 
Item 6.

1
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements


KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
 
September 30, 2014
 
December 31, 2013
 
 
(unaudited)
 
 
Assets
 
 
 
 
Real estate:
 
 
 
 
Land
 
$
221,997

 
$
221,997

Buildings and improvements
 
1,236,482

 
1,238,516

Tenant origination and absorption costs
 
147,027

 
167,904

Total real estate held for investment, cost
 
1,605,506

 
1,628,417

Less accumulated depreciation and amortization
 
(233,122
)
 
(223,889
)
Total real estate held for investment, net
 
1,372,384

 
1,404,528

Real estate held for sale, net
 
76,674

 
1,030,732

Total real estate, net
 
1,449,058

 
2,435,260

Real estate loans receivable, net
 
73,095

 
184,828

Total real estate and real estate-related investments, net
 
1,522,153

 
2,620,088

Cash and cash equivalents
 
88,304

 
175,042

Rents and other receivables, net
 
46,569

 
42,059

Above-market leases, net
 
12,358

 
16,164

Assets related to real estate held for sale
 
4,835

 
77,481

Deferred financing costs, prepaid expenses and other assets
 
29,532

 
23,466

Total assets
 
$
1,703,751

 
$
2,954,300

Liabilities and stockholders’ equity
 
 
 
 
Notes payable:
 
 
 
 
Notes payable
 
$
816,114

 
$
892,573

Notes payable related to real estate held for sale
 
56,228

 
628,780

Total notes payable
 
872,342

 
1,521,353

Accounts payable and accrued liabilities
 
31,214

 
24,597

Distributions payable
 
6,253

 
10,649

Below-market leases, net
 
13,753

 
17,943

Liabilities related to real estate held for sale
 
—

 
5,040

Other liabilities
 
18,630

 
34,674

Total liabilities
 
942,192

 
1,614,256

Commitments and contingencies (Note 14)
 


 


Redeemable common stock
 
8,181

 
70,562

Stockholders’ equity:
 
 
 
 
Preferred stock, $.01 par value; 10,000,000 shares authorized, no shares issued and outstanding
 
—

 
—

Common stock, $.01 par value; 1,000,000,000 shares authorized, 190,753,163 and 192,269,969 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively
 
1,908

 
1,923

Additional paid-in capital
 
1,692,976

 
1,647,214

Cumulative distributions in excess of net income
 
(938,816
)
 
(369,342
)
Accumulated other comprehensive loss
 
(2,690
)
 
(10,313
)
Total stockholders’ equity
 
753,378

 
1,269,482

Total liabilities and stockholders’ equity
 
$
1,703,751

 
$
2,954,300

See accompanying condensed notes to consolidated financial statements.

2
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share amounts)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
 
Rental income
 
$
44,602

 
$
65,446

 
$
171,865

 
$
192,989

Tenant reimbursements
 
6,357

 
15,582

 
38,919

 
46,175

Interest income from real estate loans receivable
 
1,396

 
8,586

 
11,346

 
25,258

Interest income from marketable securities
 
864

 
—

 
953

 
—

Other operating income
 
2,375

 
2,632

 
7,681

 
7,923

Total revenues
 
55,594

 
92,246

 
230,764

 
272,345

Expenses:
 
 
 
 
 
 
 
 
Operating, maintenance, and management
 
12,720

 
16,967

 
47,700

 
49,616

Real estate taxes and insurance
 
6,606

 
12,400

 
30,940

 
36,246

Asset management fees to affiliate
 
3,829

 
6,079

 
15,164

 
17,563

Real estate acquisition fees to affiliates
 
—

 
—

 
—

 
1,797

Real estate acquisition fees and expenses
 
—

 
—

 
—

 
623

General and administrative expenses
 
1,106

 
1,347

 
3,909

 
3,684

Depreciation and amortization
 
16,835

 
30,746

 
64,187

 
90,769

Interest expense
 
25,040

 
19,123

 
54,888

 
50,614

Impairment charge on real estate
 
3,940

 
—

 
5,015

 
—

Total expenses
 
70,076

 
86,662

 
221,803

 
250,912

Other income:
 
 
 
 
 
 
 
 
Other interest income
 
133

 
6

 
188

 
21

Loss on sale of marketable securities
 
(331
)
 
—

 
(331
)
 
—

Gain on sales of real estate, net
 
322,811

 
—

 
369,458

 
—

Total other income
 
322,613

 
6

 
369,315

 
21

Net income
 
$
308,131

 
$
5,590

 
$
378,276

 
$
21,454

Net income per common share, basic and diluted
 
$
1.61

 
$
0.03

 
$
1.97

 
$
0.11

Weighted-average number of common shares outstanding, basic and diluted
 
190,843,044

 
192,788,656

 
191,570,503

 
192,093,022

See accompanying condensed notes to consolidated financial statements.


3
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
(in thousands)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
308,131

 
$
5,590

 
$
378,276

 
$
21,454

Other comprehensive income:
 
 
 
 
 
 
 
 
Unrealized gains (losses) on derivative instruments
 
473

 
(3,067
)
 
(1,923
)
 
(3,029
)
Reclassification adjustment realized in net income (effective portion)
 
1,694

 
2,484

 
5,818

 
6,985

Reclassification of unrealized losses due to hedge ineffectiveness
 
2,385

 
—

 
3,207

 
—

Reclassification of realized losses related to swap terminations
 
—

 
256

 
521

 
613

Unrealized loss on marketable securities
 
(246
)
 
—

 
(313
)
 
—

Reclassification of loss on marketable securities to income
 
313

 
—

 
313

 
—

Total other comprehensive income (loss)
 
4,619

 
(327
)
 
7,623

 
4,569

Total comprehensive income
 
$
312,750

 
$
5,263

 
$
385,899

 
$
26,023

See accompanying condensed notes to consolidated financial statements.



4
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Year Ended December 31, 2013 and the Nine Months Ended September 30, 2014 (unaudited)
(dollars in thousands)
 
 
 
 
 
 
Additional Paid-in Capital
 
Cumulative Distributions and Net Income (Loss)
 
Accumulated Other Comprehensive Income (Loss)
 
Total Stockholders’ Equity
 
 
 
Common Stock
 
 
 
Shares
 
Amounts
 
Balance, December 31, 2012
 
190,274,167

 
$
1,903

 
$
1,633,994

 
$
(289,737
)
 
$
(17,129
)
 
$
1,329,031

Net income
 
—

 
—

 
—

 
55,779

 
—

 
55,779

Other comprehensive income
 
—

 
—

 
—

 
—

 
6,816

 
6,816

Issuance of common stock
 
7,214,805

 
72

 
70,490

 
—

 
—

 
70,562

Redemptions of common stock
 
(5,219,003
)
 
(52
)
 
(53,116
)
 
—

 
—

 
(53,168
)
Transfers to redeemable common stock
 
—

 
—

 
(4,135
)
 
—

 
—

 
(4,135
)
Distributions declared
 
—

 
—

 
—

 
(135,384
)
 
—

 
(135,384
)
Other offering costs
 
—

 
—

 
(19
)
 
—

 
—

 
(19
)
Balance, December 31, 2013
 
192,269,969

 
$
1,923

 
$
1,647,214

 
$
(369,342
)
 
$
(10,313
)
 
$
1,269,482

Net income
 
—

 
—

 
—

 
378,276

 
—

 
378,276

Other comprehensive income
 
—

 
—

 
—

 
—

 
7,623

 
7,623

Issuance of common stock
 
2,749,008

 
28

 
26,857

 
—

 
—

 
26,885

Redemptions of common stock
 
(4,265,814
)
 
(43
)
 
(43,466
)
 
—

 
—

 
(43,509
)
Transfers from redeemable common stock
 
—

 
—

 
62,371

 
—

 
—

 
62,371

Distributions declared
 
—

 
—

 
—

 
(947,750
)
 
—

 
(947,750
)
Balance, September 30, 2014
 
190,753,163

 
$
1,908

 
$
1,692,976

 
$
(938,816
)
 
$
(2,690
)
 
$
753,378

See accompanying condensed notes to consolidated financial statements.


5
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)

KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 
 
Nine Months Ended September 30,
 
 
2014
 
2013
Cash Flows from Operating Activities:
 
 
 
 
Net income
 
$
378,276

 
$
21,454

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
64,187

 
90,769

Impairment charge on real estate
 
5,015

 
—

Noncash interest income on real estate-related investments
 
(107
)
 
(3,661
)
Deferred rent
 
(5,126
)
 
(9,938
)
Bad debt expense
 
489

 
470

Amortization of above- and below-market leases, net
 
1,867

 
1,615

Amortization of deferred financing costs
 
3,834

 
2,440

Reclassification of realized losses on derivative instruments
 
521

 
613

Unrealized losses due to hedge ineffectiveness
 
3,207

 
—

Change in fair value of contingent consideration
 
—

 
(31
)
Gain on sale of real estate, net
 
(369,458
)
 
—

Loss on sale of marketable securities
 
331

 
—

Changes in operating assets and liabilities:
 
 
 
 
Restricted cash for operational expenditures
 
2

 
—

Rents and other receivables
 
(2,841
)
 
(2,807
)
Prepaid expenses and other assets
 
(6,737
)
 
(11,838
)
Accounts payable and accrued liabilities
 
(1,336
)
 
6,321

Other liabilities
 
(12,147
)
 
2,685

Net cash provided by operating activities
 
59,977

 
98,092

Cash Flows from Investing Activities:
 
 
 
 
Proceeds from sale of real estate
 
1,379,642

 
—

Acquisitions of real estate
 
—

 
(238,952
)
Improvements to real estate
 
(20,075
)
 
(15,473
)
Investments in marketable securities
 
(529,997
)
 
—

Proceeds from sale of marketable securities
 
529,666

 
—

Principal repayments on real estate loans receivable
 
152

 
1,320

Proceeds from the early payoff of real estate loans receivable
 
111,688

 
—

Investments in real estate loans receivable
 
—

 
(5,490
)
Net cash provided by (used in) investing activities
 
1,471,076

 
(258,595
)
Cash Flows from Financing Activities:
 
 
 
 
Proceeds from notes payable
 
—

 
456,000

Principal payments on notes payable
 
(649,011
)
 
(207,590
)
Payments of deferred financing costs
 
(10
)
 
(4,027
)
Return of contingent consideration related to acquisition of real estate
 
—

 
308

Payments to redeem common stock
 
(43,509
)
 
(31,757
)
Payments of other offering costs
 
—

 
(19
)
Distributions paid to common stockholders
 
(925,261
)
 
(49,637
)
Net cash (used in) provided by financing activities
 
(1,617,791
)
 
163,278

Net (decrease) increase in cash and cash equivalents
 
(86,738
)
 
2,775

Cash and cash equivalents, beginning of period
 
175,042

 
48,390

Cash and cash equivalents, end of period
 
$
88,304

 
$
51,165

Supplemental Disclosure of Cash Flow Information:
 
 
 
 
Interest paid
 
$
35,144

 
$
44,245

Supplemental Disclosure of Noncash Transactions:
 
 
 
 
(Decrease) in distributions payable
 
$
(4,396
)
 
$
(211
)
Increase in redeemable common stock payable
 
$
—

 
$
8,326

Increase in accrued improvements to real estate
 
$
5,401

 
$
5,930

Increase in lease commissions payable
 
$
3,723

 
$
710

Distributions paid to common stockholders through common stock issuances pursuant to the dividend reinvestment plan
 
$
26,885

 
$
54,308

See accompanying condensed notes to consolidated financial statements.

6
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(unaudited)



1.
ORGANIZATION
KBS Real Estate Investment Trust II, Inc. (the “Company”) was formed on July 12, 2007 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2008. The Company conducts its business primarily through KBS Limited Partnership II, a Delaware limited partnership formed on August 23, 2007 (the “Operating Partnership”), and its subsidiaries. The Company is the sole general partner of and directly owns a 0.1% partnership interest in the Operating Partnership. The Company’s wholly-owned subsidiary, KBS REIT Holdings II LLC, a Delaware limited liability company formed on August 23, 2007 (“KBS REIT Holdings II”), owns the remaining 99.9% partnership interest in the Operating Partnership and is its sole limited partner.
The Company owns a diverse portfolio of real estate and real estate-related investments. As of September 30, 2014 , the Company owned 19  real estate properties (consisting of 13 office properties, one office/flex property, a portfolio of four  industrial properties and an office campus consisting of eight office buildings) and two  real estate loans receivable. As of September 30, 2014 , one office property and a portfolio of four industrial properties were classified as held for sale.
Subject to certain restrictions and limitations, the business of the Company is managed by KBS Capital Advisors LLC (the “Advisor”), an affiliate of the Company, pursuant to an advisory agreement the Company renewed with the Advisor on May 21, 2014 (the “Advisory Agreement”). The Advisory Agreement may be renewed for an unlimited number of one-year periods upon the mutual consent of the Advisor and the Company. Either party may terminate the Advisory Agreement upon 60 days’ written notice. The Advisor owns 20,000  shares of the Company’s common stock.
Upon commencing its initial public offering (the “Offering”), the Company retained KBS Capital Markets Group LLC (the “Dealer Manager”), an affiliate of the Advisor, to serve as the dealer manager of the Offering pursuant to a dealer manager agreement, as amended and restated on April 30, 2010 (the “Dealer Manager Agreement”). The Company ceased offering shares of common stock in its primary offering on December 31, 2010 and terminated its primary offering on March 22, 2011. The Company terminated its dividend reinvestment plan effective May 29, 2014.
The Company sold 182,681,633  shares of common stock in its primary offering for gross offering proceeds of $1.8 billion . The Company sold 30,903,504  shares of common stock under its dividend reinvestment plan for gross offering proceeds of $298.2 million . Also as of September 30, 2014 , the Company had redeemed 22,851,354  shares sold in the Offering for $228.4 million .
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2013 , except for the addition of an accounting policy with respect to investments in marketable securities and the addition of an accounting policy related to the reclassification of a property from held for sale to held for investment. During the nine months ended September 30, 2014 , the Company adopted ASU No. 2014-08 (defined below), which impacts the Company’s reporting of discontinued operations. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”). 

7
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

Principles of Consolidation and Basis of Presentation
The accompanying unaudited consolidated financial statements and condensed notes thereto have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements.  In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods.  Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
The consolidated financial statements include the accounts of the Company, KBS REIT Holdings II, the Operating Partnership, and their direct and indirect wholly owned subsidiaries.  All significant intercompany balances and transactions are eliminated in consolidation. 
Use of Estimates
The preparation of the consolidated financial statements and condensed notes thereto in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.
Reclassifications
Certain amounts in the Company’s prior period consolidated financial statements have been reclassified to conform to the current period presentation.  These reclassifications have not changed the results of operations of prior periods.  During the nine months ended September 30, 2014 , the Company sold seven office properties, one industrial property and a leasehold interest in one industrial property and classified one office property and a portfolio of four industrial properties as held for sale.  As a result, certain assets and liabilities were reclassified to held for sale on the consolidated balance sheets for all periods presented. Additionally, as of September 30, 2014 , the Company reclassified two properties that were previously classified as held for sale to held for investment.
Change in a Plan to Sell
When real estate is initially considered “held for sale” it is measured at the lower of its depreciated book value or estimated fair value less estimated costs to sell. Changes in the market may compel the Company to decide to reclassify a property that was designated as held for sale to held for investment.  A property that is reclassified from held for sale to held for investment is measured and recorded at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation and amortization expense that would have been recognized had the property been continuously classified as held and used, or (ii) its fair value at the date of the subsequent decision not to sell. Any adjustment to the carrying amount of the property as a result of the reclassification is included in income from continuing operations as an impairment charge on real estate held for investment.
Marketable Securities
The Company classifies its investments in marketable securities as available-for-sale, since the Company may sell them prior to their maturity but does not hold them principally for the purpose of making frequent investments and sales with the objective of generating profits on short-term differences in price. These investments are carried at estimated fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss). Estimated fair values are generally based on quoted market prices, when available, or on estimates provided by independent pricing sources or dealers who make markets in such securities. In certain circumstances, such as when the market for the securities becomes inactive, the Company may determine it is appropriate to perform an internal valuation of the securities. Upon the sale of a security, the previously recognized unrealized gain (loss) is reversed out of accumulated other comprehensive income (loss) and the actual realized gain (loss) is recognized in earnings.

8
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

On a quarterly basis, the Company evaluates its marketable securities for other-than-temporary impairment. The Company reviews the projected future cash flows from these securities for changes in assumptions due to prepayments, credit loss experience and other factors. If, based on the Company’s quarterly estimate of cash flows, there has been an adverse change in the estimated cash flows from the cash flows previously estimated, the present value of the revised cash flows is less than the present value previously estimated, and the fair value of the securities is less than their amortized cost basis, an other-than-temporary impairment is deemed to have occurred.
The Company recognizes interest income on marketable securities that are beneficial interests in securitized financial assets and are rated “AA” and above on an accrual basis according to the contractual terms of the securities. Discounts or premiums are amortized to interest income over the life of the investment using the interest method.
The Company recognizes interest income on marketable securities that are beneficial interests in securitized financial assets that are rated below “AA” using the effective yield method, which requires the Company to periodically project estimated cash flows related to these securities and recognize interest income at an interest rate equivalent to the estimated yield on the security, as calculated using the security’s estimated cash flows and amortized cost basis, or reference amount. Changes in the estimated cash flows are recognized through an adjustment to the yield on the security on a prospective basis. Projecting cash flows for these types of securities requires significant judgment, which may have a significant impact on the timing of revenue recognized on these investments.
The Company is required to distinguish between other-than-temporary impairments related to credit and other-than-temporary impairments related to other factors (e.g., market fluctuations) on its debt securities that it does not intend to sell and where it is not likely that the Company will be required to sell the security prior to the anticipated recovery of its amortized cost basis. The Company calculates the credit component of the other-than-temporary impairment as the difference between the amortized cost basis of the security and the present value of its estimated cash flows discounted at the yield used to recognize interest income. The credit component will be charged to earnings and the component related to other factors is recorded to other comprehensive income (loss).
Redeemable Common Stock
On May 15, 2014, the Company’s board of directors approved the amendment and restatement of the Company’s share redemption program (the “Amended Share Redemption Program”) to provide only for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the Amended Share Redemption Program, and, together with redemptions sought in connection with a stockholder’s death, “special redemptions”). During each calendar year, such special redemptions are limited to an annual dollar amount determined by the board of directors, which may be reviewed during the year and increased or decreased upon ten business days’ notice to the Company’s stockholders. The Company may provide notice by including such information (a) in a Current Report on Form 8-K or in its annual or quarterly reports, all publicly filed with the Securities and Exchange Commission or (b) in a separate mailing to the stockholders.
Commencing with the June 2014 redemption date, the dollar amount limitation for special redemptions for the remainder of calendar year 2014 is $10.0 million in the aggregate, as may be reviewed and adjusted from time to time by the board of directors. Based on historical redemption data, the board of directors believes that the $10.0 million redemption limitation for the remainder of calendar year 2014 will be sufficient for special redemptions. The Amended Share Redemption Program became effective on June 18, 2014. As of September 30, 2014 , the Company had $8.1 million available for special redemptions for the remainder of 2014. There were no other changes to the terms of special redemptions, and special redemptions will continue to be made at a price per share equal to the most recent estimated value per share of the Company’s common stock as of the applicable redemption date. The Company currently does not expect to make ordinary redemptions in the future.
Per Share Data
Basic net income (loss) per share of common stock is calculated by dividing net income (loss) by the weighted-average number of shares of common stock issued and outstanding during such period. Diluted net income (loss) per share of common stock equals basic net income (loss) per share of common stock as there were no potentially dilutive securities outstanding during the nine months ended September 30, 2014 and 2013 , respectively.

9
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

Distributions declared per common share were $4.644 and $4.966 for the three and nine months ended September 30, 2014, respectively. Distributions declared per common share assumes each share was issued and outstanding each day that was a record date for distributions during the three and nine months ended September 30, 2014. These distributions declared consisted of the following:
•
The Company’s board of directors declared distributions per common share based on daily record dates for each day during the period from January 1, 2014 through August 31, 2014. Each day during the period was a record date for distributions and distributions were calculated at a rate of $0.00178082 per share per day.
•
The Company’s board of directors declared special distributions in the amount of $3.75 , $0.30 and $0.45 per share on the outstanding shares of the Company’s common stock on July 8, 2014, August 5, 2014 and August 29, 2014, respectively, for an aggregate amount of $4.50 per share of common stock, to stockholders of record as of the close of business on September 15, 2014.
•
On August 29, 2014, the Company’s board of directors declared a September 2014 distribution in the amount of $0.03277397 per share of common stock to stockholders of record as of the close of business on September 26, 2014.
Distributions declared per common share were $0.164 and $0.540 for the three and nine months ended September 30, 2013, respectively. Distributions declared per common share assumes each share was issued and outstanding each day during the three and nine months ended September 30, 2013. For each day that was a record date for distributions during the three and nine months ended September 30, 2013, distributions were calculated at a rate of $0.00178082  per share per day. Each day during the period from January 1, 2013 through September 30, 2013 was a record date for distributions. Additionally, the Company’s board of directors declared a special distribution in the amount of $0.05416667 per share of common stock to stockholders of record as of the close of business on February 4, 2013.
Segments
The Company’s segments are based on the Company’s method of internal reporting, which classifies its operations by investment type: real estate and real estate-related. For financial data by segment, see Note 13, “Segment Information.”

10
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

Recently Issued Accounting Standards Update
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360):  Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU No. 2014-08”).  ASU No. 2014-08 limits discontinued operations reporting to disposals of components of an entity that represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when any of the following occurs: a) the component of an entity or group of components of an entity meets the criteria to be classified as held for sale; b) the component of an entity or group of components of an entity is disposed of by sale; and c) the component of an entity or group of components of an entity is disposed of other than by sale.  ASU No. 2014-08 also requires additional disclosures about discontinued operations.  ASU No. 2014-08 is effective for reporting periods beginning after December 15, 2014.  Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The Company early adopted ASU No. 2014-08 for the reporting period beginning January 1, 2014.  As a result of the adoption of ASU No. 2014-08, results of operations for properties that are classified as held for sale in the ordinary course of business on or subsequent to January 1, 2014 would generally be included in continuing operations on the Company’s consolidated statements of operations, to the extent such disposals did not meet the criteria for classification as a discontinued operation described above. Additionally, any gain or loss on sale of real estate that does not meet the criteria for classification as a discontinued operation would be included in income from continuing operations on the consolidated statements of operations.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU No. 2014-09”). ASU No. 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services.  ASU No. 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification.  ASU No. 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). ASU No. 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and is to be applied retrospectively, with early application not permitted.  The Company does not expect the adoption of ASU No. 2014-09 to have a material impact on its financial statements. 
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements (Subtopic 205-40), Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU No. 2014-15”). The amendments in ASU No. 2014-15 require management to evaluate, for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or are available to be issued when applicable) and, if so, provide related disclosures. ASU No. 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company does not expect the adoption of ASU 2014-15 to have a significant impact on its financial statements.


11
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

3.
REAL ESTATE HELD FOR INVESTMENT
As of September 30, 2014 , the Company’s portfolio of real estate held for investment was composed of 12 office properties, one office/flex property and an office campus consisting of eight office buildings, encompassing in the aggregate approximately 6.3 million rentable square feet. For a discussion of the Company’s real estate properties held for sale, see Note 7, “Real Estate Held for Sale.” As of September 30, 2014 , the Company’s real estate portfolio was 89% occupied. The following table summarizes the Company’s real estate portfolio held for investment as of September 30, 2014 (in thousands):
Property
 
Date Acquired
 
City
 
State
 
Property Type
 
Total
Real Estate
at Cost
 
Accumulated Depreciation and Amortization
 
Total Real Estate, Net
100 & 200 Campus Drive Buildings
 
09/09/2008
 
Florham Park
 
NJ
 
Office
 
$
197,118

 
$
(39,103
)
 
$
158,015

300-600 Campus Drive Buildings
 
10/10/2008
 
Florham Park
 
NJ
 
Office
 
196,349

 
(41,970
)
 
154,379

350 E. Plumeria Building
 
12/18/2008
 
San Jose
 
CA
 
Office/Flex
 
36,116

 
(6,500
)
 
29,616

Willow Oaks Corporate Center
 
08/26/2009
 
Fairfax
 
VA
 
Office
 
102,203

 
(20,243
)
 
81,960

Pierre Laclede Center
 
02/04/2010
 
Clayton
 
MO
 
Office
 
82,318

 
(15,558
)
 
66,760

One Main Place
 
02/05/2010
 
Portland
 
OR
 
Office
 
50,888

 
(9,074
)
 
41,814

Horizon Tech Center
 
06/17/2010
 
San Diego
 
CA
 
Office
 
28,136

 
—

 
28,136

Union Bank Plaza
 
09/15/2010
 
Los Angeles
 
CA
 
Office
 
216,343

 
(30,307
)
 
186,036

Emerald View at Vista Center
 
12/09/2010
 
West Palm Beach
 
FL
 
Office
 
31,639

 
(5,167
)
 
26,472

Granite Tower
 
12/16/2010
 
Denver
 
CO
 
Office
 
153,769

 
(23,207
)
 
130,562

National City Tower
 
12/17/2010
 
Louisville
 
KY
 
Office
 
115,342

 
(22,059
)
 
93,283

Gateway Corporate Center
 
01/26/2011
 
Sacramento
 
CA
 
Office
 
44,959

 
(7,273
)
 
37,686

Fountainhead Plaza
 
09/13/2011
 
Tempe
 
AZ
 
Office
 
119,384

 
—

 
119,384

Corporate Technology Centre
 
03/28/2013
 
San Jose
 
CA
 
Office
 
230,942

 
(12,661
)
 
218,281

 
 
 
 
 
 
 
 
 
 
$
1,605,506

 
$
(233,122
)
 
$
1,372,384

As of September 30, 2014 , the following properties represented more than 10% of the Company’s total assets:
Property
 
Location
 
Rentable
Square
Feet
 
Total
Real Estate, Net
(in thousands)
 
Percentage
of Total
Assets
 
Annualized Base Rent
(in thousands) (1)
 
Average Annualized Base Rent per Sq. Ft.
 
Occupancy
Corporate Technology Centre
 
San Jose, CA
 
610,083

 
$
218,281

 
12.8
%
 
$
18,537

 
$
30.38

 
100
%
Union Bank Plaza
 
Los Angeles, CA
 
627,334

 
186,036

 
10.9
%
 
21,488

 
38.54

 
89
%
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2014 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

12
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

Operating Leases
The Company’s real estate properties are leased to tenants under operating leases for which the terms and expirations vary. As of September 30, 2014 , the leases had remaining terms, excluding options to extend, of up to 15.1 years with a weighted-average remaining term of 8.6  years. Some of the leases have provisions to extend the term of the leases, options for early termination for all or part of the leased premises after paying a specified penalty, rights of first refusal to purchase the property at competitive market rates, and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires a security deposit from the tenant in the form of a cash deposit and/or a letter of credit. The amount required as a security deposit varies depending upon the terms of the respective lease and the creditworthiness of the tenant, but generally is not a significant amount. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in other liabilities in the accompanying consolidated balance sheets and totaled $3.3 million and $4.6 million as of September 30, 2014 and December 31, 2013 , respectively.
During the nine months ended September 30, 2014 and 2013 , the Company recognized deferred rent from tenants, net of lease incentive amortization, of $5.1 million and $9.9 million , respectively. As of September 30, 2014 and December 31, 2013 , the cumulative deferred rent balance was $42.7 million and $38.0 million , respectively, and is included in rents and other receivables on the accompanying balance sheets. The cumulative deferred rent balance included $4.0 million and $3.3 million  of unamortized lease incentives as of September 30, 2014 and December 31, 2013 , respectively.
As of September 30, 2014 , the future minimum rental income from the Company’s properties under non-cancelable operating leases was as follows (in thousands):
October 1, 2014 through December 31, 2014
$
38,010

2015
148,671

2016
140,248

2017
126,135

2018
104,372

Thereafter
333,676

 
$
891,112

As of September 30, 2014 , the Company had over 300 tenants over a diverse range of industries and geographic areas. The Company’s highest tenant industry concentrations (greater than 10% of annualized base rent) were as follows:
Industry
 
Number of Tenants
 
Annualized
Base Rent (1)
(in thousands)
 
Percentage of Annualized Base Rent
Finance
 
41
 
$
33,380

 
21.2
%
Computer System Design & Programming
 
13
 
27,897

 
17.7
%
Legal Services
 
51
 
19,205

 
12.2
%
 
 
 
 
$
80,482

 
51.1
%
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2014 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.

13
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

No other tenant industries accounted for more than 10% of annualized base rent. The Company had not identified any material tenant credit issues as of September 30, 2014. During the nine months ended September 30, 2014 and 2013 , the Company recorded bad debt expense of $0.5 million and $0.5 million , respectively. As of September 30, 2014 , the Company had a bad debt expense reserve of approximately $0.7 million , which represents less than 1% of its annualized base rent.
As of September 30, 2014 , the Company had a concentration of credit risk related to the following tenant lease that represented more than 10% of the Company’s annualized base rent:
 
 
 
 
 
 
 
 
 
 
Annualized Base Rent Statistics
 
 
Tenant
 
Property
 
Tenant Industry
 

Square
Feet
 
% of Portfolio (Net Rentable Sq. Ft.)
 
Annualized
Base Rent
(in thousands) (1)
 
% of Portfolio Annualized Base Rent
 
Annualized Base Rent per Sq. Ft.
 
Lease Expiration (2)
Union Bank
 
Union Bank Plaza
 
Finance
 
383,785

 
6.1%
 
$
15,857

 
10.0%
 
$
41.32

 
09/30/2016 /
01/31/2022
_____________________
(1) Annualized base rent represents annualized contractual base rental income as of September 30, 2014 , adjusted to straight-line any contractual tenant concessions (including free rent), rent increases and rent decreases from the lease’s inception through the balance of the lease term.
(2)  Represents the expiration date of the lease as of  September 30, 2014  and does not take into account any tenant renewal or termination options.
Geographic Concentration Risk
As of September 30, 2014 , the Company’s net investments in real estate in California and New Jersey represented 27.7% and 18.3% of the Company’s total assets, respectively.  As a result, the geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the California and New Jersey real estate markets.  Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for office space resulting from the local business climate, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.
Impairment of Real Estate
During the three and nine months ended September 30, 2014 , the Company recorded impairment charges of $3.9 million and $5.0 million , respectively. The impairment charges during the three and nine months ended September 30, 2014 included $3.9 million of impairments with respect to two real estate properties that were reclassified from held for sale to held for investment. The impairment charge was recorded to adjust the carrying values of the properties for any depreciation and amortization expense that would have been recognized if the properties had always been classified as held for investment, which otherwise would have been recorded through depreciation and amortization expense and rental income (related to the amortization of above-market lease assets and below-market lease liabilities). See Note 7, “Real Estate Held for Sale and Discontinued Operations,” for information regarding impairments of assets related to real estate held for sale.

14
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

4.
TENANT ORIGINATION AND ABSORPTION COSTS, ABOVE-MARKET LEASE ASSETS AND BELOW-MARKET LEASE LIABILITIES
As of September 30, 2014 and December 31, 2013 , the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities (excluding fully amortized assets and liabilities and accumulated amortization) were as follows (in thousands):
 
 
Tenant Origination and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
 
 
September 30,
2014
 
December 31,
2013
 
September 30,
2014
 
December 31,
2013
 
September 30,
2014
 
December 31,
2013
Cost
 
$
147,027

 
$
167,904

 
$
20,543

 
$
25,527

 
$
(37,367
)
 
$
(39,487
)
Accumulated Amortization
 
(70,681
)
 
(74,469
)
 
(8,185
)
 
(9,363
)
 
23,614

 
21,544

Net Amount
 
$
76,346

 
$
93,435

 
$
12,358

 
$
16,164

 
$
(13,753
)
 
$
(17,943
)
Increases (decreases) in net income as a result of amortization of the Company’s tenant origination and absorption costs, above-market lease assets and below-market lease liabilities for the three and nine months ended September 30, 2014 and 2013 were as follows (in thousands):
 
 
Tenant Origination and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
 
 
For the Three Months Ended September 30,
 
For the Three Months Ended September 30,
 
For the Three Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Amortization
 
$
(5,080
)
 
$
(10,343
)
 
$
(1,684
)
 
$
(2,451
)
 
$
1,349

 
$
1,828

 
 
Tenant Origination and
Absorption Costs
 
Above-Market
Lease Assets
 
Below-Market
Lease Liabilities
 
 
For the Nine Months Ended September 30,
 
For the Nine Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Amortization
 
$
(20,310
)
 
$
(31,216
)
 
$
(6,761
)
 
$
(7,201
)
 
$
4,894

 
$
5,586


15
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

5.
REAL ESTATE LOANS RECEIVABLE
As of September 30, 2014 and December 31, 2013 , the Company, through indirect wholly owned subsidiaries, had invested in or originated real estate loans receivable as follows (dollars in thousands):
Loan Name
     Location of Related Property or Collateral
 
Date Acquired/ Originated
 
Property Type
 
Loan Type
 
Outstanding Principal Balance as of September 30,
2014 (1)
 
Book Value
as of
September 30,
2014 (2)
 
Book Value
as of
December 31,
2013 (2)
 
Contractual Interest Rate (3)
 
Annualized Effective Interest Rate  (3)
 
Maturity Date (4)
Sheraton Charlotte Airport Hotel First Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charlotte, North Carolina
 
07/11/2011
 
Hotel
 
Mortgage
 
$
14,373

 
$
14,386

 
$
14,477

 
7.5%
 
7.6%
 
08/01/2018
Summit I & II First Mortgage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reston, Virginia
 
01/17/2012
 
Office
 
Mortgage
 
58,687

 
58,709

 
58,781

 
7.5%
 
7.6%
 
02/01/2017
Tuscan Inn First Mortgage Origination (5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
San Francisco, California
 
01/21/2010
 
Hotel
 
Mortgage
 
—

 
—

 
20,077

 
(5)  
 
(5)  
 
(5)  
Chase Tower First Mortgage Origination  (6)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Austin, Texas
 
01/25/2010
 
Office
 
Mortgage
 
—

 
—

 
58,820

 
(6)  
 
(6)  
 
(6)  
Pappas Commerce First Mortgage Origination  (7)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Boston, Massachusetts
 
04/05/2010
 
Industrial
 
Mortgage
 
—

 
—

 
32,673

 
(7)  
 
(7)  
 
(7)  
 
 
 
 
 
 
 
 
$
73,060

 
$
73,095

 
$
184,828

 
 
 
 
 
 
_____________________
(1) Outstanding principal balance as of September 30, 2014 represents original principal balance outstanding under the loan, increased for any subsequent fundings and reduced for any principal paydowns.
(2) Book value represents outstanding principal balance, adjusted for unamortized acquisition discounts, origination fees and direct origination and acquisition costs.
(3) Contractual interest rate is the stated interest rate on the face of the loan. Annualized effective interest rate is calculated as the actual interest income recognized in 2014, using the interest method, annualized and divided by the average amortized cost basis of the investment. The contractual interest rates and annualized effective interest rates presented are as of September 30, 2014 .
(4) Maturity dates are as of September 30, 2014 ; subject to certain conditions, the maturity dates of certain real estate loans receivable may be extended beyond the maturity date shown.
(5) On February 7, 2014, the Company, through an indirect wholly owned subsidiary, entered into an early payoff agreement with the borrower of the Tuscan Inn First Mortgage Origination, pursuant to which the borrower of the Tuscan Inn First Mortgage Origination paid off the entire principal balance outstanding of $20.2 million and accrued interest.
(6) On February 14, 2014, the Company, through an indirect wholly owned subsidiary, entered into an early payoff agreement with the borrower of the Chase Tower First Mortgage Origination, pursuant to which the borrower of the Chase Tower Mortgage Origination paid off the entire principal balance outstanding $58.9 million and accrued interest. Additionally, the borrower paid a yield maintenance premium of $4.9 million in accordance with the early payoff agreement, which was recorded in interest income from real estate loans receivable.
(7) On June 9, 2014, the borrower under the Pappas Commerce First Mortgage Origination paid off the entire principal balance outstanding of $32.7 million plus accrued interest. The Pappas Commerce First Mortgage had an original maturity date of July 1, 2014.
The following summarizes the activity related to real estate loans receivable for the nine months ended September 30, 2014 (in thousands):
Real estate loans receivable - December 31, 2013
$
184,828

Principal repayments received on real estate loans receivable
(152
)
Payoff of real estate loans receivable
(111,688
)
Amortization of closing costs and origination fees on real estate loans receivable
107

Real estate loans receivable - September 30, 2014
$
73,095


16
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

For the three and nine months ended September 30, 2014 and 2013 , interest income from real estate loans receivable consisted of the following (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Contractual interest income
 
$
1,401

 
$
7,313

 
$
6,322

 
$
21,597

Prepayment fee received on real estate loan receivable
 
—

 
—

 
4,917

 
—

Accretion of purchase discounts
 
—

 
1,416

 
—

 
4,075

Amortization of closing costs and origination fees
 
(5
)
 
(143
)
 
107

 
(414
)
Interest income from real estate loans receivable
 
$
1,396

 
$
8,586

 
$
11,346

 
$
25,258

As of September 30, 2014 and December 31, 2013 , interest receivable from real estate loans receivable was $0.5 million and $1.3 million , respectively, and was included in rents and other receivables.
6.
MARKETABLE SECURITIES
During the nine months ended September 30, 2014 , the Company invested in marketable securities for cash management purposes, which it classified as available-for-sale. The following summarizes the activity related to the Company’s investments in marketable securities for the nine months ended September 30, 2014 (in thousands):
Marketable securities - December 31, 2013
$
—

Investments in marketable securities
529,997

Unrealized losses on marketable securities
(313
)
Sale of marketable securities
(529,684
)
Marketable securities - September 30, 2014
$
—

During the three and nine months ended September 30, 2014 , the Company recognized net income from marketable securities of $0.5 million and $0.6 million , respectively, which included a loss of $0.3 million and $0.3 million , respectively, in connection with the sale of marketable securities. During the three and nine months ended September 30, 2014 , the Company recognized interest income from marketable securities of $0.9 million and $1.0 million , respectively.
7.
REAL ESTATE HELD FOR SALE
During the nine months ended September 30, 2014 , the Company disposed of seven office properties, one industrial property and a leasehold interest in one industrial property. Additionally, as of September 30, 2014 , the Company classified one office property and a portfolio of four industrial properties with an aggregate net book value of $81.4 million as held for sale. In accordance with the Company’s early adoption of ASU No. 2014-08, properties that are classified as held for sale in the ordinary course of business on or subsequent to January 1, 2014 would generally be included in continuing operations on the Company’s consolidated statements of operations. The results of operations for all properties that were sold during the nine months ended September 30, 2014 or classified as held for sale as of September 30, 2014 are included in continuing operations on the Company’s consolidated statements of operations. For more information, see Note 2, “Summary of Significant Accounting Policies — Recently Issued Accounting Standards Update.”

17
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

The following table summarizes certain revenue and expenses for the Company’s real estate properties that were sold or were held for sale during the three and nine months ended September 30, 2014 and 2013 , which were included in continuing operations (in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Revenues
 
 
 
 
 
 
 
 
Rental income
 
$
4,690

 
$
24,769

 
$
52,405

 
$
74,180

Tenant reimbursements
 
2,090

 
11,008

 
24,590

 
32,278

Other operating income
 
161

 
544

 
1,221

 
1,645

Total revenues
 
6,941

 
36,321

 
78,216

 
108,103

Expenses
 
 
 
 
 
 
 
 
Operating, maintenance, and management
 
1,446

 
6,884

 
15,626

 
19,973

Real estate taxes and insurance
 
1,322

 
6,738

 
14,636

 
19,946

Asset management fees to affiliate
 
468

 
2,351

 
5,037

 
6,952

General and administrative expenses
 
(322
)
 
12

 
61

 
10

Depreciation and amortization
 
477

 
11,836

 
13,134

 
35,476

Interest expense
 
15,965

 
6,582

 
29,961

 
19,903

Impairment charge on real estate
 
—

 
—

 
1,075

 
—

Total expenses
 
$
19,356

 
$
34,403

 
$
79,530

 
$
102,260

During the nine months ended September 30, 2014 , the Company recorded an impairment charge of $1.1 million related to a real estate property that was sold. The impairment charge represents the difference between the carrying value of the real estate and the fair value of the real estate (based on the sales price), less costs to sell.
The following summary presents the major components of assets and liabilities related to real estate held for sale as of September 30, 2014 and December 31, 2013 (in thousands):
 
September 30, 2014
 
December 31, 2013
Assets related to real estate held for sale
 
 
 
Total real estate, at cost and net of impairment charge
$
94,052

 
$
1,169,666

Accumulated depreciation and amortization
(17,378
)
 
(138,934
)
Real estate held for sale, net
76,674

 
1,030,732

Other assets
4,835

 
77,481

Total assets related to real estate held for sale
$
81,509

 
$
1,108,213

Liabilities related to real estate held for sale
 
 
 
Notes payable
56,228

 
628,780

Other liabilities
—

 
5,040

Total liabilities related to real estate held for sale
$
56,228

 
$
633,820



18
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

8.
NOTES PAYABLE
As of September 30, 2014 and December 31, 2013 , the Company’s notes payable, including notes payable related to real estate held for sale, consisted of the following (dollars in thousands):
 
 
Principal as of September 30,
2014
 
Principal as of December 31,
2013
 
Contractual Interest Rate as of
September 30, 2014 (1)
 
Effective Interest Rate as of
September 30,
2014 (1)
 
Payment Type
 
Maturity Date (2)
Amended and Restated Portfolio Revolving Loan Facility (3)
 
$
92,376

 
$
105,000

 
One-month LIBOR + 1.80% (3)
 
3.1%
 
Interest Only
 
06/21/2017
300 N. LaSalle Building Mortgage Loan (4)
 
—

 
348,061

 
(4)  
 
(4)  
 
(4)  
 
(4)  
Union Bank Plaza Mortgage Loan (5)
 
105,000

 
105,000

 
One-month LIBOR + 1.75%
 
3.5%
 
Interest Only
 
09/15/2015
Emerald View at Vista Center Mortgage Loan
 
19,800

 
19,800

 
One-month LIBOR + 2.25%
 
4.6%
 
Interest Only
 
01/01/2016
Portfolio Mortgage Loan #1 (6)
 
249,526

 
341,544

 
One-month LIBOR + 2.15%
 
3.3%
 
Interest Only
 
01/27/2016
601 Tower Mortgage Loan (7)
 
—

 
16,320

 
(7)  
 
(7)  
 
(7)  
 
(7)  
CityPlace Tower Mortgage Loan (8)
 
—

 
71,000

 
(8)  
 
(8)  
 
(8)  
 
(8)  
Fountainhead Plaza Mortgage Loan
 
80,000

 
80,000

 
One-month LIBOR + 1.90%
 
2.9%
 
Interest Only
 
12/01/2015
Portfolio Mortgage Loan #2 (9)
 
—

 
75,628

 
(9)  
 
(9)  
 
(9)  
 
(9)  
Portfolio Mortgage Loan #3 (10)
 
107,640

 
141,000

 
One-month LIBOR +
1.75% - 1.85%
 
2.4%
 
Interest Only
 
03/01/2016
Corporate Technology Centre Mortgage Loan (11)
 
140,000

 
140,000

 
3.50%
 
3.5%
 
(11)  
 
04/01/2020
300-600 Campus Drive Revolving Loan (12)
 
78,000

 
78,000

 
One-month LIBOR + 2.05% (12)
 
2.9%
 
Interest Only
 
08/01/2016
 
 
$
872,342

 
$
1,521,353

 
 
 
 
 
 
 
 
_____________________
(1) Contractual interest rate represents the interest rate in effect under the loan as of September 30, 2014 . Effective interest rate is calculated as the actual interest rate in effect as of September 30, 2014 (consisting of the contractual interest rate and the effect of interest rate swaps and contractual floor rates, if applicable), using interest rate indices as of September 30, 2014 , where applicable. For further information regarding the Company’s derivative instruments, see Note 10, “Derivative Instruments.”
(2) Represents the initial maturity date or the maturity date as extended as of September 30, 2014 ; subject to certain conditions, the maturity dates of certain loans may be extended beyond the maturity date shown.
(3) On June 4, 2014, in connection with the sale of Mountain View Corporate Center, the borrowing capacity under the Amended and Restated Portfolio Revolving Loan Facility was reduced from $145.0 million to $128.3 million . As of September 30, 2014 , the Amended and Restated Portfolio Revolving Loan Facility was secured by 350 E. Plumeria Building, Pierre Laclede Center and One Main Place. As of September 30, 2014 , the $92.4 million non-revolving portion had been funded, and the $35.9 million revolving portion remained available for future disbursements, subject to certain terms and conditions contained in the loan documents.
(4) On July 7, 2014, in connection with the disposition of the 300 N. LaSalle Building, the Company repaid the entire $344.6 million principal balance and all other sums due under this loan, including a prepayment penalty of $13.7 million .
(5) On September 15, 2010, in connection with the acquisition of the Union Bank Plaza, the Company entered into a five -year mortgage loan for borrowings of up to $119.3 million secured by the Union Bank Plaza. As of September 30, 2014 , $105.0 million had been disbursed to the Company with the remaining loan balance of $14.3 million available for future disbursements, subject to certain conditions set forth in the loan agreement.
(6) As of September 30, 2014 , the Portfolio Mortgage Loan #1 was secured by Horizon Tech Center, Crescent VIII, National City Tower, Granite Tower, Gateway Corporate Center and I-81 Industrial Portfolio. On July 10, 2014, in connection with the disposition of Torrey Reserve West, the Company repaid $16.8 million of principal due under this loan and Torrey Reserve West was released as security from Portfolio Mortgage Loan #1. On July 25, 2014, in connection with the disposition of Two Westlake Park, the Company repaid $53.1 million of principal due under this loan and Two Westlake Park was released as security from Portfolio Mortgage Loan #1.
(7) On June 11, 2014 in connection with the disposition of 601 Tower at Carlson Center, the Company paid off the outstanding principal balance and all other sums due under this loan.
(8) On August 21, 2014 in connection with the disposition of CityPlace Tower, the Company paid off the outstanding principal balance and all other sums due under this loan.
(9) On June 9, 2014, in connection with the payoff of the Pappas Commerce First Mortgage Loan, the Company repaid the outstanding principal balance due and all other sums under Portfolio Mortgage Loan #2.
(10) On March 6, 2013, the Company entered into a three -year senior secured credit facility for borrowings of up to $235.0 million , of which $141.0 million was non-revolving debt and $94.0 million was revolving debt. On June 27, 2014, in connection with the sale of Metropolitan Center, the borrowing capacity under Portfolio Mortgage Loan #3 was reduced to $179.4 million , of which $107.6 million is non-revolving debt and $71.8 million is revolving debt. As of September 30, 2014 , the principal balance consisted of the $107.6 million non-revolving portion. The revolving portion of $71.8 million remains available for future disbursements, subject to certain terms and conditions contained in the loan documents. As of September 30, 2014 , the Portfolio Mortgage Loan #3 was secured by the 100 & 200 Campus Drive Buildings and Willow Oaks Corporate Center.
(11) Monthly payments are initially interest-only. Beginning on May 1, 2017 , monthly payments include principal and interest with principal payments calculated using an amortization schedule of 30 years for the balance of the loan term, with the remaining principal balance, all accrued and unpaid interest and any other amounts due at maturity.
(12) On July 10, 2013, the Company entered into a three -year senior secured credit facility for borrowings of up to $120.0 million , of which $95.0 million is non-revolving debt and $25.0 million is revolving debt. As of September 30, 2014 , the principal balance consisted of $78.0 million of the non-revolving portion. The remaining non-revolving portion of $17.0 million and the revolving portion of $25.0 million remain available for future disbursements, subject to certain terms and conditions contained in the loan documents.

19
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

As of September 30, 2014 and December 31, 2013 , the Company’s deferred financing costs were $3.8 million and $5.7 million , respectively, net of amortization, and are included in deferred financing costs, prepaid expenses and other assets on the accompanying consolidated balance sheets.
During the three and nine months ended September 30, 2014 , the Company incurred $25.0 million and $54.9 million of interest expense, respectively. During the three and nine months ended September 30, 2013 , the Company incurred $19.1 million and $50.6 million of interest expense, respectively. As of September 30, 2014 and December 31, 2013 , $2.3 million and $4.5 million , respectively, of interest expense were payable. Included in interest expense for the three and nine months ended September 30, 2014 were $1.1 million and $3.8 million of amortization of deferred financing costs, and $14.0 million and $14.6 million of prepayment penalties, respectively. Included in interest expense for the three and nine months ended September 30, 2013 were $0.9 million and $2.4 million of amortization of deferred financing costs, respectively. Interest expense incurred as a result of the Company’s interest rate swap agreements were $4.1 million and $9.6 million  for the three and nine months ended September 30, 2014 , respectively. Interest expense incurred as a result of the Company’s interest rate swap agreements were $2.7 million and $7.6 million for the three and nine months ended September 30, 2013 , respectively.
The following is a schedule of maturities, including principal amortization payments, for all notes payable outstanding as of September 30, 2014 (in thousands):
October 1, 2014 through December 31, 2014
 
$
—

2015
 
185,000

2016
 
454,965

2017
 
94,157

2018
 
2,750

Thereafter
 
135,470

 
 
$
872,342

Certain of the Company’s notes payable contain financial debt covenants. As of September 30, 2014 , the Company was in compliance with these debt covenants.
9.
OTHER COMPREHENSIVE INCOME (LOSS)
The following summarizes the Company’s other comprehensive income (loss) for the nine months ended September 30, 2014 (in thousands):
 
Derivative Instruments
 
Marketable Securities
 
Total
Accumulated other comprehensive loss - December 31, 2013
$
(10,313
)
 
$
—

 
$
(10,313
)
Unrealized gains (losses)
(1,923
)
 
(313
)
 
(2,236
)
Reclassification adjustment realized in net income (effective portion)
5,818

 
—

 
5,818

Reclassification of unrealized losses due to hedge ineffectiveness
3,207

 
—

 
3,207

Reclassifications of realized losses related to swap terminations
521

 
—

 
521

Reclassifications of realized losses related to marketable securities
—

 
313

 
313

Accumulated other comprehensive loss - September 30, 2014
$
(2,690
)
 
$
—

 
$
(2,690
)


20
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

10.
DERIVATIVE INSTRUMENTS
The Company enters into derivative instruments for risk management purposes to hedge its exposure to cash flow variability caused by changing interest rates. The primary goal of the Company’s risk management practices related to interest rate risk is to prevent changes in interest rates from adversely impacting the Company’s ability to achieve its investment return objectives. The Company does not enter into derivatives for speculative purposes.
The Company enters into interest rate swaps as a fixed rate payer to mitigate its exposure to rising interest rates on its variable rate notes payable. The value of interest rate swaps is primarily impacted by interest rates, market expectations about interest rates, and the remaining life of the instrument. In general, increases in interest rates, or anticipated increases in interest rates, will increase the value of the fixed rate payer position and decrease the value of the variable rate payer position. As the remaining life of the interest rate swap decreases, the value of both positions will generally move towards zero.
The following table summarizes the notional amount and other information related to the Company’s interest rate swaps as of September 30, 2014 and December 31, 2013 . The notional value is an indication of the extent of the Company’s involvement in each instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):
Derivative Instruments
 
September 30, 2014
 
December 31, 2013
 
Reference Rate as of September 30, 2014
 
Weighted-Average
 Fix Pay Rate
 
Weighted-Average Remaining Term
 in Years
 
Number of Instruments
 
Notional Amount
 
Number of Instruments
 
Notional Amount
 
 
 
Interest Rate Swaps (1)
 
11
 
$613,513
 
16
 
$842,150
 
One-month LIBOR/
Fixed at 0.50% - 2.39%
 
1.35%
 
1.6
_____________________
(1) During the nine months ended September 30, 2014 , the Company terminated two interest rate swap agreements and paid an aggregate breakage fee of $0.2 million . In addition, the Company dedesignated 11 interest rate swap instruments due to the anticipated early repayment of debt in connection with asset sales. The Company dedesignated these hedged instruments due to certain hedged forecasted transactions no longer being probable beyond the projected asset sale date. As of September 30, 2014 , none of the Company’s interest rate swaps were designated as cash flow hedges.

The following table sets forth the fair value of the Company’s derivative instruments as well as their classification on the consolidated balance sheets as of September 30, 2014 and December 31, 2013 (dollars in thousands):
Derivative Instruments
 
Balance Sheet Location
 
September 30, 2014
 
December 31, 2013
 
 
Number of
Instruments
 
Fair Value
 
Number of
Instruments
 
Fair Value
Interest Rate Swaps
 
Deferred financing costs, prepaid expenses and other assets, at fair value
 
2
 
$
223

 
2
 
$
225

Interest Rate Swaps
 
Other liabilities, at fair value
 
9
 
$
(5,973
)
 
14
 
$
(10,260
)

21
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

The change in fair value of the effective portion of a derivative instrument that is designated as a cash flow hedge is recorded as other comprehensive income (loss) in the accompanying consolidated statements of comprehensive income (loss) and as other comprehensive income in the accompanying consolidated statements of stockholders’ equity. Amounts in other comprehensive income (loss) will be reclassified into earnings in the periods in which earnings are affected by the hedged cash flow.  The change in fair value of the ineffective portion is recognized directly in earnings. With respect to swap agreements that were terminated for which it remains probable that the original hedged forecasted transactions (i.e., LIBOR-based debt service payments) will occur, the loss related to the termination of these swap agreements is included in accumulated other comprehensive income (loss) and is reclassified into earnings over the period of the original forecasted hedged transaction. The change in fair value of a derivative instrument that is not designated as a cash flow hedge is recorded as interest expense in the accompanying consolidated statements of operations. The following table summarizes the effects of derivative instruments on the Company’s consolidated statements of operations (in thousands):
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
Amount of loss recognized on interest rate swaps (effective portion)
 
$
1,694

 
$
2,484

 
$
5,818

 
$
6,985

Unrealized losses due to hedge ineffectiveness
 
2,385

 
—

 
3,207

 
—

Reclassification of realized losses related to swap terminations
 
—

 
256

 
521

 
613

 
 
4,079

 
2,740

 
9,546

 
7,598

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
Unrealized (gain) loss on interest rate swaps
 
(5
)
 
—

 
35

 
—

 
 
(5
)
 
—

 
35

 
—

Increase in interest expense as a result of derivatives
 
$
4,074

 
$
2,740

 
$
9,581

 
$
7,598

11.
FAIR VALUE DISCLOSURES
Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other financial instruments and balances at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:
•
Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
•
Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model‑derived valuations in which significant inputs and significant value drivers are observable in active markets; and
•
Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

22
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

The fair value for certain financial instruments is derived using a combination of market quotes, pricing models and other valuation techniques that involve significant management judgment. The price transparency of financial instruments is a key determinant of the degree of judgment involved in determining the fair value of the Company’s financial instruments. Financial instruments for which actively quoted prices or pricing parameters are available and for which markets contain orderly transactions will generally have a higher degree of price transparency than financial instruments for which markets are inactive or consist of non-orderly trades. The Company evaluates several factors when determining if a market is inactive or when market transactions are not orderly. The following is a summary of the methods and assumptions used by management in estimating the fair value of each class of assets and liabilities for which it is practicable to estimate the fair value:
Cash and cash equivalents, rent and other receivables, and accounts payable and accrued liabilities: These balances approximate their fair values due to the short maturities of these items.
Real estate loans receivable: The Company’s real estate loans receivable are presented in the accompanying consolidated balance sheets at their amortized cost net of recorded loan loss reserves and not at fair value. The fair values of real estate loans receivable were estimated using an internal valuation model that considered the expected cash flows for the loans, underlying collateral values (for collateral-dependent loans) and estimated yield requirements of institutional investors for loans with similar characteristics, including remaining loan term, loan-to-value, type of collateral and other credit enhancements. The Company classifies these inputs as Level 3 inputs.
Derivative instruments: The Company’s derivative instruments are presented at fair value on the accompanying consolidated balance sheets. The valuation of these instruments is determined using a proprietary model that utilizes observable inputs. As such, the Company classifies these inputs as Level 2 inputs. The proprietary model uses the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and volatility. The fair values of interest rate swaps are estimated using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit risks to the contracts, are incorporated in the fair values to account for potential nonperformance risk.
Notes payable: The fair value of the Company’s notes payable is estimated using a discounted cash flow analysis based on management’s estimates of current market interest rates for instruments with similar characteristics, including remaining loan term, loan-to-value ratio, type of collateral and other credit enhancements. Additionally, when determining the fair value of liabilities in circumstances in which a quoted price in an active market for an identical liability is not available, the Company measures fair value using (i) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets or (ii) another valuation technique that is consistent with the principles of fair value measurement, such as the income approach or the market approach. The Company classifies these inputs as Level 3 inputs.
The following were the face values, carrying amounts and fair values of the Company’s real estate loans receivable and notes payable as of September 30, 2014 and December 31, 2013 , which carrying amounts do not approximate the fair values (in thousands):
 
 
September 30, 2014
 
December 31, 2013
 
 
Face Value        
 
Carrying
Amount    
 
Fair Value        
 
Face Value        
 
Carrying
Amount    
 
Fair Value        
Financial assets:
 
 
 
 
 
 
 
 
 
 
 
 
Real estate loans receivable
 
$
73,060

 
$
73,095

 
$
73,552

 
$
184,900

 
$
184,828

 
$
190,485

Financial liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Notes payable
 
$
872,342

 
$
872,342

 
$
873,250

 
$
1,521,353

 
$
1,521,353

 
$
1,526,075


23
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

Disclosure of the fair values of financial instruments is based on pertinent information available to the Company as of the period end and requires a significant amount of judgment. Despite increased capital market and credit market activity, transaction volume for certain financial instruments remains relatively low. This has made the estimation of fair values difficult and, therefore, both the actual results and the Company’s estimate of value at a future date could be materially different.
During the nine months ended September 30, 2014 , the Company measured the following assets and liabilities at fair value (in thousands):
 
 
 
 
Fair Value Measurements Using
 
 
Total        
 
Quoted Prices in
Active Markets 
for Identical Assets
(Level 1)
 
Significant Other
Observable 
Inputs (Level 2)        
 
Significant
Unobservable
Inputs (Level 3)         
Recurring Basis:
 
 
 
 
 
 
 
 
Asset derivatives
 
223

 
—

 
223

 
—

Liability derivatives
 
(5,973
)
 
—

 
(5,973
)
 
—

12.
RELATED PARTY TRANSACTIONS
The Company has entered into the Advisory Agreement with the Advisor and the Dealer Manager Agreement with the Dealer Manager. These agreements entitled the Advisor and/or the Dealer Manager to specified fees upon the provision of certain services with regard to the Offering and reimbursement of organization and offering costs incurred by the Advisor and the Dealer Manger on behalf of the Company. These agreements also entitle the Advisor to specified fees upon the provision of certain services with regard to the investment of funds in real estate and real estate-related investments, the management of those investments, among other services, and the disposition of investments, as well as reimbursement of certain costs incurred by the Advisor in providing services to the Company. In addition, the Advisor is entitled to certain other fees, including an incentive fee upon achieving certain performance goals, as detailed in the Advisory Agreement. The Company has also entered into a fee reimbursement agreement with the Dealer Manager pursuant to which the Company agreed to reimburse the Dealer Manager for certain fees and expenses it incurs for administering the Company’s participation in the Depository Trust & Clearing Corporation Alternative Investment Product Platform with respect to certain accounts of the Company’s investors serviced through the platform. The Advisor and Dealer Manager also serve as the advisor and dealer manager, respectively, for KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Legacy Partners Apartment REIT, Inc. and KBS Strategic Opportunity REIT II, Inc.
On January 6, 2014, the Company, together with KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Legacy Partners Apartment REIT, Inc., KBS Strategic Opportunity REIT II, Inc., the Dealer Manager, the Advisor and other KBS-affiliated entities, entered into an errors and omissions and directors and officers liability insurance program where the lower tiers of such insurance coverage are shared. The cost of these lower tiers is allocated by the Advisor and its insurance broker among each of the various entities covered by the program, and is billed directly to each entity. The allocation of these shared coverage costs is proportionate to the pricing by the insurance marketplace for the first tiers of directors and officers liability coverage purchased individually by each REIT. The Advisor’s and the Dealer Manager’s portion of the shared lower tiers’ cost is proportionate to the respective entities’ prior cost for the errors and omissions insurance.
During the nine months ended September 30, 2014 and 2013 , no other business transactions occurred between the Company and KBS Real Estate Investment Trust, Inc., KBS Real Estate Investment Trust III, Inc., KBS Strategic Opportunity REIT, Inc., KBS Legacy Partners Apartment REIT, Inc. and KBS Strategic Opportunity REIT II, Inc.

24
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

Pursuant to the terms of these agreements, summarized below are the related-party costs incurred by the Company for the three and nine months ended September 30, 2014 and 2013 , respectively, and any related amounts payable as of September 30, 2014 and December 31, 2013 (in thousands):
 
 
Incurred
 
Incurred
 
Payable as of
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
September 30,
 
December 31,
 
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Expensed
 
 
 
 
 
 
 
 
 
 
 
 
Asset management fees
 
$
3,829

 
$
6,079

 
$
15,164

 
$
17,563

 
$
—

 
$
—

Reimbursement of operating expenses (1)
 
39

 
44

 
112

 
102

 
—

 
—

Acquisition fees
 
—

 
—

 
—

 
1,797

 
—

 
—

Disposition fees (2)
 
11,591

 
—

 
14,154

 
—

 
—

 
—

 
 
$
15,459

 
$
6,123

 
$
29,430

 
$
19,462

 
$
—

 
$
—

_____________________
(1) The Advisor may seek reimbursement for certain employee costs under the Advisory Agreement. The Company reimburses the Advisor for the Company’s allocable portion of the salaries, benefits and overhead of internal audit department personnel providing services to the Company. These amounts totaled $39,000 and $44,000 for the three months ended September 30, 2014 and 2013 , respectively, and $112,000 and $102,000 for the nine months ended September 30, 2014 and 2013 , respectively, and were the only type of employee costs reimbursed under the Advisory Agreement for the three and nine months ended September 30, 2014 and 2013 . The Company will not reimburse for employee costs in connection with services for which the Advisor earns acquisition, origination or disposition fees (other than reimbursement of travel and communication expenses) or for the salaries or benefits the Advisor or its affiliates may pay to the Company’s executive officers.
(2) Disposition fees with respect to real estate sold are included in the gain on sales of real estate in the accompanying consolidated statements of operations.
On July 29, 2010, the Company, through an indirect wholly owned subsidiary, KBSII 300 North LaSalle, LLC (the “Owner”), purchased the 300 N. LaSalle Building. On May 16, 2014, after a competitive bidding process overseen by HFF, Inc., an unaffiliated independent third party, the Owner entered into a purchase and sale agreement and escrow instructions for the sale of the 300 N. LaSalle Building to an affiliate of the Irvine Company, 300 North LaSalle LLC (the “Purchaser”). Donald Bren is the chairman and owner of the Purchaser and the Irvine Company and the brother of Peter Bren (one of the Company’s executive officers and sponsors). On July 7, 2014, the Company completed the sale of the 300 N. LaSalle Building to the Purchaser for $850.0 million .

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

13.
SEGMENT INFORMATION
The Company presently operates in two reportable business segments based on its investment types: real estate and real estate-related. Under the real estate segment, the Company has invested in office, office/flex and industrial properties. Under the real estate-related segment, the Company has invested in or originated mortgage loans and an A-Note. All revenues earned from the Company’s two reporting segments were from external customers and there were no intersegment sales or transfers. The Company does not allocate corporate-level accounts to its reporting segments. Corporate-level accounts include corporate general and administrative expenses, non-operating interest income, non-operating interest expense and other corporate-level expenses. The accounting policies of the segments are consistent with those described in Note 2, “Summary of Significant Accounting Policies.”
The Company evaluates the performance of its segments based upon net operating income (“NOI”), which is a non-GAAP supplemental financial measure. The Company defines NOI for its real estate segment as operating revenues (rental income, tenant reimbursements and other operating income) less property and related expenses (property operating expenses, real estate taxes, insurance, asset management fees and provision for bad debt) less interest expense. The Company defines NOI for its real estate-related segment as interest income less loan servicing costs, asset management fees and interest expense. NOI excludes certain items that are not considered to be controllable in connection with the management of an asset such as non-property income and expenses, depreciation and amortization, and corporate general and administrative expenses. The Company uses NOI to evaluate the operating performance of the Company’s real estate and real estate-related investments and to make decisions about resource allocations. The Company believes that net income is the GAAP measure that is most directly comparable to NOI; however, NOI should not be considered as an alternative to net income as the primary indicator of operating performance, as it excludes the items described above. Additionally, NOI as defined above may not be comparable to other REITs or companies as their definitions of NOI may differ from the Company’s definition.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

The following tables summarize total revenues and NOI for each reportable segment for the three and nine months ended September 30, 2014 and 2013 and total assets and total liabilities for each reportable segment as of September 30, 2014 and December 31, 2013 (in thousands):
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
 
Real estate segment (1)
 
$
53,334

 
$
83,660

 
$
218,465

 
$
247,087

Real estate-related segment
 
1,396

 
8,586

 
11,346

 
25,258

Total segment revenues
 
54,730

 
92,246

 
229,811

 
272,345

Corporate-level
 
864

 
—

 
953

 
—

Total revenues
 
$
55,594

 
$
92,246

 
$
230,764

 
$
272,345

Interest Expense:
 
 
 
 
 
 
 
 
Real estate segment (1)
 
$
25,040

 
$
17,878

 
$
53,895

 
$
46,718

Real estate-related segment
 
—

 
1,152

 
993

 
3,424

Total segment interest expense
 
25,040

 
19,030

 
54,888

 
50,142

Corporate-level
 
—

 
93

 
—

 
472

Total interest expense
 
$
25,040

 
$
19,123

 
$
54,888

 
$
50,614

NOI:
 
 
 
 
 
 
 
 
Real estate segment (1)
 
$
5,277

 
$
30,900

 
$
71,417

 
$
98,608

Real estate-related segment
 
1,258

 
6,870

 
9,702

 
20,170

Total segment NOI
 
6,535

 
37,770

 
81,119

 
118,778

Corporate-level
 
864

 
—

 
953

 
—

Total NOI
 
$
7,399

 
$
37,770

 
$
82,072

 
$
118,778

 
 
 
 
 
 
 
 
 
 
 
As of September 30,
 
As of December 31,
 
 
 
 
 
 
2014
 
2013
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
Real estate segment
 
$
1,473,070

 
$
1,514,167

 
 
 
 
Real estate-related segment
 
73,599

 
229,457

 
 
 
 
Total segment assets
 
1,546,669

 
1,743,624

 
 
 
 
Real estate held for sale
 
81,509

 
1,108,213

 
 
 
 
Corporate-level (2)
 
75,573

 
102,463

 
 
 
 
Total assets
 
$
1,703,751

 
$
2,954,300

 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Real estate segment
 
$
879,008

 
$
893,237

 
 
 
 
Real estate-related segment
 
—

 
75,820

 
 
 
 
Total segment liabilities
 
879,008

 
969,057

 
 
 
 
Real estate held for sale
 
56,228

 
633,820

 
 
 
 
Corporate-level (3)
 
6,956

 
11,379

 
 
 
 
Total liabilities
 
$
942,192

 
$
1,614,256

 
 
 
 
_____________________
(1) Amounts include properties sold and properties held for sale. See Note 7, “Real Estate Held for Sale” for more information.
(2) Total corporate-level assets consisted primarily of cash and cash equivalents of approximately $75.1 million and $102.2 million as of September 30, 2014 and December 31, 2013 , respectively.
(3) As of September 30, 2014 and December 31, 2013 , corporate-level liabilities consisted primarily of distributions payable.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

The following table reconciles the Company’s net income to its NOI for the three and nine months ended September 30, 2014 and 2013 (in thousands):  
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
308,131

 
$
5,590

 
$
378,276

 
$
21,454

Gain on sales of real estate, net
 
(322,811
)
 
—

 
(369,458
)
 
—

Loss on sale of marketable securities
 
331

 
—

 
331

 
—

Other interest income
 
(133
)
 
(6
)
 
(188
)
 
(21
)
Real estate acquisition fees to affiliates
 
—

 
—

 
—

 
1,797

Real estate acquisition fees and expenses
 
—

 
—

 
—

 
623

General and administrative expenses
 
1,106

 
1,347

 
3,909

 
3,684

Depreciation and amortization
 
16,835

 
30,746

 
64,187

 
90,769

Impairment charge on real estate
 
3,940

 
—

 
5,015

 
—

Corporate-level interest expense
 
—

 
93

 
—

 
472

NOI
 
$
7,399

 
$
37,770

 
$
82,072

 
$
118,778

14.
COMMITMENTS AND CONTINGENCIES
Economic Dependency
The Company is dependent on the Advisor for certain services that are essential to the Company, including: the disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event the Advisor is unable to provide any of these services, the Company will be required to obtain such services from other sources.
Environmental
As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. Compliance with existing environmental laws is not expected to have a material adverse effect on the Company’s financial condition and results of operations as of September 30, 2014 .
Legal Matters
From time to time, the Company is party to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is probable or reasonably possible to have a material adverse effect on the Company’s results of operations or financial condition, which would require accrual or disclosure of the contingency and possible range of loss. Additionally, the Company has not recorded any loss contingencies related to legal proceedings in which the potential loss is deemed to be remote.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 1. Financial Statements (continued)
KBS REAL ESTATE INVESTMENT TRUST II, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
September 30, 2014
(unaudited)

15.
SUBSEQUENT EVENTS
The Company evaluates subsequent events up until the date the consolidated financial statements are issued.
Distributions Paid
On October 1, 2014, the Company paid distributions of $6.3 million , which related to distributions declared for September 2014 in the amount of $0.03277397 per share of common stock to stockholders of record as of the close of business on September 26, 2014. On November 3, 2014, the Company paid distributions of $6.5 million , which related to distributions declared for October 2014 in the amount of $0.03386644 per share of common stock to stockholders of record as of the close of business on October 29, 2014.
Distributions Declared
On November 10, 2014, the Company’s board of directors declared a November 2014 distribution in the amount of $0.03277397  per share of common stock to stockholders of record as of the close of business on November 26, 2014, which the Company expects to pay on or about December 1, 2014.
Purchase and Sale Agreements for Real Estate Properties Subsequent to September 30, 2014
Crescent VIII
On May 26, 2010, the Company, through an indirect wholly owned subsidiary, purchased a four-story office building containing 82,265 rentable square feet located on approximately 4.2 acres of land in Greenwood Village, Colorado (“Crescent VIII”). On October 30, 2014, the Company entered into a purchase and sale agreement and escrow instructions for the sale of Crescent VIII to a purchaser unaffiliated with the Company or the Advisor. Pursuant to the purchase and sale agreement, the sale price for Crescent VIII is $17.25 million , subject to certain concessions and credits that will be finalized at closing. There can be no assurance that the Company will complete the sale of Crescent VIII. The purchaser would be obligated to purchase Crescent VIII only after satisfaction of agreed upon closing conditions. In some circumstances, if the purchaser fails to complete the acquisition, it may forfeit up to $0.5 million of earnest money.
I-81 Industrial Portfolio
On February 16, 2011, the Company, through an indirect wholly owned subsidiary, purchased a portfolio of four industrial properties containing an aggregate of 1,644,480 rentable square feet and encompassing an aggregate of 133.4 acres of land located in Pennsylvania (“I-81 Industrial Portfolio”). On November 3, 2014, the Company entered into a purchase and sale agreement and escrow instructions for the sale of I-81 Industrial Portfolio to a purchaser unaffiliated with the Company or the Advisor. Pursuant to the purchase and sale agreement, the aggregate sales price for I-81 Industrial Portfolio is $105.7 million , subject to certain concessions and credits that will be finalized at closing. There can be no assurance that the Company will complete the sale of I-81 Industrial Portfolio. The purchaser would be obligated to purchase I-81 Industrial Portfolio only after satisfaction of agreed upon closing conditions. In some circumstances, if the purchaser fails to complete the acquisition, it may forfeit up to $2.0 million of earnest money.



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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of KBS Real Estate Investment Trust II, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to KBS Real Estate Investment Trust II, Inc., a Maryland corporation, and, as required by context, KBS Limited Partnership II, a Delaware limited partnership, which we refer to as the “Operating Partnership,” and to their subsidiaries.
Forward-Looking Statements
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of KBS Real Estate Investment Trust II, Inc. and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
The following are some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
•
All of our executive officers and some of our directors and other key real estate and debt finance professionals are also officers, directors, managers, key professionals and/or holders of a direct or indirect controlling interest in our advisor, the entity that acted as our dealer manager and/or other KBS-affiliated entities. As a result, they face conflicts of interest, including significant conflicts created by our advisor’s compensation arrangements with us and other KBS-sponsored programs and KBS-advised investors and conflicts in allocating time among us and these other programs and investors. These conflicts could result in unanticipated actions.
•
We pay substantial fees to and expenses of our advisor and its affiliates. These payments increase the risk that our stockholders will not earn a profit on their investment in us and increase the risk of loss to our stockholders.
•
We have used and from time to time may use proceeds from financings, if necessary, to fund a portion of our distributions during our operational stage. We also expect to fund other distributions from the net proceeds from the sale of real estate and from the receipt of principal payments from, or the sale of, our real estate-related loans receivable.
•
We depend on tenants for the revenue generated by our real estate investments and, accordingly, the revenue generated by our real estate investments is dependent upon the success and economic viability of our tenants. Revenues from our properties could decrease due to a reduction in occupancy (caused by factors including, but not limited to, tenant defaults, tenant insolvency, early termination of tenant leases and non-renewal of existing tenant leases) and/or lower rental rates, making it more difficult for us to meet our debt service obligations and limiting our ability to pay distributions to our stockholders.
•
Our investments in real estate and mortgage loans may be affected by unfavorable real estate market and general economic conditions, which could decrease the value of those assets and reduce the investment return to our stockholders. Revenues from our properties and the properties and other assets directly securing our loan investments could decrease. Such events would make it more difficult for the borrowers under our loan investments to meet their payment obligations to us. It could also make it more difficult for us to meet our debt service obligations and limit our ability to pay distributions to our stockholders.
•
Disruptions in the financial markets and uncertain economic conditions could adversely affect our ability to implement our business strategy and generate returns to our stockholders.
•
Certain of our debt obligations have variable interest rates and related payments that vary with the movement of LIBOR or other indexes. Increases in these indexes could increase the amount of our debt payments and limit our ability to pay distributions to our stockholders.
•
Our share redemption program provides only for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the share redemption program document, and, together with redemptions sought in connection with a stockholder’s death, “special redemptions”). The dollar amounts available for such redemptions are determined by the board of directors and may be reviewed and adjusted from time to time. Additionally, redemptions are further subject to limitations described in our share redemption program. We currently do not expect to have funds available for ordinary redemptions in the future.


30
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

•
Since we have terminated our dividend reinvestment plan, we may have to use a greater proportion of our cash flow from operations to meet cash requirements for general corporate purposes, including, but not limited to, capital expenditures, tenant improvement costs and leasing costs related to our real estate properties; reserves required by financings of our real estate properties; the repayment of debt; and the repurchase of shares under our share redemption program that meet the requirements for special redemptions. This may reduce cash available for distributions.
•
During the nine months ended September 30, 2014, we disposed of seven office properties, one industrial property and a leasehold interest in one industrial property. Additionally, as of September 30, 2014, we had classified one office property and a portfolio of four industrial properties with an aggregate net book value of $81.4 million as held for sale. As a result of our disposition activity, our general and administrative expenses, which are not directly related to the size of our portfolio, will increase as a percentage of our cash flow from operations and this increase could be significant.
All forward-looking statements should be read in light of the risks identified in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013 , each filed with the Securities and Exchange Commission (the “SEC”).
Overview
We were formed on July 12, 2007 as a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) beginning with the taxable year ended December 31, 2008 and we intend to continue to operate in such a manner. We have invested in a diverse portfolio of real estate and real estate-related investments. We conduct our business primarily through our Operating Partnership, of which we are the sole general partner. Subject to certain restrictions and limitations, our business is managed by our advisor, KBS Capital Advisors LLC, pursuant to an advisory agreement. KBS Capital Advisors conducts our operations and manages our portfolio of real estate and real estate-related investments. Our advisor owns 20,000 shares of our common stock. We have no paid employees.
We own a diverse portfolio of real estate and real estate-related investments. As of September 30, 2014 , we owned 19  real estate properties (consisting of 13  office properties, one office/flex property, a portfolio of four industrial properties and an office campus consisting of eight office buildings) and two real estate loans receivable. As of September 30, 2014 , two of our real estate properties were classified as held for sale.
On September 27, 2007, we filed a registration statement on Form S-11 with the SEC to offer a maximum of 280,000,000 shares of common stock for sale to the public, of which 200,000,000 shares were registered in our primary offering and 80,000,000 shares were registered under our dividend reinvestment plan. We ceased offering shares of common stock in our primary offering on December 31, 2010. We sold 182,681,633  shares of common stock in the primary offering for gross offering proceeds of $1.8 billion. We terminated the offering under our dividend reinvestment plan effective May 29, 2014. Through May 29, 2014, we sold 30,903,504  shares of common stock under our dividend reinvestment plan for gross offering proceeds of $298.2 million . Also as of September 30, 2014 , we had redeemed 22,851,354 shares sold in our offering for $228.4 million .
Market Outlook – Real Estate and Real Estate Finance Markets
The following discussion is based on management’s beliefs, observations and expectations with respect to the real estate and real estate finance markets.
As a direct result of the recent recession, the Federal Reserve has maintained an accommodative monetary policy since the introduction of quantitative easing (“QE”) in October of 2008. Through this program, the Federal Reserve injected trillions of U.S. dollars into the global financial markets through the purchases of U.S. treasury bonds and mortgage backed securities. At present, it is unclear what the final cost or impact of this program will be. In July 2014, the Federal Reserve announced plans to end the purchase of securities by October 2014. The imminent end of this program has shifted investor focus from QE to the timing of an eventual interest rate increase by the Federal Reserve.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

In the United States, recent economic data has been improving. Slow and steady growth in the labor markets has driven unemployment below 6%. The U.S. labor participation rate continues to be less than optimal at 62.7% as of September 2014 and personal income growth remained muted at 0.3% as of August 2014. Consumer spending in the United States has increased, and is being driven by lower debt service burdens, record level stock market valuations and rebounding home prices. U.S. gross domestic product (“U.S. GDP”) has continued to grow at a moderate level. In the fourth quarter of 2013, U.S. GDP increased at an annual rate of 3.5%, which was followed by a decrease in U.S. GDP of 2.1% in the first quarter of 2014. In the second quarter of 2014, U.S. GDP grew at an annual rate of 4.6% and the current consensus expectation for overall U.S. GDP growth in 2014 is a modest 2.2%.
The U.S. dollar has remained a safe haven currency and the U.S. commercial real estate market has benefited from an inflow of foreign capital. Initially, gateway markets such as New York City and San Francisco benefited from a high demand for commercial properties. By 2014, the commercial real estate market recovery had spread to secondary and tertiary markets and to most asset classes. The U.S. commercial real estate market has continued to gain favor as an alternative investment class and capital flows continue to improve. Looking forward, however, the recovery in commercial real estate is expected to remain uneven across geographies and among property types.
After several years of improving market conditions, the recovery in the U.S. residential real estate market has recently begun to slow. The initial recovery was driven by low interest rates, pent-up demand from the consumer sector and institutional investors in the form of buy-to-rent portfolios. In 2014, investor demand for homes has slowed and stringent mortgage lending standards have reduced demand in the residential markets. In addition, as referenced above, the Federal Reserve’s QE program, which peaked at $85 billion a month in purchases of long-term treasury bonds and mortgage backed securities terminated on October 31, 2014. This reduction in market support could cause the demand for residential real estate to decrease further.
From a global standpoint, the U.S. economy is considered to be a bright spot. Recently the International Monetary Fund (“IMF”) lowered its global growth forecast from 3.7% to 3.3%. Lower than expected growth in the European Union (“EU”) and Chinese economies are the primary factors in the forecast change. Geopolitical events in the Ukraine and Middle East and the recent outbreak of the Ebola virus in Africa, and its possible spread to the rest of the world, have all been impediments to global economic growth.
Overall, despite indications of recovery in the United States and the U.K., uncertainties abound. China’s export-based economy has slowed, the EU is wrestling with the specter of deflation and another recession, and in Japan the government continues to experiment with a large-scale QE program of its own. In the United States, the Federal Reserve has stuck to its schedule for ending the QE program and we are monitoring the markets for their reaction to global economic slowing and related uncertainty. In the short-term, we anticipate that market conditions will continue to change and, combined with a challenging global macro-economic environment, may interfere with the implementation of our business strategy and/or force us to modify it.
Impact on Our Real Estate Investments
While current forecasts for the U.S. economy are positive, there is a level of uncertainty inherent to this outlook. Currently, both the investing and leasing environments are highly competitive. While there has been an increase in the amount of capital flowing into the U.S. real estate markets, which has resulted in an increase in real estate values in certain markets, the uncertainty regarding the economic environment has made businesses reluctant to make long-term commitments or changes in their business plans. Possible future declines in rental rates, slower or potentially negative net absorption of leased space and expectations of future rental concessions, including free rent to renew tenants early, to retain tenants who are up for renewal or to attract new tenants, may result in decreases in cash flows. Historically low interest rates could help offset some of the impact of these potential decreases in operating cash flow for properties financed with variable rate mortgages; however, interest rates likely will not remain at these historically low levels for the remaining life of many of our investments. Interest rates have become more volatile as the capital markets have prepared for the end of QE in October 2014.
Impact on Our Real Estate-Related Investments
All of our real estate-related investments are directly or indirectly secured by commercial real estate. As a result, our real estate-related investments, in general, have been and likely will continue to be impacted by the same factors impacting our real estate investments. The relatively high yields and the improving credit position of many U.S. tenants and borrowers have attracted global capital. However, the real estate and capital markets are fluid and the positive trends can reverse quickly. Economic conditions remain relatively unstable and can have a negative impact on the performance of collateral securing our loan investments, and therefore may impact the ability of some borrowers under our loans to make contractual interest payments to us.

32
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

As of September 30, 2014 , we had fixed-rate real estate loans receivable with an aggregate outstanding principal balance of $73.1 million and an aggregate carrying value (including unamortized origination and closing costs) of $73.1 million that mature in 2017 and 2018.
Impact on Our Financing Activities
In light of the risks associated with potentially volatile operating cash flows from some of our real estate properties, we may have difficulty refinancing some of our debt obligations prior to or at maturity or we may not be able to refinance these obligations at terms as favorable as the terms of our existing indebtedness. Recent financial market conditions have improved from the bottom of the economic cycle, but material risks are still present. Market conditions can change quickly, potentially negatively impacting the value of our investments.
As of September 30, 2014 , we had debt obligations in the aggregate principal amount of $872.3 million, which have initial maturities from 2015 through 2020. We had a total of $140.0 million of fixed rate notes payable and $732.3 million of variable rate notes payable as of September 30, 2014. The interest rates on $613.5 million of our variable rate notes payable are effectively fixed through interest rate swap agreements. As of September 30, 2014 , we had a total of $105.0 million of debt obligations scheduled to mature within 12 months of that date.
Liquidity and Capital Resources
Our principal demands for funds during the short- and long-term are and will be for: the payment of operating expenses, capital expenditures and general and administrative expenses; payments under debt obligations; special redemptions of common stock pursuant to our share redemption program; and payments of distributions to stockholders. To date, we have had five primary sources of capital for meeting our cash requirements:
•
Proceeds from our now terminated primary offering;
•
Proceeds from common stock issued under our now terminated dividend reinvestment plan;
•
Debt financings;
•
Proceeds from the sale of real estate and the repayment or sale of real estate-related investments; and
•
Cash flow generated by our real estate and real estate-related investments.
We ceased offering shares of common stock in our primary offering on December 31, 2010 and terminated our dividend reinvestment plan effective May 29, 2014. We intend to use our cash on hand, cash flow generated by our real estate and real estate-related investments, proceeds from debt financing, proceeds from the sale of real estate properties and principal repayments on our real estate loans receivable as our primary sources of immediate and long-term liquidity. As of September 30, 2014 , we had an aggregate of $132.7 million available for future disbursements under three credit facilities, subject to certain conditions and restrictions set forth in the respective loan agreements.
In connection with the termination of our dividend reinvestment plan, on May 15, 2014, our board of directors approved the amendment and restatement of our share redemption program (as amended and restated the “Amended Share Redemption Program”) to provide only for special redemptions. Commencing with the June 2014 redemption date, the dollar amount limitation for special redemptions for the remainder of calendar year 2014 is $10.0 million in the aggregate, as may be reviewed and adjusted from time to time by our board of directors. Based on historical redemption data, our board of directors believes that the $10.0 million redemption limitation for the remainder of calendar year 2014 will be sufficient for special redemptions. As of September 30, 2014 , we had $8.1 million available for special redemptions for the remainder of 2014. During each calendar year, such special redemptions are limited to an annual dollar amount determined by the board of directors, which may be reviewed during the year and increased or decreased upon ten business days’ notice to our stockholders. The Amended Share Redemption Program became effective on June 18, 2014. There were no other changes to the terms of special redemptions, and special redemptions will continue to be made at a price per share equal to the most recent estimated value per share of our common stock as of the applicable redemption date. We currently do not expect to make ordinary redemptions in the future.
Our investments in real estate generate cash flow in the form of rental revenues and tenant reimbursements, which are reduced by operating expenditures, debt service payments, the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from our real estate investments is primarily dependent upon the occupancy level of our portfolio, the net effective rental rates on our leases, the collectibility of rent and operating recoveries from our tenants and how well we manage our expenditures. As of September 30, 2014 , our real estate held for investment was 89%  occupied and our bad debt reserve was less than 1% of annualized base rent.

33
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our real estate-related investments generate cash flow in the form of interest income, which is reduced by loan servicing fees, debt service payments, the payment of asset management fees and corporate general and administrative expenses. Cash flow from operations from our real estate-related investments is primarily dependent on the operating performance of the underlying collateral and the borrower’s ability to make debt service payments. As of September 30, 2014 , the borrowers under our real estate loans receivable were current on their debt service payments to us.
During the nine months ended September 30, 2014, we disposed of seven office properties, one industrial property and a leasehold interest in one industrial property. Additionally, as of September 30, 2014, we classified one office property and a portfolio of four industrial properties with an aggregate net book value of $81.4 million as held for sale.
For the nine months ended September 30, 2014 , our cash needs for capital expenditures and the payment of debt obligations were met with the proceeds from the payoff or sale of real estate loans receivable and proceeds from the sales of real estate properties. Operating cash needs during the same period were met with cash flow generated by our real estate and real estate-related investments. We made distributions to our stockholders during the nine months ended September 30, 2014 using cash flows from operations, proceeds from payoff or sale of our real estate loans receivable and proceeds from the sales of real estate properties. We believe that our cash on hand, cash flow from operations, availability under our credit facilities, proceeds from the sales of real estate properties and the repayment of our real estate loans receivable will be sufficient to meet our liquidity needs for the foreseeable future.
On July 8, 2014, August 5, 2014 and August 29, 2014, our board of directors declared special distributions in the amount of $3.75, $0.30 and $0.45, respectively, per share on the outstanding shares of our common stock for an aggregate amount of $4.50 per share of common stock, to stockholders of record as of the close of business on September 15, 2014. These special distributions were funded from the proceeds from the dispositions of real estate properties between May 2014 and August 2014, as well as cash on hand resulting primarily from the repayment or sale of real estate loans during 2013 and 2014. These special distributions will constitute a return of a portion of the stockholders’ invested capital for federal income tax purposes. Each stockholder is urged to consult his or her tax advisor regarding the tax consequences of our distributions in light of his or her particular investment or tax circumstances.
On September 22, 2014, our board of directors approved an estimated value per share of our common stock of $6.05 based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding, all as of June 30, 2014, adjusted for the impact of the special distributions to stockholders of record as of the close of business on September 15, 2014. For a full description of the assumptions, methodologies and limitations used to value our assets and liabilities in connection with the calculation of our estimated value per share, see our Current Report on Form 8-K dated September 22, 2014 and filed with the SEC on September 23, 2014.
Our cash flow from operations will decrease as a result of our disposition activity, and we have adjusted our distribution policy with respect to the amount of monthly distribution payments to take into account our current real estate investments. We may continue to make strategic asset sales as opportunities become available in the market. Any future special distributions we make from the proceeds of future dispositions will reduce our estimated value per share and this reduction will be reflected in our updated estimated value per share, which we expect to update in December 2014.
Cash Flows from Operating Activities
As of September 30, 2014 , we owned 19 real estate properties (consisting of 13 office properties, one office/flex property, a portfolio consisting of four industrial properties and an office campus consisting of eight office buildings) and two real estate loans receivable. As of September 30, 2014 , one office property and a portfolio of four industrial properties, with an aggregate net book value of $81.4 million , were classified as held for sale. During the nine  months ended September 30, 2014 , net cash provided by operating activities was $60.0 million , compared to $98.1 million during the nine  months ended September 30, 2013 . Net cash provided by operating activities decreased in 2014 primarily as a result of the sales of real estate properties and the payoff or sale of real estate loans receivable. We anticipate additional asset sales in the future.

34
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Cash Flows from Investing Activities
Net cash provided by investing activities was $1.5 billion for the nine months ended September 30, 2014 , and primarily consisted of the following:
•
$1.4 billion of proceeds from the sale of seven office properties, one industrial property and a leasehold interest in one industrial property;
•
$530.0 million used for investments in marketable securities, offset by proceeds from the sale of marketable securities of $529.7 million;
•
$111.7 million of proceeds from the payoff or sale of three real estate loans receivable; and
•
$20.1 million used for improvements to real estate.
Cash Flows from Financing Activities
During the nine months ended September 30, 2014 , net cash used in financing activities was $1.6 billion and consisted primarily of the following:
•
$649.0 million of principal payments on notes payable;
•
$43.5 million of cash used for redemptions of common stock; and
•
$925.3 million of net cash distributions, after giving effect to distributions reinvested by stockholders of $26.9 million.
In addition to using our capital resources to meet our debt service obligations, for capital expenditures and for operating costs, we use our capital resources to make certain payments to our advisor. We paid our advisor fees in connection with the acquisition and origination of our assets and pay our advisor fees in connection with the management and disposition of our assets and for certain costs incurred by our advisor in providing services to us. Among the fees payable to our advisor is an asset management fee. With respect to investments in real estate, we pay our advisor a monthly asset management fee equal to one-twelfth of 0.75% of the amount paid or allocated to acquire the investment, plus the cost of any subsequent development, construction or improvements to the property. This amount includes any portion of the investment that was debt financed and is inclusive of acquisition fees and expenses related thereto. In the case of investments made through joint ventures, the asset management fee will be determined based on our proportionate share of the underlying investment. With respect to investments in loans and any investments other than real estate, we pay our advisor a monthly asset management fee calculated, each month, as one-twelfth of 0.75% of the lesser of (i) the amount paid or allocated to acquire or fund the loan or other investment (which amount includes any portion of the investment that was debt financed and is inclusive of acquisition or origination fees and expenses related thereto) and (ii) the outstanding principal amount of such loan or other investment, plus the acquisition or origination fees and expenses related to the acquisition or funding of such investment, as of the time of calculation. We also reimbursed our advisor and our dealer manager for certain offering costs related to our now terminated dividend reinvestment plan and will continue to reimburse our advisor and our dealer manager for certain stockholder services.
As of September 30, 2014 , we had $88.3 million of cash and cash equivalents and up to $132.7 million available for future disbursements under our credit facilities, subject to certain conditions and restrictions set forth in the respective loan agreements, to meet our operational and capital needs.
In order to execute our investment strategy, we primarily utilized secured debt to finance a portion of our investment portfolio. Management remains vigilant in monitoring the risks inherent with the use of debt in our portfolio and is taking actions to ensure that these risks, including refinance and interest rate risks, are properly balanced with the benefit of using leverage. Our charter limits our total liabilities to 75% of the cost (before deducting depreciation or other noncash reserves) of our tangible assets; however, we may exceed that limit if the majority of the conflicts committee approves each borrowing in excess of our charter limitation and we disclose such borrowings to our stockholders in our next quarterly report with an explanation from the conflicts committee of the justification for the excess borrowing. As of September 30, 2014 , our borrowings and other liabilities were approximately 47% of both the cost (before depreciation or other noncash reserves) and book value (before depreciation) of our tangible assets, respectively.

35
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Contractual Commitments and Contingencies
The following is a summary of our contractual obligations as of September 30, 2014 (in thousands):
 
 
 
 
Payments Due During the Years Ending December 31,
Contractual Obligations
 
Total
 
Remainder of
2014
 
2015-2016
 
2017-2018
 
Thereafter
Outstanding debt obligations (1)(3)
 
$
872,342

 
$
—

 
$
639,965

 
$
96,907

 
$
135,470

Interest payments on outstanding debt obligations (2)(3)
 
60,719

 
6,905

 
36,552

 
11,023

 
6,239

_____________________
(1) Amounts include principal payments only.
(2) Projected interest payments are based on the outstanding principal amounts, maturity dates and interest rates in effect as of September 30, 2014 (consisting of the contractual interest rate and the effect of interest rate floors and swaps, if applicable). We incurred interest expense of $32.9 million, excluding non-cash interest expense of $3.6 million related to interest rate swap agreements, amortization of deferred financing costs totaling $3.8 million and $14.6 million of prepayment penalties during the nine months ended September 30, 2014 .
(3) Amounts include outstanding debt obligations related to one office property and a portfolio of four industrial properties with an aggregate net book value of $81.4 million classified held for sale as of September 30, 2014 . The outstanding principal balances will be paid off upon the sale of these real estate properties.
Results of Operations
Overview
As of September 30, 2013 , we owned 20 office properties, one office/flex property, a portfolio of four industrial properties, an office campus consisting of eight office buildings, one individual industrial property, a leasehold interest in one industrial property and seven real estate loans receivable. Subsequent to September 30, 2013 , we sold seven office properties, one industrial property and a leasehold interest in one industrial property. Additionally, we sold or received principal repayments on five of our real estate loans receivable. As a result, as of September 30, 2014 , including real estate properties that were classified as held for sale, we owned 13 office properties, one office/flex property, a portfolio of four industrial properties, an office campus consisting of eight office buildings and two real estate loans receivable. The results of operations presented for the nine months ended September 30, 2014 and 2013 are not directly comparable due to the dispositions of real estate properties and payoff or sale of five real estate loans receivable subsequent to September 30, 2013 . In general, we expect income and expenses to decrease in future periods due to disposition activity.

36
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Comparison of the three months ended September 30, 2014 versus the three months ended September 30, 2013
The following table provides summary information about our results of operations for the three months ended September 30, 2014 and 2013 (dollar amounts in thousands):
 
 
Three Months Ended September 30,
 
Increase (Decrease)
 
Percentage Change
 
$ Change Due to Dispositions (1)
 
$ Change Due to Properties 
or Loans Held Throughout
Both Periods (2)
 
 
2014
 
2013
 
 
 
 
Rental income
 
$
44,602

 
$
65,446

 
$
(20,844
)
 
(32
)%
 
$
(20,071
)
 
$
(773
)
Tenant reimbursements
 
6,357

 
15,582

 
(9,225
)
 
(59
)%
 
(9,225
)
 
—

Interest income from real estate loans receivable
 
1,396

 
8,586

 
(7,190
)
 
(84
)%
 
(7,212
)
 
22

Interest income from marketable securities
 
864

 
—

 
864

 
100
 %
 
—

 
864

Other operating income
 
2,375

 
2,632

 
(257
)
 
(10
)%
 
(382
)
 
125

Operating, maintenance and management costs
 
12,720

 
16,967

 
(4,247
)
 
(25
)%
 
(5,453
)
 
1,206

Real estate taxes and insurance
 
6,606

 
12,400

 
(5,794
)
 
(47
)%
 
(5,601
)
 
(193
)
Asset management fees to affiliate
 
3,829

 
6,079

 
(2,250
)
 
(37
)%
 
(2,300
)
 
50

General and administrative expenses
 
1,106

 
1,347

 
(241
)
 
(18
)%
 
n/a

 
n/a

Depreciation and amortization
 
16,835

 
30,746

 
(13,911
)
 
(45
)%
 
(10,576
)
 
(3,335
)
Interest expense
 
25,040

 
19,123

 
5,917

 
31
 %
 
8,831

 
(2,914
)
Impairment charge on real estate
 
3,940

 
—

 
3,940

 
100
 %
 
—

 
3,940

Gain on sales of real estate, net
 
322,811

 
—

 
322,811

 
100
 %
 
322,811

 
—

_____________________
(1) Represents the dollar amount increase (decrease) for the three months ended September 30, 2014 compared to the three months ended September 30, 2013 related to investments disposed of on or after July 1, 2013.
(2) Represents the dollar amount increase (decrease) for the three months ended September 30, 2014 compared to the three months ended September 30, 2013 related to real estate and real estate-related investments owned by us throughout both periods presented.
Rental income and tenant reimbursements decreased from $81.0 million for the three months ended September 30, 2013 to $51.0 million for the three months ended September 30, 2014 , primarily due to the disposition of real estate properties. Overall, we expect rental income and tenant reimbursements to decrease in future periods due to the disposition of real estate properties and anticipated dispositions of real estate properties. For the three months ended September 30, 2014 and 2013 , rental income and tenant reimbursements from our real estate properties sold or held for sale were $6.8 million and $35.8 million, respectively.
Interest income from our real estate loans receivable, recognized using the interest method, decreased from $8.6 million for the three months ended September 30, 2013 to $1.4 million for the three months ended September 30, 2014 , primarily as a result of the payoff or sale of real estate loans receivable subsequent to September 30, 2013 . Interest income from real estate loans receivable in future periods compared to historical periods will decrease as a result of the potential impact of future principal repayments or sales of our real estate loans receivable.
Operating, maintenance and management costs decreased from $17.0 million for the three months ended September 30, 2013 to $12.7 million  for the three months ended September 30, 2014 . The decrease was primarily due to the disposition of real estate properties subsequent to September 30, 2013 , partially offset by an increase in maintenance costs with respect to properties held throughout both periods. Operating, maintenance and management costs may increase in future periods, as compared to historical periods, as a result of inflation. Overall, we expect operating, maintenance and management costs to decrease in future periods due to the disposition of real estate properties and anticipated dispositions of real estate properties. For the three months ended September 30, 2014 and 2013 , operating, maintenance and management costs from our real estate properties sold or held for sale were $1.4 million and $6.9 million, respectively.
Real estate taxes and insurance decreased from $12.4 million for the three months ended September 30, 2013 to $6.6 million  for the three months ended September 30, 2014 , due to the disposition of real estate properties subsequent to September 30, 2013 . We expect real estate taxes and insurance to decrease in future periods due to the disposition of real estate properties and anticipated dispositions of real estate properties. For the three months ended September 30, 2014 and 2013 , real estate taxes and insurance from our real estate properties sold or held for sale were $1.3 million and $6.7 million, respectively.

37
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Asset management fees with respect to our real estate and real estate-related investments decreased from $6.1 million for the three months ended September 30, 2013 to $3.8 million for the three months ended September 30, 2014 , due to the disposition of real estate properties and the payoff or sale of real estate loans receivable subsequent to September 30, 2013 . All asset management fees incurred as of September 30, 2014 have been paid. We expect asset management fees to decrease in future periods due to anticipated asset sales. For the three months ended September 30, 2014 and 2013 , asset management fees from our real estate properties held for sale or sold were $0.5 million and $2.4 million, respectively.
Depreciation and amortization decreased from $30.7 million for the three months ended September 30, 2013 to $16.8 million  for the three months ended September 30, 2014 primarily due to the disposition of real estate properties subsequent to September 30, 2013 , the classification of real estate properties to held for sale, and the reclassification of two real estate properties from held for sale to held for investment. Upon classifying a property as held for sale, we cease depreciation and amortization expense for that property. We expect depreciation and amortization to decrease in future periods due to the disposition of real estate properties and anticipated dispositions of real estate properties and to an overall decrease in amortization of tenant origination costs related to lease expirations. For the three months ended September 30, 2014 and 2013 , depreciation and amortization from our real estate properties sold or held for sale was $0.5 million and $11.8 million, respectively.
Interest expense increased from $19.1 million for the three months ended September 30, 2013 to $25.0 million  for the three months ended September 30, 2014 . Included in interest expense is the amortization of deferred financing costs of $0.9 million and $1.1 million for the three months ended September 30, 2013 and 2014 , respectively. The increase in interest expense is primarily due to the payments of termination fees of $14.0 million related to loans secured by the real estate properties sold during the three months ended September 30, 2014 , partially offset by an overall decrease to the average loan balance of our existing notes payable. Also included in interest expense during the three months ended September 30, 2014 was $2.2 million of unrealized swap losses primarily due to hedge ineffectiveness as a result of anticipated early repayment of debt in connection with asset sales. As of September 30, 2014, we had dedesignated all of our interest rate swaps. As a result, changes to the fair value of our interest rate swaps will be recognized directly in earnings as interest expense. In general, we expect interest expense to decrease in future periods due to debt repayments related to assets sold and anticipated asset sales, which may be offset by certain fees and costs that may be incurred due to the prepayment of certain loans. Our interest expense in future periods will also vary based on fluctuations in one-month LIBOR (for our variable rate debt, to the extent that such variable rate debt is not subject to an interest rate swap agreement) and our level of future borrowings, which will depend on the availability and cost of debt financing, draws on our credit facilities and any debt repayments we make. For the three months ended September 30, 2014 and 2013 , interest expense from our real estate properties sold or held for sale was $16.0 million and $6.6 million, respectively.
During the three months ended September 30, 2014 , we recognized an impairment charge on real estate properties held for investment of $3.9 million with respect to two of our real estate properties that were reclassified from held for sale to held for investment. The impairment charge was recorded to adjust the carrying values of the properties for any depreciation and amortization expense that would have been recognized if the properties had always been classified as held for investment, which otherwise would have been recorded through depreciation and amortization expense and rental income (related to the amortization of above-market lease assets and below-market lease liabilities).
We recognized a gain on sale of real estate of $322.8 million related to the disposition of four office properties during the three months ended September 30, 2014 .

38
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Comparison of the nine months ended September 30, 2014 versus the nine months ended September 30, 2013
The following table provides summary information about our results of operations for the nine months ended September 30, 2014 and 2013 (dollar amounts in thousands):
 
 
Nine Months Ended September 30,
 
Increase (Decrease)
 
Percentage Change
 
$ Change Due to Acquisitions and Dispositions (1)
 
$ Change Due to Properties 
or Loans Held Throughout
Both Periods (2)
 
 
2014
 
2013
 
 
 
 
Rental income
 
$
171,865

 
$
192,989

 
$
(21,124
)
 
(11
)%
 
$
(17,504
)
 
$
(3,620
)
Tenant reimbursements
 
38,919

 
46,175

 
(7,256
)
 
(16
)%
 
(8,270
)
 
1,014

Interest income from real estate loans receivable
 
11,346

 
25,258

 
(13,912
)
 
(55
)%
 
(14,104
)
 
192

Interest income from marketable securities
 
953

 
—

 
953

 
100
 %
 
—

 
953

Other operating income
 
7,681

 
7,923

 
(242
)
 
(3
)%
 
(422
)
 
180

Operating, maintenance and management costs
 
47,700

 
49,616

 
(1,916
)
 
(4
)%
 
(4,346
)
 
2,430

Real estate taxes and insurance
 
30,940

 
36,246

 
(5,306
)
 
(15
)%
 
(5,566
)
 
260

Asset management fees to affiliate
 
15,164

 
17,563

 
(2,399
)
 
(14
)%
 
(2,537
)
 
138

Real estate acquisition fees to affiliates
 
—

 
1,797

 
(1,797
)
 
(100
)%
 
(1,797
)
 
—

Real estate acquisition fees and expenses
 
—

 
623

 
(623
)
 
(100
)%
 
(623
)
 
—

General and administrative expenses
 
3,909

 
3,684

 
225

 
6
 %
 
n/a

 
n/a

Depreciation and amortization
 
64,187

 
90,769

 
(26,582
)
 
(29
)%
 
(19,428
)
 
(7,154
)
Interest expense
 
54,888

 
50,614

 
4,274

 
8
 %
 
9,691

 
(5,417
)
Impairment charge on real estate
 
5,015

 
—

 
5,015

 
100
 %
 
1,075

 
3,940

Loss on sale of marketable securities
 
(331
)
 
—

 
(331
)
 
100
 %
 
n/a

 
n/a

Gain on sales of real estate, net
 
369,458

 
—

 
369,458

 
100
 %
 
369,458

 
—

_____________________
(1) Represents the dollar amount increase (decrease) for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 related to investments acquired or disposed of on or after January 1, 2013.
(2) Represents the dollar amount increase (decrease) for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 related to real estate and real estate-related investments owned by us throughout both periods presented.
Rental income and tenant reimbursements decreased from $239.2 million for the nine months ended September 30, 2013 to $210.8 million for the nine months ended September 30, 2014 , primarily due to the disposition of real estate properties, offset by an increase due to the acquisition of an office campus in March 2013.  Rental revenues related to real estate properties held throughout both periods decreased primarily due to a decrease in occupancy with respect to one of our real estate properties held for investment.  The decrease in rental income from real estate properties held throughout both periods was partially offset by an increase in tenant reimbursements due to higher property tax recoveries and monthly operating expense recoveries. Overall, we expect rental income and tenant reimbursements to decrease in future periods due to the disposition of real estate properties and anticipated dispositions of real estate properties. For the nine months ended September 30, 2014 and 2013 , rental income and tenant reimbursements from our real estate properties sold or held for sale were $77.0 million and $106.5 million, respectively.
Interest income from our real estate loans receivable, recognized using the interest method, decreased from $25.3 million for the nine months ended September 30, 2013 to $11.3 million for the nine months ended September 30, 2014 , primarily as a result of the payoff or sale of real estate loans receivable subsequent to September 30, 2013 , partially offset by a prepayment fee received for the early repayment of a note receivable. Interest income included $3.7 million and $0.1 million in accretion of purchase price discounts, net of amortization of closing costs, for the nine months ended September 30, 2013 and September 30, 2014 , respectively. Interest income from real estate loans receivable in future periods compared to historical periods will decrease as a result of the potential impact of future principal repayments or sales of our real estate loans receivable.

39
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Operating, maintenance and management costs decreased from $49.6 million for the nine months ended September 30, 2013 to $47.7 million  for the nine months ended September 30, 2014 . The decrease was primarily due to the disposition of real estate properties subsequent to September 30, 2013 , partially offset by higher snow removal costs, and an increase in repair and maintenance costs, utility costs and lease termination fees for real estate properties held through both periods. Operating, maintenance and management costs may increase in future periods, as compared to historical periods, as a result of inflation. Overall, we expect operating, maintenance and management costs to decrease in future periods due to the disposition of real estate properties and anticipated disposition of real estate properties. For the nine months ended September 30, 2014 and 2013 , operating, maintenance and management costs from our real estate properties sold or held for sale were $15.6 million and $20.0 million, respectively.
Real estate taxes and insurance decreased from $36.2 million for the nine months ended September 30, 2013 to $30.9 million  for the nine months ended September 30, 2014 . This decrease was primarily due to the disposition of real estate properties subsequent to September 30, 2013 , partially offset by an increase in real estate taxes and insurance due to the acquisition of an office campus in March 2013. We expect real estate taxes and insurance to decrease in future periods due to the disposition of real estate properties and anticipated dispositions of real estate properties. For the nine months ended September 30, 2014 and 2013 , real estate taxes and insurance from our real estate properties sold or held for sale were $14.6 million and $19.9 million, respectively.
Asset management fees with respect to our real estate and real estate-related investments decreased from $17.6 million for the nine months ended September 30, 2013 to $15.2 million for the nine months ended September 30, 2014 , due to the disposition of real estate properties and the payoff or sale of real estate loans receivable subsequent to September 30, 2013 , partially offset by an increase in asset management fees as a result of the acquisition of an office campus in March 2013. All asset management fees incurred as of September 30, 2014 have been paid. We expect asset management fees to decrease in future periods due to anticipated asset sales. For the nine months ended September 30, 2014 and 2013 , asset management fees from our real estate properties sold or held for sale were $5.0 million and $7.0 million, respectively.
Real estate acquisition fees and expenses to affiliates and non-affiliates were $2.4 million for the nine months ended September 30, 2013 and related to the acquisition of an office campus in March 2013. We did not incur any real estate acquisition fees and expenses during the nine months ended September 30, 2014 . We do not expect to incur real estate acquisition fees and expenses in the future.
Depreciation and amortization decreased from $90.8 million for the nine months ended September 30, 2013 to $64.2 million  for the nine months ended September 30, 2014 due to the disposition of real estate properties subsequent to September 30, 2013 , the classification of real estate properties to held for sale, the reclassification of two real estate properties from held for sale to held for investment, and a decrease in amortization of tenant origination costs related to an early lease termination. Upon classifying a property as held for sale, we cease depreciation and amortization expense for that property. This decrease was partially offset by an increase in depreciation and amortization as a result of the acquisition of an office campus in March 2013. We expect depreciation and amortization to decrease in future periods due to the disposition of real estate properties and anticipated dispositions of real estate properties and to an overall decrease in amortization of tenant origination costs related to lease expirations. For the nine months ended September 30, 2014 and 2013 , depreciation and amortization from our real estate properties sold or held for sale was $13.1 million and $35.5 million, respectively.

40
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Interest expense increased from $50.6 million for the nine months ended September 30, 2013 to $54.9 million  for the nine months ended September 30, 2014 . Included in interest expense is the amortization of deferred financing costs of $2.4 million and $3.8 million for the nine months ended September 30, 2013 and 2014 , respectively. The increase in interest expense is primarily due to increased borrowings in connection with the acquisition of an office campus in March 2013 and the payments of termination fees of $14.6 million related to loans secured by the real estate properties sold during the nine months ended September 30, 2014 , partially offset by an overall decrease to the average loan balance of our existing notes payable related to properties held throughout both periods. Also included in interest expense during the nine months ended September 30, 2014 was $3.1 million of unrealized swap losses primarily due to hedge ineffectiveness as a result of anticipated early repayment of debt in connection with asset sales. As of September 30, 2014, we had dedesignated all of our interest rate swap agreements. As a result, changes to the fair value of our interest rate swap agreements will be recognized directly in earnings as interest expense. In general, we expect interest expense to decrease in future periods due to debt repayments related to assets sold and anticipated asset sales, which may be offset by certain fees and costs that may be incurred due to the prepayment of certain loans. Our interest expense in future periods will also vary based on fluctuations in one-month LIBOR (for our variable rate debt, to the extent that such variable rate debt is not subject to an interest rate swap agreement) and our level of future borrowings, which will depend on the availability and cost of debt financing, draws on our credit facilities and any debt repayments we make. For the nine months ended September 30, 2014 and 2013 , interest expense from our real estate properties sold or held for sale was $30.0 million and $19.9 million, respectively.
During the nine months ended September 30, 2014, we recognized an impairment charge on real estate properties held for investment of $5.0 million consisting of (i) $3.9 million with respect to two of our real estate properties that were reclassified from held for sale to held for investment and (ii) $1.1 million on a real estate property sold during the nine months ended September 30, 2014. The impairment charge related to the reclassified properties was recorded to adjust the carrying values of the properties for any depreciation and amortization expense that would have been recognized if the properties had always been classified as held for investment, which otherwise would have been recorded through depreciation and amortization expense and rental income (related to the amortization of above-market lease assets and below-market lease liabilities).
We recognized a gain on sale of real estate of $369.5 million related to the disposition of seven office properties, one industrial property and a leasehold interest in one industrial property during the nine months ended September 30, 2014 .
Funds from Operations and Modified Funds from Operations
We believe that funds from operations (“FFO”) is a beneficial indicator of the performance of an equity REIT. We compute FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. FFO represents net income, excluding gains and losses from sales of operating real estate assets (which can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates), impairment losses on real estate assets, depreciation and amortization of real estate assets, and adjustments for unconsolidated partnerships and joint ventures. We believe FFO facilitates comparisons of operating performance between periods and among other REITs. However, our computation of FFO may not be comparable to other REITs that do not define FFO in accordance with the NAREIT definition or that interpret the current NAREIT definition differently than we do. Our management believes that historical cost accounting for real estate assets in accordance with U.S. generally accepted accounting principles (“GAAP”) implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered the presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. As a result, we believe that the use of FFO, together with the required GAAP presentations, provides a more complete understanding of our performance relative to our competitors and provides a more informed and appropriate basis on which to make decisions involving operating, financing, and investing activities, and when compared year over year, FFO reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, which may not be immediately apparent from net income or loss.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Changes in accounting rules have resulted in a substantial increase in the number of non-operating and non-cash items included in the calculation of FFO. Items such as acquisition fees and expenses, which had previously been capitalized prior to 2009, are currently expensed and accounted for as operating expenses. As a result, our management also uses modified funds from operations (“MFFO”) as an indicator of our ongoing performance as well as our dividend sustainability. MFFO excludes from FFO: acquisition fees and expenses; adjustments related to contingent purchase price obligations; amounts relating to straight-line rents and amortization of above and below market intangible lease assets and liabilities; accretion of discounts and amortization of premiums on debt investments; amortization of closing costs relating to debt investments; impairments of real estate-related investments; mark-to-market adjustments included in net income; and gains or losses included in net income for the extinguishment or sale of debt or hedges. We compute MFFO in accordance with the definition of MFFO included in the practice guideline issued by the Investment Program Association (“IPA”) in November 2010. Our computation of MFFO may not be comparable to other REITs that do not compute MFFO in accordance with the current IPA definition or that interpret the current IPA definition differently than we do.
We believe that MFFO is helpful as a measure of ongoing operating performance because it excludes costs that management considers more reflective of investing activities and other non-operating items included in FFO.  Management believes that excluding acquisition costs from MFFO provides investors with supplemental performance information that is consistent with management’s analysis of the operating performance of the portfolio over time, including periods after our acquisition stage.  MFFO also excludes non-cash items such as straight-line rental revenue.  Additionally, we believe that MFFO provides investors with supplemental performance information that is consistent with the performance indicators and analysis used by management, in addition to net income and cash flows from operating activities as defined by GAAP, to evaluate the sustainability of our operating performance.  MFFO provides comparability in evaluating the operating performance of our portfolio with other non-traded REITs which typically have limited lives with short and defined acquisition periods and targeted exit strategies.  MFFO, or an equivalent measure, is routinely reported by non-traded REITs, and we believe often used by analysts and investors for comparison purposes.
FFO and MFFO are non-GAAP financial measures and do not represent net income as defined by GAAP. Net income as defined by GAAP is the most relevant measure in determining our operating performance because FFO and MFFO include adjustments that investors may deem subjective, such as adding back expenses such as depreciation and amortization and the other items described above. Accordingly, FFO and MFFO should not be considered as alternatives to net income as an indicator of our current and historical operating performance. In addition, FFO and MFFO do not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an indication of our liquidity. We believe FFO and MFFO, in addition to net income and cash flows from operating activities as defined by GAAP, are meaningful supplemental performance measures; however, neither FFO nor MFFO reflect adjustments for the operations of properties and real estate-related investments sold or held for sale during the periods presented. During periods of significant disposition activity, FFO and MFFO are much more limited measures of future performance and dividend sustainability. In connection with our presentation of FFO and MFFO, we are providing information related to the proportion of MFFO related to properties and real estate-related investments sold or held for sale as of September 30, 2014 .

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Although MFFO includes other adjustments, the exclusion of straight-line rent, the amortization of above- and below-market leases, the amortization of discounts and closing costs, prepayment fees received on notes receivable, unrealized losses on derivative instruments, acquisition fees and expenses, and prepayment fees related to the extinguishment of debt are the most significant adjustments for the periods presented.  We have excluded these items based on the following economic considerations:
•
Adjustments for straight-line rent.   These are adjustments to rental revenue as required by GAAP to recognize contractual lease payments on a straight-line basis over the life of the respective lease.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the current economic impact of our in-place leases, also providing investors with a useful supplemental metric that addresses core operating performance by removing rent we expect to receive in a future period or rent that was received in a prior period;
•
Amortization of above- and below-market leases.   Similar to depreciation and amortization of real estate assets and lease related costs that are excluded from FFO, GAAP implicitly assumes that the value of intangible lease assets and liabilities diminishes predictably over time and requires that these charges be recognized currently in revenue.  Since real estate values and market lease rates in the aggregate have historically risen or fallen with local market conditions, management believes that by excluding these charges, MFFO provides useful supplemental information on the realized economics of the real estate;
•
Amortization of discounts and closing costs.   Discounts and closing costs related to debt investments are amortized over the term of the loan as an adjustment to interest income.  This application results in income recognition that is different than the underlying contractual terms of the debt investments.  We have excluded the amortization of discounts and closing costs related to our debt investments in our calculation of MFFO to more appropriately reflect the economic impact of our debt investments, as discounts will not be economically recognized until the loan is repaid and closing costs are essentially the same as acquisition fees and expenses on real estate (discussed below).  We believe excluding these items provides investors with a useful supplemental metric that directly addresses core operating performance;
•
Prepayment fees received on notes receivable.   Prepayment fees related to notes receivable are included in interest income from real estate loans receivable.  Although these amounts increase net income, we exclude them from MFFO to more appropriately present the ongoing operating performance of our real estate-related investments on a comparative basis;
•
Unrealized losses on derivative instruments.   These adjustments include unrealized gains (losses) from mark-to-market adjustments on interest rate swaps and losses due to hedge ineffectiveness.  The change in fair value of interest rate swaps not designated as a hedge and the change in fair value of the ineffective portion of interest rate swaps are non-cash adjustments recognized directly in earnings and are included in interest expense.  We have excluded these adjustments in our calculation of MFFO to more appropriately reflect the economic impact of our interest rate swap agreements;
•
Acquisition fees and expenses.   Acquisition fees and expenses related to the acquisition of real estate are expensed.  Although these amounts reduce net income, we exclude them from MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis.  Additionally, acquisition fees and expenses have been funded from the proceeds from our now terminated initial public offering and debt financings and not from our operations.  We believe this exclusion is useful to investors as it allows investors to more accurately evaluate the sustainability of our operating performance; and
•
Prepayment fees related to the extinguishment of debt. Prepayment fees related to the extinguishment of debt are included in interest expense. Although these amounts reduce net income, we exclude them from MFFO to more appropriately present the ongoing operating performance of our real estate investments on a comparative basis.


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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our calculation of FFO, which we believe is consistent with the calculation of FFO as defined by NAREIT, is presented in the following table, along with our calculation of MFFO, for the three and nine months ended September 30, 2014 and 2013 , respectively (in thousands). No conclusions or comparisons should be made from the presentation of these periods.
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
Net income
 
$
308,131

 
$
5,590

 
$
378,276

 
$
21,454

Depreciation of real estate assets
 
8,867

 
14,989

 
32,914

 
43,326

Amortization of lease-related costs
 
7,968

 
15,757

 
31,273

 
47,443

Impairment charge on real estate
 
3,940

 
—

 
5,015

 
—

Gain on sales of real estate, net
 
(322,811
)
 
—

 
(369,458
)
 
—

Loss on sale of marketable securities
 
331

 
—

 
331

 
—

FFO
 
6,426

 
36,336

 
78,351

 
112,223

Straight-line rent and amortization of above- and below-market leases
 
(1,074
)
 
(2,626
)
 
(3,259
)
 
(8,323
)
Amortization of discounts and closing costs
 
5

 
(1,273
)
 
(107
)
 
(3,661
)
Prepayment fee received on note receivable
 
—

 
—

 
(4,917
)
 
—

Prepayment fees related to the extinguishment of debt
 
14,037

 
3,711

 
14,583

 
3,711

Termination fees on derivative instruments
 
—

 
256

 
521

 
613

Unrealized losses on derivative instruments
 
2,380

 
—

 
3,060

 
—

Real estate acquisition fees to affiliates
 
—

 
—

 
—

 
1,797

Real estate acquisition fees and expenses
 
—

 
—

 
—

 
623

Adjustment to valuation of contingent purchase consideration
 
—

 
—

 
—

 
(31
)
MFFO
 
$
21,774

 
$
36,404

 
$
88,232

 
$
106,952

Our calculation of MFFO above includes amounts related to the operations of nine real estate properties sold and five real estate loans receivable sold or paid off as of September 30, 2014; and one office property and a portfolio of four industrial properties held for sale as of September 30, 2014 . Please refer to the table below with respect to the proportion of MFFO related to real estate properties or real estate-related investments sold or held for sale as of September 30, 2014 (in thousands).
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2014
 
2013
 
2014
 
2013
MFFO by component:
 
 
 
 
 
 
 
 
Assets held for investment
 
$
19,174

 
$
18,469

 
$
57,895

 
$
54,074

Real estate properties sold
 
1,148

 
11,561

 
23,895

 
33,829

Real estate properties held for sale
 
1,452

 
1,393

 
4,491

 
4,198

Real estate loans receivable sold or paid off
 
—

 
4,981

 
1,951

 
14,851

MFFO
 
$
21,774

 
$
36,404

 
$
88,232

 
$
106,952

FFO and MFFO may also be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

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PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Distributions
Distributions declared, distributions paid and cash flow from operations were as follows for the first. second and third quarters of 2014 (in thousands, except per share amounts):
Period
 
Distributions Declared (1)
 
Distributions Declared Per Share (1) (2)
 
Distributions Paid (3)
 
Cash Flow
From Operations
 
 
 
Cash
 
Reinvested
 
Total
 
First Quarter 2014
 
$
30,852

 
$
0.160

 
$
14,828

 
$
16,061

 
$
30,889

 
$
31,400

Second Quarter 2014
 
31,002

 
0.162

 
20,589

 
10,824

 
31,413

 
26,947

Third Quarter 2014
 
885,896

 
4.644

 
889,844

 
—

 
889,844

 
1,630

 
 
$
947,750

 
$
4.966

 
$
925,261

 
$
26,885

 
$
952,146

 
$
59,977

_____________________
(1) “Distributions Declared” and “Distributions Declared Per Share” consist of the following:
•
Our board of directors declared distributions per common share based on daily record dates for each day during the period from January 1, 2014 through August 31, 2014. Each day during the period was a record date for distributions and distributions were calculated at a rate of $0.00178082 per share per day. These distributions totaled approximately $82.9 million.
•
Our board of directors declared special distributions in the amount of $3.75, $0.30 and $0.45 per share on the outstanding shares of the Company’s common stock on July 8, 2014, August 5, 2014 and August 29, 2014, respectively, for an aggregate amount of $4.50 per share of common stock, to stockholders of record as of the close of business on September 15, 2014. These special distributions totaled approximately $858.6 million.
•
On August 29, 2014, our board of directors declared a September 2014 distribution in the amount of $0.03277397 per share of common stock to stockholders of record as of the close of business on September 26, 2014. This distribution totaled approximately $6.3 million.
(2) Assumes share was issued and outstanding each day during the period presented.
(3) Other than special distributions, distributions generally are paid on a monthly basis, on or about the first business day of the following month.
For the nine months ended September 30, 2014 , we paid aggregate distributions of $952.2 million, including $925.3 million of distributions paid in cash and $26.9 million of distributions reinvested through our dividend reinvestment plan (which terminated effective May 29, 2014). FFO and cash flow from operations for the nine months ended September 30, 2014 were $78.4 million and $60.0 million, respectively. We funded our total distributions paid, which includes net cash distributions and distributions reinvested by stockholders, with $888.2 million from the proceeds from the sales of real estate and the repayment or sale of real estate loans receivable, $60.0 million of current period cash flow from operations, and $4.0 million of cash flow from operations in excess of distributions paid for the year ended December 31, 2013. For purposes of determining the source of our distributions paid, we assume first that we use cash flow from operations from the relevant periods to fund distribution payments. See the reconciliation of FFO to net income above.
With the exception of the special distributions discussed below, substantially all of our distributions have been paid from cash flow from operations and FFO from current or prior periods.
During the nine months ended September 30, 2014, we disposed of seven office properties, one industrial property and a leasehold interest in one industrial property. Additionally, as of September 30, 2014, the Company classified one office property and a portfolio of four industrial properties with an aggregate net book value of $81.4 million as held for sale. On July 8, 2014, August 5, 2014 and August 29, 2014, our board of directors declared special distributions in the amount of $3.75, $0.30 and $0.45, respectively, per share on the outstanding shares of our common stock for an aggregate amount of $4.50 per share of common stock, to stockholders of record as of the close of business on September 15, 2014. These special distributions were funded from the proceeds from the dispositions of real estate properties between May 2014 and August 2014, as well as cash on hand resulting primary from the repayment or sale of real estate loans during 2013 and 2014. These special distributions will constitute a return of a portion of the stockholders’ invested capital for federal income tax purposes. Each stockholder is urged to consult his or her tax advisor regarding the tax consequences of our distributions in light of his or her particular investment or tax circumstances.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

On September 22, 2014, our board of directors approved an estimated value per share of our common stock of $6.05 based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding, all as of June 30, 2014, adjusted for the impact of the special distributions to stockholders of record as of the close of business on September 15, 2014. For a full description of the assumptions, methodologies and limitations used to value our assets and liabilities in connection with the calculation of our estimated value per share, see our Current Report on Form 8-K dated September 22, 2014 and filed with the SEC on September 23, 2014.
Our cash flow from operations will decrease as a result of our disposition activity, and we have adjusted our distribution policy with respect to the amount of monthly distribution payments to take into account our current real estate investments. We may continue to make strategic asset sales as opportunities become available in the market. Any future special distributions we make from the proceeds of future dispositions will reduce our estimated value per share and this reduction will be reflected in our updated estimated value per share, which we expect to update in December 2014.
Our operating performance and ability to pay distributions from our cash flow from operations and/or the disposition of our assets cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Forward-Looking Statements,” “Market Outlook - Real Estate and Real Estate Finance Markets,” “Liquidity and Capital Resources” and “Results of Operations” herein, and the risks discussed in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013, each as filed with the SEC. Those factors include: the future operating performance of our investments in the existing real estate and financial environment; the success and economic viability of our tenants; the ability of our borrowers and their sponsors to continue to make their debt service payments and/or to repay their loans upon maturity; our ability to refinance existing indebtedness at comparable terms; changes in interest rates on our variable rate debt obligations; our ability to successfully dispose of some of our assets; and the sources and amounts of cash we have available for distributions.
Critical Accounting Policies
Our consolidated interim financial statements have been prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC. There have been no significant changes to our policies during 2014, except for the addition of an accounting policy with respect to investments in marketable securities and the addition of an accounting policy related to the reclassification of two properties from held for sale to held for investment as follows:
Change in a Plan to Sell
When real estate is initially considered “held for sale” it is measured at the lower of its depreciated book value, or estimated fair value less estimated costs to sell. Changes in the market may compel us to decide to reclassify a property that was designated as held for sale to held for investment.  A property that is reclassified from held for sale to held for investment is measured and recorded individually at the lower of (i) its carrying amount before the property was classified as held for sale, adjusted for any depreciation and amortization expense that would have been recognized had the property been continuously classified as held and used, or (ii) its fair value at the date of the subsequent decision not to sell. Any adjustment to the carrying amount of the property as a result of the reclassification is included in income from continuing operations as an impairment charge on real estate held for investment.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Marketable Securities
We classify our investments in marketable securities as available-for-sale, since we may sell them prior to their maturity but do not hold them principally for the purpose of making frequent investments and sales with the objective of generating profits on short-term differences in price. These investments are carried at estimated fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss). Estimated fair values are generally based on quoted market prices, when available, or on estimates provided by independent pricing sources or dealers who make markets in such securities. In certain circumstances, such as when the market for the securities becomes inactive, we may determine it is appropriate to perform an internal valuation of the securities. Upon the sale of a security, the previously recognized unrealized gain (loss) is reversed out of accumulated other comprehensive income (loss) and the actual realized gain (loss) is recognized in earnings.
On a quarterly basis, we evaluate our marketable securities for other-than-temporary impairment. We review the projected future cash flows from these securities for changes in assumptions due to prepayments, credit loss experience and other factors. If, based on our quarterly estimate of cash flows, there has been an adverse change in the estimated cash flows from the cash flows previously estimated, the present value of the revised cash flows is less than the present value previously estimated, and the fair value of the securities is less than their amortized cost basis, an other-than-temporary impairment is deemed to have occurred.
We recognize interest income on marketable securities that are beneficial interests in securitized financial assets and are rated “AA” and above on an accrual basis according to the contractual terms of the securities. Discounts or premiums are amortized to interest income over the life of the investment using the interest method.
We recognize interest income on marketable securities that are beneficial interests in securitized financial assets that are rated below “AA” using the effective yield method, which requires us to periodically project estimated cash flows related to these securities and recognize interest income at an interest rate equivalent to the estimated yield on the security, as calculated using the security’s estimated cash flows and amortized cost basis, or reference amount. Changes in the estimated cash flows are recognized through an adjustment to the yield on the security on a prospective basis. Projecting cash flows for these types of securities requires significant judgment, which may have a significant impact on the timing of revenue recognized on these investments.
We are required to distinguish between other-than-temporary impairments related to credit and other-than-temporary impairments related to other factors (e.g., market fluctuations) on our debt securities that we do not intend to sell and where it is not likely that we will be required to sell the security prior to the anticipated recovery of its amortized cost basis. We calculate the credit component of the other-than-temporary impairment as the difference between the amortized cost basis of the security and the present value of its estimated cash flows discounted at the yield used to recognize interest income. The credit component will be charged to earnings and the component related to other factors is recorded to other comprehensive income (loss).
Subsequent Events
We evaluate subsequent events up until the date the consolidated financial statements are issued.
Distributions Paid
On October 1, 2014, we paid distributions of $6.3 million , which related to distributions declared for September 2014 in the amount of $0.03277397 per share of common stock to stockholders of record as of the close of business on September 26, 2014. On November 3, 2014, we paid distributions of $6.5 million, which related to distributions declared for October 2014 in the amount of $0.03386644 per share of common stock to stockholders of record as of the close of business on October 29, 2014.
Distributions Declared
On November 10, 2014, our board of directors declared a November 2014 distribution in the amount of $0.03277397  per share of common stock to stockholders of record as of the close of business on November 26, 2014, which we expect to pay on or about December 1, 2014.

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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Purchase and Sale Agreement for Real Estate Properties Subsequent to September 30, 2014
Crescent VIII
On May 26, 2010, we, through an indirect wholly owned subsidiary, purchased a four-story office building containing 82,265 rentable square feet located on approximately 4.2 acres of land in Greenwood Village, Colorado (“Crescent VIII”). On October 30, 2014, we entered into a purchase and sale agreement and escrow instructions for the sale of Crescent VIII to a purchaser unaffiliated with us or our advisor. Pursuant to the purchase and sale agreement, the sale price for Crescent VIII is $17.25 million, subject to certain concessions and credits that will be finalized at closing. There can be no assurance that we will complete the sale of Crescent VIII. The purchaser would be obligated to purchase Crescent VIII only after satisfaction of agreed upon closing conditions. In some circumstances, if the purchaser fails to complete the acquisition, it may forfeit up to $0.5 million of earnest money.
I-81 Industrial Portfolio
On February 16, 2011, we, through an indirect wholly owned subsidiary, purchased a portfolio of four industrial properties containing an aggregate of 1,644,480 rentable square feet and encompassing an aggregate of 133.4 acres of land located in Pennsylvania (“I-81 Industrial Portfolio”). On November 3, 2014, we entered into a purchase and sale agreement and escrow instructions for the sale of I-81 Industrial Portfolio to a purchaser unaffiliated with us or our advisor. Pursuant to the purchase and sale agreement, the aggregate sales price for I-81 Industrial Portfolio is $105.7 million, subject to certain concessions and credits that will be finalized at closing. There can be no assurance that we will complete the sale of I-81 Industrial Portfolio. The purchaser would be obligated to purchase I-81 Industrial Portfolio only after satisfaction of agreed upon closing conditions. In some circumstances, if the purchaser fails to complete the acquisition, it may forfeit up to $2.0 million of earnest money.



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Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity, related to our real estate and real estate-related investment portfolio, and to fund our operations. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We have managed and will continue to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, floors, and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments of distributions to our stockholders and that the losses may exceed the amount we invested in the instruments.
We borrow funds and made real estate-related investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt or fixed rate real estate loans receivable unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. As of September 30, 2014 , the fair value and carrying value of our fixed rate real estate loans receivable were $73.6 million and $73.1 million , respectively. The fair value estimate of our real estate loans receivable is calculated using an internal valuation model that considers the expected cash flows for the loans, underlying collateral values (for collateral-dependent loans) and the estimated yield requirements of institutional investors for loans with similar characteristics, including remaining loan term, loan-to-value, type of collateral and other credit enhancements. As of September 30, 2014 , the fair value of our fixed rate debt was $138.8 million and the carrying value of our fixed rate debt was $140.0 million . The fair value estimate of our fixed rate debt is calculated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated as of September 30, 2014 . As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.
Conversely, movements in interest rates on our variable rate debt would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of floating rate instruments. As of September 30, 2014 , we were exposed to market risks related to fluctuations in interest rates on $118.8 million of variable rate debt outstanding, after giving consideration to the impact of interest rate swap agreements on approximately $613.5 million of our variable rate debt. Based on interest rates as of September 30, 2014 , if interest rates were 100 basis points higher during the 12 months ending September 30, 2015, interest expense on our variable rate debt would increase by $1.2 million. As of September 30, 2014 , one-month LIBOR was 0.1525% and if this index was reduced to 0% during the 12 months ending September 30, 2015, interest expense on our variable rate debt would decrease by $0.2 million.
The weighted-average annual effective interest rate of our fixed rate real estate loans receivable as of September 30, 2014 was 7.6%. The weighted-average annual effective interest rate represents the effective interest rate as of September 30, 2014 , using the interest method, which we use to recognize interest income on our real estate loans receivable. The weighted-average interest rates of our fixed rate debt and variable rate debt as of September 30, 2014 were 3.5% and 3.1%, respectively. The weighted-average interest rate represents the actual interest rate in effect as of September 30, 2014 (consisting of the contractual interest rate and the effect of interest rate swaps and floors, if applicable), using interest rate indices as of September 30, 2014 , where applicable.

49
Table of Contents
PART I. FINANCIAL INFORMATION (CONTINUED)
Item 4. Controls and Procedures

Disclosure Controls and Procedures
As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

50
Table of Contents
PART II. OTHER INFORMATION


Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
In addition to the risks discussed below, please see the risks discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC.
During the nine months ended September 30, 2014, we sold nine properties and classified one office property and a portfolio of four industrial properties with an aggregate net book value of $81.4 million as of September 30, 2014 as held for sale. As a result, our general and administrative expenses as a percentage of our cash flow from operations will increase and this increase could be significant.
Our real estate properties generate cash flow in the form of rental revenues and tenant reimbursements and our real estate-related investments generate cash flow in the form of interest income. During the nine months ended September 30, 2014 , we disposed of seven office properties, one industrial property and a leasehold interest in one industrial property and as of September 30, 2014, we had classified one office property and a portfolio of four industrial properties with an aggregate net book value of $81.4 million as held for sale. As as result, our cash flow from operations has decreased. Our general and administrative expenses are not directly related to the size of our portfolio and thus will not decrease proportionately. As a result, our general and administrative expenses as a percentage of cash flow from operations will increase and, depending on the amount of assets we sell, this increase could be significant.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
a)
During the period covered by this Form 10-Q, we did not sell any equity securities that were not registered under the Securities Act of 1933.
b)
Not applicable.
c)
On May 15, 2014, our board of directors approved the termination of our dividend reinvestment plan, which termination was effective May 29, 2014, and the amendment and restatement of our share redemption program (the “Amended Share Redemption Program”). The Amended Share Redemption Program provides only for redemptions sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” (each as defined in the Amended Share Redemption Program, and together with redemptions sought in connection with a stockholder’s death, “special redemptions”) and is limited as further described below. For the terms of our share redemption program, prior to effectiveness of our Amended Share Redemption Program on June 18, 2014, see Part II, Item 2 of our Quarterly Report on Form 10-Q for the period ended June 30, 2014, filed with the SEC.
Upon effectiveness of the Amended Share Redemption Program on June 18, 2014, the terms of our share redemption program were as follows:
Our Amended Share Redemption Program provides only for special redemptions. In addition, during each calendar year, such special redemptions are limited to an annual dollar amount determined by the board of directors, which may be reviewed during the year and increased or decreased upon ten business days’ notice to our stockholders. We may provide notice by including such information (a) in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the Securities and Exchange Commission or (b) in a separate mailing to the stockholders.
Such redemptions are also subject to other limitations described in our Amended Share Redemption Program, including:
•
During any calendar year, we may redeem no more than 5% of the weighted-average number of shares outstanding during the prior calendar year.
•
We have no obligation to redeem shares if the redemption would violate the restrictions on distributions under Maryland General Corporation Law, as amended from time to time, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency.


51
Table of Contents
PART II. OTHER INFORMATION (CONTINUED)
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds (continued)

Commencing with the June 2014 redemption date, the dollar amount limitation for special redemptions for the remainder of calendar year 2014 is $10.0 million in the aggregate, as may be reviewed and adjusted from time to time by the board of directors. Based on historical redemption data, the board of directors believes that the $10.0 million redemption limitation for the remainder of calendar year 2014 will be sufficient for special redemptions. As of September 30, 2014 , we had $8.1 million available for special redemptions for the remainder of 2014. There were no other changes to the terms of special redemptions, and special redemptions will continue to be made at a price per share equal to the most recent estimated value per share of our common stock as of the applicable redemption date. We currently do not expect to make ordinary redemptions in the future.
Procedures for Redemption
If we cannot repurchase all shares presented for redemption in any month because of the limitations on redemptions set forth in our Amended Share Redemption Program, then we will honor redemption requests on a pro rata basis, except that if a pro rata redemption would result in a stockholder owning less than the minimum purchase requirement described in our currently effective, or our most recently effective, registration statement as such registration statement has been amended or supplemented, then we would redeem all of such stockholder’s shares.
Redemption Price
On December 18, 2013, our board of directors approved an estimated value per share of our common stock of $10.29 (unaudited), based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding, as of September 30, 2013, with the exception of our real estate properties, which were appraised as of November 30, 2013. This estimated value per share was used to calculate the redemption price effective for the December 2013 redemption date, which was December 31, 2013, and was used to calculate the redemption price until our estimated value per share was updated on September 22, 2014. For a full description of the methodologies used to value our assets and liabilities in connection with the calculation of the December 2013 estimated value per share, see our Annual Report on Form 10-K for the year ended December 31, 2013 at Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Market Information.”
On September 22, 2014, our board of directors approved an estimated value per share of our common stock of $6.05 based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding, all as of June 30, 2014, adjusted for the impact of the $4.50 special distribution declared subsequent to June 30, 2014 and paid on September 23, 2014. The change in the redemption price was effective for the September 2014 redemption date, which was September 30, 2014 and will be used to calculate the redemption price until our estimated value per share is updated. We currently expect to utilize our advisor and/or an independent valuation firm to update our estimated value per share in December 2014, but we are not required to update our estimated value per share more frequently than every 18 months. For a full description of the methodologies used to value our assets and liabilities in connection with the calculation of the estimated value per share, see our Current Report on Form 8-K dated September 22, 2014 and filed with the SEC September 23, 2014 .
We may amend, suspend or terminate the Amended Share Redemption Program with 30 days’ notice to our stockholders, provided that we may increase the funding available for the redemption of shares under the program upon ten business days’ notice to our stockholders. We may provide this notice by including such information in a Current Report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC, or by a separate mailing to our stockholders.

52
Table of Contents
PART II. OTHER INFORMATION (CONTINUED)
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds (continued)

We funded redemptions during the nine months ended September 30, 2014 with proceeds from our now terminated dividend reinvestment plan. During the nine months ended September 30, 2014 , we redeemed shares pursuant to our share redemption program as follows:
Month
 
Total Number
of Shares
Redeemed  (1)
 
Average
Price Paid
Per Share  (2)
 
Approximate Dollar Value of Shares
Available That May Yet Be  Redeemed
Under the Program
January 2014
 
869,191

 
$
10.25

 
(3)  
February 2014
 
720,046

 
$
10.22

 
(3)  
March 2014
 
1,378,375

 
$
10.22

 
(3)  
April 2014
 
509,250

 
$
10.25

 
(3)  
May 2014
 
594,129

 
$
10.26

 
(3)  
June 2014
 
52,752

 
$
10.29

 
(3)  
July 2014
 
59,355

 
$
10.29

 
(3)  
August 2014
 
42,560

 
$
10.29

 
(3)  
September 2014
 
40,156

 
$
6.05

 
(3)  
Total
 
4,265,814

 
 
 
 
_____________________
(1) We announced the adoption and commencement of the program on April 8, 2008. We announced amendments to the program on May 13, 2009 (which amendment became effective on June 12, 2009), on March 11, 2011 (which amendment became effective on April 10, 2011), on May 18, 2012 (which amendment became effective on June 17, 2012), on June 29, 2012 (which amendment became effective on July 29, 2012), on October 18, 2012 (which amendment became effective on November 17, 2012), on March 8, 2013 (which amendment became effective on April 7, 2013), on October 17, 2013 (which amendment became effective on November 16, 2013) and on May 19, 2014 (which amendment became effective on June 18, 2014).
(2) The prices at which we redeem shares under the program are set forth above for redemption dates from June 2014 through September 2014. For the prices at which we redeemed shares for redemption dates from January 2014 to May 2014, see Part II, Item 2 of our Quarterly Report on Form 10-Q for the period ended June 30, 2014, filed with the SEC.
(3) As of September 30, 2014, we limit the dollar value of shares that may be redeemed under our Amended Share Redemption Program as described above. For the nine months ended September 30, 2014 , we redeemed $43.5 million of shares, which represented all redemption requests received in good order and eligible for redemption through the September 2014 redemption date. Based on the redemption limitations described above in the Amended Share Redemption Program and redemptions through September 30, 2014 , we may redeem up to $8.1 million of shares in connection with special redemptions for the remainder of 2014.
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.

53
Table of Contents
PART II. OTHER INFORMATION (CONTINUED)
Item 6.    Exhibits

Ex.
  
Description
 
 
 
 
3.1
  
Second Articles of Amendment and Restatement of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2008
 
 
 
3.2
  
Second Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.2 to Pre-Effective Amendment No. 2 to the Company’s Registration Statement on Form S-11, Commission File No. 333-146341
 
 
 
4.1
  
Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates), incorporated by reference to Exhibit 4.2 to Pre-Effective Amendment No. 1 to the Company’s Registration Statement on Form S-11, Commission File No. 333-146341
 
 
 
10.1
 
Office/Retail Lease (relating to Union Bank Plaza), by and between Hines VAF UB Plaza, L.P. and Union Bank of California, N.A., dated as of October 8, 2008
 
 
 
10.2
 
First Amendment to Office/Retail Lease (relating to Union Bank Plaza), by and between Hines VAF UB Plaza, L.P. and Union Bank of California, N.A., dated as of November 17, 2008
 
 
 
10.3
 
Second Amendment to Office/Retail Lease (relating to Union Bank Plaza), by and between Hines VAF UB Plaza, L.P. and Union Bank, N.A., dated as of July 10, 2009
 
 
 
10.4
 
Commencement Letter for Second Amendment to Office/Retail Lease (relating to Union Bank Plaza), by and between Hines VAF UB Plaza, L.P. and Union Bank, N.A., dated as of August 21, 2009
 
 
 
10.5
 
Third Amendment to Office/Retail Lease (relating to Union Bank Plaza), by and between Hines VAF UB Plaza, L.P. and Union Bank, N.A., dated as of April 14, 2010
 
 
 
10.6
 
Fourth Amendment to Office/Retail Lease (relating to Union Bank Plaza), by and between Hines VAF UB Plaza, L.P. and Union Bank, N.A., dated as of August 10, 2010
 
 
 
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
32.1
 
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
32.2
 
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
99.1
 
Eighth Amended and Restated Share Redemption Program, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed May 19, 2014
 
 
 
101.INS
 
XBRL Instance Document
 
 
 
101.SCH
 
XBRL Taxonomy Extension Schema
 
 
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase
 
 
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase
 
 
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase
 
 
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase



54
Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
 
 
KBS REAL ESTATE INVESTMENT TRUST II, INC.
 
 
 
 
Date:
November 12, 2014
By:
/ S / C HARLES  J. S CHREIBER , J R .        
 
 
 
Charles J. Schreiber, Jr.
 
 
 
Chairman of the Board,
Chief Executive Officer and Director
 
 
 
(principal executive officer)
 
 
 
 
Date:
November 12, 2014
By:
/ S / D AVID  E. S NYDER        
 
 
 
David E. Snyder
 
 
 
Chief Financial Officer
 
 
 
(principal financial officer)

55


Exhibit 10.1



















OFFICE/RETAIL LEASE



UNION BANK PLAZA




HINES VAF UB PLAZA, L.P.,
a Delaware limited partnership

as Landlord


and


UNION BANK OF CALIFORNIA, N.A.,
a national association

as Tenant


804296.08/LA
H4321-047/10-7-08/nng/law
 
UNION BANK PLAZA
[Union Bank Lease]


TABLE OF CONTENTS

 
 
Page

ARTICLE 1
REAL PROPERTY, BUILDING AND PREMISES; RIGHT OF
FIRST OFFER
1

ARTICLE 2
LEASE TERM
17

ARTICLE 3
BASE RENT
24

ARTICLE 4
ADDITIONAL RENT
24

ARTICLE 5
USE OF PREMISES
43

ARTICLE 6
SERVICES AND UTILITIES
46

ARTICLE 7
REPAIRS
50

ARTICLE 8
ADDITIONS AND ALTERATIONS
52

ARTICLE 9
COVENANT AGAINST LIENS
56

ARTICLE 10
INSURANCE
56

ARTICLE 11
DAMAGE AND DESTRUCTION
62

ARTICLE 12
NONWAIVER
65

ARTICLE 13
CONDEMNATION
65

ARTICLE 14
ASSIGNMENT AND SUBLETTING
66

ARTICLE 15
SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF
TRADE FIXTURES
72

ARTICLE 16
HOLDING OVER
73

ARTICLE 17
ESTOPPEL CERTIFICATES
74

ARTICLE 18
SUBORDINATION
75

ARTICLE 19
DEFAULTS; REMEDIES
76

ARTICLE 20
COVENANTS OF QUIET ENJOYMENT
80

ARTICLE 21
BUILDING RENOVATION
80

ARTICLE 22
EXISTING LEASE TERMINATIONS
81


804296.08/LA
H4321-047/10-7-08/nng/law

- i -
UNION BANK PLAZA
[Union Bank Lease]



 
 
Page

ARTICLE 23
SIGNS
82

ARTICLE 24
COMPLIANCE WITH LAW
87

ARTICLE 25
LATE CHARGES
88

ARTICLE 26
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY
TENANT
89

ARTICLE 27
ENTRY BY LANDLORD
89

ARTICLE 28
TENANT PARKING
90

ARTICLE 29
MISCELLANEOUS PROVISIONS
95



EXHIBITS
A
OUTLINE OF PREMISES
B
TENANT WORK LETTER
C
DEPICTION OF 20 TH  FLOOR SPACE
D
RULES AND REGULATIONS
E
JANITORIAL SPECIFICATIONS
F
HVAC SPECIFICATIONS
G
FORM OF TENANT'S ESTOPPEL CERTIFICATE
H
FORM OF SUBORDINATION, NON-DISCLOSURE AND ATTORNMENT
AGREEMENT
I
ELEVATOR UPGRADE WORK PLANS AND SPECIFICATIONS
J
EXTERIOR BUILDING PAINT COLOR SCHEMES
K
LOCATIN OF TENANT'S RESERVED PARKING
L
VISUAL EXAMPLE OF NORTHERN VIEW
M
PRE-EXISTING EXEMPT SIGNATURE RIGHTS
N
LOCATION OF SECURITY SCANNERS AND LOBBY ATM SPACE

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- ii -
UNION BANK PLAZA
[Union Bank Lease]


INDEX

 
Page(s)

 
 
1.00 Ratio
91

1.45 Ratio
91

1980 Modified BOMA
3

1996 BOMA
4

20th Floor Space
5

28th Floor Expansion Space
14

Abatement Event
78

Abatement Event Termination Date
79

Abatement Event Termination Notice
79

Additional Area
3

Additional Rent
24

Affiliate
70

Alterations
52

Amortization Period
23

Annual Direct Expense Allowance
25

Annual Report
61

Applicable Date
27

Applicable Reassessment
40

Applicable Rights
7

Approved Transferee
66

Approved Working Drawings
Exhibit B

Architect
Exhibit B

Automated After-Hours HVAC System
49

Available for Lease
15

Bank
79

Bank Rent
24

Brokers
99

Building
1

Building Parking Area
3

Building Parking Area Parking Rate Freeze Period
93

Building Parking Area Passes
90

Business Affiliate
70

Business Hours
46

Calender Year
25

CD Date
Exhibit B

Claims
57

Code
Exhibit B

Code Compliance Work
Exhibit B

Comparable Buildings
10

Comparable Landlords
87

Comparable Transactions
19

Conduit Uses
2

Construction Drawings
Exhibit B


804296.08/LA


( i )

 


 
Page(s)

 
 
Construction Period
13

Consumption Standard
48

Contemplated Effective Date
69

Contemplated Transfer
69

Contemplated Transfer Space
69

Contract
Exhibit B

Contractor
Exhibit B

Control
70

Cosmetic Alterations
52

Cost Pools
43

Court
101

Current Above Ground Floor Exterior Sign
82

Current Monument Signage
85

Current Prevailing Building Parking Area Parking Rate
93

Current Rooftop Sign
82

Cut-Off Point
41

Damage Termination Date
64

Damage Termination Notice
64

Delivery Condition
Exhibit B

Delivery Window
16

Design Problem
52

Direct Expenses
25

Dispute Notice
42

Disputed Charge
93

Disputed Matter
101

Drawing Change Notice
Exhibit B

Effective Termination Date
Exhibit B

Eligibility Period
78

Emergency Generator
105

Enclosed Core Areas
Exhibit B

Engineers
Exhibit B

Equitable
81

Estimate
38

Estimate Statement
38

Estimated Excess
38

Excess
38

Excess Variable Expenses
33

Exclusive Elevators
55

Exempt Matters
102

Existing Equipment
103

Existing Full TI Floors
Exhibit B

Existing Leases
82


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( ii )

 


 
Page(s)

 
 
Existing Leases Termination Date
82

Existing Office Lease
81

Existing Retail Lease
82

Expansion Designation Notice
15

Expansion Option
14

Expansion Options
14

Expansion Space
14

Expense Year
25

Extended Term
17

Extended Term Commencement Date
17

Extended Term First Offer/Expansion Rent
11

Extended Term First Offer/Expansion Rent Notice
11

Extended Term First Offer/Expansion Terms
11

Extension Notices(s)
17

Extension Option(s)
17

Exterior ATM
109

Exterior ATM Space
109

Exterior Building Signs
82

Exterior Signs
85

Fair Market Rental Rate
19

Final Retention
Exhibit B

Final Space Plan
Exhibit B

Final Working Drawings
Exhibit B

First Expansion Non-Exercise Notice
14

First Offer Election Notice
8

First Offer Space
7

First Offer/Expansion Outside Agreement Date
12

First Offer/Expansion Review Period
12

First Option Term
18

Floor Rent
18

FMRR Data
21

Force Majeure
97

Fuel Tank
108

Full Floor Tenant Improvement Allowance
Exhibit B

Full TI Floors
Exhibit B

GAAP
61

General Abatement Standard
Exhibit B

Generator Connection Equipment
105

Generator Equipment
106

Generator Site
105

Hazardous Material
100

Holidays
46


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( iii )

 


 
Page(s)

 
 
Improvement Excess
Exhibit B

Incorrect Amounts
Exhibit B

Indemnified Group
55

Initial Period
17

Initial Period First Offer/Expansion Terms
9

Initial Period Tax Reassessment Protection Amount
40

Initial Premises
2

Insurance/Real Estate Tax Component
32

Intention to Transfer Notice
69

Interest Rate
103

Interior East Lobby Wall
111

Landlord
1, 115

Landlord Delays
Exhibit B

Landlord First Offer Notice
8

Landlord Work
Exhibit B

Landlord's Asbestos Consultant
Exhibit B

Landlord's Delivery Date
Exhibit B

Landlord's Option Rent Notice
20

Landlord's Review Period
21

Last CD Date
Exhibit B

Last Vacated Floor
Exhibit B

Last Vacated Floor Termination Notice
Exhibit B

Lease
1

Lease Commencement Date
17

Lease Expiration Date
17

Lease Term
17

Lease Year
17

Lighting Improvements
112

Lobby ATM
111

Lobby ATM Space
111

Lost Off-Site Parking Event
91

Minimum Occupancy Threshold
87

Modified/New Rooftop Sign
83

Monthly Draw Request
Exhibit B

MTA Assessment
36

Name Change Costs
86

New Banking Equipment
111

New Equipment
103

New Structure
114

New Tenant Improvements
Exhibit B

Non-Construction Items
Exhibit B

Non-Qualification Items
18


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( iv )

 


 
Page(s)

 
 
Northern View
114

Notices
98

Objectionable Names/Logos
87

Office Space
2

Office Space Permitted Use
43

Off-Site Parking Area
91

One Year Period
69

Operating Expenses
25

Operator
113

Option Term
17

Option Term Commencement Date(s)
17

Option Term Parking Rates
94

Original Existing Office Lease
81

Original Existing Retail Lease
81

Original Tenant
9

Other Tenant Existing Lease
113

Outside Agreement Date
20, 74

Outside Disbursement Date
Exhibit B

Outside Repair Period
64

Outside Termination Notice Date
Exhibit B

Overlap Period
79

Parking Areas
3

Parking Survey
93

Payment Notice
Exhibit B

Permits
Exhibit B

Permitted Use
44

Pre-Extended Term Base Rent
9

Premises
1

Premises Base Building HVAC/Sprinkler Equipment
50

Prohibited Sign
87

Proposed Sublease Space
67

Proposition 13
35

Proration Fraction
19

Protection Period
39

Qualified Sublease
71

Qualified Subtenant
71

Qualified Transferee
87

Real Property
3

Reassessment
39

Recognition Agreement
71

Referee Laws
101

Refusal Notice
Exhibit B


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( v )

 


 
Page(s)

 
 
Remainder Notice
Exhibit B

Remaining Floors
Exhibit B

Remaining Floors Tenant Improvement Allowance
Exhibit B

Renewed Premises
17

Renewed Premises Floor Allowance
18

Rent
25

Rentable Space
105

Request Notice
8

Required Hours
44

Rescission Notice
21

Response Notice
8

Retail Space
2

Retail/Vault Space Permitted Use
44

Retained Distribution Systems
Exhibit B

Return Notice
90

Returned Floor
Exhibit B

Returned Privileges
90

Review Period
41

RSF Threshold
91

Second Expansion Option Exercise Notice
15

Second Expansion Option Interest Notice
15

Second Expansion Space
14

Second Option Term
18

Secured Areas
90

Signage Allowance
84

Signage Allowance Period
84

Signage Costs
84

Signage Restrictions
83

Signage Work
84

Statement
38

Storage Space
2

Storage Space Permitted Use
44

Storage Space Termination Date
23

Storage Space Termination Notice
23

Subject Space
66

Submittal Date
Exhibit B

Substitute Facility
91

Summary
1

Superior Rights
7

Superior Rights Date
7

Survey Charge Amount
93

Systems and Equipment
26


804296.08/LA


( vi )

 


 
Page(s)

 
 
Tangible Net Worth
61

Tax Expenses
36

Tax Increase
39

Tax Reassessment Protection Amount
39

Tax Reassessment Purchase Price
40

Telecommunication Equipment
103

Tenant
1, 116

Tenant Change
Exhibit B

Tenant Improvement Allowance
Exhibit B

Tenant Improvement Allowance Items
Exhibit B

Tenant Parties
45

Tenant Refund
38

Tenant Signage Criteria
83

Tenant's Agents
Exhibit B

Tenant's Delivery Date
Exhibit B

Tenant's Parking Contest Notice
93

Tenant's Review Period
20

Tenant's Share
37

Terminated Space
22

Terminated Storage Space
23

Termination Consideration
23

Termination Date
22

Termination Notice
22

Termination Option
23

Termination Option Interest Rate
22

Termination Period
22

Transfer Notice
66

Transferee
66

Transfers
66

Uncontrollable Delays
Exhibit B

Union Bank
81

Upgrade Work
80

Vacated Space
33

Vacation Notice
33

Variable Expenses
33

Vault Space
2








804296.08/LA


( vii )

 


SUMMARY OF BASIC LEASE INFORMATION
The undersigned hereby agree to the following terms of this Summary of Basic Lease Information (the "Summary"). This Summary is hereby incorporated into and made a part of the attached Office/Retail Lease (this Summary and the Office/Retail Lease to be known collectively as the "Lease") which pertains to the office building (the "Building") which is commonly known as Union Bank Plaza and currently located at 445 South Figueroa Street, Los Angeles, California 90071. Each reference in the Office/Retail Lease to any term of this Summary shall have the meaning as set forth in this Summary tor such term. In the event of a conflict between the terms of this Summary and the Office/Retail Lease, the terms of the Office/Retail Lease shall prevail. Any capitalized terms used herein and not otherwise defined herein shall have the meaning as set forth in the Office/Retail Lease.
 
TERM OF LEASE
 
 
 
(References are to the Office/Retail
Lease)
 
DESCRIPTION
 
 
 
 
 
1.
Date for Reference Purposes:
 
October 8, 2008
 
 
 
 
 
2.
Landlord:
 
HINES VAF UB PLAZA, L.P., a Delaware limited partnership
 
 
 
 
 
3.
Address of Landlord
(Section 29.19):
 
Hines VAF UB Plaza, L.P.
c/o Hines Interest Limited Partnership
445 South Figueroa Street, Suite 2320
Los Angeles, California 90071
Attention: Property Manager
 
 
 
 
 
4.
Tenant:
 
UNION BANK OF CALIFORNIA, N.A., a national association.
 
 
 
 
 
5.
Address of Tenant
(Section 29.19):
 
Corporate Real Estate
Union Bank of California, N.A.
445 South Figueroa Street
Los Angeles, California 900071
 
 
 
 
 
 
 
With a copy to:
 
 
 
 
 
 
 
Cushman & Wakefield, Inc.
601 South Figueroa Street
Los Angeles, California 90017
Attention: Mr. Robert A. Ortiz
 
 
 
 
 
 
 
 
and


804296.08/LA
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- i -
UNION BANK PLAZA
[Union Bank Lease]


 
 
 
Union Bank of California, N.A.
Office of General Counsel
400 California Street
San Francisco, California 94104
 
 
 
 
 
 
 
 
and
 
 
 
 
 
 
 
 
DLA Piper LLP (US)
550 South Hope Street, Suite 2300
Los Angeles, California 90071
Attention: Michael Meyer, Esq.
 
 
 
 
 
6.
Premises (Article 1):
 
 
 
 
 
 
 
 
6.1
During the Initial Period:
 
A stipulated 310,639 rentable square feet of space (as determined pursuant to Section 1.1 of the Office/Retail Lease) located on those floors of the Building described in Section 1.1 of the Office/Retail Lease.
 
 
 
 
 
 
6.2
During the Extended Term:
 
A stipulated 317,509 rentable square feet of space (as determined pursuant to Section 1.2 of the Office/Retail Lease) located on those floors of the Building described in Section 1.2 of the Office/Retail Lease.
 
 
 
 
 
 
6.3
Changing Size:
 
The reference on the term "Premises" shall be expanded to include all space leased by Tenant from time to time in accordance with the provisions of this Lease and there shall be excluded from the term "Premises" any spaced deleted pursuant to Sections 2.2, 2.4, and 2.5 of the Office/Retail Lease; provided, however, even if a portion of the Premises is deleted in accordance with the provisions of this Lease, the Office/Retail Lease will remain in effect as to such deleted space to the extent necessary to allow Tenant or Landlord to enforce their respective rights and obligations under the Office/Retail Lease applicable to the period of time prior to the deletion of such space.
 
 
 
 
 
7.
Term (Article 2):
 
 
 
 
 
 
 
 
7.1
Lease Term
 
The period commencing on the Lease Commencement Date and ending on the Lease Expiration Date.

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- ii -
UNION BANK PLAZA
[Union Bank Lease]


 
7.2
Initial Period:
 
The period commencing on the Lease Commencement Date and ending on January 31, 2012.
 
 
 
 
 
 
7.3
Extended Term:
 
The period commencing on February 1, 2012 and ending on the Lease Expiration Date.
 
 
 
 
 
 
7.4
Lease Commencement Date:
 
November1, 2008.
 
 
 
 
 
 
7.5
Extended Term Commencement Date:
 
February 1, 2012
 
 
 
 
 
 
7.6
Lease Expiration Date:
 
January 31, 2022
 
 
 
 
 
8.
Base Rent (Article 3):
 
 
 
 
 
 
 
 
8.1
Initial Period Base Rent:
 
 
 
 
 
 
 
 
 
(a) During the Initial Period, Base Rent for the Office Space shall be as follows:
Portion
of Initial Period
 
Annual Base
Rent
 
Monthly
Installment of Base
Rent
 
Annual
Base Rent Per Rentable
Square Foot (pursuant to
1980 Modified BOMA)
 
 
 
 
 
 
 
Lease Commencement
Date – 1/31/10
 
$7,314,475.00
 
$609,539.58
 
$25.00
 
 
 
 
 
 
 
2/1/10 – 1/31/12
 
$7,607,054.00
 
$633,921.16
 
$26.00
 
 
(b) During the Initial Period, Base Rent for the Office Space shall be as follows:
Portion
of Initial Period
 
Annual Base
Rent
 
Monthly
Installment of Base
Rent
 
Annual
Base Rent Per Rentable
Square Foot (pursuant to
1980 Modified BOMA)
 
 
 
 
 
 
 
Lease Commencement
Date – 1/31/12
 
$100,890.00
 
$8,407.50
 
$18.00

804296.08/LA
H4321-047/10-7-08/nng/law

- iii -
UNION BANK PLAZA
[Union Bank Lease]


 
 
(c) During the Initial Period, Base Rent for the Retail Space shall be as follows:
Portion
of Initial Period
 
Annual Base
Rent
 
Monthly
Installment of Base
Rent
 
Annual
Base Rent Per Rentable
Square Foot (pursuant to
1980 Modified BOMA)
 
 
 
 
 
 
 
Lease Commencement
Date – 1/31/10
 
$366,905.00
 
$30,575.42
 
$38.50
 
 
 
 
 
 
 
2/1/10 – 1/31/12
 
$376,435.00
 
$31,369.58
 
$39.50
 
 
(d) During the Initial Period, Base Rent for the Vault Space shall be as follows:
Portion
of Initial Period
 
Annual Base
Rent
 
Monthly
Installment of Base
Rent
 
Annual
Base Rent Per Rentable
Square Foot (pursuant to
1980 Modified BOMA)
 
 
 
 
 
 
 
Lease Commencement
Date – 1/31/10
 
$73,125.00
 
$6,093.75
 
$25.00
 
 
 
 
 
 
 
2/1/10 – 1/31/12
 
$76,050.00
 
$6,337.50
 
$26.00

 
8.2
Extended Term Base Rent:
 
 
 
 
 
(a) During the Initial Period, Base Rent for the portion of the Premises that
excludes the Storage Space shall be as follows:
Portion
of Initial Period
 
Annual Base
Rent
 
Monthly
Installment of Base
Rent
 
Annual
Base Rent Per Rentable
Square Foot (pursuant to
1980 Modified BOMA)
 
 
 
 
 
 
 
2/1/12 – 1/31/13
 
$12,398,184.00
 
$1,033,182.00
 
$39.75
 
 
 
 
 
 
 
2/1/13 – 1/31/14
 
$12,706,968.96
 
$1,058,914.08
 
$40.74
 
 
 
 
 
 
 
2/1/14 – 1/31/15
 
$13,025,111.04
 
$1,085,425.92
 
$41.76
 
 
 
 
 
 
 
2/1/15 – 1/31/16
 
$13,352,610.24
 
$1,112,717.52
 
$42.81
 
 
 
 
 
 
 
2/1/16 – 1/31/17
 
$13,686,347.52
 
$1,140,528.96
 
$43.88
 
 
 
 
 
 
 
2/1/17 – 1/31/18
 
$14,026,322.88
 
$1,168,860.24
 
$44.97

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- iv -
UNION BANK PLAZA
[Union Bank Lease]


2/1/18 – 1/31/19
 
$14,378,774.40
 
$1,198,231.20
 
$46.10
 
 
 
 
 
 
 
2/1/19 – 1/31/20
 
$14,737,464.00
 
$1,228,122.00
 
$47.25
 
 
 
 
 
 
 
2/1/20 – 1/31/21
 
$15,105,510.72
 
$1,258,792.60
 
$48.43
 
 
 
 
 
 
 
2/1/21 – 1/31/22
 
$15,482,914.56
 
$1,290,242.88
 
$49.64
 
 
(b) During the Initial Period, Base Rent for the Storage Space shall be as follow
(except as otherwise provided in Section 2.5 of the Office/Retail Lease):
Portion
of Initial Period
 
Annual Base
Rent
 
Monthly
Installment of Base
Rent
 
Annual
Base Rent Per Rentable
Square Foot (pursuant to
1980 Modified BOMA)
 
 
 
 
 
 
 
2/1/12 – 1/31/13
 
$117,705.00
 
$9,808.75
 
$21.00
 
 
 
 
 
 
 
2/1/13 – 1/31/14
 
$122,413.20
 
$10,201.10
 
$21.84
 
 
 
 
 
 
 
2/1/14 – 1/31/15
 
$127,289.55
 
$10,607.46
 
$22.71
 
 
 
 
 
 
 
2/1/15 – 1/31/16
 
$132,390.10
 
$11,032.51
 
$23.62
 
 
 
 
 
 
 
2/1/16 – 1/31/17
 
$137,714.85
 
$11,476.24
 
$24.57
 
 
 
 
 
 
 
2/1/17 – 1/31/18
 
$143,207.75
 
$11,933.98
 
$25.55
 
 
 
 
 
 
 
2/1/18 – 1/31/19
 
$148,924.85
 
$12,410.40
 
$26.57
 
 
 
 
 
 
 
2/1/19 – 1/31/20
 
$154,866.15
 
$12,905.51
 
$27.63
 
 
 
 
 
 
 
2/1/20 – 1/31/21
 
$161,087.70
 
$13,423.98
 
$28.74
 
 
 
 
 
 
 
2/1/21 – 1/31/22
 
$167,533.45
 
$13,961.12
 
$29.89
9.
Additional Rent (Article 4):
 
 
 
 
 
 
 
 
9.1
Annual Direct Expense
Allowance:
 
 
 
 
 
 
 
 
 
(a) During the Initial
Period:
 
Amount of Direct Expenses for the calender year 2002 calculated in accordance with Section 4.2.
 
 
 
 
 
 
 
(b) During the
Extended Term:
 
Amount of Direct Expenses for the calendar year 2012 calculated in accordance with Section 4.2.


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- v -
UNION BANK PLAZA
[Union Bank Lease]


 
9.2
Tenant's Share of Direct
Expenses:
 
 
 
 
 
 
 
 
 
(a) During the Initial
Period:
 
50.66% (i.e., 310,639 rentable square feet in the Premises/613,235 rentable square feet in the Building [including the retail/office towner portion of the Building and the existing retail portion of the Real Property located outside the retail/office towner portion of the Building], as determined pursuant to Section 1.2 of the Office/Retail Lease).
 
 
 
 
 
 
 
(b) During the
Extended Term:
 
5.34% (i.e., 311,904 rentable square feet in the portion of the Premises which is other than the Storage Space/607,517 rentable square feet in the Building [excluding the existing retail portion of the Real Property located outside the retail/office towner portion of the Building], as determined pursuant to Section 1.2 of the Office/Retail Lease).
 
 
 
 
 
10.
Parking Passes
(Article 28):
 
453 parking passes in the Building Parking Area and 107 parking passes in the Off-Site Parking Area, for a total of 560 parking passes, subject to increase or reduction, as the case may be, pursuant to the provisions of Article 28 of the Office/Retail Lease.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]


804296.08/LA
H4321-047/10-7-08/nng/law
-vii-
UNION BANK PLAZA
[Union Bank Lease]


The foregoing terms of this Summary are hereby agreed to by Landlord and Tenant.
"Landlord":
HINES VAF UB PLAZA, L.P.,
a Delaware limited partnership
By:
Hines VAF UB Plaza GP LLC,
its general partner
By:
Hines VAF UB Plaza Mezz, L.P.,
its sole member
By:
Hines VAF UB Plaza GP2 LLC,
its general partner
By:
Hines U.S. Office Value Added Fund, L.P.,
its sole member
By:
Hines U.S. Office Value Added Fund, LLC,
its general partner
By:
Hines Interests Limited Partnership,
its managing member
By:
Hines Holdings, Inc.
its general partner
By:
/s/ Colin P. Shepherd
Name:
Colin P. Shepherd
Title:
Senior Vice President

804296.08/LA
H4321-047/10-7-08/nng/law
- vii -
UNION BANK PLAZA
[Union Bank Lease]


"Tenant":
UNION BANK OF CALIFORNIA, N.A.,
a national association
By:
/s/ Craig Poletti
Name: Craig Poletti
Title: Vice President
By:
/s/ Kenneth Holdway
Name: Kenneth Holdway
Title: Senior Vice President
By:
/s/ John Erickson
Name: John Erickson
Title: Vice Chairman


804296.08/LA
H4321-047/10-7-08/nng/law
- viii -
UNION BANK PLAZA
[Union Bank Lease]


UNION BANK PLAZA

OFFICE/RETAIL LEASE
This Office/Retail Lease, which includes the preceding Summary of Basic Lease Information (the " Summary ") attached hereto and incorporated herein by this reference (the Office/Retail Lease and Summary to be known sometimes collectively hereafter as the " Lease "), dated as of the date set forth in Section 1 of the Summary, is made by and between HINES VAF UB PLAZA, L.P., a Delaware limited partnership (" Landlord "), and UNION BANK OF CALIFORNIA, N.A., a national association (" Tenant ").
ARTICLE 1
REAL PROPERTY, BUILDING AND PREMISES; RIGHT OF FIRST OFFER
1.1     Real Property, Building and Premises . Upon and subject to the terms, covenants and conditions hereinafter set forth in this Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the following premises in the building located at 445 South Figueroa Street, Los Angeles, California 90071 (" Building "), the floor plans of which premises are outlined in Exhibit A attached hereto (" Premises "):
Portion of Premises on Each of the
Following
Floors of the Building
 
Rentable Square Footage
(pursuant to 1980 Modified
BOMA, as defined in
Section 1.2 below)
 
 
485

 
B-1 Level
 
2,221

 
B-2 Level
 
2,925

 
Street Level
 
9,530

 
Lobby Level
 
15,251

 
Two (2)
 
15,304

 
Three (3)
 
15,304

 
Four (4)
 
15,304

 
Five (5)
 
15,304

 
Six (6)
 
15,304

 
Seven (7)
 
15,304

 
Eight (8)
 
15,320

 
Nine (9)
 
15,358

 
Ten (10)
 
15,296

 
Eleven (11)
 
15,358

 
Twelve (12)
 
15,428

 
Thirteen (13)
 
15,428

 
Fourteen (14)
 
15,447

 
Fifteen (15)
 
15,429

 
Sixteen (16)
 
15,451

 

804296.08/LA
H4321-047/10-7-08/nng/law
 
UNION BANK PLAZA
[Union Bank Lease]


Seventeen (17)
 
15,464

 
Eighteen (18)
 
15,188

 
Twenty-One (21)
 
15,837

 
Twenty-Four (24)
 
15,804

 
Thirty-Nine (39)
 
2,899

 
 
 
 
 
Total
 
310,639

 
For purposes of this Lease: (i) the " Office Space " shall mean, collectively, (A) that portion of the Premises listed in the schedule above located on the second (2 nd ) through eighteenth (18 th ) floors of the Building, inclusive, the twenty-first (21 st ) and twenty-fourth (24 th ) floors of the Building, (B) the 20 th Floor Space (as defined below) when added to the Premises and (C) any Expansion Space and/or First Offer Space (as such terms are defined below), if leased by Tenant pursuant to Sections 1.5 and/or 1.6 below, respectively; (ii) the " Retail Space " shall mean that portion of the Premises listed in the schedule above located on the Lobby Level of the Building; (iii) the " Vault Space " shall mean that portion of the Premises listed in the schedule above located on the Street Level of the Building; (iv) the " Storage Space " shall mean that portion of the Premises listed in the schedule above located on B-1 Level, B-2 Level and thirty-ninth (39 th ) floor of the Building; and (v) the "Initial Premises " shall mean the initial Premises leased by Tenant as of the Lease Commencement Date listed in the schedule above ( i.e. , the Office Space [excluding the 20 th Floor Space, the Expansion Space and the First Offer Space] the Retail Space, the Vault Space and the Storage Space). Tenant's rights to the Premises include the limited right (together with Landlord's right to use such space to the extent necessary to provide services to the Premises) to use and access the janitorial closet and the fan, electrical, and telephone rooms on the floors containing the Premises as reasonably necessary for Tenant's effective and efficient use of the Premises. Tenant shall also be permitted to use the telephone rooms on the floors containing the Premises to service, maintain, repair and/or replace its equipment. Tenant shall also have the right to use, or access, at its sole cost and expense, any ceilings or space above the ceilings on the floors containing the Premises to the extent necessary to service Tenant's equipment in the Premises and to run wires, cables and other conduits (including telecommunications and computer wires, cables and conduits) from the ground and/or roof to the Premises to the extent (A) permitted by applicable laws, and (B) necessary in connection with conducting normal business and/or banking operations in the Premises (collectively, the " Conduit Uses "). Tenant's right to use and access the conduits and riser space from the ground and/or roof to the Premises for the Conduit Uses shall be subject to availability as reasonably determined by Landlord, but Tenant shall, at its sole cost and expense, in all events: (1) be entitled to continue to use for the Conduit Uses the conduits and riser space that Tenant currently uses as of the Lease Commencement Date; (2) be entitled to use for the Conduit Uses up to Tenant's Share of the usable area of any common riser and conduit space located in and through the telephone closets of the Building that exists and is unused as of the date of this Lease, so long as any such use does not preclude or unreasonably interfere with Landlord's ability to access such riser and conduit space and/or telephone closets to maintain and repair such space and closets and any conduits, wiring, cabling and/or equipment therein; and (3) so long as a Design Problem (as defined below) is not created, Tenant may construct, at Tenant's sole cost and expense, additional conduit and riser space through the telephone closets of the Building ( i.e. , construct additional holes in the floor and ceiling of such telephone closets) for the Conduit Uses without charge for the use of such additional conduit and riser space (so long as Tenant

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- 2 -
UNION BANK PLAZA
[Union Bank Lease]


does not use, in the aggregate, more than Tenant's Share of the usable area within such telephone closets therefor), which construction shall be performed in compliance with all applicable laws and the provisions of Article 8 below. Tenant's rights to the Premises include the right to use and access any floors or walls on the floors containing the Premises to install equipment, wiring, cables, conduits and the like as necessary to service, maintain, repair and/or replace Tenant's equipment in the Premises. Tenant shall indemnify, defend and hold Landlord harmless from and against any and all liabilities, costs, losses, expenses and claims relating to the installation, placement, removal, access and/or use of any such conduits, riser space, janitorial closets, fan rooms, electrical rooms, telephone rooms and closets, walls, floors, and ceilings (and any wiring, cabling and equipment therein), except to the extent such liabilities, costs, losses, expenses and claims result from Landlord's negligence or willful misconduct.
Notwithstanding anything to the contrary set forth in this Lease (other than as expressly provided in Section 7.2 of this Lease), in no event shall Tenant take any action in the Premises or the Building which may affect the "Systems and Equipment," as that term is defined in Section 4.2.6 of this Lease, without the prior written consent of Landlord which will not be withheld except to the extent such action will create a Design Problem. The Building, the parking structure located beneath both the Building and land located adjacent to the Building (" Building Parking Area "), the outside plaza areas, land and other improvements surrounding the Building which are designated from time to time by Landlord as common areas appurtenant to or servicing the Building, and the land upon which any of the foregoing are situated, but excluding the "Off-Site Parking Area" (as defined in Article 28 of this Lease), are herein sometimes collectively referred to as the " Real Property. " The Building Parking Area and the Off-Site Parking Area are herein sometimes collectively referred to as the " Parking Areas ." Tenant is hereby granted the right to the nonexclusive use of the common corridors and hallways, stairwells, elevators, restrooms and other public or common areas located on the Real Property; provided, however, that Tenant shall be granted the right to the exclusive use of the restrooms (for "restroom" uses only), corridors and hallways on full floors leased by Tenant; provided further, however, that the manner in which such public and common areas are maintained and operated shall (except as otherwise provided or required under this Lease) be at the reasonable discretion of Landlord and the use thereof shall be subject to such rules, regulations and restrictions as Landlord may make from time to time. Subject to the provisions of Section 19.7.2 of this Lease, Landlord reserves the right to make alterations or additions to or to change the location of elements of the Real Property and the common areas thereof, as long as such alterations, additions or changes (aa) shall be consistent with the operation of the Building and Real Property in a first-class manner, (bb) shall not unreasonably interfere with Tenant's use of or access to the Premises, and (cc) shall be performed in accordance with the conditions and restrictions set forth in this Lease.
1.2     Rentable Square Feet of Premises and Building . During the Initial Period (as defined below), Landlord and Tenant hereby stipulate (regardless of anything to the contrary set forth herein) and agree that for purposes of this Lease the rentable area of the Initial Premises (i) shall be as set forth in Section 1.l above, (ii) was required to be calculated pursuant to Standard Method for Measuring Floor Area in Office Buildings, ANSI 265.1-1980, as modified to include a prorata portion of (A) the Building common areas, and (B) any occupied space in the Building dedicated to the service of the Building (collectively the " Additional Area "), which Additional Area could not exceed 11,199 rentable square feet (as so modified, " 1980 Modified BOMA "), and (iii) whether or not such rentable area was actually calculated pursuant to 1980

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- 3 -
UNION BANK PLAZA
[Union Bank Lease]


Modified BOMA, is not subject to adjustment or re-measurement by Landlord or Tenant. Commencing on the Extended Term Commencement Date, and continuing thereafter through the remaining Lease Term, as extended by the Option Terms, (as that term is defined in Section 2.2 of this Lease), the rentable area of the Initial Premises shall be deemed to be the stipulated amounts set forth below in this Section 1.2, calculated (subject to the clarification in the last sentence of this Section 1.2) pursuant to Standard Method for Measuring Floor Area in Office Buildings, ANSI 265.1-1996 (" 1996 ROMA "). In addition, the rentable area of the 20 th Floor Space (when added to the Premises pursuant to Section 1.4 below is deemed and stipulated to contain 16,387 rentable square feet, as calculated, subject to the clarification in tbe last sentence of this Section 1.2, in accordance with 1996 BOMA [not 1980 Modified BOMA]), and any Expansion Space and/or First Offer Space (if leased by Tenant pursuant to Sections 1.5 and/or 1.6 below, respectively), shall at all times during the applicable lease term thereof be calculated pursuant to 1996 BOMA (not 1980 Modified BOMA), and all amounts, percentages and figures appearing or referred to in this Lease based upon the rentable area of such applicable space shall be determined based upon 1996 BOMA. Landlord and Tenant agree and have verified that the rentable area of the Initial Premises calculated (subject to the clarification in the last sentence of this Section 1.2) in accordance with 1996 BOMA is as follows, and is not subject to adjustment or re-measurement by Landlord or Tenant:
Portion of Premises on each of the
Following Floors of the Building
 
Rentable Square Footage
(pursuant to 1980 BOMA)
B-1 Level
 
485

 
B-2 Level
 
2,221

 
Street Level
 
2,335

 
Lobby Level
 
9,650

 
Two (2)
 
15,658

 
Three (3)
 
15,660

 
Four (4)
 
15,660

 
Five (5)
 
15,660

 
Six (6)
 
15,660

 
Seven (7)
 
15,660

 
Eight (8)
 
15,677

 
Nine (9)
 
15,716

 
Ten (10)
 
15,716

 
Eleven (11)
 
15,716

 
Twelve (12)
 
15,789

 
Thirteen (13)
 
15,789

 
Fourteen (14)
 
15,806

 
Fifteen (15)
 
15,788

 
Sixteen (16)
 
15,822

 
Seventeen (17)
 
15,829

 
Eighteen (18)
 
15,546

 
Twenty-One (21)
 
16,400

 
Twenty-Four (24)
 
16,367

 
Thirty-Nine (39)
 
2,899

 
 
 
 
 
Total
 
317,509

 

804296.08/LA
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- 4 -
UNION BANK PLAZA
[Union Bank Lease]


Effective on and after the Extended Term Commencement Date, all amounts, percentages and figures appearing or referred to in this Lease based upon the rentable area of the Initial Premises shall be adjusted to reflect the above-described calculation of the rentable area of the Initial Premises. By way of example, but not limitation, (1) Base Rent for the Initial Premises shall be adjusted as set forth in Section 8.2 of the Summary, and (2) Tenant's Share shall be adjusted as set forth in Section 4.2.8 of this Lease and Section 9.2(b) of the Summary. For purposes of determining Tenant's Share, Landlord and Tenant also agree and stipulate that: (x) during the Initial Period, (I) the rentable area of the Building shall be deemed to be 613,235 rentable square feet (which rentable area includes both the retail/office tower portion of the Building and the existing retail portion of the Real Property located outside the retail/office tower portion of the Building), and was required to be calculated pursuant to 1980 Modified BOMA, and (II) whether or not such rentable area was actually calculated pursuant to 1980 Modified BOMA, such rentable area amount is not subject to adjustment or re-measurement by Landlord Tenant; and (y) commencing on the Extended Term Commencement Date, and continuing thereafter through the remaining Lease Term, as extended by the Option Terms, (I) the rentable area of the Building shall be deemed to be 607,517 rentable square feet (as determined without regard to the retail portion of the Real Property located outside the retail/office tower portion of the Building), calculated (subject to the clarification in the last sentence of this Section 1.2) pursuant to 1996 BOMA, and (II) such rentable area amount is not subject to adjustment or re-measurement by Landlord or Tenant. Notwithstanding the stipulation of the rentable square footage of the Initial Premises and the 20 th Floor Space as provided in and pursuant to the foregoing provisions of this Section 1.2 (and the stipulation of the rentable square footage of the 28 th Floor Expansion Space as provided in and pursuant to Section 1.6.1 below), neither such stipulated rentable square footage amounts or any interpretations and/or assumptions used by the parties in calculating such rentable square footage amounts pursuant to 1996 BOMA for such space shall be used as a reference or otherwise be binding upon the parties in determining, in accordance with 1996 BOMA, the rentable square footage of any First Offer Space, Second Expansion Space or any other expansion space which hereafter becomes part of the Premises.
1.3     Condition of the Premises . Prior to the date of this Lease, Tenant has occupied the Premises pursuant to the Existing Leases as defined in Article 22 below. Except as specifically set forth in Article 21 of this Lease and the Tenant Work Letter attached hereto as Exhibit B , and subject to Landlord's obligations set forth in this Lease, Tenant shall occupy the Premises in its "AS-IS" condition as of the date of this Lease, and Landlord shall have no obligation (except as specifically set forth in this Lease) to alter, remodel, improve, renovate or decorate the Premises, the Building, the Real Property or any part thereof, nor has Landlord made any representation or warranty regarding the condition of the Premises, the Building or the Real Property.
1.4     20th Floor Space .
1.4.1     20th Floor Space Commencement Date . The Premises shall be expanded to include that certain space comprising the entirety of the twentieth (20 th ) floor of the Building containing a stipulated 16,387 rentable square feet, calculated (subject to the clarification in the last sentence of Section 1.2 above) in accordance with 1996 BOMA, and depicted on Exhibit C attached to this Lease (the "20 th Floor Space "), commencing on the 20 th Floor Commencement Date (as defined below). Landlord and Tenant agree and have verified that the stipulated

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- 5 -
UNION BANK PLAZA
[Union Bank Lease]


rentable square feet of the 20 th Floor Space as set forth hereinabove is not subject to adjustment or re-measurement by Landlord or Tenant. Subject to delays caused by (i) Force Majeure events, and/or (ii) the unauthorized holdover by the existing tenant of the 20th Floor Space beyond the expiration of the lease term of such existing tenant's lease ( i.e. , March 31, 2009), Landlord shall use commercially reasonable efforts to deliver the 20th Floor Space to Tenant in the Delivery Condition (as defined in the Tenant Work Letter attached hereto as Exhibit B ) for the 20 th Floor Space on July 1, 2009. The lease term for the 20th Floor Space shall commence upon the 20 th Floor Space Commencement Date and expire coterminously with the Lease Term for the Initial Premises, as may be extended pursuant to Section 2.2 below. For purposes hereof, the "20 th Floor Space Commencement Date" shall mean the CD Date (as defined in the Tenant Work Letter) for the 20th Floor Space; provided, however, the Delivery Date for the 20 th Floor Space shall not actually occur until Tenant has received from Landlord a minimum fourteen (14) day prior factually correct written notice that the 20 th Floor Space will be delivered to Tenant in the Delivery Condition therefor.
1.4.2     20th Floor Space Base Rent . The Base Rent payable for the 20th Floor Space during the portion of the lease term thereof that occurs during the Initial Period shall be as follows: (i) $35.50 per rentable square foot of the 20 th Floor Space for that portion of the lease term thereof which occurs during the calendar year 2009; (ii) $36.86 per rentable square foot of the 20 th Floor Space for that portion of the lease term thereof which occurs during the calendar year 2010; and (iii) $38.28 per rentable square foot of the 20 th Floor Space for that portion of the lease term thereof which occurs during the calendar year 2011 and continuing through January 31, 2012. The Base Rent payable for the 20 th Floor Space during the portion of the lease term thereof that occurs during the Extended Term shall be equal to the same Base Rent rate per rentable square foot as applicable to the portion of the Initial Premises that excludes the Storage Space, subject to annual increases at the same time and at the same rate per rentable square foot as applicable to such portion of the Initial Premises (as set forth in Section 8.2(a) of the Summary).
1.4.3     20th Floor Annual Direct Expense Allowance . If (i) the 20 th Floor Commencement Date occurs during the calendar year 2009, the Annual Direct Expense Allowance applicable to the 20 th Floor Space shall, during the period from the 20 th Floor Commencement Date through the end of the Initial Period, be the amount of Direct Expenses for the calendar year 2009 calculated in accordance with Section 4.2, (ii) the 20 th Floor Commencement Date occurs during the calendar year 2010, the Annual Direct Expense Allowance applicable to the 20 th Floor Space shall, during the period from the 20 th Floor Commencement Date through the end of the Initial Period, be the amount of Direct Expenses for the calendar year 2010 calculated in accordance with Section 4.2, and (iii) the 20 th Floor Commencement Date occurs during the calendar year 2011, the Annual Direct Expense Allowance applicable to the 20 th Floor Space shall, during the period from the 20 th Floor Commencement Date through the end of the Initial Period, be the amount of Direct Expenses for the calendar year 2011 calculated in accordance with Section 4.2. Notwithstanding the foregoing, from and after the Extended Term Commencement Date, the Annual Direct Expense Allowance applicable to the 20 th Floor Space shall be the amount of Direct Expenses for the calendar year 2012 calculated in accordance with Section 4.2.

804296.08/LA
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- 6 -
UNION BANK PLAZA
[Union Bank Lease]


1.4.4     20th Floor Space Tenant's Share . To take into account the addition of the 20 th Floor Space to the Premises, upon (i) the 20 th Floor Space Commencement Date, Tenant's Share for the Initial Period (as set forth in Section 9.2(a) of the Summary) shall be increased by 2.67% (i.e., 16,387 rentable square feet in the 20 th Floor Space/613,235 rentable square feet in the Building, including the retail/office tower portion of the Building and the existing retail portion of the Real Property located outside the retail/office tower portion of the Building), and (ii) the Extended Term Commencement Date, Tenant's Share for the Extended Term (as set forth in Section 9.2(b) of the Summary) shall be increased by 2.70% (i.e., 16,387 rentable square feet in the 20 th Floor Space/607,517 rentable square feet in the Building, excluding the existing retail portion of the Real Property located outside the retail/office tower portion of the Building).
1.4.5     20th Floor Space Tenant Improvements . The Tenant Improvement Allowance for the 20 th Floor Space shall be $52.50 per rentable square foot of the 20 th Floor Space. The terms and provisions for the design, permitting and construction of the Tenant Improvements and the disbursement of the Tenant Improvement Allowance for the 20 th Floor Space shall be governed by the terms and provisions of the Tenant Work Letter.
1.4.6     20th Floor Space Parking . Upon the 20 th Floor Commencement Date, the Building Parking Area Passes (as defined in Section 28.1.1 below) which are Tenant's obligation to rent pursuant to Article 28 below shall be increased in accordance with the provisions of Section 28.1.3 below.
1.5     Right of First Offer .
1.5.1     First Offer Space; Superior Rights . During the initial Lease Term and any Option Term (subject, however, to the limitations set forth below in this Section 1.5.1 ), Tenant shall have a right of first offer to lease available office space located above the ground floor of the Building ("First Offer Space ") in accordance with and subject to the following provisions of this Section 1.5. Notwithstanding anything to the contrary contained in this Lease, Tenant's right of first offer contained in this Section 1.5 shall be subject and subordinate to all "Superior Rights." "Superior Rights" shall mean the following rights existing as of the date (the "Superior Rights Date") Tenant delivers to Landlord its Request Notice (as defined below) or Landlord delivers to Tenant a Landlord First Offer Notice (as defined below), as the case may be: (i) all lease rights, renewal rights, expansion rights, including any expansion options, must take obligations, first offer or first refusal rights, or any similar rights (collectively, "Applicable Rights") in leases for space in the Building existing as of such Superior Rights Date, along with the right of each tenant which does not have a renewal right set forth in its lease, to renew the lease term for its space provided that such renewal is exercised or agreed to by such tenant at least six (6) months prior to the expiration of such tenant's lease term; (ii) all Applicable Rights in connection with space (including Landlord's right to enter into a lease for such space) described in bona fide lease proposals or letters of intent executed by Landlord as of such Superior Rights Date, whether for new space in the Building, or for the extension of the term of an existing lease of space in the Building or the expansion of the premises identified in any lease of space in the Building, or (iii) the rights of Landlord to enter into any lease for space in the Building, including space subject to Applicable Rights, which is the subject as of such Superior Rights Date of exclusive, bona fide, good faith negotiations involving Landlord and a prospective tenant or an existing tenant in the Building. Further notwithstanding anything to the

804296.08/LA
H4321-047/10-7-08/nng/law
- 7 -
UNION BANK PLAZA
[Union Bank Lease]


contrary contained in this Section 1.5, Tenant shall have no such right of first offer during the last two (2) years of the then-current Lease Term unless either (A) as of the date Landlord delivers to Tenant the Response Notice or the Landlord First Offer Notice, as the case may be (as such terms are defined below), Tenant has previously properly exercised its extension option to extend the then-current Lease Term for the Renewed Premises (as defined below) for the next applicable Option Term pursuant to Section 2.2 below, or (B) if the Response Notice or the Landlord First Offer Notice, as the case may be, is delivered on or before the date that is fifteen (15) months prior to the expiration of the then-current Lease Term, then concurrently with Tenant's delivery of Tenant's First Offer Election Notice (as defined below) exercising such right of first offer, Tenant delivers to Landlord Tenant's Extension Notice (as defined in Section 2.2 below) properly exercising its option to extend the then-current Lease Term for the next applicable Option Term pursuant to Section 2.2 below which Tenant shall have right to do notwithstanding the time frames for delivery of Tenant's Extension Notice for such extension option set forth in Section 2.2 below.
1.5.2     Information Regarding Available Space; Additional Right of First Offer . At any time during the Lease Term, but not more frequently than once each calendar year, Tenant shall have the right to request in a notice to Landlord (the " Request Notice ") that Landlord send Tenant notice (the " Response Notice ") listing all office space in the Building located above the ground floor that is other than the Premises, the approximate rentable and usable areas of such space (as determined pursuant to 1996 BOMA), the Superior Rights, if any, with respect to such space, and the scheduled expiration of all such Superior Rights. Landlord shall deliver the Response Notice to Tenant within ten (10) business days following Landlord's receipt of the Request Notice. Subject to the limitations and restrictions set forth in Section 1.5.3 below, Tenant shall have the right, within fifteen (15) business days of the delivery of the Response Notice, to deliver notice to Landlord (" First Offer Election Notice ") pursuant to which (i) Tenant exercises its right of first offer to lease any First Offer Space, to the extent not encumbered by Superior Rights, (ii) if any First Offer Space is then subject to a Superior Right, Tenant exercises its right of first offer to lease such First Offer Space effective upon the termination or lapse of such Superior Rights, or (iii) Tenant elects not to lease any such First Offer Space. In addition to Tenant's right to send Landlord a First Offer Election Notice pursuant to the foregoing provisions of this Section 1.5.2, at such time during the initial Lease Term and any Option Terru (subject, however, to the limitations set forth in Section 1.5.1 above ), as any First Offer Space that is not subject to a Superior Right becomes available for lease to third parties that are other than the existing tenant (or its affiliate) of such space, prior to leasing such space to a third party (that is other than the existing tenant or its affiliate of such space), Landlord shall offer such space to Tenant by delivery of a written notice (" Landlord First Offer Notice ") to Tenant informing Tenant of the availability of such First Offer Space. Subject to the limitations and restrictions set forth in Section 1.5.3 below, Tenant shall thereupon have the right to lease such First Offer Space by delivery to Landlord within ten (10) days following the date of the Landlord First Offer Notice of a First Offer Election Notice electing to lease such space. In the event that Tenant (A) elects not to lease any such First Offer Space, or (B) does not notify Landlord of its election to lease any such First Offer Space within such ten (10) day period, Landlord shall thereafter have the right for a six (6) month period following such ten (10) day period to lease such First Offer Space (or any portion thereof) to any other party and on any terms Landlord desires.

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- 8 -
UNION BANK PLAZA
[Union Bank Lease]


1.5.3     Restrictions on Lease of First Offer Space . Notwithstanding any provision of this Section 1.5 to the contrary, the following provisions shall apply with respect to the exercise by Tenant of its right to lease First Offer Space: (i) Tenant must elect to lease, if any, all, but not less than all, of all contiguous First Offer Space located on a floor of the Building; provided, that if any such contiguous First Offer Space was most recently occupied by two or more unaffiliated tenants and is currently separately demised, Tenant shall have the right to lease all, but not less than all, of one or more contiguous demised sections of such First Offer Space; (ii) Tenant must elect to lease all First Offer Space contiguous to the then-existing Premises prior to leasing any First Offer Space not contiguous to the then-existing Premises; and (iii) Tenant's rights under this Section 1.5 are personal to the original Tenant executing this Lease (the " Original Tenant ") and any Approved Transferee (as defined in Section 14.1 of this Lease) to which Tenant's rights under this Section 1.5 have been assigned, and Tenant's rights and Landlord's obligations under this Section 1.5 shall only be applicable during such periods as the Original Tenant or any such Approved Transferee physically occupies at least seventy-five percent (75%) of the rentable area of the then-existing Premises (not including any portion of the Premises recaptured by Landlord pursuant to Section 14.3 of this Lease).
1.5.4     Lease Term for First Offer Space . All First Offer Space which Tenant elects to lease shall be leased for a lease term commencing upon the day after the expiration of the applicable Construction Period (as defined in Section 1.5.8 below) for such First Offer Space and expiring coterminously with the remaining Lease Term for the Initial Premises or earlier if leased by Tenant subject to Superior Rights, as such Lease Term may be extended pursuant to Section 2.2 of this Lease.
1.5.5     Initial Period First Offer/Expansion Terms . If the commencement date for any First Offer Space leased by Tenant pursuant to this Section 1.5 (or the commencement date for any Expansion Space leased by Tenant pursuant to Section 1.6 below, as the case may be) occurs during the Initial Period, then such First Offer Space (or such Expansion Space, as the case may be) shall be leased by Tenant upon all of the applicable terms and conditions of this Lease, except as follows (collectively, the " Initial Period First Offer/Expansion Terms "):
1.5.5.1     Initial Period First Offer/Expansion Rent . The Base Rent payable for any such First Offer Space (or Expansion Space, as the case may be) shall be calculated as follows: (i) for the period from the commencement date of the lease term for such First Offer Space (or Expansion Space, as the case may be) through the end of the Initial Period, such Base Rent (herein, the " Pre-Extended Term Base Rent ") shall equal (A) $35.50 per rentable square foot of such applicable space for that portion of such lease term which occurs during the calendar year 2009; (B) $36.86 per rentable square foot of such applicable space for that portion of such lease term which occurs during the calendar year 2010; and (C) $38.28 per rentable square foot of such applicable space for that portion of such lease term which occurs during the calendar year 2011 and continuing through January 31, 2012; and (ii) during the Extended Term, such Base Rent shall equal the same Base Rent rate per rentable square foot as applicable to the portion of the Initial Premises that excludes the Storage Space, subject to annual increases at the same time and at the same rate per rentable square foot as applicable to such portion of the Initial Premises as set forth in Section 8.2(a) of the Summary (e.g., the Base Rent for such First Offer Space [or Expansion Space, as the case may be] during the period from February 1, 2012 through January 31,2013 shall equal $39.75 pre rentable square foot of such applicable space).

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H4321-047/10-7-08/nng/law
- 9 -
UNION BANK PLAZA
[Union Bank Lease]


1.5.5.2     Initial Period First Offer/Expansion Annual Direct Expense Allowance Year . If (i) the commencement date for any such First Offer Space (or any such Expansion Space, as the ease may be) leased by Tenant occurs during the calendar year 2009, the Annual Direct Expense Allowance for such applicable space shall, during the period from such applicable commencement date through the end of the Initial Period, be the amount of Direct Expenses for the calendar year 2009 calculated in accordance with Section 4.2 below, (ii) the commencement date for any such First Offer Space (or any such Expansion Space, as the case may be) leased by Tenant occurs during the calendar year 2010, the Annual Direct Expense Allowance for such applicable space shall, during the period from such applicable commencement date through the end of the Initial Period, be the amount of Direct Expenses for the calendar year 2010 calculated in accordance with Section 4.2 below, and (iii) the commencement date for any such First Offer Space (or any such Expansion Space, as the ease may be) leased by Tenant occurs during the calendar year 2011, the Annual Direct Expense Allowance for such applicable space shall, during the period from such applicable commencement date through the end of the Initial Period, be the amount of Direct Expenses for the calendar year 2011 calculated in accordance with Section 4.2 below. Notwithstanding the foregoing, from and after the Extended Term Commencement Date, the Annual Direct Expense Allowance for such First Offer Space (or Expansion Space, as the case may be) shall, during the period from the applicable commencement for such space through the end of the Extended Term, be the Annual Direct Expense Allowance set forth in Section 9.1(b) of the Summary ( i.e. , the amount of Direct Expenses for the calendar year 2012 calculated in accordance with Section 4.2 below).
1.5.5.3     Initial Period First Offer/Expansion Space Tenant Improvement Allowance . Tenant shall be entitled to receive from Landlord a tenant improvement allowance for such First Offer Space (or Expansion Space, as the case may be) equal to the fair market tenant improvement allowance provided for comparable space located in the Building and in and in other buildings comparable to the Building in services, amenities and location in the Los Angeles Central Business District (collectively, the " Comparable Buildings "), determined after taking into account the Pre-Extended Term Base Rent and the Annual Direct Expense Allowance for such applicable space (as calculated pursuant to Sections 1.5.5.2 and 1.5.5.3 above), as well as the age, quality and layout of the existing tenant improvements in such First Offer Space (or Expansion Space, as the case may be) as of the commencement date of the initial lease term for such applicable First Offer Space (or Expansion Space, as the case may be); provided, however, if such First Offer Space (or Expansion Space, as the case may be) contains asbestos or such Expansion Space is the 28 th Floor Expansion Space (as defined below), the tenant improvement allowance for such applicable space shall equal $52.50 per rentable square foot of such space and Landlord shall abate the asbestos contained in such applicable space (whether by removal, enclosure, encapsulation and/or repair) pursuant to the General Abatement Standard (as defined in the Tenant Work Letter) at Landlord's sole cost and expense before delivering such applicable space to Tenant. Such tenant improvement allowance shall only be used to help Tenant pay for the costs (including, without limitation, design, architectural, space planning and permitting fees and costs) actually incurred and paid for by Tenant for the design, architectural, space planning and permitting fees and construction of the initial tenant improvements in such applicable First Offer Space (or Expansion Space, as the case may be). All construction of such initial tenant improvements shall be performed by Tenant pursuant to the terms and provisions of Articles 8 and 9 below (except that the construction of the initial tenant improvements for the 28 th Floor

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- 10 -
UNION BANK PLAZA
[Union Bank Lease]


Expansion Space shall be performed by Tenant pursuant to the terms and provisions of the Tenant Work Letter).
1.5.6     Extended Term First Offer Expansion Terms . If the commencement date for any First Offer Space leased by Tenant pursuant to this Section 1.5 (or the commencement date for any Expansion Space leased by Tenant pursuant to Section 1.6 below, as the case may be) occurs on or after the Extended Term Commencement Date, then such First Offer Space (or such Expansion Space, as the case may be) shall be leased by Tenant upon all of the applicable terms and conditions of this Lease, except as follows (collectively, the " Extended Term First Offer/Expansion Terms "):
1.5.6.1     Extended Term First Offer/Expansion Rent Notice . Within ten (10) business days after Landlord's receipt of any First Offer Election Notice (or any Expansion Space Exercise Notice [as defined below], as the case may be), Landlord shall notify Tenant of Landlord's determination of the "Extended Term First Offer/Expansion Rent" (as defined below) for such First Offer Space (or Expansion Space, as the case may be) which Tenant elects to lease (" Extended Term First Offer/Expansion Rent Notice ").
1.5.6.2     Extended Term First Offer/Expansion Rent . The Base Rent payable by Tenant for such First Offer Space (or such Expansion Space, as the case may be) (the " Extended Term First Offer/Expansion Rent ") shall be determined pursuant to Section 1.5.6.5 below and shall be equal to the rent at which tenants are then leasing non-encumbered, non-sublease, non-equity space comparable in size and location to such First Offer Space (or Expansion Space, as the case may be), for a comparable term as the initial lease term for such First Offer Space (or Expansion Space, as the case may be), which comparable space is located in the Building and in the Comparable Buildings, in either case giving appropriate consideration to the following terms and conditions: (i) the annual base rental rates per rentable square foot (including additional rent and considering any "base year" or "expense stop" applicable thereto); (ii) rental abatement concessions; and (iii) the value of tenant improvements and allowances (which shall be determined after taking into account the value of the existing improvements in such First Offer Space [or Expansion Space, as the case may be], with such value to be based upon the age and quality of such existing improvements to an average office user), which tenant improvement allowance shall be subject to adjustment as provided in Section 1.5.6.4 below, and if so adjusted, the Extended Term First Offer/Expansion Rent shall also be adjusted to take into account such modified tenant improvement allowance. In determining the Extended Term First Offer/Expansion Rent no consideration shall be given to the existence or nonexistence of a brokerage commission or any Proposition 13 real property tax increase protections in such comparable transactions, and no adjustments shall be made to the rent to take into account any such brokerage commissions or Proposition 13 real property tax increase protections.
1.5.6.3     Extended Term Annual Direct Expense Allowance . The Annual Direct Expense Allowance for any such First Offer Space (or Expansion Space, as the case may be), if applicable, shall be determined as part of the Extended Term First Offer/Expansion Rent.
1.5.6.4     Extended Term Tenant Improvement Allowance . The tenant improvement allowance for such First Offer Space (or Expansion Space, as the case may be), if any, shall be determined as part of the Extended Term First Offer/Expansion Rent; provided,

804296.08/LA
H4321-047/10-7-08/nng/law
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UNION BANK PLAZA
[Union Bank Lease]


however, if any such applicable space contains asbestos, (i) the tenant improvement allowance for such applicable space shall equal the product of (A) $52.50 per rentable square foot of such applicable space, multiplied by (B) a fraction, the numerator of which is the number of months in the initial lease term for such applicable space and the denominator of which is one hundred twenty (120) months, and (ii) Landlord shall abate (whether by removal and/or encapsulation in the manner set forth in Section 1.2 of the Tenant Work Letter) the asbestos contained in such applicable space at Landlord's sole cost and expense before delivering such applicable space to Tenant. Such tenant improvement allowance shall only be used to help Tenant pay for the costs (including, without limitation, design, architectural, space planning and permitting fees and costs) actually incurred and paid for by Tenant for the design and construction of the initial tenant improvements in such applicable First Offer Space (or Expansion Space, as the case may be). All construction of such initial tenant improvements shall be performed by Tenant pursuant to the terms and provisions of Articles 8 and 9 below.
1.5.6.5     Determination of Extended Term First Offer/Expansion Rent . The Extended Term First Offer/Expansion Rent payable by Tenant for such First Offer Space (or Expansion Space, as the case may be) shall be the Extended Term First Offer/Expansion Rent set forth by Landlord in the Extended Term First Offer/Expansion Rent Notice if Tenant accepts such determination by sending Landlord written notice of such acceptance within ten (10) business days after Tenant's receipt of the Extended Term First Offer/Expansion Rent Notice. In the event Tenant does not provide a notice to Landlord accepting the applicable Extended Term First Offer/Expansion Rent proposed by Landlord in the Extended Term First Offer/Expansion Rent Notice within ten (10) business days after Tenant's receipt thereof (the " First Offer/Expansion Review Period "), Landlord and Tenant shall attempt to agree upon the applicable Extended Term First Offer/Expansion Rent using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within twenty (20) days following the expiration of the First Offer/Expansion Review Period (the " First Offer/Expansion Outside Agreement Date "), then each party shall make a separate final determination of the applicable Extended Term First Offer/Expansion Rent, which final determinations shall be placed in separate sealed envelopes and exchanged in a meeting between the parties conducted within five (5) business days after the First Offer/Expansion Outside Agreement Date. At such meeting, the parties shall open such envelopes in each other's presence and if the parties' determinations of the applicable Extended Term First Offer/Expansion Rent are within three percent (3%) of one another, such applicable Extended Term First Offer/Expansion Rent shall be equal to the average of such determinations and the arbitration provisions in Sections 1.5.6.5.1 through 1.5.6.6.6 shall not apply. If however, such determinations contained in such envelopes are not within three percent (3%) of one another, then such determinations shall be submitted to arbitration in accordance with Sections 1.5.6.5.1 through 1.5.6.5.5 below.
1.5.6.5.1    Landlord-and Tenant shall each appoint one arbitrator who shall by profession be a real estate broker or appraiser who shall have been active over the five (5) year period ending on the date of such appointment in the leasing (or appraisal, as the case may be) of commercial properties in the Los Angeles Central Business District. The determination of the arbitrators shall be limited solely to the issue of whether Landlord's or Tenant's submitted Extended Term First Offer/Expansion Rent is the closest to the actual Extended Term First Offer/Expansion Rent as determined by the arbitrators, taking into account

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UNION BANK PLAZA
[Union Bank Lease]


the requirements of Section 15.6.2 of this Lease. Each such arbitrator shall be appointed within fifteen (15) days after the applicable First Offer/Expansion Outside Agreement Date.
1.5.6.5.2    The two arbitrators so appointed shall within ten (10) days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two arbitrators. In the event that the two arbitrators shall fail to so agree upon and appoint the third arbitrator within such ten (10) day period, either Landlord or Tenant shall have the right to elect by written notice to the other party prior to the appointment of such third arbitrator, to have such third arbitrator appointed in accordance with the rules and procedures of the American Arbitration Association (subject to the same qualifications as set forth in Section 1.5.6.5.1 above).
1.5.6.5.3    The three arbitrators shall within thirty (30) days of the appointment of the third arbitrator reach a decision as to whether the parties shall use Landlord's or Tenant's Extended Term First Offer/Expansion Rent and shall notify Landlord and Tenant thereof.
1.5.6.5.4    The decision of the majority of the three arbitrators shall be binding upon Landlord and Tenant.
1.5.6.5.5    If either Landlord or Tenant fails to appoint an arbitrator within fifteen (15) days after the First Offer/Expansion Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator's decision shall be binding upon Landlord and Tenant.
1.5.7     Condition of First Offer Space/Expansion Space . The 28 th Floor Expansion Space shall be delivered to Tenant in the Delivery Condition (as defined in and determined pursuant to the Tenant Work Letter), and the commencement date of the initial lease term therefor shall be determined as set forth in Section 1.6.4 below. In the event that any First Offer Space (or the Second Expansion Space, as defined below, as the case may be) contains asbestos, such First Offer Space (or such Second Expansion Space, as the case may) shall be deemed to be a Full TI Floor (which is other than an Existing Full TI Floor) as it pertains to Landlord's delivery obligation and Landlord shall be required to deliver such First Offer Space (or such Second Expansion Space, as the case may) to Tenant in the Delivery Condition pursuant to the terms and provisions of the Tenant Work Letter related thereto (including abatement, whether by removal and for encapsulation of such asbestos in the manner set forth in Section 1.2 of the Tenant Work Letter). In the event that any First Offer Space (or the Second Expansion Space, as the case may be) does not contain asbestos, Landlord shall deliver such First Offer Space (or such Second Expansion Space, as the case may be) in its "AS IS" condition as of the date such First Offer Space (or such Second Expansion Space, as the case may be) is so delivered to Tenant.
1.5.8     Construction Period . Tenant shall be granted the Construction Period (as defined below) to complete its tenant improvements in any First Offer Space (or the Second Expansion Space, as the case may be). For purposes hereof, the " Construction Period " for any First Offer Space (or the Second Expansion Space, as the case may be), shall mean the period

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H4321-047/10-7-08/nng/law
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UNION BANK PLAZA
[Union Bank Lease]


commencing on the date upon which Landlord delivers the applicable First Offer Space (or such Second Expansion Space, as the case may be) in the Delivery Condition and ending on the date which is the earlier of (i) the date Tenant commences its business from any portion of such First Offer Space (or such Second Expansion Space, as the case may be) and (ii) the date which is four (4) months (which shall be extended for Uncontrollable Delays as defined in Section 2.3.2 of Exhibit B ) after the date Landlord delivers such First Offer Space (or such Second Expansion Space, as the case may be) to Tenant in the Delivery Condition.
1.5.9     Amendment to Lease . If Tenant timely exercises its right to lease First Offer Space as set forth herein, Landlord and Tenant shall within fifteen (15) days after the later of (i) the date Tenant delivers Tenant's First Offer Election Notice and (ii) the determination of the tenant improvement allowance for the Initial Period (or the determination of the Extended Term First Offer/Expansion Rent, as the case may be), execute an amendment adding the applicable First Offer Space to the Premises upon the terms and conditions set forth in this Section 1.5. The rentable area of any First Offer Space added to the Premises shall be determined in accordance with 1996 BOMA. All provisions of this Lease which vary based upon the rentable square footage of the Premises shall be adjusted to reflect the addition of the First Offer Space to the Premises.
1.5.10     Default by Tenant . At Landlord's option, in addition to any other rights or remedies under this Lease, at law and/or in equity, Tenant shall not have the right to lease the First Offer Space, as provided in this Section 1.5, so long as Tenant, as of the date of the attempted exercise of any first offer right by Tenant, is in default under this Lease beyond any applicable notice and cure period.
1.5.11     Confidentiality . Tenant acknowledges and agrees that the information set forth in any Response Notice delivered by Landlord is confidential information. Tenant shall keep such information strictly confidential and shall not disclose such information to any person or entity other than Tenant's financial, legal and real estate advisors.
1.6     Expansion Space .
1.6.1     General . Landlord hereby grants to Tenant two (2) options (each, an "Expansion Option" and collectively, the " Expansion Options "), each to expand the Premises to include the entirety of one (1) full floor (each an " Expansion Space ") within the Building (with the location of the Expansion Space for the first Expansion Option to be the entire 28th floor of the Building containing approximately 16,287 rentable square feet (the " 28 th Floor Expansion Space ") and with the location of the Expansion Space for the second Expansion Option to be designated by Landlord as provided below (the " Second Expansion Space ")), all upon the terms and conditions set forth in this Section 1.6. Landlord and Tenant agree and have confirmed that the rentable square feet of the 28 th Floor Expansion Space as set forth hereinabove is deemed and stipulated to contain 16,287 rentable square feet as calculated, subject to clarification in the last sentence of Section 1.2 above, in accordance with 1996 BOMA, and is not subject to adjustment or re-measurement by Landlord or Tenant. The rentable square feet of the Second Expansion Space shall also be determined in accordance with 1996 BOMA. In the event Tenant does not deliver written notice to Landlord on or before November 1, 2008 electing not to exercise the first Expansion Option (the " First Expansion Non-Exercise

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UNION BANK PLAZA
[Union Bank Lease]


Notice "), then Tenant shall be deemed to have elected to exercise the first Expansion Option. The second Expansion Option shall be exercised by Tenant, if at all, only in the following manner: (i) Tenant shall deliver written notice (the " Second Expansion Option Interest Notice ") to Landlord no later than April 30, 2012 stating that Tenant may be interested in exercising its second Expansion Option; (ii) Landlord, after receipt of Tenant's Second Expansion Option Interest Notice, shall deliver notice (the " Expansion Designation Notice ") to Tenant no later than May 30, 2012, designating all of the single full floors of the Building above the ground floor that are reasonably expected by Landlord to be Available for Lease (as defined below) to Tenant as the Second Expansion Space during the Delivery Window (as defined below); provided, however, that at least one (1) full floor must, at a minimum, be available for lease and shall be so designated and nothing set forth in this Section 1.6 shall reduce such absolute obligation of Landlord; and (iii) if Tenant wishes to exercise such second Expansion Option, Tenant shall, on or before that date which is the later of (A) thirty (30) days after Landlord's delivery of the Expansion Designation Notice to Tenant and (B) June 30, 2012, exercise the second Expansion Option by delivering written notice (the " Second Expansion Option Exercise Notice ") thereof to Landlord, in which Second Expansion Option Exercise Notice Tenant shall also designate Tenant's selection of the single full floor that will constitute the Second Expansion Space (in the event Landlord's Expansion Designation Notice included more than one (1) full floor in the Building as Available for Lease). If Tenant fails to deliver to Landlord (A) the Second Expansion Option Interest Notice on or before April 30, 2012, or (B) the Second Expansion Option Exercise Notice on or before June 30, 2012, Tenant shall be deemed to have waived Tenant's second Expansion Option.
1.6.2     Available for Lease . As used herein, a single full floor of the Building shall be reasonably expected to be " Available for Lease " during the Delivery Window if, as of the date of Landlord's delivery of Landlord's Expansion Designation Notice to Tenant, such floor is (i) not subject to a lease to another tenant, (ii) not subject to an executed letter of intent for lease to another tenant for a lease term, inclusive of renewal options, that will extend beyond the expiration of the Delivery Window, (iii) subject to a lease to another tenant, but the lease term therefor (inclusive of unexpired renewal options, whether or not such renewal options are in fact subsequently exercised) is scheduled to expire before the expiration of the Delivery Window, and (iv) contiguous to another full floor of the Building that would, but for this clause (iv), be Available for Lease pursuant to the foregoing provisions of this Section 1.6.2, unless Landlord, in its sole discretion, lists all or any such contiguous full floors of the Building as Available for Lease in Landlord's Expansion Designation Notice (i.e., Landlord shall not be obligated to break up contiguous full floors in the Building by designating in Landlord's Expansion Designation Notice one or more of such contiguous full floors as available Second Expansion Space, but in any event at least one (1) full floor must be available as Second Expansion Space).
1.6.3     Delivery of Expansion Space . If Tenant timely and properly exercises the first Expansion Option with respect to the 28 th Floor Expansion Space, subject to delays caused by (i) Force Majeure events and/or (ii) the unauthorized holdover by the existing tenant of a portion of the 28 th Floor Expansion Space beyond the expiration of the lease term of such existing tenant's lease, Landlord shall use commercially reasonable efforts to deliver the 28 th Floor Expansion Space to Tenant in the Delivery Condition therefor (as provided in the Tenant Work Letter) on August 1, 2009. If Tenant timely and properly exercises the second Expansion Option with respect to the Second Expansion Space, Landlord shall deliver such Second

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UNION BANK PLAZA
[Union Bank Lease]


Expansion Space to Tenant in the applicable condition required under Section 1.5.7 above at any time within the "Delivery Window", which for purposes hereof shall mean the period commencing on December 1, 2012 and ending on November 30, 2013.
1.6.4     Expansion Space Lease Terms . The lease term for the 28 th Floor Expansion Space shall commence upon the CD Date for the 28 th Floor Expansion Space (as determined pursuant to the Tenant Work Letter) and expire coterminously with the Lease Term (as the same may be extended pursuant to Section 2.2 below or shortened with respect to certain portions of the Premises pursuant to Section 2.4 below); provided, however, that the Delivery Date for the 28 th Floor Expansion Space shall not actually occur until Tenant has received at least fourteen (14) days' prior notice from Landlord that the 28 th Floor Expansion Space will be delivered to Tenant in the Delivery Condition for the 28 th Floor Expansion Space (as set forth in the Tenant Work Letter). The lease term for the Second Expansion Space shall commence on the day after the expiration of the Construction Period (as may be extended pursuant to Section 1.5.8 above) for the Second Expansion Space and expire coterminously with the Lease Term (as the same may be extended pursuant to Section 2.2 below or shortened with respect to certain portions of the Premises pursuant to Section 2.4 below).
1.6.5     Expansion Space Economic Terms . The Base Rent payable by Tenant and the tenant improvement allowance to be provided by Landlord for the applicable Expansion Space shall be as set forth in Section 1.5 above.
1.6.6     Same Terms . If Tenant timely exercises any Expansion Option as set forth herein, Tenant shall lease the applicable Expansion Space which is the subject of such Expansion Option upon all of the same terms and conditions as set forth in this Lease, as modified in this Section 1.6.
1.6.7     Parking . Commencing on the applicable lease commencement date for each applicable Expansion Space, Tenant's parking rights shall be adjusted pursuant to Article 28 below.
1.6.8     Amendment to Lease . If Tenant timely exercises any Expansion Option as set forth herein, Landlord and Tenant shall within fifteen (15) days after the determination of the Initial Period First Offer/Expansion Rent or Extended Term First Offer/Expansion Rent, as the case may be, execute an amendment adding the applicable Expansion Space to the Premises upon the terms and conditions set forth in this Section 1.6. All provisions of this Lease which vary based upon the rentable square footage of the Premises shall be adjusted to reflect the addition of the applicable Expansion Space to the Premises.
1.6.9     Expansion Options Personal . Tenant's Expansion Options are personal to the Original Tenant and any Approved Transferee to which Tenant's Expansion Options have been assigned, and may only be exercised by the Original Tenant or such Approved Transferee, as the case may be.
1.6.10     Default by Tenant . At Landlord's option, in addition to any other rights or remedies under this Lease, at law and/or in equity, Tenant shall not have the right to exercise any Expansion Option, as provided in this Section 1.6, so long as Tenant, as the date of the

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UNION BANK PLAZA
[Union Bank Lease]


anticipated exercise of such applicable Expansion Option, is in default under this Lease beyond any applicable notice and cure period.
ARTICLE 2
LEASE TERM
2.1     Initial Term . The terms and provisions of this Lease shall be effective as of the date of this Lease. The term of this Lease (the " Lease Term ") shall be as set forth in Section 7.1 of the Summary, commencing on the date (the " Lease Commencement Date ") set forth in Section 7.4 of the Summary and terminating on January 31, 2022 (the " Lease Expiration Date ") as set forth in Section 7.6 of the Summary, unless this Lease is sooner terminated as hereinafter provided. The " Initial Period " portion of the Lease Term shall be as set forth in Section 7.2 of the Summary, commencing on the Lease Commencement Date and terminating on January 31, 2012, unless this Lease is sooner terminated as hereinafter provided. The " Extended Term " portion of the Lease Term shall be as set forth in Section 7.3 of the Summary, commencing on February 1, 2012 (the " Extended Term Commencement Date ") as set forth in Section 7.5 of the Summary and terminating on the Lease Expiration Date, unless this Lease is sooner terminated or extended as hereinafter provided. For clarification purposes, as used herein, the term " Lease Term " shall mean and refer to the Initial Period and the Extended Term, and the terms and provisions of this Lease shall apply with respect to the entire Lease Term unless otherwise expressly stated in this Lease. For purposes of this Lease, the term " Lease Year " shall mean each consecutive one (1) year period commencing on and after the Lease Commencement Date and each anniversary thereof.
2.2     Option Terms . Provided there is no event of default by Tenant, after any applicable notice and cure period provided for in this Lease, then in existence on either the date of giving the Extension Notice (defined below), or on the commencement date of the relevant Option Term (" Option Term Commencement Date(s) "), Tenant shall have options to renew the Lease Term (" Extension Option(s) ") beyond the Lease Expiration Date for the Renewed Premises (as defined below) for two (2) periods of time (each, an "O ption Term "), with each such Option Term to be either three (3), four (4), five (5), six (6) or seven (7) years (as designated by Tenant in the applicable Extension Notice); provided, however, in the event the initial Lease Term is extended for the first Option Term, in no event shall the second Option Term be for a period of time which, when aggregated with the period of time of the first Option Term, exceeds ten (10) years. Each Extension Option (if any) shall be exercisable by Tenant giving written exercise notice thereof (" Extension Notice(s) ") to Landlord a minimum of fifteen (15) months but not more than twenty-four (24) months prior to the Lease Expiration Date of the Extended Term as to the first Extension Option, or prior to the end of the first Option Term, as to the second Extension Option (as the case may be). Tenant's right to exercise the second Extension Option is dependent and conditioned upon Tenant's timely exercise of the first Extension Option.
2.2.1    If Tenant elects to exercise an Extension Option, such Extension Option must be exercised as to the " Renewed Premises ", which for purposes hereof shall mean either of the following space, as shall be designated by Tenant in Tenant's Extension Notice: (i) the entire Premises leased by Tenant under this Lease as of the date Tenant delivers Tenant's Extension

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UNION BANK PLAZA
[Union Bank Lease]


Notice to Landlord; or (ii) no less than two hundred thousand (200,000) rentable square feet of the Premises (which shall be full floors only, and not partial floors) plus either the entire or none, at Tenant's election, of both the Retail Space and Vault Space (as designated by Tenant in Tenant's Extension Notice). Unless Tenant designates in the applicable Tenant's Extension Notice that the Renewed Premises shall be for less than the entire Premises, the Renewed Premises for such applicable Extension Option shall be for the entire Premises pursuant to clause (i) hereinabove. In the event Tenant designates in the applicable Tenant's Extension Notice that the Renewed Premises shall be for less than the entire Premises, but such designated Renewed Premises does not meet the qualifications set forth in clause (ii) hereinabove, then Landlord shall deliver to Tenant notice (a " Non-Qualification Notice ") (A) stating that such designated Renewed Premises does not meet the qualifications set forth in clause (ii) hereinabove, and (B) identifying the deficiencies in such designation which cause such designated Renewed Premises not to meet the qualifications set forth in clause (ii) hereinabove. Tenant shall have three (3) business days to submit to Landlord either (1) a new Tenant's Extension Notice which (x) is for the entire Premises described in clause (i) hereinabove, or (y) correctly designates the Renewed Premises such that it meets the qualifications set forth in clause (ii) hereinabove, or (2) a notice electing not to exercise the applicable Extension Option. In the event Tenant fails to deliver either of the notices described in clauses (1) and (2) hereinabove, and if Landlord's deficiencies identified in such Non-Qualification Notice are in sum and substance factually correct, Tenant shall be deemed to have elected to exercise its applicable Extension Option for the entire Premises pursuant to clause (i) hereinabove.
2.2.2    The Base Rent payable hereunder for the Renewed Premises during the first Option Term (" First Option Term ") shall be adjusted as of the Option Term Commencement Date of the First Option Term (determined in advance pursuant to Section 2.3 below) to an amount equal to the Fair Market Rental Rate at that time, calculated on a per rentable square foot basis and multiplied by the number of rentable square feet of the Renewed Premises as to which Tenant exercises its first Extension Option. The Base Rent payable hereunder for the Renewed Premises during the second Option Term (" Second Option Term ") shall be adjusted as of the Option Term Commencement Date of the Second Option Term (determined in advance pursuant to Section 2.3 below) to the Fair Market Rental Rate at that time, calculated on a per rentable square foot basis and multiplied by the number of rentable square feet of the Renewed Premises as to which Tenant exercises its second Extension Option. The Fair Market Rental Rate for each Option Term shall be determined in accordance with the provisions and the time line set forth in Section 2.3 below. Notwithstanding the foregoing to the contrary, (i) in no event shall the Base Rent payable by Tenant during any Option Term be less than $23.75 per rentable square foot of the Renewed Space calculated on a "net" basis without regard to a base year or an Annual Direct Expense Allowance (the " Floor Rent "), and (ii) if the Base Rent for any Option Term is the Floor Rent, then the tenant improvement allowance for such Renewed Space for such Option Term (the " Renewed Premises Floor Allowance ") shall be equal to the product of $10.00 per rentable square foot of such Renewed Space multiplied by the Proration Fraction (as defined below); provided, however, with respect to each Full TI Floor (as defined in the Tenant Work Letter) multiplied by the Proration Fraction (as defined below) which is part of such Renewed Premises for which Tenant previously received from Landlord (in the form of cash, a credit against Base Rent and/or for use for another floor or floors of the Premises) a tenant improvement allowance of $10.00 per rentable square foot of such Full TI Floor or less, the tenant improvement allowance to be provided to Tenant for such applicable

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UNION BANK PLAZA
[Union Bank Lease]


Full TI Floor(s) pursuant to this clause (ii) in connection with such Floor Rent shall be equal to the product of $52.50 per rentable square foot of such Full TI F1oor(s) multiplied by the Proration Fraction, but such prorated $52.50 Renewed Premises Floor Allowance shall only be available to Tenant if Tenant (A) fully vacates and delivers such Full TI Floor(s) to Landlord in accordance with the provisions of Section 2.3.1 of the Tenant Work Letter, and (B) meets the minimum build-out requirements for such Full TI Floor(s) as set forth in Section 2.2.1 of the Tenant Work Letter. For purposes hereof, the " Proration Fraction " for each applicable Option Term for which the Floor Rent is applicable, shall mean a fraction, the numerator of which is equal to the number of months of such applicable Option Term, and the denominator of which is one hundred twenty (120).
2.2.3    Tenant shall pay Additional Rent during each of the Option Terms as to which an Extension Option is exercised, in accordance with the provisions of Article 4 of this Lease, subject to the adjustment in the Annual Direct Expense Allowance, if any, determined in connection with the determination of the Fair Market Rental Rate under Section 2.4 (but if the Base Rent for any Option Term is the Floor Rent, there shall be no Annual Direct Expense Allowance for such Option Term and Additional Rent shall be paid by Tenant to Landlord without regard to any base year as provided in Section 2.2.2 above.
2.2.4    Each Extension Option set forth in this Section 2.2 is personal to the Original Tenant and any Approved Transferee to which such Extension Option has been assigned, and may not be assigned, transferred or conveyed to, or exercised by, any other party.
2.3     Fair Market Rental Rate .
2.3. 1     Exclusive Procedure . The Fair Market Rental Rate for the Option Terms shall be determined pursuant to the provisions of this Section 2.3. Tenant and Landlord shall have no further right to appraisal and shall be obligated to accept the Fair Market Rental Rate as determined hereby.
2.3.2     Definition . The phrase " Fair Market Rental Rate " shall mean the fair market value annual rental rate per square foot of rentable area that Landlord has accepted in current transactions from tenants leasing non-encumbered (i.e., space that is not expansion space, must-take space, or other encumbered space), non-sublease, non-equity space comparable to the Renewed Premises, for a comparable period of time (" Comparable Transactions ") in the Building, or if there are not a sufficient number of Comparable Transactions in the Building, what a comparable landlord of another first-class high rise office building in the Los Angeles Central Business District would accept in Comparable Transactions. In any determination of Comparable Transactions, appropriate consideration should be given to annual rental rates per square foot of rentable area, the type of escalation clauses (e.g., whether increases in additional rent are determined on a net or gross basis, and if gross, whether such increases are determined according to a base year or a base dollar amount expense stop), and any market tenant improvement allowance, all taking into account such concessions to which Tenant is entitled in this Lease, length of the lease term, location of premises being leased, the value of any tenant improvements or tenant improvement allowances (which shall be determined after taking into account the value of the existing improvements in such Renewed Premises, with such value to be based on the value of such existing improvements to an average office user (or, with respect to

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UNION BANK PLAZA
[Union Bank Lease]


the Retail Space, an average retail user) with no reference to the fact that the Renewed Premises was built out for use by Tenant, and such other generally applicable conditions of tenancy for such Comparable Transactions. In determining the Fair Market Rental Rate, no consideration shall be given to, or adjustments made for, the existence or non-existence in this Lease or in any Comparable Transactions of any Proposition 13 real property tax increase protections. The intent is that Tenant will obtain the same rent and other economic benefits that Landlord would otherwise give in Comparable Transactions and that Landlord will make, and receive the same economic payments and concessions that Landlord would otherwise make, and receive in Comparable Transactions (excluding, however, any Proposition 13 real property tax protections, which shall, in any event, not be provided to Tenant during any Option Term). If, for example, after applying the criteria set forth above, a Comparable Transaction provides a new tenant with comparable space at Forty-Two Dollars ($42) per square foot of rentable area, with a Ten Dollar ($10) base amount expense stop, four (4) months' free rent, Fifty Dollar ($50) per usable square foot tenant improvement allowance, and certain other generally applicable economic terms, the Fair Market Rental Rate for Tenant shall not be Forty-Two Dollars ($42) per square foot of rentable area only, but shall be the economic equivalent of Forty-Two Dollars ($42) per square foot of rentable area, a Ten Dollar ($ 10) base amount expense stop, four (4) months' free rent, Fifty Dollars ($50) per usable square foot tenant improvement allowance or payment in lieu of such allowance, and such other generally applicable economic terms (other than any Proposition 13 real property tax protections). Construction time shall not be considered in the calculation of the Fair Market Rental Rate since Tenant shall be deemed to be continuously able to occupy the Renewed Premises.
2.3.3     Determination . Landlord shall determine the Fair Market Rental Rate for the Option Terms by using its good faith judgment. Landlord shall provide written notice (" Landlord's Option Rent Notice ") of such amount within twenty (20) days (but in no event later than thirty (30) days) after Tenant provides the notice to Landlord exercising Tenant's Extension Option; provided, however, that Landlord shall not be obligated to provide Landlord's Option Rent Notice with respect to the Fair Market Rental Rate determination for the applicable Extension Term prior to the date which is fifteen (15) months before the applicable Option Term Commencement Date. Within fifteen (15) days (" Tenant's Review Period" ) after Tenant's receipt of Landlord's Option Rent Notice of the new Fair Market Rental Rate, Tenant shall notify Landlord in writing of either Tenant's acceptance of such Fair Market Rental Rate set forth in Landlord's Option Rent Notice or Tenant's objection thereto. If Tenant fails to deliver to Landlord such written notice accepting Landlord's determination of the new Fair Market Rental Rate within such fifteen (15) day period, Tenant shall conclusively be deemed to have objected to such determination. If Tenant does timely object (or is deemed to have objected) to Landlord's determination of the new Fair Market Rental Rate, Landlord and Tenant shall thereafter attempt to agree upon such Fair Market Rental Rate using their best good faith efforts. If Landlord and Tenant fail to reach agreement on the new Fair Market Rental Rate within fifteen (15) days following Tenant's Review Period (" Outside Agreement Date "), then each party shall place in a separate sealed envelope their final proposal as to Fair Market Rental Rate and such determination shall be submitted to arbitration in accordance with the following procedure set forth in Sections 2.3.3.1 through 2.3.3.7 below.
If Landlord fails to timely generate Landlord's Option Rent Notice (which triggers the negotiation period of this Section 2.3.3), then Tenant may commence such negotiations by

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UNION BANK PLAZA
[Union Bank Lease]


providing the initial notice containing Tenant's determination of the Fair Market Rental Rate for the applicable Option Term, in which event Landlord shall have fifteen (15) days (" Landlord's Review Period ") after receipt of Tenant's notice of the new Fair Market Rental Rate within which to accept or reject such Fair Market Rental Rate. If Landlord fails to accept or reject such Fair Market Rental Rate proposed by Tenant by delivering to Tenant written notice of acceptance or rejection within such fifteen (15) day period, then Tenant's proposal shall be deemed rejected, and Landlord and Tenant shall thereafter attempt to agree upon such Fair Market Rental Rate using their best good faith efforts. If Landlord and Tenant fail to reach agreement on the New Fair Market Rental Rate within fifteen (15) days following Landlord's Review Period (which shall be, in such event, the "Outside Agreement Date" in lieu of the above definition of such date), then each party shall place in a separate sealed envelope their final proposal as to the Fair Market Rental Rate and such determination shall be submitted to arbitration in accordance with the following procedure.
2.3.3.1 Landlord and Tenant shall meet with each other within five (5) business days after the Outside Agreement Date and exchange the sealed envelopes and then open such envelopes in each other's presence. If Landlord and Tenant do not mutually agree upon the Fair Market Rental Rate within one (1) business day after the exchange and opening of such envelopes, then, Tenant, by notice (the " Rescission Notice ") delivered to Landlord within five (5) business days after the exchange of sealed envelopes, may elect to rescind the exercise of its Extension Option (in which event, such Extension Option, and any succeeding Extension Option, if any, shall be null and void and of no further force or effect); provided, however, if after opening such envelopes in each other's presence, it is discovered that each party's final proposal as to the Fair Market Rental Rate are within three percent (3%) of one another, then Tenant shall not have the right to so rescind the exercise of its Extension Option, and in such event, the Fair Market Rental Rate shall be equal to the average of each party's final proposal, the determination of the Fair Market Rental Rate shall not be subject to the arbitration provisions of this Section 2.3.3, and the provisions of Sections 2.3.3.2 through 2.3.3.6 below shall not be applicable.
2.3.3.2 If Tenant does not timely deliver the Rescission Notice to Landlord pursuant to Section 2.3.3.1 above, then within fifteen (15) business days after the exchange and opening of such envelopes, Landlord and Tenant shall agree upon and jointly appoint a single arbitrator who shall by profession be a real estate broker who shall have been active over the ten (10) year period ending on the date of such appointment in the leasing of commercial high-rise properties in the vicinity of the Building. Neither Landlord nor Tenant shall consult with such broker as to his or her opinion as to Fair Market Rental Rate prior to the appointment. The determination of the arbitrator shall be limited solely to the issue of whether Landlord's or Tenant's submitted Fair Market Rental Rate for the Renewed Premises is the closest to the actual Fair Market Rental Rate for the Renewed Premises as determined by the arbitrator, taking into account the requirements of this Section 2.3. Such arbitrator may hold such hearings and require such briefs as the arbitrator, in his or her sole discretion, determines is necessary, In addition, Landlord or Tenant may submit to the arbitrator, with a copy to the other party, within five (5) business days after the appointment of the arbitrator, any market data and additional information that such party deems relevant to the determination of the Fair Market Rental Rate (" FMRR Data ") and the other party may submit a reply in writing within five (5) business days after receipt of such FMRR Data.

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UNION BANK PLAZA
[Union Bank Lease]


2.3.3.3 The arbitrator shall, within thirty (30) days after his or her appointment, reach a decision as to whether the parties shall use Landlord's or Tenant's submitted Fair Market Rental Rate, and shall notify Landlord and Tenant of such determination.
2.3.3.4 The decision of the arbitrator shall be final and binding upon Landlord and Tenant.
2.3.3.5 If Landlord and Tenant fail to agree timely upon and appoint the single arbitrator, then upon a petition by either party, the appointment of the arbitrator shall be made by the Presiding Judge of the Los Angeles Superior Court, or, if he or she refuses to act, by any judge having jurisdiction over the parties.
2.3.3.6 The cost of the arbitrator shall be paid by Landlord and Tenant equally.
2.3.3.7 In no event shall the Base Rent for the applicable Option Term selected by the arbitrator pursuant to this Section 2.3.3 (or determined as a result of averaging each party's final proposal of the Fair Market Rental Rate pursuant to Section 2.3.3.1 above if such proposals are within three percent (3%) of one another) be less than the Floor Rent (and if the Base Rent equals the Floor Rent, then the tenant improvement allowance to be provided to Tenant for the applicable Option Term shall be the Renewed Premises Floor Allowance as provided in Section 2.2.2 above).
2.4     Tenant's Partial Early Termination Option . Notwithstanding anything to the contrary contained in this Lease, Tenant shall have the ongoing option (" Termination Option ") to terminate and cancel this Lease with respect to the " Terminated Space ", which for purposes hereof shall mean a portion of the Premises comprising either one (1) or two (2) full floors as designated by Tenant in Tenant's Termination Notice (as defined below) (but in no event more than two (2) full floors at any one time or in the aggregate (and for this purpose the termination of the Last Vacated Floor pursuant to Section 2.3.3 of the Tenant Work Letter shall not count as one of the two (2) floors) and in no event as to any partial floors). Any such termination shall be effective during the period from February 1, 2012 through July 31, 2017 (the " Termination Period "), with the actual date of termination of the applicable full floor space(s) to be designated by Tenant in its applicable Termination Notice (as provided herein below) and referred to herein as the " Termination Date ". Notwithstanding the foregoing, if Tenant exercises its Termination Option(s) with respect to two (2) full floors and if such full floors are both located below the tenth (10th) floor of the Building, then such full floors must be contiguous to each other regardless of whether or not Tenant exercises its Termination Option as to both such full floors at the same time (i.e., if Tenant exercises its Termination Option with respect to one (1) full floor that is below the tenth (10th) floor of the Building, then Tenant shall not have the right to exercise that particular Termination Option or a subsequent Termination Option with respect to another full floor space located below the tenth (lath) floor of the Building unless such space is contiguous to the space concurrently or previously terminated by Tenant pursuant to this Section 2.4). To exercise any such Termination Option, Tenant must deliver to Landlord: (i) irrevocable written notice of Tenant's exercise of such Termination Option (the " Termination Notice "), which Termination Notice shall designate the applicable Termination Date selected by Tenant, which Termination Date (A) shall be no sooner than the date which is fifteen (15)

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UNION BANK PLAZA
[Union Bank Lease]


months after Landlord's receipt of such Termination Notice and (B) must occur within the Termination Period; and (ii) the Termination Consideration (as defined below) prior to the applicable Termination Date. As used herein, the " Termination Consideration " shall mean an amount equal to the sum of: (1) the unamortized portion of the brokerage commissions paid by Landlord with respect to the original leasing of the Terminated Space; plus (2) the unamortized portion of the tenant improvement allowance previously provided by Landlord for the Terminated Space pursuant to the provisions of this Lease. The items set forth in clauses (1) and (2) hereinabove shall be amortized on a straight-line basis over the " Amortization Period " (which for purposes hereof shall mean the period from and after the commencement date of that portion of the lease term for such Terminated Space which occurs during the Extended Term through and including the scheduled expiration date of the Extended Term), together with interest at an interest rate equal to the "Prime Rate" or "Reference Rate" announced from time to time by Union Bank of California, N.A. (or such reasonable comparable national banking institution as is selected by Landlord in the event Union Bank of California, N.A. ceases to publish a Prime Rate or Reference Rate), plus one-quarter percent (0.25%) (the " Termination Option Interest Rate "), and the unamortized portions thereof shall be determined based upon the unexpired portion of such Amortization Period as of the applicable Termination Date had this Lease not been so terminated pursuant to this Section 2.4. If Tenant properly and timely exercises the applicable Termination Option in accordance with the provisions set forth in this Section 2.4, this Lease, as it pertains to the applicable Terminated Space which is the subject of such Termination Option, shall expire at midnight on the Termination Date, and Tenant shall be required to surrender such Terminated Space to Landlord on or prior to such Termination Date in accordance with the applicable surrender provisions of this Lease. Notwithstanding the foregoing provisions of this Section 2.4 to the contrary, at Landlord's option, in addition to any and all remedies available to Landlord under this Lease, at law and/or in equity, Tenant shall not have the right to exercise such applicable Termination Option, as provided hereinabove, if, as of the date of the attempted exercise of such Termination Option, Tenant is in default under this Lease beyond any applicable notice and cure period.
2.5     Tenant's Storage Space Termination Option . Notwithstanding anything to the contrary contained in this Lease, Tenant shall have the option to terminate and cancel this Lease with respect to the "Terminated Storage Space" (as defined below) at any time during the Extended Term (as may be extended pursuant to Section 2.2 above), in a timely manner in accordance with the following provisions of this Section 2.5. For purposes hereof, the " Terminated Storage Space " shall mean any or all of the individual suites comprising the Storage Space (i.e., Level B-1, B-2 and/or the approximately 2,899 rentable square foot portion of the Storage Space located on the thirty-ninth (39 th ) floor of the Building) as designated by Tenant in Tenant's Storage Space Termination Notice (as defined below), but may not include only a portion of any such individual suite(s). To exercise such termination option, Tenant must deliver to Landlord written notice of Tenant's exercise of such option (each, a " Storage Space Termination Notice ") specifying the Terminated Storage Space to be terminated and the date upon which Tenant desires to so terminate this Lease with respect to such designated Terminated Storage Space (each, a " Storage Space Termination Date "), which Storage Space Termination Date must be at least thirty (30) days after the date such Storage Space Termination Notice is received by Landlord (but shall in all events be on or after the Extended Term Commencement Date). If Tenant properly and timely exercises its termination option(s) in this Section 2.5: (i) this Lease with respect to such applicable Terminated Storage Space shall terminate at

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[Union Bank Lease]


midnight on the Storage Space Termination Date so specified by Tenant in the Storage Space Termination Notice for such Terminated Storage Space, and Tenant shall be required to surrender such Terminated Storage Space to Landlord on or prior to such applicable Storage Space Termination Date in accordance with the applicable surrender provisions of this Lease; and (ii) if at any time after such applicable Storage Space Termination Date, such Terminated Storage Space is or becomes available for lease to third parties, as reasonably determined by Landlord, then during such period as such previously Terminated Storage Space is so available for lease and has not been leased by Tenant or to any other party or become the subject of an executed letter of intent for lease by Landlord to any other party, then Tenant shall have the right to notify Landlord in writing of Tenant's desire to lease such available Terminated Storage Space, in which event Tenant shall lease such available Terminated Storage Space at the then prevailing rate charged by Landlord for storage space in the Building (notwithstanding the Base Rent rate set forth in Section 8.2(b) of the Summary) for the entire then-remaining portion of the Lease Term (as may be extended pursuant to Section 2.2 above), without any further termination option therefor or at Tenant's option, on a month-to-month basis terminable by either party upon thirty (30) days' prior notice.
ARTICLE 3
BASE RENT
Tenant shall pay, without notice or demand, to Landlord or Landlord's agent at the management office of the Building, or at such other place as Landlord may from time to time designate in writing, in currency or a check for currency or by wire transfer, in each event consisting of United States currency, which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent (" Base Rent ") as set forth in Section 8 of the Summary, payable in equal monthly installments as set forth in Section 8 of the Summary in advance commencing on the Lease Commencement Date and continuing on or before the last day of each and every calendar month thereafter during the Lease Term (as may be extended), without any set off or deduction whatsoever (except as expressly provided in this Lease).
ARTICLE 4
ADDITIONAL RENT
4.1     Additional Rent . During the Initial Period, in addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay as additional rent "Tenant's Share" of the annual "Direct Expenses," as those terms are defined in Sections 4.2.8 and 4.2.3 of this Lease, respectively, which are in excess of Tenant's Share of the "Annual Direct Expense Allowance," as that term is defined in Section 4.2.1 of this Lease, applicable to the Initial Period (as set forth in Section 9.1(a) of the Summary). During the Extended Term, in addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay as Additional Rent (as defined below) Tenant's Share of the annual Direct Expenses which are in excess of Tenant's Share of the Annual Direct Expense Allowance applicable to the Extended Term (as set forth in Section 9.1(b) of the Summary). Such additional rent, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, shall be hereinafter collectively referred to as the " Additional Rent ." The Base Rent and Additional Rent are herein

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[Union Bank Lease]


collectively referred to as the " Rent ." Except as otherwise expressly provided in this Lease or the Tenant Work Letter to the contrary, if Base Rent is abated or free Base Rent is granted by Landlord during the Lease Term, no such abatement or granting of free Base Rent shall alter or modify Tenant's obligation to pay Additional Rent pursuant to this Article 4. Without limitation on other obligations of Tenant or Landlord which shall survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 or of Landlord to refund any overcharges shall survive the expiration of the Lease Term, to the extent same is attributable to the time period prior to the Lease Term. If Tenant disputes that an amount is due and owing by it pursuant to this Lease, Tenant shall have the right, without waiving any rights held by it at law or in equity, to pay any such amount under protest and thereafter to seek recovery of all or any part thereof from Landlord.
4.2     Definitions . As used in this Article 4, the following terms shall have the meanings hereinafter set forth:
4.2.1    " Annual Direct Expense Allowance " during (i) the Initial Period shall be the applicable amount set forth in Section 9.1(a) of the Summary, and (ii) the Extended Term shall be the applicable amount set forth in Section 9.1(b) of the Summary. The Annual Direct Expense Allowance for the 20 th Floor Space shall be determined in accordance with Section 1.4.3 above. The Annual Direct Expense Allowance for any First Offer Space or Expansion Space leased pursuant to Sections 1.5 and 1.6 above, respectively, shall be determined in accordance with Sections 1.5 and 1.6 above, respectively.
4.2.2    " Calendar Year " shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires.
4.2.3    " Direct Expenses " shall mean "Operating Expenses" and "Tax Expenses."
4.2.4    " Expense Year " shall mean each Calendar Year, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive-month period, and, in the event of any such change, Tenant's Share of Direct Expenses then in effect shall be equitably adjusted for any Expense Year involved in any such change.
4.2.5    " Operating Expenses " shall mean all expenses, costs and amounts of every kind and nature which Landlord shall pay during, and which are properly allocated to, any Expense Year because of, or in connection with, the management, maintenance, repair, replacement, restoration or operation of the Real Property (including the Building Parking Area) including, without limitation, any amounts paid for: (i) the cost of supplying all utilities, the cost of operating, maintaining, repairing and managing the utility systems, mechanical systems, sanitary and storm drainage systems, and any escalator and/or elevator systems, and the cost of supplies and equipment and maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of reasonable and good faith contests of the validity or applicability of any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with the implementation and operation of a governmentally mandated transportation management system program or similar program; (iii) the cost of insurance carried by Landlord, in such amounts and with such deductibles as

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UNION BANK PLAZA
[Union Bank Lease]


Landlord may reasonably determine or as may be required by any mortgagees or the lessor of any underlying or ground lease affecting the Real Property and/or the Building to the extent such insurance coverage is not greater (nor the deductibles less) than those customarily carried by the landlords of Comparable Buildings (except as required to be carried by Landlord under Section 10.2 of this Lease); (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Building and Real Property; (v) the cost of parking area repair, restoration, and maintenance, including, but not limited to, resurfacing, repainting, restriping, and cleaning; (vi) fees, charges and other costs, including consulting fees, legal fees and accounting fees (excluding accounting fees for audits of the Direct Expenses more frequently than on an annual basis), of all contractors engaged by Landlord or otherwise reasonably incurred by Landlord in connection with the management, operation, maintenance and repair of the Building and Real Property; (vii) any equipment rental agreements or management agreements (including the cost of any management fee paid by or to Landlord and the fair rental value of any office space actually used for management purposes to the extent the size of such office space docs not exceed that customarily utilized by other landlords of Comparable Buildings in connection with the management of such buildings); (viii) wages, salaries and other compensation and benefits of all persons engaged in the operation, management, maintenance or security of the Building and Real Property (but not including any persons holding a position above the level of Building manager), and employer's social security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits; provided, that if any employees of Landlord provide services for more than one building of Landlord, then a prorated portion of such employees' wages, benefits and taxes shall be included in Operating Expenses based on the portion of their working time devoted to the Building, and provided further, that no portion of any employee's wages, benefits, or taxes allocable to time spent on the development or marketing of the Building shall be included in Operating Expenses; (ix) payments under any easement, license, operating agreement, declaration, restrictive covenant, underlying or ground lease (excluding rent), or instrument pertaining to the sharing of costs by the Building or Real Property; (x) operation, repair, maintenance and, to the extent reasonably necessary, replacement of all " Systems and Equipment ," as that term is defined in Section 4.2.6 of this Lease, and components thereof; provided that if any such cost is a capital expenditure, such cost shall be amortized on a straight line basis (including interest on the unamortized cost) over its reasonably anticipated useful life, even if such life extends beyond the Lease Term; (xi) the cost of janitorial service (provided, however, Operating Expenses shall not include the cost of janitorial services provided to the Premises or the premises of other tenants of the Real Property during the period, if any, that such janitorial services with respect to the Premises arc directly provided and paid for by Tenant pursuant to Section 6.1.4 below), alarm and security service, window cleaning, trash removal, replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and other common or public areas or facilities, maintenance and replacement of curbs and walkways, and repair to roofs; (xii) amortization (including interest on the unamortized cost) of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Building and Real Property, with such amortization to be on a straight line basis over the reasonably anticipated useful life of the applicable item, even if such life extends beyond the Lease Term; and (xiii) the cost of any capital improvements or other costs which are (I) reasonably intended and reasonably expected to serve as a labor-saving device or to effect other economies in the operation or maintenance of the Building or Real Property, to the

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[Union Bank Lease]


extent of cost savings reasonably anticipated by Landlord, or (II) made to the Building or Real Property after February 1, 2002 that are required under any governmental law or regulation, except for capital improvements or costs to remedy a condition existing as of January 1, 1992 (" Applicable Date ") which a federal, state or municipal governmental authority, if it had knowledge of such condition as of the Applicable Date, would have then required to be remedied pursuant to governmental laws or regulations in their form existing as of the Applicable Date; provided, however, that if such cost is a capital expenditure, such cost shall be amortized on a straight line basis (including interest on the unamortized cost) over its reasonably anticipated useful life, even if such life extends beyond the Lease Term. If Landlord is not furnishing any particular work or service (the cost of which, if performed by Landlord, would be included in Operating Expenses) to a tenant who has undertaken to perform such work or service in lieu of the performance thereof by Landlord, Operating Expenses shall be deemed to be increased by an amount equal to the additional Operating Expenses which would reasonably have been incurred during such period by Landlord if it had at its own expense furnished such work or service to such tenant. If the Building is not at least ninety-five percent (95%) occupied with all tenants and occupants paying full rent (as opposed to free rent, half rent, partial rent, and the like) during all or a portion of any Expense Year during the Initial Period (including the calendar year 2002 and any other calendar year during the Initial Period which is used as the base year for calculating the Annual Direct Expense Allowance for the 20th Floor Space, any Expansion Space and/or any First Offer Space, if applicable), Landlord shall make an appropriate adjustment to the variable components of Operating Expenses for such year or applicable portion thereof, employing sound accounting and management principles, to determine reasonably the amount of Operating Expenses that would have been paid had the Building been at least ninety-five percent (95%) occupied (with all tenants and occupants paying full rent, as opposed to free rent, half rent, partial rent, and the like); and the amount so reasonably determined shall be deemed to have been the amount of Operating Expenses for such year, or applicable portion thereof. If the Building is not at least one hundred percent (100%) occupied with all tenants and occupants paying full rent (as opposed to free rent, half rent, partial rent, and the like) during all or a portion of any Expense Year during the Extended Term or any Option Term (including the calendar year 2012 and any other calendar year during the Extended Term or any Option Term which is used as the base year for calculating the Annual Direct Expense Allowance for any Expansion Space and/or any First Offer Space, if applicable), Landlord shall make an appropriate adjustment to the variable components of Operating Expenses for such year or applicable portion thereof, employing sound accounting and management principles, to determine reasonably the amount of Operating Expenses that would have been paid had the Building been at least one hundred percent (100%) occupied (with all tenants and occupants paying full rent, as opposed to free rent, half rent, partial rent, and the like); and the amount so reasonably determined shall be deemed to have been the amount of Operating Expenses for such year, or applicable portion thereof. Landlord (x) shall not collect or be entitled to collect from Tenant an amount in excess of Tenant's Share of one hundred percent (100%) of the Operating Expenses, and (y) shall reduce the amount of the Operating Expenses by any refund or discount received by Landlord in connection with any expenses previously included in Operating Expenses.
4.2.5.1 Exclusions from Operating Expenses . Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include:

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UNION BANK PLAZA
[Union Bank Lease]


(i)    bad debt expenses and interest, principal, points and fees on debts (except in connection with the financing of items which may be included in Operating Expenses) or on any mortgage or mortgages or any other debt instrument encumbering the Building and/or the Real Property (including the land on which the Building and/or the Real Property is situated) or any amortization thereon;
(ii)    marketing costs, including leasing commissions, attorneys' fees in connection with the negotiation and preparation of letters, deal memos, letters of intent, leases, subleases and/or assignments, space planning costs, and other costs and expenses incurred in connection with any lease, sublease and/or assignment negotiations and transactions with present or prospective tenants or other occupants of the Building, including attorneys' fees and other costs and expenditures incurred in connection with disputes with present or prospective tenants or other occupants of the Building;
(iii)    real estate brokers' leasing commissions or any other tenant concessions;
(iv)    costs, including permit, license and inspection costs, incurred with respect to the installation of other tenants' or occupants' improvements made for tenants or other occupants in the Building or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants in the Building;
(v)    the cost of providing any service directly to and payable by any tenant; provided, however, Landlord shall directly charge, and enforce its right to collect such direct charges from, tenants for any above-standard services in a nondiscriminatory manner:
(vi)    any costs expressly excluded from Operating Expenses elsewhere in this Lease;
(vii)    costs of any items (including, but not limited to, costs incurred by Landlord for the repair or damage to the Building or Real Property) to the extent Landlord receives reimbursement from insurance proceeds or would have received reimbursement from insurance proceeds if Landlord had carried the insurance required to be carried by Landlord hereunder (such proceeds to be deducted from Operating Expenses in the year in which they are received or would have been received, as the case may be) or from a third party, such proceeds to be credited to Operating Expenses in the year in which received, except that any deductible amount under any insurance policy (to the extent such deductible is consistent with Landlord's insurance obligations set forth in Section 10.2 below) shall be included within Operating Expenses; provided, however, that any earthquake repair costs (regardless of whether such costs are covered by insurance), and/or deductible amounts for earthquake and/or terrorism insurance policies carried by Landlord, if any, included in Operating Expenses only to the extent they do not exceed five percent (5%) of the total Operating Expenses (including the costs of any repair or replacement of any items damaged as a result of such earthquake or terrorist act, as the case may be) for any single Expense Year, and to the extent such costs exceed five percent (5%) of the total Operating Expenses for any single Expense Year, such excess costs shall be included in Operating Expenses in the immediately next subsequent Expense Year(s) (but in no event shall such included excess costs exceed five percent

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UNION BANK PLAZA
[Union Bank Lease]


(5%) of the total Operating Expenses for any single subsequent Expense Year(s)). To the extent any such earthquake repair costs (regardless of whether such costs are covered by insurance), and/or deductible amounts pertain to costs of repairs or improvements, which costs are included in Operating Expenses pursuant to the foregoing and are capital improvements under generally accepted accounting principles, such costs shall be amortized on a straight line basis (including interest on the unamortized cost) over the reasonably anticipated useful life of such capital item (except in no event shall such anticipated useful life for purposes of this clause (vii) be less than five (5) years or greater than thirty-five (35) years) and shall be subject to the cap of not collectively exceeding five percent (5%) of the total Operating Expenses for any single Expense Year;
(viii)    costs of capital improvements, capital repairs or capital replacements, except those specifically permitted (and subject to the conditions contained) in clauses (x), (xii) and (xiii) of Section 4.2.5 above or clauses (vii) or (x) of this Section 4.2.5.1;
(ix)    rentals and other related expenses for leasing a heating, ventilation and air conditioning system, elevators, or other items (except when needed in connection with normal repairs and maintenance of the Building and/or Real Property) which if purchased, rather than rented, would constitute a capital improvement not included in Operating Expenses pursuant to this Lease;
(x)    depreciation, amortization and interest payments, except (A) in connection with capital improvements, capital repairs or capital replacements specifically permitted in clauses (x), (xii) or (xiii) of Section 4.2.5 above or clause (vii) of this Section 4.2.5.1, or (B) on materials, tools, supplies and vendor-type equipment purchased by Landlord to enable Landlord to supply services for which Landlord might otherwise contract with a third party, provided such depreciation, amortization and interest payments would otherwise have been included in the charge for such third party's services, all as determined in accordance with generally accepted accounting principles, consistently applied; and provided that in any case where depreciation or amortization is permitted or required pursuant to the foregoing, the item shall be amortized on a straight line basis over its reasonably anticipated useful life, even if such life extends beyond the Lease Term;
(xi)    costs incurred by Landlord for alterations (including structural additions), repairs, equipment and tools which are of a capital nature and/or which are considered capital improvements or replacements under generally accepted accounting principles, consistently applied, except as specifically included in Operating Expenses pursuant to clauses (x), (iii), (xiii) of Section 4.2.5 above or clauses (vii) or (x) of this Section 4.2.5.1;
(xii)    expenses in connection with services, materials or other benefits (A) for which Tenant or any other tenants or occupants of the Building are charged directly, or (B) which are not offered or made available to Tenant, but are offered and made available to other tenants of the Building without charge;
(xiii)    costs incurred by Landlord due to the violation by Landlord or any tenant of the terms and conditions of any lease of space in the Building;

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UNION BANK PLAZA
[Union Bank Lease]


(xiv)    overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in the Building and/or Real Property to the extent the same exceeds the costs of such goods and/or services provided by unaffiliated third parties on a competitive basis;
(xv)    Landlord's general corporate overhead and general and administrative expenses;
(xvi)    advertising and promotional expenditures, and costs of signs in or on the Building or Real Property identifying the owner of the Building or other tenants' signs;
(xvii)    electric power costs or other utility costs for which any tenant directly contracts with the local public service company;
(xviii)    tax penalties incurred as a result of Landlord's negligence, inability or unwillingness to make payments or file returns when due;
(xix)    costs arising from Landlord's charitable or political contributions or the payment of Builders and Owners Management Association dues;
(xx)    costs of installing, maintaining and operating any specialty service operated by Landlord including without limitation, any luncheon club, communications facility, observatory or athletic facility, and/or the repair thereof;
(xxi)    the amounts of the management fee paid or charged by Landlord in connection with the management of the Building and Real Property (including the common areas of the Building and Real Property) to the extent such management fee is in excess of the lesser of (A) management fees customarily paid or charged by landlords of other first-class office buildings in the Downtown Los Angeles, California area, or (B) three percent (3%) of gross revenues of the Building and Real Property, as such gross revenues are customarily and reasonably calculated by landlords of such first-class office buildings (including the gross-up of such revenues, with such gross-up to be determined assuming all tenants and occupants paying full rent, as opposed to free rent, half rent, partial rent, and the like); provided, however, during the Extended Term only (and not during the Initial Period), if the percentage rate used for calculating such management fee (on a percentage of gross revenues basis) included in Operating Expenses for any Expense Year after the calendar year 2012 exceeds the applicable percentage rate used for calculating such management fee (on a percentage of gross revenues basis) included in the Annual Direct Expense Allowance, then for each such Expense Year during which such higher percentage rate is so used, such percentage rate for the calendar year 2012 (for purposes of calculating the Annual Direct Expense Allowance) shall be increased to equal the same percentage rate for such applicable Expense Year;
(xxii)    costs necessitated by or resulting from the negligence or willful misconduct of Landlord, or any of its agents, employees or independent contractors including, but not limited to, tax penalties incurred as a result of Landlord's negligence, inability or unwillingness to make payments or file returns when due;

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UNION BANK PLAZA
[Union Bank Lease]


(xxiii)    any ground lease rental;
(xxiv)    costs associated with the operation of the business of the person or entity which constitutes Landlord, as the same are distinguished from the costs of operation and management of the Building and Real Property;
(xxv)    costs of any items to the extent Landlord receives reimbursement through warranties or service contracts (such proceeds to be credited to Operating Expenses in the year in which received);
(xxvi)    Landlord's travel expenses;
(xxvii) for Expenses Years occurring during the Initial Period, only, the cost of providing during non-Business Hours (as defined in Section 6.1.1 below) to any tenant in the Building any heating, ventilation and air-conditioning (" HVAC ") or other utilities or services (except janitorial) which are normally provided to Tenant only during Business Hours;
(xxviii)    for Expense Years occurring during the Extended Term, the costs of providing non-Business Hours HVAC to tenants of the Building (including Tenant) in an amount equal to the sum of (A) the amount actually paid by Tenant to Landlord for after-hours HVAC usage, plus (B) the amount that would have been paid by other tenants in the Building for such other tenants' non-Business Hours HVAC usage if such other tenants were charged the hourly rates applicable to Tenant as set forth in Section 6.2 below (regardless of whether such other tenants were charged higher or lower rates or not charged at all for such non-Business Hours HVAC usage and regardless of whether such tenants were billed for such non-Business Hours HVAC and then failed to pay for such non-Business Hours HVAC);
(xxix)    the following costs and expenses attributable to the Parking Areas: (A) all costs and expenses attributable to the Off-Site Parking Area; (B) the wages and salaries of any clerks, attendants or other personnel engaged in the operation of the Building Parking Area and any fee or compensation paid to any operator of the Building Parking Area; (C) the cost and expense of any daily and weekly cleaning and maintenance of the Building Parking Area; and (D) the extra cost and expense attributable to any special insurance coverage specifically relating to the operation of the Building Parking Area, as opposed to the general operation of the Building and Real Property;
(xxx)    for Expense Years occurring during the Initial Period, only, the cost and expense of earthquake insurance coverage, except to the extent the amount which such coverage would have cost during the calendar year 2002 is included in the Annual Direct Expense Allowance applicable to the Initial Period; and
(xxxi)    the costs described III clauses (1) through (4) of Sections 29.29.2 of this Lease.
4.2.5.2 Refunds . Operating Expenses shall be reduced by the amounts of any cash reimbursements, refunds or credits received by Landlord (net of the reasonable costs and expenses of obtaining the same, if any) with respect to any item of cost that is included in

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[Union Bank Lease]


Operating Expenses other than reimbursements by other tenants in the nature of Operating Expenses similar to those required of Tenant. Landlord shall make payment for goods, utilities and services in a timely manner to obtain the maximum possible discount consistent with the customary practices of the landlords of the Comparable Buildings. In the event any such reimbursement, refund or credit is received by Landlord in a later calendar year, it shall be applied against the Operating Expenses for such later calendar year. No item of expense shall be included in or deducted from Operating Expenses more than once under any circumstance. Landlord shall use its best efforts in good faith to effect an equitable proration of bills for services rendered to the Real Property and to any other property owned by Landlord.
4.2.5.3 Special Provisions for Extended Term . The following provisions of this Section 4.2.5.3 shall apply only during the Extended Term (and not during the Initial Period):
4.2.5.3.1    Notwithstanding anything in this Article 4 to the contrary, Tenant shall not be required to pay to Landlord the component of Tenant's Share of increases in Direct Expenses comprised of insurance premiums and real property taxes (the " Insurance/Real Estate Tax Component ") on an estimated basis in accordance with the other terms and provisions of this Article 4, and instead Tenant shall pay the Insurance/Real Estate Tax Component to Landlord upon the later to occur of (i) the date which is fourteen (14) days prior to the date that the installment of the applicable insurance premiums and/or real property taxes, as the ease may be, is due and payable by Landlord, and (ii) the date which is ten (10) days after Landlord delivers to Tenant a bill therefor. By way of example, only, (A) real estate taxes are paid by Landlord to the Los Angeles County Assessor in two (2) annual installments and such installments become delinquent on December 10 and April 10, respectively, for each real estate tax year, and (B) with respect to the installment delinquent as of April 10, Tenant shall pay to Landlord Tenant's share of the increase in the real estate tax portion of the Insurance/Real Estate Tax Component on or prior to the later of (1) March 28 ( i.e. , fourteen (14) days prior to the date that such installment is delinquent), and (2) the date which is ten (10) days after Landlord delivers to Tenant a bill therefor. To the extent Landlord incurs costs in order to administer the special billing of the Insurance/Real Estate Tax Component as set forth hereinabove, Tenant shall reimburse Landlord for such costs within thirty (30) days after receipt of an invoice therefor.
4.2.5.3.2    Landlord hereby agrees that the east of any new type or increased amount of insurance coverage, including earthquake insurance coverage (or increased limits of insurance or decrease in the amount of deductibles), which is obtained or effected by Landlord during any Expense Year after the calendar year 2012 (but is not obtained or effected during the calendar year 2012) shall be added to the Annual Direct Expense Allowance applicable to the Extended Term (but at the rate which would have been in effect during the calendar year 2012 or the rate in effect during such subsequent Expense Year, whichever is lower) prior to the calculation of Tenant's Share of Direct Expenses for each such Expense Year in which such change in insurance is obtained or effected. In the event that any of Landlord's insurance premiums applicable to the Building shall decrease in any Expense Year subsequent to the calendar year 2012 due to any decrease in the amount or type of coverage or increase in deductibles, the Annual Direct Expense Allowance, shall, commencing the year of such

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UNION BANK PLAZA
[Union Bank Lease]


decrease, but only as long as and to the extent such decrease remains in effect, thereafter be reduced by the amount of such decrease in the insurance premiums.
4.2.5.3.3    Landlord further agrees that any costs incurred in any Expense Year within the Extended Term that occurs after the calendar year 2012 because of any added new type of voluntary or discretionary services and/or utilities that are not required by law (or voluntary or discretionary changes to existing services and/or utilities that are not required by law, e.g., telecommunications) which were readily available during the calendar year 2012 and customarily provided by landlords of Comparable Buildings during the calendar year 2012 (but not by Landlord), and not included in the Annual Direct Expense Allowance applicable to the Extended Term, shall be added to and included in the Annual Direct Expense Allowance applicable to the Extended Term for purposes of determining the Excess payable for such Expense Year in which such added new type of voluntary or discretionary services and/or utilities are so provided, as if such services and/or utilities were provided in the calendar year 2012 (but at the rate for such services which would have been in effect during the calendar year 2012 or the rate in effect during such subsequent Expense Year, whichever is lower).
4.2.5.3.4    If, at least thirty (30) days prior to the commencement of any calendar month of the Extended Term that arises after the calendar year 2012, Tenant gives Landlord a factually correct notice (the " Vacation Notice ")" that Tenant shall cease to occupy (but will still lease) one (1) or more full floors of the Premises (in full floor increments) for an entire calendar month (as so quantified, the " Vacated Space "), Landlord shall: (i) determine, in the exercise of its reasonable judgment, the amount of the costs of the electricity, janitorial service and HVAC (collectively, the " Variable Expenses ") included in Operating Expenses each such month as a result of the gross-up provision that is directly attributable to the Vacated Space (such monthly amount shall be referred to herein as the " Excess Variable Expenses "); and (ii) to the extent permitted pursuant to applicable laws and reasonably practicable, cease causing to be provided to such Vacated Space such electricity, janitorial service and HVAC Landlord shall provide to Tenant a credit against Tenant's Share of increases in Direct Expenses otherwise due with respect to the remainder of the Premises during each such month in an amount equal to the Excess Variable Expenses attributable to such Vacated Space during each such month and not in fact paid by Landlord to third party providers of such Variable Expenses, all as reasonably determined by Landlord; provided, however, Tenant shall not be entitled to receive any such credit with respect to any such Vacated Space identified in a Vacation Notice (A) unless and until Tenant has actually vacated the Vacated Space identified in the Vacation Notice for at least two (2) full consecutive calendar months, and (B) Tenant provided Landlord with a factually correct Vacation Notice of Tenant's intention to so vacate such space for each of such two (2) months at least thirty (30) days prior to the commencement of each such month (which Vacation Notice may, at Tenant's option, consist of a separate notice for each such month or one (1) single notice for all such months). If Tenant meets such minimum two (2) month test, such credit shall be applied retroactively to the date Tenant first vacated the Vacated Space as indicated in such factually correct Vacation Notice and shall be applied for each month within such 2-month period, and for each consecutive month thereafter that Tenant continues to vacate such Vacated Space if Tenant timely delivered a Vacation Notice (either separately or as part of any prior Vacation Notice) to Landlord for each such subsequent consecutive month. Nothing in this Section 4.2.5.3.5 shall limit or alter

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[Union Bank Lease]


Landlord's right to gross-up Operating Expenses nor Tenant's obligation to pay Tenant's Share of increases in Direct Expenses as calculated based upon such gross-up.
4.2.6    " Systems and Equipment " shall mean any plant, machinery, transformers, duct work, cable, wires, and other equipment, facilities, and systems designed to supply heat, ventilation, air conditioning and humidity or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or fire/life safety systems or equipment, or any other mechanical, electrical, plumbing, electronic, computer or other systems or equipment which serve the Building and/or Real Property in whole or in part.
4.2.7    " Tax Expenses " shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary, (including, without limitation, real estate taxes, general and special assessments, transit taxes, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Building and/or Real Property), which Landlord shall pay during and are appropriately allocable to any Expense Year (without regard to any different fiscal year used by such governmental or municipal authority) because of or in connection with the ownership, leasing and operation of the Real Property, including the Building Parking Area. For purposes of this Lease, during the Extended Term, Tax Expenses for the calendar year 2012 (hereinafter referred to as the " 2012 Base Year ") (and thus the Annual Direct Expense Allowance for the Extended Term) and each Expense Year after the 2012 Base Year shall be calculated as if the Building were fully occupied, tenant improvements in the Building were fully constructed and the Real Property, the Building and all tenant improvements in the Building were fully assessed for real estate tax purposes, and without excluding any Tax Increase (as defined in Section 4.3.4 below) and without regard to any Proposition 13 protection provided in Section 4.3.4 below, and accordingly, during any Expense Year during the Extended Term (including the 2012 Base Year), Tax Expenses shall be deemed to be increased appropriately; provided, however, that notwithstanding the foregoing, there shall be excluded from the Tax Expenses included in the Annual Direct Expense Allowance for the Extended Term and for each Expense Year during the Extended Term after the 2012 Base Year the Tax Reassessment Protection Amount (as defined in Section 4.3.4 below), except for the Initial Period Tax Reassessment Protection Amount (as defined in Section 4.3.4 below) which shall be included in the 2012 Base Year (and consequently in the determination of the Annual Direct Expense Allowance for the Extended Term) and each Expense Year thereafter.
In addition, during the Initial Period only, for purposes of calculating the Annual Direct Expense Allowance applicable to the 20 th Floor Space when leased pursuant to Section 1.4 above and any Expansion Space and/or First Offer Space if leased by Tenant during the Initial Period (but not during the Extended Term) pursuant to Sections 1.5 and/or 1.6 above, respectively, (but only to the extent such Annual Direct Expense Allowance for such applicable space is other than the Annual Direct Expense Allowance for the Extended Term ( i.e. , other than the 2012 Base Year)), the Tax Expenses for the calendar year base year for which such applicable Annual Direct Expense Allowance is determined (hereinafter referred to as the

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[Union Bank Lease]


" Applicable Initial Period Base Year ") and for each Expense Year thereafter during the Initial Period shall be calculated as if the Building were fully occupied, tenant improvements in the Building were fully constructed and the Real Property, the Building and all tenant improvements in the Building were fully assessed for real estate tax purposes, and without excluding any Tax Increase and without regard to any Proposition 13 protection provided in Section 4.3.4 below, and accordingly, during any Expense Year during the Initial Period (including the Applicable Initial Period Base Year), Tax Expenses shall be deemed to be increased appropriately; provided, however, that notwithstanding the foregoing, there shall be excluded from such applicable Annual Direct Expense Allowance for such space during the Initial Period and each Expense Year during the Initial Period after the Applicable Initial Period Base Year for such space, the applicable Initial Period Tax Reassessment Protection Amount (as defined in Section 4.3.4 below) for such space.
4.2.7.1 Tax Expenses shall include, without limitation:
(i)    Any tax on Landlord's rent, right to rent or other income from the Real Property or as against Landlord's business of leasing any of the Real Property;
(ii)    Except as otherwise provided in Section 4.3.4 below, any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adapted by the voters of the State of California in the June 1978 election (" Proposition 13 ") and that assessments, taxes, fees, levies and charges) may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants. It is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies, and charges and all similar assessments, taxes, fees, levies and charges be included within the definition of Tax Expenses for purposes of this Lease;
(iii)    Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the rent payable hereunder, including, without limitation, any gross revenue tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; and
(iv)    Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises.
4.2.7.2 During the Initial Period, only (and not during the Extended Term which shall be governed by the provisions of Section 4.2.5.3.2 above with respect to the payment of the assessments described hereinbelow), with respect to any assessment that may be levied against or upon the Real Property and that under the laws then in force may be evidenced by improvement or other bonds, or may be paid in annual installments, there shall be included within the definition of Tax Expenses with respect to any tax fiscal year only the amount

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[Union Bank Lease]


currently payable on such bonds, including interest, for such tax fiscal year, Or the current annual installment for such tax fiscal year, In addition, during the Initial Period, only (and not during the Extended Term which shall be governed by the provisions of Section 42.5.3.2 above with respect to the payment of the assessments described hereinbelow), all assessments which may be paid in installments shall be paid by Landlord in the maximum number of installments permitted by law and not included in Tax Expenses except in the year in which the assessment is actually paid; provided, however, that if the prevailing practice in Comparable Buildings is to pay such assessments on an early basis, and Landlord pays the same on such basis, such assessments shall be included in Tax Expenses in the year paid by Landlord.
4.2.7.3 If the method of taxation of real estate prevailing at the time of execution hereof shall be, or has been, altered so as to cause the whole or any part of the taxes now, hereafter or heretofore levied, assessed or imposed on real estate to be levied, assessed, or imposed upon Landlord, wholly or partially, as a capital levy or otherwise, or on or measured by the rents received therefrom, then such new or altered taxes attributable to the Real Property, including the Building Parking Area, shall be included within the term " Tax Expenses " except that the same shall not include any enhancement of said tax attributable to other income of Landlord. In no event shall Tax Expenses for any Expense Year be less than the component of Tax Expenses comprising the applicable Annual Direct Expense Allowance.
4.2.7.4 In the event that either Landlord or Tenant shall desire to contest in good faith the validity or amount of any Tax Expenses, then, at Landlord's option, either (i) Landlord shall diligently pursue claims for reductions in the Tax Expenses, (ii) Tenant may pursue such claims with Landlord's concurrence, in the name of Landlord, or (iii) Tenant may pursue such claims in the name of Landlord without Landlord's concurrence. If either Landlord agrees to pursue such claims or concurs in the decision to pursue such claims but eJects to have them pursued by Tenant, the cost of such proceedings shall be paid by Landlord and included in Tax Expenses in the Expense Year such expenses are paid. If Tenant pursues such claims without obtaining Landlord's concurrence and such contest is successful, then to the extent of the cumulative tax savings achieved, Landlord shall pay to or reimburse Tenant the cost of such proceedings, and include such cost in Tax Expenses in the year so paid or reimbursed by Landlord. No contest of Tax Expenses by either party shall involve the possibility of forfeiture, sale or disturbance of Landlord's interest in the Building or Real Property, or Landlord's or Tenant's interest in the Premises, and all Tax Expenses shall be paid prior to such contest.
4.2.7.5 Tax refunds shall be deducted from Tax Expenses in the Expense Year they are received by Landlord, provided that such refunds shall not be taken into account when determining Tax Expenses for each calendar year which is used as the base year for calculating the applicable Annual Direct Expense Allowance for the different portions of the Premises pursuant to this Lease.
4.2.7.6 The following provisions of this Section 4.2.7.6 shall apply only during the Initial Period (and not during the Extended Term or any Option Terms). The component of Tax Expenses comprised of any share of the Metropolitan Transit Authority assessment on the Real Property (the " MTA Assessment ") which is levied by the Los Angeles County Assessor in the calendar year 2002 shall not be included in the Annual Direct Expenses Allowance applicable to the Initial Period, but Tax Expenses shall include all amounts of the

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[Union Bank Lease]


MTA Assessment during each year of the Lease Term and any Option Term commencing with the beginning of the calendar year 2002. Tenant shall pay Tenant's Share of the MTA Assessment during each year of the Initial Period without offset or reduction by, and without regard to, any savings or decrease in the other Direct Expenses for any such year.
4.2.7.7 If Tax Expenses for any period during the Lease Term or any extension thereof are increased after payment thereof by Landlord for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord Tenant's Share of such increased Tax Expenses, within thirty (30) days after receipt by Tenant of a notice from Landlord of such increase, including reasonably satisfactory evidence and explanation of such increase, along with the calculation of Tenant's Share of such increase.
4.2.7.8 There shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlord's general or net income (as opposed to rents, receipts or income attributable to operations at the Building or the Real Property), (ii) any items included as Operating Expenses, (iii) any items paid by Tenant under Section 4.4 of this Lease, and (iv) taxes attributable to leasehold improvements in excess of the "Cut-Off Point," as that term is defined in Section 4.4.1 of this Lease.
4.2.7.9 Subject to the right to contest the validity or amount of any Tax Expense as provided in Section 4.2.7.4 above, Landlord shall pay before delinquency and before any fine, penalty or interest is due thereon, every real estate tax, assessment, license fee, excise or other charge (however described) which is imposed, levied or assessed or charged by any governmental or quasi-governmental authority having jurisdiction and which is payable in respect of the Lease Term upon, or on account of, the Building or the Real Property.
4.2.8    " Tenant's Share " during (i) the Initial Period shall mean the applicable percentage set forth in Section 9.2(a) of the Summary, and (ii) the Extended Term shall mean the applicable percentage set forth in Section 9.2(b) of the Summary (it being acknowledged and agreed that during the Extended Term, the Storage Space shall not be considered part of the Premises solely for purposes of calculating Tenant's Share). The applicable Tenant's Share was calculated by dividing the number of rentable square feet of the Premises by the total rentable square feet in the applicable portions of the Building as described in Sections 9.2(a) and 9.2(b) of the Summary and as determined pursuant to Section 1.2 above for the Initial Period or Extended Term (as the case may be), and shall be subject to increase pursuant to Section 1.4 above as a result of the addition of the 20ti ] Floor Space. In addition, in the event that the rentable square feet of the Premises is further increased due to the lease by Tenant of any First Offer Space or Expansion Space pursuant to Sections 1.5 and 1.6, respectively, Tenant's Share shall be appropriately increased in accordance with the terms of this Lease, and, as to the Expense Year in which such change occurs, Tenant's Share for such year shall be determined on the basis of the number of days during such Expense Year that each such Tenant's Share was in effect.

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[Union Bank Lease]


4.3     Calculation and Payment of Additional Rent .
4.3.1     Calculation of Excess . If for any Expense Year ending or commencing within the Lease Term, Tenant's Share of Direct Expenses for such Expense Year exceeds Tenant's Share of the applicable Annual Direct Expense Allowance, then Tenant shall pay to Landlord, in the manner set forth in Section 4.3.2, below, and as Additional Rent, an amount equal to the excess (the " Excess ").
4.3.2     Statement of Actual Direct Expenses and Payment by Tenant . Landlord shall give to Tenant on or before the first day of April following the end of each Expense Year, a statement (the " Statement ") which Statement shall be itemized on a line-item by line-item basis and shall state the Direct Expenses incurred or accrued for such preceding Expense Year, and which shall indicate the amount, if any, of any Excess or underage. Upon receipt of the Statement for each Expense Year ending during the Lease Term, if an Excess is present, Tenant shall pay, upon the later to occur of its next installment of Base Rent due or within thirty (30) days after receipt of the Statement, the full amount of the Excess for such Expense Year, less the amounts, if any, paid during such Expense Year as Estimated Excess (as defined in Section 4.3.3 below). If the amount of the Excess is less than the amount paid by the Tenant as Estimated Excess during the applicable period of the Expense Year (but, in each ease, not including any period of the Expense Year which occurred after this Lease has terminated or expired), Landlord shall pay the difference (" Tenant Refund ") to Tenant together with the applicable Statement, even if this Lease has terminated or expired. In the event that Landlord shall fail to pay any Tenant Refund specified in a particular Statement concurrent with delivery of such Statement, Tenant shall be entitled to offset such Tenant Refund against the Rent next due under this Lease. In the event that Landlord shall fail to deliver the Statement on or before April 1 of a particular year, and when subsequently delivered the Statement reveals that a Tenant Refund is due, such Tenant Refund shall bear interest at the Interest Rate from such preceding April 1 until paid by Landlord, or if Landlord fails to pay such Tenant Refund concurrently with delivery of the Statement, until such time as such Tenant Refund is applied against Rent due under this Lease. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord from enforcing its rights under this Article 4.
Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Share of the Direct Expenses for the Expense Year in which this Lease terminates, if an Excess is present, Tenant shall within thirty (30) days of receipt of a Statement setting forth the Excess pay to Landlord an amount as calculated pursuant to the provisions of Section 4.3.1 of this Lease, less any amounts owed from Landlord to Tenant. The provisions of this Section 4.3.2 shall survive the expiration or earlier termination of the Lease Term.
4.3.3     Statement of Estimated Direct Expenses . In addition, Landlord shall give Tenant a yearly expense estimate statement (the " Estimate Statement ") which Estimate Statement shall be itemized on a line-item by line-item basis and shall set forth Landlord's reasonable estimate (the " Estimate ") of what the total amount of Direct Expenses for the then current Expense Year shall be and the estimated Excess (the " Estimated Excess ") as calculated by comparing Tenant's Share of Direct Expenses, which shall be based upon the Estimate, to Tenant's Share of the applicable Annual Direct Expense Allowance. The failure of Landlord to

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[Union Bank Lease]


timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Excess under this Article 4. If pursuant to the Estimate Statement an Estimated Excess is calculated for the then-current Expense Year, Tenant shall pay, within thirty (30) days after Tenant's receipt of the Estimate Statement, a fraction of the Estimated Excess for the then-current Expense Year (reduced by any amounts paid pursuant to the last sentence of this Section 4.3.3). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year to the month of such payment, both months inclusive, and shall have twelve (12) as its denominator. Until a new Estimate Statement is furnished, Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1112) of the total Estimated Excess set forth in the previous Estimate Statement delivered by Landlord to Tenant.
4.3.4     Tenant's Payment of Certain Tax Expenses . Notwithstanding anything to the contrary contained in this Lease (but subject to Section 4.2.7 above and the last sentence of this Section 4.3.4), in the event that, at any time during the Initial Period or Extended Term (but not during any Option Terms) (herein, the " Protection Period ), any sale, refinancing, or change in ownership of the Real Property is consummated, or any "new construction" in connection with future development of buildings or improvements at the Real Property (excluding tenant improvements, improvements to the interior of the Building and the Upgrade Work and/or the building enhancement work specifically described in Article 21 below) is completed, and as a result thereof, and to the extent that in connection therewith, the Real Property is reassessed (the " Reassessment ") for real estate tax purposes by the appropriate governmental authority pursuant to the terms of Proposition 13 or any similar legislation, then Tenant shall not be obligated to pay during the Protection Period any portion of the Tax Increase (as defined below), except to the extent any such Tax Increase (or any portion thereof) is included in both (i) the Base Year for the applicable Annual Direct Expense Allowance for the applicable portions of the Premises as described in Section 4.2.7 above, and (ii) the subsequent Expense Years for the same applicable portions of the Premises as described in Section 4.2.7 above. The term " Tax Increase " shall mean that portion of the Tax Expenses, as calculated following the Reassessment, which is attributable solely to the Reassessment. Accordingly, the term Tax Increase shall not include any portion of the Tax Expenses, as calculated following the Reassessment, which are attributable to (A) (because such amounts were included in the applicable Annual Direct Expense Allowance) the initial assessment of the value of the Real Property (which, for purposes hereof (1) during the Initial Period, shall mean the Proposition 13 assessed value of the Real Property shown on the Los Angeles County Assessor's roll as of February 18, 2000, and (2) during the Extended Term shall mean the Proposition 13 assessed value of the Real Property shown on the Los Angeles County Assessor's roll as of January 31,2012), including the base building, shell and core of the Building and the tenant improvements located in the Building, (B) (because such amounts were included in the applicable Annual Direct Expense Allowance) assessments which were pending immediately prior to the Reassessment which assessments were conducted during, and included in, such Reassessment, or which assessments were otherwise rendered unnecessary following the Reassessment, or (C) the statutory two percent (2%) annual inflationary increase in real estate taxes (as such statutory increase may be modified by subsequent legislation). The amount of Tax Expenses which Tenant is not obligated to pay or will not be obligated to pay during the Protection Period in connection with a particular Reassessment pursuant to the foregoing provisions of this Section 4.3.4, shall be sometimes referred to hereafter as a " Tax Reassessment Protection Amount ." The Tax Reassessment Protection Amount applicable during the Initial

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[Union Bank Lease]


Period shall be referred to herein as the " Initial Period Tax Reassessment Protection Amount ". If the occurrence of a Reassessment is reasonably foreseeable by Landlord and the Tax Reassessment Protection Amount attributable to such Reassessment can be reasonably quantified or estimated for particular Lease Years remaining in the Protection Period commencing with the Lease Year in which the Reassessment will occur, the remaining terms of this Section 4.3.4 set forth below shall apply to such Reassessment. Upon notice to Tenant, Landlord shall have the right to purchase the Tax Reassessment Protection Amount relating to the applicable Reassessment (the " Applicable Reassessment ") as it applies to one or more of the remaining Lease Years in the Protection Period, at any time during the Protection Period, by paying to Tenant an amount equal to the "Tax Reassessment Purchase Price" as that term is defined below, for each such particular Lease Year; provided that the right of any successor of Landlord to exercise its right of repurchase hereunder shall not apply to any Reassessment which results from the event pursuant to which such successor of Landlord became the Landlord under this Lease. As used herein, " Tax Reassessment Purchase Price " for each particular Lease Year shall mean the present value of the Tax Reassessment Protection Amount for such particular Lease Year, as of the date of payment of the Tax Reassessment Purchase Price by Landlord. Such present value shall be calculated (1) by using the portion of the Tax Reassessment Protection Amount attributable to such Lease Year (as though the portion of such Tax Reassessment Protection Amount benefited Tenant in equal monthly installments throughout such Lease Year), as the amount to be discounted, and (2) by using eight percent (8%) as a discount factor. Upon such payment of the Tax Reassessment Purchase Price with respect to any particular Lease Year, Tenant shall thereupon not be relieved of its obligation to pay any Tax Increase for such particular Lease Year attributable to the Applicable Reassessment. Since Landlord is estimating the Tax Reassessment Purchase Price because a Reassessment has not yet occurred, then when such Reassessment occurs, if Landlord has underestimated the Tax Reassessment Purchase Price with respect to any particular Lease Year, then upon notice by Landlord to Tenant, Tenant's Rent next due shall be credited with the amount of such underestimation, and if Landlord overestimates the Tax Reassessment Purchase Price with respect to any particular Lease Year, then upon not less than thirty (30) days notice by Landlord to Tenant, the Rent next due shall be increased by the amount of the overestimation. Notwithstanding any contrary provision of this Lease, the provisions of this Section 4.3.4 shall be applicable only during the Protection Period and only to the Initial Premises, the 20 th Floor Space when leased pursuant to Section 1.4 above and any Expansion Space and/or First Offer Space if leased by Tenant during the Initial Period (but not during the Extended Term) pursuant to Sections 1.5 and/or 1.6 above, respectively, and shall not be applicable during any Option Terms nor be applicable to any other Expansion Space or First Offer Space.
4.3.5     Proposition 8 Protection . Notwithstanding anything to the contrary set forth in this Lease, the amount of Tax Expenses for the any Expense Year during the Lease Term (including the Tax Expenses component of the Annual Direct Expense Allowance applicable to the Initial Period and Extended Term) shall be calculated without taking into account any decreases in real estate taxes obtained in connection with Proposition 8, and, therefore, the Tax Expenses in an Expense Year may be greater than those actually incurred by Landlord, but shall, nonetheless, be the Tax Expenses due under this Lease; provided that (i) any reasonable costs and expenses incurred by Landlord in securing any Proposition 8 reduction shall not be deducted from Tax Expenses nor included in Direct Expenses for purposes of this Lease, and (ii) tax refunds under Proposition 8 shall not be deducted from Tax Expenses nor refunded to Tenant,

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but rather shall be the sole property of Landlord. Landlord and Tenant acknowledge that this Section 4.3.5 is not intended to in any way affect (A) the inclusion in Tax Expenses of the statutory two percent (2%) annual inflationary increase in Tax Expenses (as such statutory increase may be modified by subsequent legislation), or (B) the inclusion or exclusion of Tax Expenses pertaining to changes in ownership or new construction pursuant to the terms of Proposition 13, which shall be governed by the terms and conditions of Section 4.3.5 above.
4.4     Taxes and Other Charges for Which Tenant Is Directly Responsible . Tenant shall reimburse Landlord upon written demand (together with reasonably satisfactory evidence and calculation of the applicable payment) for, or pay directly (if appropriate), any and all taxes or assessments required to be and actually paid by Landlord (except to the extent included in Tax Expenses by Landlord), excluding state, local and federal personal or corporate income taxes measured by the net income of Landlord from all sources and estate and inheritance taxes, whether or not now customary or within the contemplation of the parties hereto, when:
4.4.1    Said taxes are measured by or reasonably attributable to (a) the cost or value of Tenant's equipment, furniture, fixtures and other personal property located in the Premises, or (b) the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, to the extent the cost or value of such leasehold improvements exceeds Thirty Five Dollars ($35.00) per rentable square foot of the Premises (the " Cut-Off Point "); provided that any amounts of real estate taxes attributable to tenant improvements that are in excess of the CutOff Point shall not be included in Tax Expenses;
4.4.2    Said taxes are assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Real Property, including the Building Parking Area;
4.4.3    Said taxes are assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises; or
4.4.4    During the Initial Period only (and not during the Extended Term or any Option Terms), said assessments are levied or assessed upon the Real Property or any part thereof or upon Landlord and/or by any governmental authority or entity, and relate to the construction, operation, management, use, alteration or repair of mass transit improvements including, but not limited to, any amounts paid in connection with Metrorail assessments or other similar payments or assessments; provided, that during the Initial Period, (i) Tenant shall be responsible for Metrorail assessments only in an amount each Expense Year during the Initial Period not to exceed $.30 per rentable square foot of the Premises, and (ii) Landlord shall be responsible at its sole cost and expense (and not as part of Direct Expenses) for all Metrorail assessments in excess of such amount.
4.5     Landlord's Books and Records . If Tenant disputes the amount of Additional Rent set forth in a Statement, then upon reasonable notice to Landlord and at reasonable times, Tenant and/or its authorized representative shall have the right within two (2) years after receipt of such Statement (" Review Period "), to inspect Landlord's records, at Landlord's offices in Los Angeles County, provided that Tenant is not then in default under Section 19.1.1 of this Lease; provided, that Tenant and its authorized representative shall, and each of them shall use their commercially

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[Union Bank Lease]


reasonable efforts to cause their respective agents and employees to, maintain all information contained in Landlord's records in strict confidence. The inspection rights described above shall be performed only by Tenant, Tenant's employees, or an authorized representative of Tenant who is an independent certified public accountant and a member of a nationally or regionally recognized accounting firm (which is not paid on a commission or contingency basis). Notwithstanding the foregoing, Tenant may use a commercial real estate brokerage or real estate firm whose primary business is not auditing operating expenses as its representative as long as Tenant does not engage such representative on a commission or contingent fee basis. If after such inspection, Tenant still disputes the amount of Additional Rent set forth in the applicable Statement, Tenant shall notify Landlord in writing of such dispute (" Dispute Notice ") and Landlord and Tenant shall attempt in good faith to resolve such dispute. In the event that within fifteen (15) days following the date of the Dispute Notice Landlord and Tenant are unable to resolve the dispute, such dispute shall be submitted to arbitration in accordance with the provisions of Sections 4.5.1 through 4.5.5 below:
4.5.1    Landlord and Tenant shall each appoint one arbitrator who shall by profession be an independent certified public accountant who shall have been active over the five (5) year period ending an the date of such appointment in the determination of Direct Expenses for commercial high-rise properties in Los Angeles County.
4.5.2    The two (2) arbitrators so appointed shall within ten (10) days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria as set forth hereinabove for qualification of the initial two (2) arbitrators.
4.5.3    The three (3) arbitrators shall within thirty (30) days of the appointment of the third arbitrator reach a decision as to the actual Direct Expenses for the period set forth in the applicable Statement.
4.5.4    The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant.
4.5.     If the two (2) arbitrators fail to agree upon and appoint a third arbitrator, then the appointment of the arbitrators shall be dismissed and the matter shall be submitted to arbitration under the provisions of the American Arbitration Association.
The cost of Tenant's inspection of Landlord's records and the cost of any arbitration proceeding hereunder shall be Tenant's responsibility; provided that in the event that Landlord and Tenant agree or the arbitrators determine that the Direct Expenses set forth in the Statement were overstated by more than three percent (3%), then the cost of Tenant's inspection of Landlord's records and the cost of any resulting arbitration proceeding shall be paid for by Landlord; and provided further, that if Landlord and Tenant agree or the arbitrators determine that the Direct Expenses set forth in the Statement were understated, then the cost of Tenant's inspection of Landlord's records and the cost of any resulting arbitration proceeding shall be paid for by Landlord to the extent Landlord is entitled to and does actually recover such additional Direct Expenses from other tenants in the Building. Landlord shall act in good faith and with reasonable diligence to attempt to recover such additional Direct Expenses from the other tenants

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in the Building. Promptly following any such agreement by the parties or arbitration decision, as the case may be, the parties shall make such appropriate payments or reimbursements, as the case may be, to each other, as are determined to be owing pursuant to such agreement or arbitration decision, as the case may be, together with interest at the "Interest Rate," as that term is defined in Section 29.34 of this Lease, from the date due until paid, in the case of payments by Tenant to Landlord, or from the date paid until reimbursed, in the case of reimbursements by Landlord to Tenant, and if Landlord fails to make required reimbursements, Tenant may offset such amounts against the Rent next due hereunder. Landlord shall be required to maintain records of all Direct Expenses set forth in each Statement delivered to Tenant for the entirety of the two (2) year period following Landlord's delivery of the applicable Statement. The payment by Tenant of any amounts pursuant to this Article 4 shall not preclude Tenant from questioning the correctness of any Statement delivered by Landlord, provided that the failure of Tenant to object thereto prior to the expiration of the Review Period shall be conclusively deemed Tenant's approval of the applicable Statement. The provisions of this Section 4.5 shall survive the expiration or earlier termination of the Lease Term.
4.6     Proration . Any amounts of Additional Rent due under this Lease for periods constituting less than a full month shall be prorated based on the number of days in any such fractional month as compared to the number of days in the calendar month during which such fractional month occurs.
4.7     Cost Pools . Landlord shall, from time to time, equitably allocate some or all of the Direct Expenses for the Building and Real Property among different portions or occupants of the Building and Real Property (the " Cost Pools "), in Landlord's reasonable discretion. The Direct Expenses within each such Cost Pool shall be allocated and charged to the tenants within such Cost Pool in an equitable manner. Notwithstanding anything to the contrary contained in this Article 4, Landlord specifically agrees, however, that (i) during the Initial Period, Landlord shall allocate Operating Expenses in an equitable manner between (A) all office space tenants of the Building, along with the Retail Space and the Vault Space, and (B) all other retail and non-office tenants of the Building and the Real Property, and (ii) during the Extended Term, Landlord shall allocate Operating Expenses in an equitable manner between (A) all office and retail space tenants of the retail/office tower portion of the Building (including the Retail Space and the Vault Space), and (B) all tenants of the retail portion of the Real Property located outside the retail/office tower portion of the Building.
ARTICLE 5
USE OF PREMISES
5.1     Permitted Use . During the entire Lease Term, Tenant shall use the Office Space solely for any or all of the following purposes, all consistent with the character of the Building as a first-class multi-tenant office building (the " Office Space Permitted Use "): (i) retail, private and commercial banking purposes; (ii) general office purposes; (iii) general storage purposes; and/or (iv) any other non-retail lawful use permitted by Landlord for other tenants' premises located above the first (1 st ) floor of the Building, so long as (A) such other premises contain in excess of 20,000 rentable square feet on a cumulative basis (whether such other premises are leased pursuant to one (l) lease or multiple leases), (B) such other non-retail lawful use does not

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violate an exclusive use granted by Landlord to a tenant of the Real Property, and (C) such other non-retail lawful use by Tenant does not exceed, by more than fifty percent (50%), the aggregate rentable square footage of such other lawful uses granted to such other tenants of the Building. Tenant shall not use or permit the Office Space to be used for any other purpose or purposes whatsoever. Tenant shall use the Retail Space and the Vault Space solely for any or all of the following purposes, all consistent with the character of the Building as a first-class multi-tenant office building (the " Retail/Vault Space Permitted Use "): (1) retail banking purposes, including the right to use and maintain vaults; (2) general office purposes; and/or (3) in the case of any portion of the Retail Space and/or Vault Space which is then subject to a Transfer, other similar business office type or retail purposes commensurate with the operation of the Building in a manner consistent with that of the Comparable Buildings. Tenant shall not use or permit the Retail Space and/or Vault Space to be used for any other purpose or purposes whatsoever. Tenant shall use the Storage Space solely for general storage purposes and mechanical storage purposes consistent with the character of the Building as a first-class multi-tenant office building (the " Storage Space Permitted Use "), and Tenant shall not use or permit the Storage Space to be used for any other purpose or purposes whatsoever. The Office Space Permitted Use, the Retail Space Permitted Use and the Storage Space Permitted Use are collectively referred to herein as the " Permitted Use ".
5.2     Continued Occupancy . During the Extended Term, it is Landlord's desire to have Tenant continuously and uninterruptedly operate the Retail Space and Vault Space for the Retail/Vault Space Permitted Use during the minimum hours of 10:00 a.m. to 4:00 p.m. Monday through Friday, national holidays excepted (the " Required Hours "); provided, however, that Tenant shall be entitled to operate the Retail Space and Vault Space for the Retail/Vault Space Permitted Use before or after the Required Hours without obtaining Landlord's prior consent. Tenant's failure to continuously uninterruptedly operate the Retail Space and Vault Space for the Retail/Vault Space Permitted Use in accordance with the foregoing provisions of this Section 5.2 shall not be a breach or default by Tenant under this Lease; provided, however, that if Tenant shall fail to continuously uninterruptedly operate the Retail Space and Vault Space for the Retail/Vault Space Permitted Use in accordance with the foregoing provisions of this Section 5.2, including as a result of any vacation or abandonment of the Premises, and if such failure shall continue for a period of one (1) year or longer, then, as Landlord's sole and exclusive remedy, Landlord may, at its election, terminate this Lease with respect to the Retail Space and Vault Space, only, which termination shall be effective upon the date which is thirty (30) days after Landlord delivers written notice of termination to Tenant.
5.3     Prohibited Uses . Tenant further covenants and agrees that it shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the provisions of Exhibit D , attached hereto, or in violation of the laws of the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Building; provided however that Landlord agrees that the Rules and Regulations shall not be (i) modified or enforced in any way by Landlord so as to interfere with the Permitted Use, or (ii) discriminatorily modified or enforced against Tenant. Landlord agrees that nothing in the Rules and Regulations of the Building shall be used to prohibit or unreasonably interfere with the conduct of any business from the Premises which Tenant is permitted to conduct. In the event any other tenant or occupant of the Building fails to comply with the Rules and Regulations, and

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such non-compliance unreasonably and materially interferes with Tenant's use of the Premises, Landlord shall use reasonable efforts to cause such other tenants and/or occupants to comply with the Rules and Regulations. Tenant shall comply with all recorded covenants, conditions, and restrictions, and the provisions of all ground or underlying leases, now or hereafter affecting the Real Property which have been provided by Landlord to Tenant in writing, and shall not at any time use or occupy or allow any person to use or occupy the Premises or the Building or do or permit anything to be done or kept in the Premises or the Building in any manner which: (i) violates any certificate of occupancy in force for the Premises or the Building; (ii) causes or is likely to cause damage to the Real Property, the Building, the Premises or any equipment, facilities or other systems therein; (iii) other than conducting normal banking operations from its Premises, results in repeated demonstrations, bomb threats or other events which require evacuation of the Building or otherwise disrupt the use, occupancy or quiet enjoyment of the Building by other tenants and occupants; or (iv) materially interferes with the transmission or reception of microwave, television, radio or other communications signals by antennae located on the roof of the Building or elsewhere in the Building. Tenant, at Tenant's expense, shall comply with all laws, rules, orders, ordinances, directions, regulations, and requirements of federal, state, county and municipal authorities, now in force or which may hereafter be in force, which shall impose any duty or requirement relating to the use, occupation or alteration of the Premises.
5.4     Hazardous Materials . Except for the use of general office supplies within the Premises which are of a kind typically used in normal office areas in the ordinary course of business (such as, for example, copier toner, liquid paper, glue, ink, photocopy supplies, secretarial supplies and limited janitorial supplies, and cleaning solvents), for use in the manner for which they were designed and only in accordance with all applicable governmental regulations pertaining to Hazardous Materials (as defined in Section 29.29 below) and the customary standards prevailing in the industry for such use, and then only in such amounts as may be normal for the office business operations conducted by Tenant on the Premises, Tenant shall not cause or permit the use, handling, storage or disposal of any Hazardous Materials in, on, under or about the Premises by Tenant or Tenant's employees, agents, contractors, invitees or licensees (" Tenant Parties "), or in, on, under or about the remaining portions of the Real Property by Tenant or Tenant's employees, agents, representatives or contractors. Tenant shall promptly take all actions, at its sole cost and expense, as are necessary to return the Premises and the Real Property to the condition existing prior to the introduction of any such Hazardous Materials by Tenant or the applicable parties specified above, provided Landlord's approval of such actions shall first be obtained. Tenant shall be solely responsible for and shall indemnify, protect, defend (at Tenant's expense with counsel reasonably approved by Landlord) and hold Landlord harmless from and against any and all claims, judgments, suits, causes of action, damages, penalties, fines, liabilities, losses and expenses (including, without limitation, reasonable investigation and clean-up costs, reasonable attorneys' fees, reasonable consultant fees and court costs) which arise during or after the Term of this Lease as a result of the breach of any of the obligations and covenants set forth in this Section 5.3, and/or any contamination of the Premises, directly or indirectly, arising from activities of Tenant or Tenant Parties, and/or any contamination of the remaining portions of the Real Property, directly or indirectly arising from the activities of Tenant or its employees, agents, representatives or contractors. Notwithstanding anything in the foregoing to the contrary, Tenant shall have no liability to Landlord for any Hazardous Materials that exist in or outside the Premises as of the Lease

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Commencement Date or which thereafter were placed in the Premises or found to be in or outside the Premises to the extent not (i) introduced, disposed of; disturbed or otherwise caused by Tenant or any of the Tenant Parties or (ii) in any tenant improvements, alterations, fixtures, equipment or personal property installed by or for Tenant in the Premises, Building or Real Property (collectively, the " Excluded Hazardous Materials ").
ARTICLE 6
SERVICES AND UTILITIES
6.1     Standard Tenant Services . Landlord shall provide the following services and utilities on all days during the Lease Term, unless otherwise stated below.
6.1.1    Subject to all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide HVAC when necessary for normal comfort for normal office use in the Premises (and in compliance with the HVAC specifications described in Section 6.1.9 below), from Monday through Friday, during the period from 7 a.m. to 7 p.m., and on Saturday during the period from 9:00 a.m. to 2:00 p.m., except for the date of observation of New Year's Day, Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and other state and nationally recognized holidays. The daily time periods identified hereinabove arc sometimes hereinafter referred to as the " Business Hours " and the holidays identified hereinabove are sometimes hereinafter referred to as the " Holidays ."
6.1.2    Landlord shall provide adequate electrical wiring and power for normal general office use (but in any event sufficient to accommodate a maximum connected electrical load capacity for Tenant's lighting fixtures and incidental use equipment of seven (7) watts per usable square foot of the Premises) twenty-four (24) hours per day, seven (7) days per week. Tenant shall be responsible for excess electrical consumption above the Consumption Standard set forth in Section 6.2 below. Tenant shall bear the cost of replacement of lamps, starters and ballasts for lighting fixtures within the Premises.
6.1.3    Landlord shall provide city water from the regular Building connections and any other connections the Tenant is making use of in the Premises as of the date of this Lease and Landlord has heretofor approved, for drinking, lavatory and toilet purposes. Subject to the terms of Article 8 of this Lease, Tenant shall have the right to add to or access the water systems for the Building and/or provide supplemental water systems in order to service the Premises.
6.1.4    During the Lease Term, Landlord shall provide janitorial services in a quantity and manner consistent with Comparable Buildings, five (5) days per week, except the date of observation of the Holidays, in and about the Premises in accordance with the specifications attached hereto as Exhibit E. Landlord shall provide exterior window washing services for the exterior windows of the Building at least three (3) times per year; however, Landlord may reduce such exterior window washing services to two (2) times per year at any time after the date the Original Tenant and/or a Qualified Transferee fails to satisfy the Minimum Occupancy Threshold. Tenant shall have the right, upon at least sixty (60) days' notice to Landlord at any time during the Lease Term or any Option Term, to provide its own janitorial

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service to the Premises by independently contracting with a janitorial service provider approved by Landlord, which approval shall not be unreasonably withheld or delayed by Landlord, Such janitorial service provider shall in all events utilize "green" cleaning procedures comparable to those used by Landlord or its janitorial service provider and maintain harmonious labor relations with other contractors and service providers working in, on or about the Real Property, If Tenant elects to provide its own janitorial service to the Premises during the Lease Term or any Option Term, the Base Rent payable by Tenant from and after the date on which Tenant commences providing its own janitorial service, and Tenant's Annual Direct Expense Allowance for purposes of calculating Tenant's Share of Direct Expenses from and after such date, shall each be reduced by an amount equal to the actual savings realized by Landlord through the termination of the janitorial service to the Premises, Within sixty (60) days after Tenant commences providing its own janitorial service, Landlord shall reasonably calculate the actual savings realized by Landlord as a result of Tenant providing its own janitorial service. Landlord shall notify Tenant of such calculation as soon as possible after Tenant commences providing its own janitorial services. Tenant shall have the right to review Landlord's calculation of such savings in janitorial costs.
6.1.5    Landlord shall provide nonexclusive automatic passenger elevator service, with at least two (2) elevator cabs in service for each elevator bank at all times.
6.1.6    Landlord shall provide nonexclusive freight elevator service as part of Operating Expenses, subject to reasonable scheduling by Landlord.
6.1.7    Landlord shall provide twenty-four (24) hours per day, seven (7) days per week, reasonable security and supervision of the Building and common areas, in a manner consistent with Comparable Buildings. On or prior to the Extended Term Commencement Date, Landlord shall, at its expense (which may included in Operating Expenses but shall be treated as a capital expenditure and amortized over its useful life), install security cameras on the mezzanine level of the Building Parking Area. In addition, upon request by Tenant, security personnel for the Building shall escort Tenant's employees to their vehicles in the Building Parking Area between the hours of8:00 p.m. (or 6:30 p.m. if it is dark outside at such hour) and 6:00 a.m., Monday through Friday, except for Holidays. Tenant shall have the right to install its own security system, subject to the terms of Article 8 of this Lease or the Tenant Work Letter, as the case may be, and/or have its own security personnel in the Premises, provided that the same does not interfere with the operation of the Building security system.
6.1.8    Landlord shall operate and maintain the Building and the common areas and provide services in a first-class manner and condition in accordance with the standards of maintenance and operation as are customary for other Comparable Buildings. Tenant shall be entitled to access to the Premises and the Parking Areas 24 hours per day, 365 days per year (after-hours access shall be subject to reasonable security procedures).
6.1.9    During the Lease Term and any Option Term, Landlord shall provide during the Business Hours HVAC services for the Premises in compliance with the HVAC Specifications attached hereto as Exhibit F . Without limiting the provisions of Section 6.2 of this Lease, including Tenant's obligation to pay Landlord for the cost of additional equipment and facilities, and costs of wear and tear on existing equipment, required as a result of Tenant's

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use of machines, equipment and lighting which are described therein, any costs of purchasing and installing additional equipment or fixtures in the Building to the extent necessary to provide HVAC to the Premises in compliance with the HVAC specifications on Exhibit F shall be borne solely by Landlord. All operating costs associated with providing such services, including the costs of repair, maintenance and operation of all equipment in the Building, shall be included as part of the Direct Expenses and shall be subject to the provisions of Article 4 of this Lease (and the amount of such operating costs incurred during (i) the calendar year 2002 shall be included in Tenant's Annual Direct Expense Allowance applicable to the Initial Period, and (ii) the calendar year 2012 shall be included in Tenant's Annual Direct Expense Allowance applicable to the Extended Term).
6.2     Overstandard Tenant Use . Tenant shall not, without Landlord's prior written consent, which consent shall not be withheld unless a Design Problem exists, install and thereafter use in the Premises any heat-generating machines, machines other than normal fractional horsepower office machines, or equipment or lighting other than Building standard lights in the Premises, which do not exist in the Premises as of the date of this Lease, and which may adversely and materially affect the temperature otherwise maintained by the HVAC system or significantly increase the water normally furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of this Lease. If such consent is given, Landlord shall have the right to install supplementary HVAC units or other facilities in the Premises, including supplementary or additional metering devices, and the reasonable, actual cost thereof, including the cost of installation, operation and maintenance, increased wear and tear on existing equipment and other similar charges (without profit or overhead), shall be paid by Tenant to Landlord within thirty (30) days of receipt of written notice (including a reasonably particularized statement therefor). If Tenant uses water or HVAC in excess of that supplied by Landlord pursuant to Section 6.1 of this Lease, or if Tenant's consumption of electricity shall exceed the greater of (i) four (4) watts per usable square foot of the Premises, or (ii) the average watts per usable square foot of the Premises used in June 2008, each calculated on a monthly basis for the Business Hours described in Section 6.1.1 above (the " Consumption Standard "), Tenant shall pay to Landlord, within thirty (30) days of receipt of written notice (including a reasonably particularized statement therefor), all costs reasonably incurred by Landlord in connection with the provision of such excess consumption and the installation, operation, and maintenance of equipment which is installed in order to supply such excess consumption, as such costs are reasonably determined by Landlord, including a reasonable amount attributable to increased wear and tear on existing equipment caused by such excess consumption (but without overhead or profit); and Landlord may install devices to separately meter any increased use and in such event Tenant shall pay the increased actual cost directly to Landlord, within five (5) business days of receipt of written notice (including a reasonably particularized statement therefor), including the cost of such additional metering devices in the event such metering devices indicate that there has been excess consumption. Notwithstanding the foregoing to the contrary, Tenant is currently charged for electricity consumption for certain of Tenant's equipment located on the 39th floor portion of the Premises and Tenant's Current Roof Top Sign pursuant to a separate meter, and shall continue to be charged separately for the usage of such electricity (including any electricity used by a Modified New Roof Top Sign) in a similar manner. If Tenant desires to use HVAC during non-Business Hours: (A) Tenant shall (until such time as the Automated After-Hours HVAC System [as defined below} is installed as provided herein below) give Landlord reasonable prior notice of Ten ant's desired use; and (B) Landlord shall supply such non-Business Hours HVAC to

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Tenant on a full floor basis at an hourly rate payable by Tenant to Landlord equal to Landlord's actual, out-of-pocket expenses of providing such non-Business Hours HVAC, without overhead or profit, and without the inclusion of a "start up" fee for turning on the HVAC system in connection with such non-Business Hours HVAC use ( i.e. , Landlord will only charge Tenant for each hour that the mechanical and chilled water systems required to provide such non-Business Hours HVAC are turned on). Notwithstanding the foregoing, during the calendar year 2008, shall such hourly rate shall in no event exceed Ninety-Six Dollars ($96.00) per hour per floor, which $96.00 rate cap shall be reduced to Sixty-Five Dollars (S65.00) per hour per floor for non-Business Hours HVAC provided by Landlord, at Tenant's request, to at least four (4) floors of the Premises to the extent ordered by Tenant and provided by Landlord at the same time (such $65.00 cap rate shall apply to each such floor of the Premises for which such 4-floor minimum requirement is met, as well as to each other floor of the Premises for which non-Business Hours HVAC is provided by Landlord at the same time). Amounts payable by Tenant to Landlord for such use of additional utilities shall be deemed Additional Rent hereunder and shall be billed on a monthly basis. Landlord may increase the hours or days during which HVAC are provided to the Premises and the Building to accommodate the usage by tenants occupying two-thirds or more of the rentable square feet of the Building or to conform to practices of the Comparable Buildings. Notwithstanding anything in the foregoing to the contrary: (1) on or prior to the Extended Term Commencement Date, Landlord shall install, at its expense (which installation costs shall not be included in Operating Expenses), an automated telephone system (the " Automated After-Hours HVAC System ") via which Tenant can request Tenant's desired after-hours HVAC use (on a full floor basis); and (2) Landlord shall not treat as additional water or electrical usage hereunder any level of water or electrical usage generally existing in the Premises by Tenant as of the Lease Commencement Date which immediately prior to the termination of the Existing Leases (as defined in Article 22 below) Landlord did not generally treat as excess utility usage thereunder.
6.3     Interruption of Use . Except as provided in Section 19.7.2 of this Lease, Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building after diligent effort to do so, by any accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause beyond Landlord's reasonable control; and such failures or delays or diminution shall never he deemed to constitute an eviction or disturbance of Tenant's use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease. Furthermore, except as provided in Section 19.7.2 of this Lease, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference With, Tenant's business, including, without limitation, loss of profits, however occurring, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in this Article 6. Except as provided in Section 19.7.2 of this Lease, if any governmental entity promulgates or revises any statute, ordinance, building code, fire code or other code or imposes mandatory controls or guidelines on Landlord or the Real Property or any part thereof, relating to the use or conservation of energy, water, gas, light or electricity or the reduction of automobile or other emissions or the provision of any other utility or service provided with respect to this Lease or if Landlord is required to

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make alterations to the Building or any other part of the Real Property in order to comply with such mandatory or voluntary controls or guidelines, then Landlord may, in its reasonable discretion, comply with such mandatory controls Or guidelines or make such alterations to the Building or any other part of the Real Property related thereto without creating any liability of Landlord to Tenant under this Lease, provided that the Premises are not thereby rendered untenantable, and, in connection with voluntary action undertaken by Landlord, such action does not unduly interfere with Tenant's Permitted Use of the Premises, and further provided that Landlord will not voluntarily reduce the level of services provided to the Premises. Except as provided in Section 19.7.2 of this Lease, such compliance and the making of such permitted alterations shall in no event entitle Tenant to any damages, relieve Tenant of the obligation to pay the full Rent reserved hereunder or constitute or be construed as a constructive or other eviction of Tenant. In addition, the actual, reasonable and documented cost of such compliance and alterations shall, subject to the terms of Article 4 of this Lease, be included in Operating Expenses.
6.4     Additional Services . Landlord shall also have the exclusive right, but not the obligation, to provide any additional services which may be requested by Tenant, including, without limitation, locksmithing, lamp replacement, additional janitorial service, and additional repairs and maintenance, provided that such services shall be provided by Landlord at competitive market rates. Tenant shall pay to Landlord within thirty (30) days of receipt of notice (including a reasonably particularized statement therefor), the sum of all actual costs to Landlord of such additional services (without profit or overhead). Charges for any service for which Tenant is required to pay from time to time hereunder, shall be deemed Additional Rent hereunder, shall be billed on a monthly basis, and shall be payable by Tenant within thirty (30) days after Tenant's receipt of any such bill. If Landlord refuses to provide such additional services, or if Tenant prefers to perform such services itself, Tenant may separately obtain such services at its sole cost and expense.
ARTICLE 7
REPAIRS
7.1     Duties to Repair . Landlord shall maintain and repair any and all structural portions of the Building, all restrooms located on each floor of the Premises (excluding executive washrooms, if any), and the Systems and Equipment; provided, however, Tenant shall be directly responsible for all maintenance and repair costs incurred by Landlord respecting Systems and Equipment located in the Premises, except for (i) the HVAC units located on the perimeter walls of the Building, the interior main loop of the Building's HVAC and sprinkler systems, and the pipes and other equipment connecting such interior main loops within the Premises to the Building's base building HVAC and sprinkler systems located outside the Premises, all to the extent constructed as part of the original construction of the Building (collectively, the " Premises Base Building HVAC/Sprinkler Equipment "), (ii) repairs to Systems and Equipment in the Premises to the extent the condition necessitating such repair results from breakdowns or malfunctions of Systems and Equipment located outside the Premises and/or the Premises Base Building HVAC/Sprinkler Equipment, or (iii) repair or maintenance, which may be included in Direct Expenses, to base building mechanical, electrical, life safety, plumbing, sprinkler systems and HVAC systems located in the Premises and which do not exclusively

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service the Premises. Landlord shall also maintain and repair the common areas in and outside of the Building, including all walkways, escalators and landscaping. Tenant shall, at Tenant's own expense, keep the non-structural portions of the Premises, including all improvements, fixtures and furnishings therein, in good order, repair and condition at all times during the Lease Term. In addition, except as provided as part of Landlord's repair obligations set forth above, Tenant shall, at Tenant's own expense but under the supervision and subject to the prior approval of Landlord, and within any reasonable period of time specified by Landlord, promptly and adequately repair all damage to the Premises and replace or repair all damaged or broken fixtures and appurtenances; provided however, that, at Landlord's option, or if Tenant fails to make such repairs, Landlord may, but need not, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof, including a reasonable percentage of the cost thereof (to be uniformly established for the Building and consistent with similar charges imposed by the landlords of Comparable Buildings) sufficient to reimburse Landlord for all overhead, general conditions, fees and other reasonable and actual costs or expenses arising from Landlord's involvement with such repairs and replacements forthwith upon being billed for same (including receipt of reasonably satisfactory evidence of such costs). Landlord may, but shall not be required to, enter the Premises at all reasonable times and upon reasonable prior notice to Tenant (except in the event of emergency) to make such repairs, alterations, improvements and additions to the Premises or to the Building or to any equipment located in the Building as Landlord shall deem reasonably necessary or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree, and if requested by Tenant, Landlord shall perform such work after Tenant's normal business hours (except in the event of emergency) to the extent reasonably practicable if the performance of such work will unreasonably interfere with Tenant's normal business operations. Tenant hereby waives and releases its right to make repairs at Landlord's expense under Sections 1941 and 1942 of the California Civil Code or under any similar law, statute, or ordinance now or hereafter in effect.
7.2     Tenant's Right to Make Repairs . If Tenant provides notice to Landlord of an event or circumstance which requires the action of Landlord with respect to the provision of utilities and/or services and/or repairs and/or maintenance as set forth in Sections 6.1 and 7.1 of this Lease, above, and Landlord fails to provide such action as required by the terms of this Lease, then Tenant may proceed to take the required action upon delivery of an additional five (5) business days notice to Landlord specifying that Tenant is taking such required action, and if such action was required under the terms of this Lease to be taken by Landlord, then Tenant shall be entitled to prompt reimbursement by Landlord of Tenant's reasonable costs and expenses in taking such action plus interest at the Interest Rate, as that term is defined in Section 29.34 of this Lease, during the period from the date Tenant incurs such costs and expenses until such time as payment is made by Landlord. In the event Tenant takes such action, and such work will affect the Systems and Equipment, structural integrity of the Building or exterior appearance of the Building, Tenant shall use only those contractors used by Landlord in the Building for such work unless such contractors are unwilling or unable to perform such work, in which event Tenant may utilize the services of any other qualified contractor which normally and regularly performs similar work in Comparable Buildings. Further, if Landlord does not deliver a detailed written objection to Tenant, within thirty (30) days after receipt of an invoice by Tenant of its costs of taking action which Tenant claims should have been taken by Landlord, and if such invoice from Tenant sets forth a reasonably particularized breakdown of its costs and expenses in connection with taking such action on behalf of Landlord, then Tenant shall be entitled to deduct

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from Rent payable by Tenant under this Lease, the amount set forth in such invoice together with interest at the Interest Rate. If, however, Landlord in good faith delivers to Tenant within thirty (30) days after receipt of Tenant's invoice, a written objection to the payment of such invoice, setting forth with reasonable particularity Landlord's reasons for its claim that such action did not have to be taken by Landlord pursuant to the terms of this Lease or that the charges arc excessive (in which case Landlord shall pay the amount it contends would not have been excessive), then Tenant shall not be entitled to such deduction from Rent, but as Tenant's sole remedy, Tenant may proceed to have such dispute settled pursuant to the proceedings described in Section 29.3 1 below, and if Tenant obtains a judgment in its favor in such proceedings, Tenant shall have the right to deduct the amount of such judgment and attorneys' fees awarded in such proceedings from the Rent next due and owing by Tenant under this Lease if such amount and attorneys' fees are not paid within thirty (30) days after such judgment is issued.
ARTICLE 8
ADDITIONS AND ALTERATIONS
8.1     Landlord's Consent to Alterations . Except for Cosmetic Alterations (as defined below), Tenant may not make any improvements, alterations, additions or changes to the Premises (collectively, the " Alterations "), without first procuring the prior written consent of Landlord to such Alterations. Such consent shall be requested by Tenant not less than ten (10) business days prior to the commencement thereof, and Landlord shall not withhold or delay its consent for any Alterations except with respect to Alterations which (i) do not comply with applicable laws, (ii) adversely affect the Systems and Equipment or the structural aspects of the Building, (iii) can be seen from outside the Premises, (iv) unreasonably interfere with another tenant's use of such tenant's premises for normal business office purposes, and/or (v) do not use materials that are equal to or better than Building standard materials (each, a " Design Problem "). Notwithstanding the foregoing, with respect to any Alterations installed after the Lease Commencement Date that (A) create a Design Problem described in clause (iii) hereinabove and (B) are other than walls not aligned with existing columns or mullions: (1) Landlord shall act reasonably and in good faith based upon standards generally employed by Comparable Landlords (as defined in Section 23.6 below) for the Comparable Buildings; and (2) Tenant may install in (x) any space above the ground floor of the Building now or hereafter leased by Tenant pursuant to this Lease, Alterations similar to those existing in any office space in the Building as of the Lease Commencement Date, and (y) the Retail Space, Alterations similar to those existing in the Retail Space as of the Lease Commencement Date. Further notwithstanding the foregoing, Tenant may make strictly cosmetic, non-structural alterations, additions or improvements to the interior of the Premises (collectively, the " Cosmetic Alterations ") without Landlord's consent, provided that: (a) Tenant delivers to Landlord written notice of such Cosmetic Alterations at least ten (10) days prior to the commencement thereof; (b) such Cosmetic Alterations shall be performed by or on behalf of Tenant in compliance with the other provisions of this Article 8; (c) such Cosmetic Alterations do not require the issuance of a building permit or other governmental approval; and (d) such Cosmetic Alterations would not result in a Design Problem. Any time Tenant proposes to make Alterations other than Cosmetic Alterations, Tenant's notice regarding the proposed Alterations shall be provided together with the plans and specifications for the Alterations, and Landlord shall approve or disapprove of the same within ten (10) business days after its receipt of the same in accordance with the standard

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[Union Bank Lease]


for consent set forth hereinabove. In the event that Landlord shall fail to notify Tenant in writing of its approval or disapproval of a proposed Alteration within such ten (10) business day period, Landlord shall be deemed to have approved such Alteration. In the event that Landlord shall disapprove of a proposed Alteration because the same contains a Design Problem, Landlord shall notify Tenant of it's the specific Design Problem which is the reason for such disapproval and Tenant shall have the right to resubmit for Landlord's approval modified plans and specifications to address Landlord's reasons for disapproval to eliminate such Design Problem. The construction of the New Tenant Improvements (as defined in the Tenant Work Letter) shall be governed by the terms of the Tenant Work Letter and not the terms of this Article 8.
8.2     Manner of Construction . Any time Tenant proposes to make an Alteration which requires the consent of Landlord, Landlord may impose, as a condition of such consent, such reasonable requirements as Landlord in its reasonable discretion may deem desirable, including, but not limited to, the requirement that upon Landlord's request made at the time such consent is granted, Tenant shall utilize for such purposes only contractors, materials, mechanics and materialmen reasonably approved by Landlord, provided that Tenant shall utilize a contractor of Landlord's selection to perform all work for Alterations that constitute a Design Problem; provided that Landlord shall cause such contractor to charge Tenant for such work an amount equal to the costs that comparable first-class, reputable and reliable contractors would have charged Tenant if selected pursuant to competitive bidding procedures. Tenant shall construct all Alterations and perform any repairs undertaken by Tenant in conformance with any and all applicable rules and regulations of any federal, state, county or municipal code or ordinance and pursuant to a valid building permit, issued by the City of Los Angeles, and in conformance with Landlord's reasonable construction rules and regulations. Landlord's approval of the plans, specifications and working drawings for Tenant's Alterations shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules and regulations of governmental agencies or authorities, but, subject to Tenant's obligation to carry out all Alteration work in compliance with the provisions of this Article 8, shall constitute Landlord's approval of such Alteration. A1l work with respect to any Alterations must be done in a good and workmanlike manner and diligently prosecuted to completion to the end that the Premises shall at all times be a complete unit except during the period of work. In performing the work of any such Alterations, Tenant shall have the work performed in such manner as not to obstruct access to the Building or the common areas for any other tenant of the Building, and as not to obstruct the business of Landlord or other tenants in the Building, or interfere with the labor force working in the Building. In addition to Tenant's obligations under Article 9 of this Lease, upon completion of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the County of Los Angeles in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and Tenant shall deliver to the Building management office an electronic copy of the record set of the Alteration drawings.
8.3     Payment for Improvements . In the event Tenant orders any Alteration or repair work directly from Landlord, or from the contractor selected by Landlord, the charges for such work shall be deemed Additional Rent under this Lease, payable within thirty (30) days after Tenant's receipt of billing therefor (including a reasonably particularized statement setting forth the charges), either periodically during construction or upon the substantial completion of such work, at Landlord's option. Upon completion of such work, Tenant shall deliver to Landlord, if

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[Union Bank Lease]


payment is made directly to contractors, evidence of payment, contractors' affidavits and full and final waivers of all liens for labor, services or materials. If Tenant orders any work directly from Landlord, Tenant shall pay to Landlord a percentage of the cost of such work (such percentage to be established on a uniform basis for the Building and consistent with similar charges imposed by the landlords of the Comparable Buildings) sufficient to compensate Landlord for all overhead, general conditions, fees and other costs and expenses arising from Landlord's involvement with such work, and if Tenant does not order any work directly from Landlord, Tenant shall reimburse Landlord tor Landlord's reasonable, actual, out-of-pocket costs and expenses actually and reasonably incurred in connection with Landlord's review of such work (without profit or mark-up).
8.4     Construction Insurance . In addition to the requirements of Article 10 of this Lease, in the event that Tenant makes any Alterations, Tenant agrees to carry, or cause the applicable contractors to carry, prior to the commencement of such Alterations, "Builder's All Risk" insurance in an amount reasonably approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may reasonably require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon completion thereof. In addition, Landlord may, in its reasonable discretion, require any Transferee (as defined in Section 14.1 of this Lease), but not the Original Tenant or an Affiliate of the Original Tenant, to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of such Alterations and naming Landlord as a co-obligee.
8.5     Landlord's Property . All Alterations, improvements, fixtures and/or equipment which may be permanently installed in or about the Premises, and all signs installed in, on or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord, except that Tenant may remove any Alterations, improvements, fixtures and/or equipment which are installed, provided Tenant repairs any damage to the Premises and Building caused by such removal. Furthermore, if Landlord requires, at the time Landlord approves of the Alteration, that Tenant remove any Alteration upon the expiration or early termination of the Lease Term, Landlord may, by written notice to Tenant prior to the end of the Lease Term, or given upon any earlier termination of this Lease, require Tenant at Tenant's expense to remove such Alterations and to repair any damage to the Premises and Building caused by such removal, subject, however, to the restrictions on Landlord's right to so require Tenant to remove certain Alterations as provided in Section 15.2.1 below. If Tenant fails to complete such removal and/or to repair any damage caused by the removal of any Alterations prior to or at the expiration or earlier termination of the Lease Term, Landlord may do so upon ten (10) days notice to Tenant and may charge the actual, reasonable and documented cost thereof to Tenant (without profit or mark-up). Tenant hereby indemnifies and holds Landlord harmless from any liability, cost, obligation, expense or claim of lien in any manner relating to the installation, placement, removal or financing of any such Alterations, improvements, fixtures and/or equipment in, on or about the Premises, except to the extent the particular work is performed by Landlord and/or such liability, cost, obligation, claim or expense results from Landlord's negligence or willful misconduct.
8.6     Security Scanners . Notwithstanding anything to the contrary set forth in this Lease, during the period of time that Tenant concurrently leases under this Lease all of the floors

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[Union Bank Lease]


that are served exclusively by any set of passenger elevators of the Building ( e.g. ,, the Building's low-rise passenger elevators exclusively serve floors 2-17; the Building's mid-rise passenger elevators exe1usively serve floors 18-29; and the Building's high-rise passenger elevators exclusively serve floors 29-38) (collectively, the " Exclusive Elevators "), Tenant may, at its sole cost and expense, and otherwise in compliance with the provisions of this Lease (including, without limitation, the provisions of this Article 8), install and maintain security scanners in the main lobby of the Building to monitor access to such Exclusive Elevators (collectively, the " Security Scanners "). The design, location and specifications of the Security Scanners shall be subject to Landlord's prior approval, which shall not be unreasonably withheld so long as the Security Scanners (i) are compatible with the Building's security systems, (ii) do not cause a Design Problem (except that for purposes of this Section 8.6, the term "Design Problem" shall not include clause (iii) of Section 8.1 above), and (iii) do not affect Landlord's ability to operate the Building on a commercially reasonable basis. As of the date of execution of this Lease, Tenant currently leases all of floors 2 through 17 of the Building which are exclusively served by the Exclusive Elevators described hereinabove as the Building's low-rise passenger elevators; Landlord hereby pre-approves of the location depicted on Exhibit N attached hereto for the installation of the Security Scanners for such Exclusive Elevators if installed by Tenant pursuant to this Section 8.6. Tenant shall not be charged any rent for use of the space where the Security Scanners are installed. Tenant shall reimburse Landlord, within thirty (30) days after receipt of invoice from Landlord, for any actual, documented and reasonable out-of-pocket costs incurred by Landlord in connection with Landlord's and its consultants' review of the plans and specifications for the Security Scanners and/or the installation, use and/or operation by Tenant of the Security Scanners. Tenant shall be solely responsible, at Tenant's sole cost and expense, for the monitoring, operation, repair and maintenance of the Security Scanners, and neither Landlord nor the security personnel employed by Landlord shall have any responsibility with respect thereto (including, without limitation, the responsibility to monitor and/or prevent access to any Exclusive Elevators by any persons entering through the Security Scanners or to respond to the triggering of any sensors indicating a breach of the Security Scanners). Tenant shall provide Landlord with key cards for the Security Scanners installed by Tenant so that Landlord and Landlord's management and security personnel can access the Exclusive Elevators that are monitored by the Security Scanners to perform any of Landlord's obligations and/or exercise any of Landlord's rights under this Lease. Tenant shall indemnity, defend, protect, and hold harmless Landlord, its partners and their respective officers, agents, servants and employees (collectively, the " Indemnified Group ") from and against any and all Claims (as defined in Section 10.1 below) in connection with or arising from the installation, use and/or operation of the Security Scanners except to the extent such Claims are (A) caused by the negligence and/or willful misconduct of one or more of the Indemnified Group and (B) not covered by property insurance obtained, or required to be obtained, by Tenant pursuant to this Lease and as to which the waiver of subrogation in Section 10.4 below applies. Tenant shall, at Tenant's expense, remove the Security Scanners and repair any damage to the Building caused by such removal upon the expiration or early termination of this Lease, if Landlord, at its option, requires that Tenant so remove the Security Scanners by written notice delivered to Tenant at least thirty (30) days prior to the expiration of the Lease Term, or given upon any earlier termination of this Lease. In addition, if Tenant no longer leases the entirety of the floors serviced by the Exclusive Elevators for which Security Scanners previously have been installed, Landlord may, at its option, by written notice to Tenant, require Tenant to remove such Security Scanners, in which event

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Tenant shall, at Tenant's expense, within ten (10) days after receipt of such notice, remove such Security Scanners and repair any damage to the Building caused by such removal. If Tenant fails to timely complete any such removal and/or repair work, Landlord may do so upon ten (10) days' notice to Tenant and may charge the actual, reasonable and documented cost thereof to Tenant (without profit or mark-up).
ARTICLE 9
COVENANT AGAINST LIENS
Tenant has no authority or power to cause or permit any lien or encumbrance of any kind whatsoever, whether created by act of Tenant, operation of law or otherwise, to attach to or be placed upon the Real Property, Building or Premises, and any and all liens and encumbrances created by Tenant shall attach to Tenant's interest only. Landlord shall have the right at all times to post and keep posted on the Premises any reasonably sized notice which it deems necessary for protection from such liens. In the event that other then due to Landlord's failure to timely disburse any tenant improvement allowance required to be disbursed by Landlord pursuant to this Lease, any lien of mechanics or materialmen or others is placed against the Real Property, the Building or the Premises with respect to work or services claimed to have been performed for or materials claimed to have been furnished to Tenant or the Premises, Tenant covenants and agrees to cause it to be released and removed of record (by bonding or otherwise) within fifteen (15) business days after its receipt of written notice from Landlord regarding the existence of such lien. Notwithstanding anything to the contrary set forth in this Lease, in the event that such lien is not released and removed (by bonding or otherwise) on or before the date occurring fifteen (15) business days after written notice of such lien is delivered by Landlord to Tenant, Landlord, at its sole option, may immediately take all action necessary to release and remove such lien, without any duty to investigate the validity thereof, and all sums, costs and expenses, including reasonable attorneys' fees and costs, actually incurred by Landlord in connection with such lien shall be deemed Additional Rent under this Lease and shall be due and payable by Tenant within thirty (30) days of receipt of a reasonably detailed invoice therefor.
ARTICLE 10
INSURANCE
10.1     Indemnification and Waiver . To the extent not prohibited by law, Landlord, its partners and their respective officers, agents, servants, employees, and independent contractors shall not be liable to Tenant (except as expressly provided in Section 19.7.2 or elsewhere in this Section 10.1 of this Lease) for any damage to property resulting from the loss of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant, due to the occurrence of any accident or event in or about the Building, Real Property and/or the Parking Areas, or due to any act or neglect of any tenant or occupant of the Building, including the Premises, or of any other person, including without limitation, any damage caused by gas, electricity, steam, sewage, sewer gas or odors, fire, water or by the bursting or leaking of pipes, faucets, sprinklers, plumbing fixtures and windows, or to any other cause regardless of whether of an entirely different nature; provided, however, the provisions of this sentence shall not be applicable to any such damage to the extent (i) resulting from the negligence or willful

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[Union Bank Lease]


misconduct of Landlord or its agents, contractors, servants or employees, or to any default by Landlord in the observance or performance of any of the terms, covenants or conditions of this Lease to be performed on Landlord's part, and (ii) not insured or required to be insured by Tenant under this Lease. Tenant shall indemnify, defend, protect, and hold harmless Landlord, its partners and their respective officers, agents, servants and employees from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys' fees) incurred in connection with or arising from any cause in, on or about the Premises, including, without limiting the generality of the foregoing: (A) any default by Tenant in the observance or performance of any of the terms, covenants or conditions of this Lease on Tenant's part to be observed or performed; (B) the use or occupancy of the Premises by Tenant or any person claiming by, through or under Tenant; (C) the condition of the Premises or any occurrence on the Premises from any cause whatsoever, except to the extent such occurrence is the result of (1) a condition or occurrence originating outside the Premises that is not described in clause (D) hereinbelow, or (2) Hazardous Materials that exist in or outside the Premises as of the Lease Commencement Date or which thereafter were placed in the Premises or found to be in or outside the Premises to the extent not (x) introduced, disposed of or otherwise caused by Tenant or any of the Tenant Parties or (y) in any tenant improvements, alterations, fixtures, equipment or personal property installed by or for Tenant in the Premises, Building or Real Property; or (D) any acts, omissions or negligence of Tenant or any person claiming by, through or under Tenant, or of the contractors, agents, servants, employees, visitors or licensees of Tenant or any such person, in, on or about the Premises, Real Property, and/or the Parking Areas either prior to (but excluding visitors of Tenant prior to the Lease Commencement Date which shall be governed by the terms and provisions of the Existing Leases), during, or after the expiration of the Lease Term, including, without limitation, any acts, omissions or negligence in the making or performance of any Alterations or the New Tenant Improvements by Tenant, provided that Tenant shall not be required to indemnify and hold Landlord harmless from, nor does Tenant hereby waive any claim against Landlord for, any loss, cost, liability, damage or expense, including, but not limited to, penalties, fines, attorneys' fees or costs (collectively, " Claims "), to any person, property or entity resulting from the negligence or willful misconduct of Landlord or its agents, contractors, servants or employees, in connection with Landlord's operation of the Building, Real Property and/or Building Parking Area or the failure of Landlord to perform any of its obligations under this Lease (except for damage to any improvements or alterations in the Premises [including the New Tenant Improvements1 and Tenant's personal property, fixtures, furniture and equipment in the Premises, to the extent such damage is covered by Tenant's required insurance coverage hereunder, or if Tenant had carried the insurance required hereunder would have been covered; but not to the extent of any insurance deductibles permitted to be carried by Tenant hereunder). Notwithstanding the foregoing limitations or exceptions to Landlord's liability contained in this Section 10.1, Landlord hereby indemnifies, defends, protects and holds Tenant harmless from any such excluded Claims described in the immediately preceding sentence; provided further that because Landlord is required to maintain property damage insurance on the Building and Tenant compensates Landlord for such insurance as part of Tenant's Share of Direct Expenses and because of the existence of waivers of subrogation set forth in Section 10.4 of this Lease, Landlord hereby indemnifies, defends, protects, and holds Tenant harmless from any Claims for any property damage or loss to any portion of the Building located outside the Premises to the extent such Claim is covered by such insurance or damages due to the failure of Landlord to perform any of its obligations under this

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[Union Bank Lease]


Lease (or if Landlord had carried the insurance required hereunder would have been covered; but not to the extent of any insurance deductibles permitted to be carried by Landlord hereunder), even if resulting from the negligent acts or omissions of Tenant or those of its agents, contractors, servants, employees or licensees, Similarly, since Tenant must carry property damage insurance pursuant to this Article 10 to cover its personal property within the Premises and the Real Property, and any tenant improvements and Alterations in the Premises (including the New Tenant Improvements), Tenant hereby indemnifies and holds Landlord harmless from any Claims for any property damage or loss to any such items to the extent arising from any event to the extent such Claims are covered by such insurance (or if Tenant had carried the insurance required hereunder would have been covered; but not to the extent of any insurance deductibles permitted to be carried by Tenant hereunder), even if resulting from the negligent acts or omissions of Landlord or those of its agents, contractors, servants, employees or licensees. The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any claims or liability occurring prior to such expiration or termination. No provision of this Section 10.1 shall affect the waivers of subrogation described in Section 10.4 of this Lease. Each party's indemnification obligations hereunder shall include the obligation, at the indemnified party's request, to defend the indemnified party with counsel reasonably acceptable to such indemnified party, at the indemnifying party's sole cost and expense, including all reasonable attorneys' fees and court costs.
10.2     Landlord's Insurance . Landlord shall maintain during the Lease Term a policy or policies of property insurance insuring the Building, Real Property and Building Parking Area against loss or damage due to fire and other casualties covered within the classification of "all risk" or "special form" coverage, to the extent available on a commercially reasonable basis, for the full replacement cost of the covered items determined in a commercially reasonable manner. Such coverage shall be in amounts that meet any co-insurance clauses of the policies of insurance. Landlord shall be permitted to carry such deductibles with respect to such property insurance as are customarily carried from time to time by reasonably prudent landlords of the Comparable Buildings. Landlord shall also maintain a policy or policies of commercial general liability insurance covering the Building, Building Parking Area and the Real Property and the performance by Landlord of its indemnity agreements set forth in Section 10.1 of this Lease, in such amounts and with such deductibles as are customarily carried from time to time by reasonably prudent landlords of the Comparable Buildings. As of the date of this Lease Landlord currently carries commercial general liability coverage in limits of $1,000,000 per occurrence, with umbrella coverage of $100,000,000 per occurrence. Additionally, at the option of Landlord, Landlord's property insurance coverage may include the risks of earthquakes and/or flood damage and additional hazards, a rental loss endorsement and one or more loss payee endorsements in favor of the holders of any mortgages or deeds of trust encumbering the interest of Landlord in the Real Property or the ground or underlying lessors of the Real Property, or any portion thereof. Upon inquiry by Tenant, from time to time, Landlord shall inform Tenant of such coverage carried by Landlord. Tenant shall neither use the Premises nor permit the Premises to be used or acts to be done therein which will: (i) increase the premium of any insurance described in this Section 10.2 unless Tenant agrees to pay for such increase in premium (which payment shall be made by Tenant to Landlord within thirty (30) days after Tenant's receipt of invoice therefor from Landlord); (ii) cause a cancellation of or be in conflict with any such insurance policies; (iii) result in a refusal by insurance companies of good standing to insure the Building or the Real Property in amounts reasonably satisfactory to

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Landlord; or (iv) subject Landlord to any liability or responsibility for injury to any person or property by reason of any operation being conducted in the Premises; provided, that Landlord agrees that Tenant's use of the Premises for the Permitted Use and otherwise in compliance with this Lease will not cause or result in any of the matters referred to in clauses (i) through (iv) hereinabove. Tenant shall, at Tenant's expense, comply as to the Premises with all reasonable insurance company requirements pertaining to the use of the Premises. If Tenant's conduct or use of the Premises causes any increase in the premium for such insurance policies, then Tenant shall reimburse Landlord for any such increase. Tenant, at Tenant's expense, shall comply with all rules, orders, regulations or requirements of the American Insurance Association (formerly the National Board of Fire Underwriters) and with any similar body.
10.3     Tenant's Insurance . Tenant shall maintain during the Lease Term the following coverages in the following amounts. 10.3.1 A policy or policies of commercial general liability insurance covering the insured against claims of bodily injury, personal injury and property damage arising out of Tenant's occupancy, assumed liabilities or use of the Premises, including coverage with respect to the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in Section 10.1 of this Lease, for limits of liability not less than:
Bodily Injury and
Property Damage Liability    $5,000,000 each occurrence
$5,000,000 annual aggregate
Property Injury Liability    $5,000,000 each occurrence
$5,000,000 annual aggregate
10.3.2    Property insurance covering (i) all office furniture, trade fixtures, office equipment, merchandise and all other items of Tenant's property on the Premises installed by, for, or at the expense of Tenant, (ii) all leasehold improvements in the Premises, (iii) all other improvements, alterations and additions to the Premises, and (iv) the Telecommunication Equipment. Such insurance shall insure against loss or damage due to fire and other casualties covered within the classification of "all risk" or "special form" coverage, to the extent available on a commercially reasonable basis, for the full replacement cost of the covered items determined in a commercially reasonable manner, and in amounts that meet any co-insurance clauses of the policies of insurance.
10.3.3 Comprehensive Automobile Insurance covering all owned, non-owned and hired automobiles of Tenant with limits of liability not less than:
Bodily Injury Liability    $5,000,000 each accident
Property Damage Liability    $5,000,000 each accident
10.3.4     Form of Policies . The minimum limits of policies of insurance required of Landlord and Tenant under this Lease shall in no event limit the liability of either party under this Lease. Tenant's insurance shall: (i) name as an additional insured Landlord, and all mortgage or deed of trust holders or lessors of any underlying ground leases respecting the Real

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UNION BANK PLAZA
[Union Bank Lease]


Property, the identity of whom Landlord has provided Tenant with not less than thirty (30) days prior written notice; (ii) specifically cover Tenant's indemnification obligations under Section 10.1 of this Lease except to the extent such obligations arise as a result of a default by Tenant; (iii) be issued by an insurance company having a rating of not less than A-V11 in Best's Insurance Guide or which is otherwise reasonably acceptable to Landlord and licensed to do business in the State of California; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is non-contributing with any insurance requirement of Tenant; (v) provide that said insurance shall not be canceled or coverage changed unless thirty (30) days' prior written notice shall have been given to Landlord and any mortgagee or ground or underlying lessor of Landlord the identity of whom Landlord has given Tenant thirty (30) days prior written notice: and (vi) contain a cross-liability endorsement or severability of interest clause. Landlord's insurance shall comply with the requirements of clauses (ii) and (iii) above, with all references to Landlord in such clauses modified to refer to Tenant, and all references to Tenant modified to refer to Landlord. Tenant shall deliver certificates of such policies to Landlord at or before the expiration dates thereof. In the event Tenant shall fail to procure such insurance, or to deliver such policies or certificates, Landlord may, at its option, upon at least fifteen (15) days' prior written notice to Tenant, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent within ten (10) days after delivery to Tenant of bills therefor. Upon reasonable request by Tenant, Landlord shall make available for Tenant's review at the Building management office, copies of the applicable insurance policies evidencing the existence of Landlord's required insurance hereunder.
10.4     Subrogation/Failure to Carry Insurance . Landlord and Tenant agree to have their respective insurance companies issuing property damage insurance waive any rights of subrogation that such companies may have against Landlord or Tenant, as the ease may be, to the extent such waivers are routinely and customarily available. As long as such waivers of subrogation are contained in their respective insurance policies, or would have been contained in such insurance policies had the responsible party used commercially reasonable efforts to obtain such waivers and such waivers are routinely and customarily available, Landlord and Tenant hereby waive any right that either may have against the other on account of any loss or damage to their respective property to the extent such loss or damage is insurable under policies of insurance maintained or required to be maintained hereunder. If either party fails to carry the amounts and types of insurance required to be carried by it pursuant to this Article 10, such failure shall be deemed to be a covenant and agreement by such party to self-insure with respect to the type and amount of insurance which such party so failed to carry, with full waiver of subrogation with respect thereto.
10.5     Additional Insurance Obligations . Tenant shall carry and maintain during the entire Lease Term, at Tenant's sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant to Section 10.3.1 above, as may be reasonably requested by Landlord, but in no event shall such increased amounts of insurance be in excess of that required by landlords of Comparable Buildings for tenants comparable to Tenant.
10.6     Tenant's Self-Insurance . So long as Tenant maintains a Tangible Net Worth (as defined below) in excess of Five Hundred Million Dollars ($500,000,000.00), Tenant may provide self-insurance in lieu of the insurance required in Sections 10.3 and 10.5 above, whether

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UNION BANK PLAZA
[Union Bank Lease]


by the establishment of an insurance fund or reserve to be held and applied to make good losses from casualties, or otherwise, which conforms to the practice of large corporations maintaining systems of self-insurance or by simply sending a notice to Landlord stating that it will be responsible to pay all Claims as if it was an insurance company providing the insurance coverage Tenant was otherwise obligated to obtain under this Lease. As used herein, " Tangible Net Worth " means the excess of total assets over total liabilities, in each case as determined in accordance with generally accepted accounting principles consistently applied (" GAAP "), excluding, however, from the determination of total assets, all assets which would be classified as intangible assets under GAAP including, without limitation, goodwill, licenses, patents, trademarks, trade names, copyrights, and franchises. Prior to Tenant electing to self-insure under this Section 10.6, Tenant shall deliver to Landlord Tenant's annual report evidencing such minimum $500,000,000.00 Tangible Net Worth requirement, which annual report shall be prepared by a national firm of certified public accountants in accordance with GAAP and certified as accurate (the " Annual Report "). Thereafter while Tenant is continuing to self-insure under this Section 10.6, Tenant shall deliver to Landlord, within forty-five (45) days after written request therefor from Landlord made after the end of each fiscal year, a current Annual Report for the prior fiscal year evidencing such $500,000,000.00 minimum Tangible Net Worth. If at any time Tenant's Tangible Net Worth is less than $500,000,000.00, then Tenant shall be required to immediately obtain and maintain the insurance provided for in Sections 10.3 and 10.5 above. If Tenant self-insures any of the risks to which coverage is required under Sections 10.3 and/or 10.5 above, Tenant's self-insurance protection shall be deemed to include (and Tenant's self-insurance shall be deemed to include) the waivers of subrogation and the additional insured status mentioned above in favor of Landlord, its lenders and any other parties Landlord so specifies as provided in Section 10.3 above. Furthermore, (i) the self-insurance protection shall be equivalent to the coverage required under Sections 10.3 and 10.5 above, and Tenant shall not be relieved from the indemnification obligations of this Lease, (ii) Tenant shall be responsible for, assume all liability for, and release and waive all right of recovery against Landlord and its partners and members and subpartners and submembers, and their respective officers, agents, property managers, servants, employees, and independent contractors for, the costs of any loss or claim to the extent that such loss or claim would have been covered by the insurance Tenant would have otherwise been required to maintain hereunder, and (iii) Tenant shall pay all amounts on behalf of Landlord and its partners and members and subpartners and submembers, and their respective officers, agents, property managers, servants, employees, and independent contractors (and waive, release, protect, indemnify, defend, protect and hold harmless Landlord and its partners and members and subpartners and submembers, and their respective officers, agents, property managers, servants, employees, and independent contractors from and against) any and all Claims incurred by Landlord (and its partners and members and subpartners and submembers, and their respective officers, agents, property managers, servants, employees, and independent contractors) which would have been payable or insured against by a hypothetical third-party insurer for the benefit of Tenant and/or Landlord (and its partners and members and subpartners and submembers, and their respective officers, agents, property managers, servants, employees, and independent contractors) had Tenant maintained the insurance required under Sections 10.3 and 10.5 above with deemed full waiver of subrogation in favor of Landlord (and its partners and members and subpartners and subrnembers, and their respective officers, agents, property managers, servants, employees, and independent contractors), and with reasonable deductible amounts applicable to such policies. If Tenant fails to comply with the requirements relating to

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UNION BANK PLAZA
[Union Bank Lease]


self-insurance and insurance, Landlord may, in accordance with the provisions of Section 10.3.4 above, obtain such insurance and Tenant shall pay to Landlord immediately on demand the premium cost thereof. It is expressly understood that the self-insurance permitted above does not relieve Tenant of its statutory obligations under Workers' Compensation laws.
ARTICLE 11
DAMAGE AND DESTRUCTION
11.1     Repair of Damage to Premises by Landlord . If the Premises or any common areas of the Building serving or providing access to the Premises shall be damaged by fire or other casualty, Landlord shall promptly and diligently, subject to reasonable delays for matters beyond Landlord's reasonable control, and subject to all other terms of this Article 11, restore the base building, shell and core of the Premises and such common areas. Such restoration shall be to substantially the same condition of the base building, shell and core of the Premises and common areas prior to the casualty, except for modifications thereto (i) required by zoning and building codes and other laws, or (ii) reasonably required by the holder of a mortgage on the Building or reasonably deemed desirable by Landlord, provided (A) access to any common restrooms serving the Premises and Tenant's access to and use of the Premises shall not be materially impaired, and (B) such base building, shell and core and common areas will be in a condition that is equal or better than the condition of such items immediately prior to the damage and destruction. Notwithstanding any other provision of this Lease, upon the occurrence of any damage to the Premises, if this Lease is not terminated, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant's insurance required under Sections 10.3.2(ii) and (iii) of this Lease to the extent necessary to reimburse Landlord on a progress payment basis for all costs and expenses incurred by Landlord in connection with the repair of any such damage, and Landlord shall repair any injury or damage to the leasehold improvements and Alterations installed in the Premises and shall return such leasehold improvements and Alterations to their original condition; provided that if the cost of such repair by Landlord exceeds the amount of insurance proceeds received by Landlord from Tenant's insurance carrier, as assigned by Tenant, plus the amount of insurance proceeds received by Landlord from Landlord's insurance carrier to the extent allocable to damage of the leasehold improvements and Alterations, the cost of such repair shall be paid by Tenant on a progress-payment basis, but only after exhaustion of Tenant's and Landlord's insurance proceeds received by Landlord and allocable to the damage of the leasehold improvements and Alterations. In connection with such repairs and replacements, Tenant shall, prior to the commencement of construction, submit to Landlord, for Landlord's review and approval, all plans, specifications and working drawings relating thereto, and Tenant and Landlord shall select the general contractor to perform such improvement work and if they do not agree as to the identity of the general contractor, Landlord shall select the general contractor on the basis of a reputation for high quality work, integrity, timeliness of performance and financial stability, and, if commercially reasonable and practicable under the circumstances, after competitively bidding such improvement work to at least three (3) general contractors designated by Landlord (with respect to any such competitive bidding procedure, Landlord shall select as the general contractor to perform such improvement work, the general contract submitting the lowest bid and is able to meet Landlord's commercially reasonable schedule for the performance of such improvement work). Landlord shall not be liable for any inconvenience or annoyance to Tenant

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UNION BANK PLAZA
[Union Bank Lease]


or its visitors, or injury to Tenant's business resulting in any way from such damage or the repair thereof; provided however, that if such fire or other casualty shall have damaged the Premises or common areas necessary to Tenant's occupancy of or access to the Premises, Landlord shall allow Tenant a proportionate abatement of Rent during the time and to the extent to which Tenant is denied access to the Premises and/or to the extent the Premises are unfit for occupancy for the purposes permitted under this Lease, and not occupied by Tenant as a result thereof; provided, further, if the Premises or common areas providing access to the Premises are damaged such that the portion of the Premises which is fit for occupancy and to which Tenant is permitted access is not sufficient to allow Tenant to conduct its business operations from such remaining portion and Tenant does not conduct its business operations therefrom, Landlord shall allow Tenant a total abatement of Rent during the time and to the extent Tenant is denied access to the Premises and/or the Premises are unfit for occupancy for the purposes permitted under this Lease, and not occupied by Tenant as a result of the subject damage.
11.2     Landlord's Option to Repair . Notwithstanding the terms of Section 11.1 of this Lease, Landlord may elect not to rebuild and/or restore the Premises and/or Building and instead terminate this Lease by notifying Tenant in writing of such termination within sixty (60) days after the date of damage, such notice to include a termination date giving Tenant ninety (90) days to vacate the Premises, but Landlord may so elect only if the Building shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and one or more of the following conditions is present: (i) repairs cannot reasonably be substantially completed within one hundred eighty (180) days of the date of damage (when such repairs are made without the payment of overtime or other premiums); or (ii) as a result of the casualty in question, (A) Landlord would have to repair "uninsured" or "underinsured" damage to the Building ("uninsured" or "underinsured" meaning that Landlord does not have insurance proceeds from third party insurance companies with respect to such damage to the Building, provided that Landlord would also not have such insurance proceeds had Landlord carried the insurance required under this Lease) at a cost in excess of Five Million Dollars ($5,000,000.00), (B) Landlord terminates the leases of all other tenants of the Building leasing a full floor or more similarly affected by the damage and destruction which, with respect to tenants of the Building leasing space pursuant to leases in effect as of the date of this Lease, contain termination rights in favor of Landlord permitting Landlord to terminate such leases in the event of an uninsured or underinsured casualty damage (it being agreed by Landlord that Landlord shall not modify any such existing leases to eliminate any such termination rights), and (C) Landlord covenants to Tenant in writing that Landlord will not commence any repairs of such damaged portions of the Premises and/or Building within nine (9) months following the date of casualty for the purposes of leasing the Premises to third parties, and such covenant by Landlord shall survive any such termination of this Lease, the breach of which shall subject Landlord to liability to Tenant for any actual damages suffered by Tenant as a result therefrom. For purposes of clause (C) hereinabove, "repairs" shall not be deemed to include repairs to the extent required by applicable law or reasonably necessary to ensure safety in or around the Building and/or any such damaged portions of the Premises or Building. If Landlord does not elect to terminate this Lease pursuant to Landlord's termination right as provided hereinabove, and the repairs cannot reasonably be substantially completed within two hundred forty (240) days after being commenced (which 240day period shall be subject to extension as a result of any Force Majeure events and delays caused by Tenant), Tenant may elect, no earlier than sixty (60) days after the date of the damage and not later than one hundred twenty (120) days after the date of such damage, to terminate this

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UNION BANK PLAZA
[Union Bank Lease]


Lease by written notice to Landlord effective as of the date specified in the notice. Furthermore. if neither Landlord nor Tenant have terminated this Lease, and the repairs are not actually substantially completed within the period (the " Outside Repair Period ") which is the later of (A) such 240-day period, and (B) the estimated time period for repairs to have been substantially completed as provided hereinabove (which Outside Repair Period shall be subject to extension as a result of any Force Majeure events and delays caused by Tenant), Tenant shall have the right to terminate this Lease within five (5) business days of the end of such Outside Repair Period and thereafter during the first five (5) business days of each calendar month following the end of such Outside Repair Period until such time as the repairs are substantially complete, by notice to Landlord (the " Damage Termination Notice "), effective as of a date set forth in the Damage Termination Notice (the " Damage Termination Date "), which Damage Termination Date shall not be less than five (5) business days following the end of such Outside Repair Period or each such month, as the case may be. Notwithstanding the foregoing, if Tenant delivers a Damage Termination Notice to Landlord, then Landlord shall have the right to suspend the occurrence of the Damage Termination Date for a period ending thirty (30) days after the Damage Termination Date set forth in the Damage Termination Notice by delivering to Tenant, within five (5) business days of Landlord's receipt of the Damage Termination Notice, a certificate of Landlord's contractor responsible for the repair of the damage certifying that it is such contractor's good faith judgment that the repairs shall be substantially completed within thirty (30) days after the Damage Termination Date. If repairs shall be substantially completed prior to the expiration of such thirty-day period, then the Damage Termination Notice shall be of no force or effect, but if the repairs shall not be substantially completed within such thirty-day period, then this Lease shall terminate upon the expiration of such thirty-day period. On or before thirty (30) days after the date of a damage or destruction, Landlord shall inform Tenant of Landlord's reasonable opinion of the projected date of completion of the repairs and whether adequate insurance proceeds will be available to cover the cost of repair and restoration.
11.3     Waiver of Statutory Provisions . The provisions of this Lease, including this Article 11, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or any other portion of the Real Property, and any statute or regulation of the State of California, including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or any other portion of the Real Property.
11.4     Damage Near End of Tenn . In the event that the Premises or the Building is destroyed or damaged to any substantial extent during the last eighteen (18) months of the Lease Term (as such Lease Term may have been previously extended pursuant to Section 2.2 of this Lease), then notwithstanding anything contained in this Article 11, Landlord or Tenant shall have the option to terminate this Lease by giving written notice to the other party of the exercise of such option within thirty (30) days after such damage or destruction, in which event: (i) this Lease shall cease and terminate as of the date of such notice; (ii) Tenant shall pay the Base Rent and Additional Rent, properly apportioned up to such date of damage; (iii) Landlord shall refund to Tenant the Base Rent and Additional Rent prepaid by Tenant and attributable to the period of time following the date of such damage; and (iv) both parties hereto shall thereafter be freed and

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[Union Bank Lease]


discharged of all further obligations hereunder, except as provided for in provisions of this Lease which by their terms survive the expiration or earlier termination of the Lease Term.
ARTICLE 12
NONWAIVER
No waiver of any provision of this Lease shall be implied by (i) any failure of either party to insist in any instance on the strict keeping, observance or performance of any covenant or agreement contained in the Lease or exercise any election contained in the Lease or (ii) any failure of either party to enforce any remedy on account of the violation of such provision, even if such violation shall continue or be repeated subsequently. Any waiver by either party of any provision of this Lease may only be in writing, and no express waiver shall affect any provision other than the one specified in such waiver and that one only for the time and in the manner specifically stated. No receipt of monies by Landlord from Tenant after the termination of this Lease shall in any way alter the length of the Lease Term or of Tenant's right of possession hereunder or after the giving of any notice shall reinstate, continue or extend the Lease Term or affect any notice given Tenant prior to the receipt of such monies, it being agreed that after the service of notice or the commencement of a suit or after final judgment for possession of the Premises, Landlord may receive and collect any Rent due, and the payment of said Rent shall not waive or affect said notice, suit or judgment.
ARTICLE 13
CONDEMNATION
13.1     Permanent Taking . If the whole or any major part of the Premises or a major portion of the Building shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of any part of the Premises or Building, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation, Landlord shall have the option to terminate this Lease upon one hundred eighty (180) days' notice, provided such notice is given no later than three hundred sixty-five (365) days after the date of such taking, condemnation, reconfiguration, vacation, deed or other instrument. If so much of the Premises, Building or the Real Property is taken so as to substantially interfere with the conduct of Tenant's business from the Premises, or if access to the Premises is substantially impaired, Tenant shall have the option to terminate this Lease upon one hundred eighty (180) days' notice, provided such notice is given no later than three hundred sixty-five (365) days after the date of such taking. Landlord and Tenant shall each be entitled to receive fifty percent (50%) of the "bonus value" of the leasehold estate in connection therewith, which bonus value shall be equal to the sum paid by the condemning authority as the award for compensation for taking the leasehold created by this Lease. Tenant shall have the right to file any separate claim available to Tenant for any taking of Tenant's personal property and fixtures belonging to Tenant and removable by Tenant upon expiration of the Lease Term pursuant to the terms of this Lease, and for moving expenses, so long as such claim is payable separately to Tenant. All Rent shall be apportioned as of the date of such termination, or the date of such

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UNION BANK PLAZA
[Union Bank Lease]


taking, whichever shall first occur. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated. Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of The California Code of Civil Procedure.
13.2     Temporary Taking . Notwithstanding anything to the contrary contained in this Article 13, in the event of a temporary taking of all or any portion of the Premises for a period of one hundred and eighty (180) days or less, then this Lease shall not terminate but the Base Rent and the Additional Rent shall be abated for the period of such taking in proportion to the ratio that the aggregate amount of rentable square feet of the Premises (i) taken and (ii) rendered unusable, bears to the total rentable square feet of the Premises. Landlord shall be entitled to receive the entire award made in connection with any such temporary taking.
ARTICLE 14
ASSIGNMENT AND SUBLETTING
14.1     Transfers . Tenant shall not, without the prior written reasonable consent of Landlord except as provided herein to the contrary, assign, mortgage, pledge, hypothecate, encumber, or otherwise transfer, this Lease or any interest hereunder, permit any assignment or other such foregoing transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or permit the use of the Premises by any persons other than Tenant and its employees (all of the foregoing are hereinafter sometimes referred to collectively as " Transfers " and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a " Transferee "). For purposes of this Lease, an " Approved Transferee " shall mean (i) any Affiliate (as defined in Section 14.5 below) that is an assignee of Tenant's entire interest in this Lease, (ii) any other assignee of Tenant's entire interest in this Lease approved by Landlord pursuant to the terms and conditions of this Article 14, and (iii) any sublessee of the entire Office Space portion of the Premises then leased by Tenant for the entire balance of the Lease Term which sublessee is approved by Landlord pursuant to the terms and conditions of this Article 14.
In no event shall the terms of a proposed Transfer provide the Transferee with a right of first offer to all or any portion of the Premises. If Tenant shall desire Landlord's consent to any Transfer, Tenant shall notify Landlord in writing, which notice (the " Transfer Notice ") shall include (i) the proposed effective date of the Transfer, which shall not be less than thirty (30) days nor more than one hundred eighty (180) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the " Subject Space "), (iii) the substantive terms of the proposed Transfer and the consideration therefor, the name and address of the proposed Transferee, and a copy of all existing and/or proposed documentation pertaining to the proposed Transfer, including all existing operative documents to be executed to evidence such Transfer or the agreements incidental or related to such Transfer, (iv) in the case of a proposed assignment of the Lease or a proposed sublease involving three (3) or more floors of the Premises, current financial statements of the proposed Transferee certified by an officer, partner or owner thereof, (v) any other information reasonably required by Landlord, which will enable Landlord to determine the financial responsibility (in the case of a proposed assignment of the Lease or a proposed sublease involving three (3) or more floors of the Premises),

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UNION BANK PLAZA
[Union Bank Lease]


character, and reputation of the proposed Transferee, nature of such Transferee's business and proposed use of the Subject Space, and (vi) such other information as Landlord may reasonably require. Landlord shall approve or disapprove of the proposed Transfer within fifteen (15) days after Landlord's receipt of the applicable Transfer Notice. Any Transfer made without Landlord's prior written consent shall, at Landlord's option, be null, void and of no effect. Whether or not Landlord shall grant consent, Tenant shall, within thirty (30) days after written request by Landlord, reimburse Landlord for all reasonable legal fees and expenses incurred by Landlord in connection with its review of a proposed Transfer; provided, however, in the event that the Transfer is a sublease of other than three (3) or more floors of the Premises and Tenant uses Landlord's approved form to evidence such sublease (with red-lined changes where appropriate), Landlord's legal fees and expenses in connection with the review of such sublease shall not exceed $1,500.00 during the Initial Period, and $3,000.00 during the Extended Term.
Notwithstanding anything in this Lease to the contrary, no restriction in any other tenant or subtenant's lease or sublease restricting the subleasing of space to another tenant in the Real Property shall be enforced by Landlord as to Tenant and/or the other tenant or subtenant so as to prevent or restrict an assignment, sublease or sub-sublease to Tenant if either (A) Landlord has no available space in the Building for direct lease to Tenant of comparable size as the proposed space to be assigned to or sublet by Tenant from such other tenant or subtenant (herein, the " Proposed Sublease Space "), or (B) the Proposed Sublease Space is contiguous to any space in the Building then leased by Tenant under this Lease or is located below the 30th floor of the Building (unless Landlord has available space in the Building for direct lease to Tenant of comparable size as the Proposed Sublease Space and such available space consists of space in the Building that was once leased under this Lease but subsequently terminated by Tenant pursuant to Section 2.4 above and/or Section 2.3.3 of the Tenant Work Letter)
14.2     Landlord's Consent . Landlord shall not unreasonably withhold or condition its consent to any proposed Transfer of the Subject Space to the Transferee on the terms specified in the Transfer Notice. The parties hereby agree that it shall be reasonable under this Lease for Landlord to withhold consent to any proposed Transfer where one or more of the following apply, without limitation as to other reasonable grounds for withholding consent:
14.2.1    The Transferee is of a character or reputation or engaged in a business which is not consistent with the quality of the Building as determined with reference to the then existing tenants of the Building;
14.2.2    The Transferee intends to use the Subject Space for purposes which are not permitted under this Lease;
14.2.3    The Transferee (i) is a governmental agency or instrumentality whose use of the space shall involve the rendering of welfare-related services and/or unusually heavy pedestrian visitor traffic, (ii) is a governmental agency or an instrumentality of a foreign country, (iii) is of a character or reputation, is engaged in a business, or is of, or is associated with, a political orientation or faction or other cause, which is materially inconsistent with the quality of the Building, may result in repeated demonstrations or other events which may disrupt the use, occupancy or quiet enjoyment of the Building by other tenants or occupants or which would otherwise reasonably offend a landlord of a Comparable Building, or (iv) is a governmental

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[Union Bank Lease]


agency or instrumentality which is capable of exercising the power of eminent domain or condemnation; provided, however, if Landlord has voluntarily and directly leased, in the aggregate pursuant to one lease or a series of leases, at least 20,000 rentable square feet of space in the Building to an entity or entities described in clauses (i), (ii), (iii) or(iv) above, such clauses (i), (ii), (iii) or (iv), as the case may be, shall not be applicable to the extent a proposed Transferee is of comparable prestige, character, and reputation and comparable or smaller in size (based on the aggregate amount of rentable square feet voluntarily and directly leased by Landlord to a tenant or tenants described in clauses (i), (ii), (iii) or (iv), as the case may be);
14.2.4    The Transfer will result in more than a reasonable and safe number of occupants per floor within the Subject Space;
14.2.5    In the case of an assignment of the Lease or a sublease involving three (3) or more floors of the Premises, the Transferee is not a party of reasonable financial worth and/or financial stability in light of the responsibilities involved under the Lease on the date consent is requested (with such financial worth and stability to be determined after taking into account any credit enhancements provided by the Transferee as part of the Transfer, but only if such credit enhancements benefit Landlord and are consistent with the credit enhancements accepted by Landlord for direct leases of space in the Building covering comparable obligations as the proposed Transfer with tenants of financial worth and stability comparable to that of the Transferee);
14.2.6    The proposed Transfer would cause Landlord to be in violation of another lease or agreement to which Landlord is a party, or would give an occupant of the Building a right to cancel its lease; Landlord hereby represents that for purposes of this Section 14.2.6, no lease of space in the retail/office tower portion of the Building currently provides any tenant with any exclusive use or restricts the right of Landlord to lease space in the retail/office tower portion of the Building to tenants of any particular type or character; Landlord shall provide Tenant with reasonable written notice of any such provisions or restrictions hereafter included in any lease of space in the retail/office tower portion of the Building; or
14.2.7    Either the proposed Transferee, or any person or entity which directly or indirectly, controls, is controlled by, or is under common control with, the proposed Transferee, is actively negotiating with Landlord in good faith to lease space in the Building at such time.
If Landlord consents to any Transfer pursuant to the terms of this Section 14.2 (and does not exercise any recapture rights Landlord may have under Section 14.3 of this Lease), Tenant may within six (6) months after Landlord's consent, but not later than the expiration of said six-month period, enter into such Transfer of the Premises or portion thereof, upon substantially the same terms and conditions as are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1 of this Lease, provided that if there are any changes in the terms and conditions from those specified in the Transfer Notice such that Landlord would initially have been entitled to refuse its consent to such Transfer under this Section 14.2, Tenant shall again submit the Transfer Notice to Landlord for its approval and other action under this Article 14.

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UNION BANK PLAZA
[Union Bank Lease]


14.3     Landlord's Option as to Subject Space . Notwithstanding anything to the contrary contained in this Article 14, in the event that Tenant contemplates a Transfer (" Contemplated Transfer "), then Tenant shall give Landlord notice (" Intention to Transfer Notice ") of such Contemplated Transfer. The Intention to Transfer Notice shall specify the portion and number of rentable square feet of the Premises which Tenant intends to transfer (" Contemplated Transfer Space "), the contemplated date of the commencement of the term of such Contemplated Transfer (" Contemplated Effective Date "), and the contemplated length of the term of such Contemplated Transfer, and shall specify that such Intention to Transfer Notice is delivered to Landlord pursuant to this Section 14.3 in order to allow Landlord to elect to recapture the Contemplated Transfer Space. Thereafter, Landlord shall have the option, by giving written notice to Tenant within thirty (30) days after receipt of such Intention to Transfer Notice, to recapture such Contemplated Transfer Space upon the basic terms and conditions specified in the Intention to Transfer Notice. In the event such option is exercised by Landlord, this Lease shall be cancelled and terminated (or when appropriate, suspended if the last day of the term of the Contemplated Transfer is not the last day of the Lease Term or when appropriate, the last day of a renewal period and at the end of the suspension period, such Premises, or where appropriate, portion of the Premises, shall be returned to Tenant in the same condition as when received, reasonable wear and tear excepted) with respect to the Contemplated Transfer Space as of the date stated in the Intention to Transfer Notice as of the Contemplated Effective Date until the last day of the term of the Contemplated Transfer. In the event of a recapture by Landlord, if this Lease shall be cancelled with respect to less than the entire Premises, (i) the Rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, (ii) Tenant's parking passes described in Section 28.1 of this Lease shall be subject to reduction as provided in Section 28.1.3 of this Lease, and (iii) this Lease as so amended shall continue thereafter in full force and effect, and upon the request of either party, the parties shall execute written confirmation of the same. If Landlord fails to timely elect to recapture the Contemplated Transfer Space under this Section 14.3, then, for a period of one (1) year (" One Year Period ") commencing on the last day of such thirty (30) day period, Tenant may transfer the Contemplated Transfer Space provided that any such Transfer is upon terms not materially inconsistent with the terms set forth in the Intention to Transfer Notice; provided, however, that any such Transfer shall be subject to the remaining terms of this Article 14. If such a Transfer is not so consummated within the One Year Period (or if a Transfer is so consummated, then upon the expiration of the term of the Transfer for such Contemplated Transfer Space consummated within such One Year Period), or if Tenant desires to effectuate a Transfer during such One Year Period on terms materially inconsistent with the terms set forth in the Intention to Transfer Notice, Tenant shall again be required to submit a new Intention to Transfer Notice to Landlord with respect to any Contemplated Transfer, as provided in this Section 14.3. Tenant may deliver a Transfer Notice and an Intention to Transfer Notice simultaneously or at different times and the periods provided for Landlord's approval following its receipt of the same, as set forth in Sections 14.2 and 14.3 respectively, shall commence upon Landlord's receipt of each such notice notwithstanding the fact that such periods may overlap.
14.4     Effect of Transfer . If Landlord consents to a Transfer, (i) the terms and conditions of this Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy (or a

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[Union Bank Lease]


certified conformed copy) of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, and (iv) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlord's consent, shall relieve Tenant from liability under this Lease. Landlord or its authorized representatives shall have the right at all reasonable times to audit the books, records and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof.
14.5     Non-Transfers . Notwithstanding anything to the contrary contained in this Article 14, an assignment or subletting of all or a portion of the Premises to an Affiliate (as defined below) or occupancy of the Premises by an Affiliate, shall not be deemed a Transfer under this Article 14, provided that Tenant notifies Landlord in writing of any assignment or sublease to an Affiliate and promptly supplies Landlord with any documents or information requested by Landlord regarding such assignment or sublease or such Affiliate, and further provided that such assignment or sublease is not a subterfuge by Tenant to avoid its obligations under this Lease. The term " Affiliate " shall mean (i) any entity which is controlled, controls, or is under common control with the Original Tenant or its parent, (ii) a purchaser of all or substantially all of the assets of, or stock in, the Original Tenant or to a successor of the Original Tenant by merger, consolidation or corporate reorganization (involving solvent parties), or (iii) UnionBanCal Corporation, a Delaware corporation or the Bank of Tokyo-Mitsubishi UFJ, Ltd. " Control ," as used in this Section 14.5, shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding anything to the contrary set forth in this Article 14, Tenant shall not be permitted to assign or sublease all or any portion of the Premises to an Affiliate (or permit occupancy of the Premises by an Affiliate) if such assignment or sublease (or occupancy) would cause a violation of another lease for space in the Building or would give an occupant of the Building a right to cancel its Lease, provided that Landlord has previously notified Tenant of the restrictions which result in such violation or cancellation; and provided further, that for purposes of this Section 14.5 no such restrictive provisions shall prohibit a Transfer to an Affiliate due to the fact the business of such Affiliate includes the conducting or offering of retail financial services to the general public, including banks, savings banks, savings and loan institutions, or thrift and loan companies.
14.6     Business Affiliates . Notwithstanding anything to the contrary contained in the foregoing provisions of this Article 14 (but subject to Section 14.8 below), Tenant shall have the right, without being subject to Landlord's prior consent or Landlord's recapture option in Section 14.3 above, but upon at least ten (10) days' prior written notice to Landlord, to sublease, license or otherwise permit occupancy of up to an aggregate of 15,000 rentable square feet within the Premises which is other than the Retail Space and Vault Space to vendors, consultants or clients of Tenant who have an ongoing business relationship with Tenant such as, for example, Pitney Bowes and Jones Lang LaSalle (each a " Business Affiliate "), which sublease, license or occupancy agreement, as the case may be, to a Business Affiliate shall be on and subject to all of the following conditions: (A) all such Business Affiliates shall be of a reputation comparable to the reputation of other tenants of the Building; (B) all such Business Affiliates shall use the Premises for the Permitted Use and otherwise in conformity with all of the applicable provisions of this Lease; (C) each such sublease, license or occupancy agreement is not a subterfuge by Tenant to avoid its obligations under this Article 14; (D) there shall be no separate demising walls or entrances to the space which is the subject of such sublease, license or

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[Union Bank Lease]


occupancy agreement; (E) each such sublease, license and occupancy agreement shall be subject to and subordinate to all of the terms and provisions of this Lease; (F) prior to the effective date of such occupancy agreement, Tenant shall provide Landlord with the name and address of the occupant and a copy of the agreement under which such occupant is occupying the Premises; and (G) no separate signage is provided to any such Business Affiliate. No such sublease, license or occupancy agreement, as the case may be, shall relieve Tenant from any liability under this Lease. If the occupancy of any such Business Affiliate does not satisfy all of the foregoing conditions, then such occupancy shall be deemed to constitute a Transfer and shall be deemed subject to the provisions of this Article 14.
14.7     Recognition Agreement . In the event that, after the Lease Commencement Date, (i) Tenant desires to enter into a sublease for the remainder of the then-current Lease Term with a proposed subtenant which is not an Affiliate or a Business Affiliate (herein referred to as a " Qualified Subtenant ") where the sublease space consists of either (A) at least one (1) full-floor of the Premises that is not contiguous to another full-floor of the Premises then leased by Tenant hereunder, or (B) two (2) or more contiguous full floors of the Premises (but if the condition in this clause (B) is not initially met, but Tenant subsequently enters into another full floor sublease to a Qualified Subtenant for the remainder of the then-current Lease Term to the same or a different Qualified Subtenant which would result in such condition being satisfied if both subleases were viewed together as one sublease, then such condition shall be deemed satisfied) (herein, a " Qualified Sublease "), and (ii) Tenant requests in connection therewith (which request shall be made (if at all) concurrently with Tenant's request for consent of such Qualified Sublease delivered by Tenant to Landlord pursuant to Section 14.1 above) that Landlord and such Qualified Subtenant enter into a Recognition Agreement (as defined below), then if Tenant and such Qualified Subtenant enter into a sublease (and such sublease and Qualified Subtenant are otherwise consented to by Landlord) pursuant to the other provisions of this Article 14 (such consent by Landlord may be conditioned upon, among the other factors set forth above in this Article 14, that the proposed Qualified Subtenant has sufficient financial wherewithal to not only meet its obligations under the proposed sublease but also under the Recognition Agreement), then Landlord shall provide the Recognition Agreement for such full floor sublease described in clause (A) hereinabove and with respect to the subleases described in clause (B) hereinabove, Landlord shall provide a Recognition Agreement effective as of the later of (1) the effective date of such subsequent sublease and (2) the date Landlord, Tenant and the Qualified Subtenant of such subsequent sublease execute and deliver Landlord's consent to such subsequent sublease. By way of example, only, Landlord shall not be obligated to provide a Recognition Agreement for a sublease of the 3rd floor of the Premises, but if (x) Tenant subsequently enters into a sublease of the 4th floor of the Premises to a Qualified Subtenant for the remainder of the then current Lease Term, (y) the prior sublease of the 3rd floor of the Premises was to a Qualified Subtenant for the remainder of the then-current Lease Term, and (z) such 3rd floor sublease remains in effect, Landlord shall be required to provide a Recognition Agreement for both such subleases effective as of the later of (a) the effective date of such 4th floor sublease and (b) the date Landlord, Tenant and the Qualified Subtenant of such 4th floor sublease execute and deliver Landlord's consent to such 4th floor sublease. As used herein, the " Recognition Agreement " shall mean an agreement between Landlord and the Qualified Subtenant of a Qualified Sublease (the exact form of which shall be negotiated in good faith by Landlord, Tenant and such Qualified Subtenant), which provides that if this Lease is terminated as a result of an Event of Default by Tenant: (I) such Qualified Sublease shall thereupon automatically be converted from

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[Union Bank Lease]


a sublease to an assignment by Tenant and assumption by such Qualified Subtenant (as an assignee) of all of Tenant's rights and obligations under this Lease but only with respect to the subleased space under such Qualified Sublease; and (II) Landlord and such subtenant/assignee shall recognize such assignment as a direct lease between Landlord and such subtenant/assignee for such subleased space at the greater of the Rent payable under the Qualified Sublease or the Rent payable under this Lease with respect to such subleased space and upon all of the same other applicable terms and conditions as set forth in this Lease.
ARTICLE 15
SURRENDER OF PREMISES; OWNERSHIP AND
REMOVAL OF TRADE FIXTURES
15.1     Surrender of Premises . No act or thing done by Landlord or Tenant or any agent or employee of Landlord or Tenant during the Lease Term shall be deemed to constitute a surrender of the Premises by Tenant or an acceptance by Landlord of a surrender of the Premises unless such intent is specifically acknowledged in a writing signed by Landlord and Tenant. The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises.
15.2     Removal of Tenant Property by Tenant . All articles of personal property and all business and trade fixtures, machinery and equipment, furniture and movable partitions owned by Tenant or installed by Tenant at its expense in the Premises, which items are not a part of the tenant improvements or Alterations installed in the Premises, shall remain the property of Tenant, and may be removed by Tenant at any time during the Lease Term as long as Tenant is not in default under this Lease with any applicable cure period having expired. Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article 15 (including Section 15.2.1 below), quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear, casualty (but not including casualty caused by Tenant for which full replacement insurance proceeds are not available to Landlord) and repairs which are specifically made the responsibility of Landlord hereunder excepted. Upon such expiration or termination, subject to the provisions of Section 15.2.1 below, Tenant shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, and such items of furniture, equipment, freestanding cabinet work, and other articles of personal property owned by Tenant or installed or placed by Tenant in the Premises, and such similar articles of any other persons claiming under Tenant, as Landlord has required to be removed at the time Tenant installed such items, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal.

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[Union Bank Lease]


15.2.1     No Obligation to Remove Certain Office Improvements . Notwithstanding anything to the contrary set forth in this Lease, in addition to Tenant's removal obligations in Section 15.2 above, at the end of the Lease Term or earlier termination of this Lease, Tenant shall be obligated to remove, at its expense (i) all items required to be removed by applicable codes and laws at the time Tenant vacates any portion of the Premises, and (ii) except upon notice from Landlord to the contrary, all "specialty improvements" then existing in the Premises (such as, for example, vaults, internal staircases, and raised flooring) to the extent such special improvements were installed in the Premises after the Lease Commencement Date, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from the removal of such items described in clauses (i) and (ii) hereinabove. Notwithstanding anything to the contrary in this Lease, in no event, however, shall Tenant be required to remove from the Premises (A) any such specialty improvements existing in the Initial Premises prior to the Lease Commencement Date, or (B) any other permanently affixed improvements in the Premises which are considered normal and customary business office improvements. In addition, Tenant shall not be obligated to repair normal wear and tear or to repaint or replace wall or floor coverings, or patch or repair small holes (not exceeding 1/4 inch in diameter) in the walls and floors of the Premises.
15.3     Removal of Tenant's Property by Landlord . Any personal property of Tenant not removed by Tenant upon the expiration of the Lease Term, or within five (5) days after a termination by reason of Tenant's default as provided in this Lease, shall be deemed abandoned by Tenant and may be disposed of by Landlord after three (3) days' notice to Tenant in accordance with Sections 1980 through 1991 of the California Civil Code and Section 1174 of the California Code of Civil Procedure, or in accordance with any laws or judicial decisions which may supplement or supplant those provisions from time to time.
15.4     Landlord's Actions on Premises . Tenant hereby waives all claims (not arising out of Landlord's negligence or willful misconduct) for damages or other liability in connection with Landlord's reentering and taking possession of the Premises or removing, retaining, storing or selling the property of Tenant as herein provided, and Tenant hereby indemnifies and holds Landlord harmless from any such damages or other liability, and no such re-entry shall be considered or construed to be a forcible entry.
ARTICLE 16
HOLDING OVER
If Tenant holds over after the expiration of the Lease Term hereof, with or without the express or implied consent of Landlord, such tenancy shall be from month-to-month only, and shall not constitute a renewal hereof or an extension for any further term, and in such case Base Rent shall be payable at a monthly rate equal to the greater of (i) one hundred fifty percent (150%) of the Base Rent applicable during the last rental period of the Lease Term under this Lease, or (ii) the fair market face or stated rental rate for the Premises as of the end of the Lease Term; provided however that, notwithstanding the foregoing, in the event Landlord has executed a letter of intent or lease proposal with another tenant to occupy all or any portion of the Premises, Base Rent shall he payable at a monthly rate equal to the greater of (A) one hundred seventy-five percent (175%) for the first three (3) months, and two hundred percent (200%)

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[Union Bank Lease]


thereafter, of the Base Rent applicable during the last rental period of the Lease Term under this Lease, or (B) the fair market face or stated rental rate for the Premises as of the end of the Lease Term. For the purpose of this Article 16, "fair market face or stated rental rate" shall mean the face or stated rental rate then being paid on new leases for non-encumbered, non-sublease, non-equity space comparable to the Premises located in the Comparable Buildings, which new leases contain tenant concessions in amounts then customarily provided by the landlords of the Comparable Buildings with respect to the lease of such space. In the event that on or before thirty (30) days following the end of the Lease Term (for purposes of this Article 16, the " Outside Agreement Date ") Landlord and Tenant are unable to agree on the fair market face or stated rental rate, then each party shall make a separate determination of such rate and provide such determination in writing to the other party within five (5) business days, and such determination shall be submitted to arbitration in accordance with the same procedures as set forth in Sections 1.5.6.5.1 through 1.5.6.5.5 of this Lease. Any month-to-month tenancy hereunder shall be subject to every other term, covenant and agreement contained herein. Nothing contained in this Article 16 shall be construed as consent by Landlord to any holding over by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord harmless from all loss, costs (including reasonable attorneys' fees) and liability resulting from such failure, including, without limiting the generality of the foregoing, any claims made by any succeeding tenant founded upon such failure to surrender, and any lost profits to Landlord resulting therefrom.
ARTICLE 17
ESTOPPEL CERTIFICATES
Within ten (10) days following a request in writing by Landlord, Tenant shall execute and deliver to Landlord an estoppel certificate, which, as submitted by Landlord, shall be substantially in the form of Exhibit G, attached hereto (or such other form as may be required by any prospective mortgagee or purchaser of the Building, or any portion thereof), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information reasonably requested by Landlord or Landlord's mortgagee or prospective mortgagee. Tenant shall execute and deliver whatever other instruments may be reasonably required for such purposes. Failure of Tenant to timely execute and deliver such estoppel certificate or other instruments shall constitute an acceptance of the Premises and an acknowledgment by Tenant that statements included in the estoppel certificate are true and correct, without exception. Landlord hereby agrees to provide to Tenant an estoppel certificate signed by Landlord, containing the same types of information, and within the same periods of time, as set forth above, with such changes as are reasonably necessary to reflect that the estoppel certificate is being granted and signed by Landlord to Tenant, rather than from Tenant to Landlord or a lender.

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[Union Bank Lease]


ARTICLE 18
SUBORDINATION
Landlord represents and warrants to Tenant that as of the date of this Lease, Landlord is the fee title owner of the Building and Real Property, unencumbered by any ground lease. This Lease shall be subject and subordinate to all future ground or underlying leases of the Real Property, if any, and to the lien of any mortgages or trust deeds, now or hereafter in force against the Real Property and the Building, and to all renewals, extensions, modifications, consolidations and replacements thereof, and to all advances made or hereafter to be made upon the security of such mortgages or trust deeds, unless the holders of such mortgages or trust deeds, or the lessors under such ground lease or underlying leases, require in writing that this Lease be superior thereto. Concurrently with the execution and delivery of this Lease, Landlord and Tenant shall execute and deliver to the other party, and Landlord shall cause the mortgagee under the existing deed of trust on the Real Property to execute and deliver to Tenant, a subordination, non-disturbance and attornment agreement substantially in the form of Exhibit H attached hereto. Notwithstanding any contrary provision of this Article 18, in consideration of, and as a condition precedent to, Tenant's agreement to be bound by the terms of this Article 18 (including the subordination of this Lease to all future ground leases, mortgages or deeds of trust affecting the Real Property and/or Building), Landlord agrees to provide Tenant with commercially reasonable non-disturbance agreement(s) providing Tenant with protections in sum and substance essentially comparable to those provided in Exhibit H attached hereto, and otherwise reasonably satisfactory to and in favor of Tenant from any ground or underlying lessors, mortgage holders or lien holders of Landlord who come into existence at any time after the date hereof and prior to the expiration of the Lease Term. Tenant covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage, or if any ground or underlying lease is terminated, to attorn to the purchaser upon any such foreclosure sale, or to the lessor of such ground or underlying lease, as the case may be, if so requested to do so by such purchaser or lessor, and to recognize such purchaser or lessor as the lessor under this Lease. Such commercially reasonable non-disturbance agreement(s) shall include the obligation of any such successor landlord to recognize Tenant's offset rights specifically set forth in this Lease (including, without limitation, Tenant's offset rights set forth in Section 7.2 above, and Tenant's offset rights set forth in the Tenant Work Letter). Tenant shall, within ten (10) days of request by Landlord, and receipt of the commercially reasonable non-disturbance agreement(s) reasonably satisfactory to and in favor of Tenant described above, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any such mortgages, trust deeds, ground leases or underlying leases. Tenant waives the provisions of any current or future statute, rule or law which may give or purport to give Tenant any right or election to terminate or otherwise adversely affect this Lease and the obligations of the Tenant hereunder in the event of any foreclosure proceeding or sale.


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ARTICLE 19
DEFAULTS; REMEDIES
19.1     Events of Default . The occurrence of any of the following shall constitute a default of this Lease by Tenant, and all references in this Lease to a default of or under this Lease or the provisions or obligations hereof shall mean the occurrence of any of such events:
19.1.1    Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, within five (5) business days of notice that the same was not paid when due, which notice shall be in addition to, and not in lieu of, any notice required under California Code of Civil Procedure Section 1161 or any similar or successor law; or
19.1.2    Any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant; provided however, that any such notice shall be in addition to, and not in lieu of, any notice required under California Code of Civil Procedure Section 1151 or any similar or successor law; and provided further that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30)-day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure said default as soon as possible.
19.2     Remedies Upon Default . Upon the occurrence of any event of default by Tenant, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity, the option to pursue anyone or more of the following remedies, each and all of which shall be cumulative and nonexclusive.
19.2.1    Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefor; and Landlord may recover from Tenant the following:
(i)    The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus
(ii)    The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus
(iii)    The worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

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(iv)    Any other amount reasonably necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease as allowed by applicable law; plus
(v)    At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law.
The term "rent" as used in this Section 19.2 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease to Landlord. As used in Sections 19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by allowing interest at the Interest Rate, as that term is defined in Section 29.34 of this Lease. As used in Section 19.2.l(iii) above, the "worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%).
19.2.2    Landlord shall have the remedy described in California Civil Code Section 1951.4 ( i.e. , lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due.
19.3     Sublessees of Tenant . In the event that Landlord elects to terminate this Lease on account of any default by Tenant, as set forth in this Article 19, subject to and except as provided in Section 14.7 above, Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession entered into by Tenant and affecting the Premises or any portion thereof, or may, in Landlord's sole discretion, succeed to Tenant's interest in such subleases, licenses, concessions or arrangements. In the event of Landlord's election to succeed to Tenant's interest in any such subleases, licenses, concessions or arrangements, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder.
19.4     Form of Payment After Default . Following the occurrence of an event of default by Tenant, Landlord shall have the right to require that any or all subsequent amounts paid by Tenant to Landlord hereunder, whether in the cure of the default in question or otherwise, be paid in the form of cash, money order, cashier's or certified check drawn on an institution acceptable to Landlord, or by other means reasonably approved by Landlord, notwithstanding any prior practice of accepting payments in any different form.
19.5     Waiver of Default . No waiver by Landlord or Tenant of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other or later violation or breach of the same or any other of the terms, provisions, and covenants herein contained. Forbearance by Landlord in enforcement of one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. The acceptance of any Rent hereunder by Landlord

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following the occurrence of any default, whether or not known to Landlord, shall not be deemed a waiver of any such default, except only a default in the payment of the Rent so accepted.
19.6     Efforts to Relet . For the purposes of this Article 19, Tenant's right to possession shall not be deemed to have been terminated by efforts of Landlord to relet the Premises or any portion thereof (not including the actual taking of possession of the Premises or any portion thereof by any such new tenant), by its acts of maintenance or preservation with respect to the Premises or any portion thereof, or by appointment of a receiver to protect Landlord's interests hereunder. The foregoing enumeration is not exhaustive, but merely illustrative of acts which may be performed by Landlord without terminating Tenant's right to possession.
19.7     Landlord Default .
19.7.1     General . Notwithstanding anything to the contrary set forth in this Lease, Landlord shall not be in default in the performance of any obligation required to be performed by Landlord pursuant to this Lease unless Landlord has failed to perform such obligation within thirty (30) days after the receipt of notice from Tenant specifying in detail Landlord's failure to perform; provided, however, if the nature of Landlord's obligation is such that more than thirty (30) days are required for its performance, then Landlord shall not be in default under this Lease if it shall commence such performance within such thirty (30) day period and thereafter diligently pursue the same to completion. Upon any such default by Landlord under this Lease, Tenant may, except as otherwise specifically provided in this Lease to the contrary and subject to the provisions of Section 29.20 below, exercise any of its rights provided in law or in equity.
19.7.2     Abatement of Rent . In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof, as a result of (i) any repair, maintenance or alteration performed by Landlord, or which Landlord failed to perform, after the Lease Commencement Date and required by this Lease, which substantially interferes with Tenant's use of the Premises, (ii) any failure to provide services or access to the Premises or the Parking Areas, regardless of whether caused by circumstances beyond Landlord's control, (iii) the presence of Hazardous Materials in, on or around the Building taking into account the standards and guidelines included in the definition of applicable laws with respect to Hazardous Materials, which pose a significant health risk to occupants of the Premises and are not caused by Tenant or any of the Tenant Parties, or (iv) because of the occurrence of a casualty (each such set of circumstances as set forth in items (i), (ii), (iii) and (iv), above, to be known as an " Abatement Event "), then Tenant shall give Landlord notice of such Abatement Event, and if such Abatement Event continues for five (5) consecutive business days after Landlord's receipt of any such notice or ten (10) days after Landlord's receipt of any such notice(s) in any consecutive twelve (12) month period (the " Eligibility Period "), then the Base Rent and Tenant's Share of Direct Expenses and Tenant's obligation to pay for parking shall be abated or reduced, as the case may be, retroactive to the date of the commencement of the Abatement Event, for such time that Tenant continues to be so prevented from using, and does not use, the Premises or a portion thereof, in the proportion that the rentable area of the portion of the Premises that Tenant is prevented from using, and does not use, bears to the total rentable area of the Premises; provided, however, in the event that Tenant is prevented from using, and does not use, a portion of the Premises for a period of time in excess of the Eligibility Period and the remaining portion of the Premises is not sufficient to allow Tenant to effectively conduct its business therein, and if

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Tenant does not conduct its business from such remaining portion, then for such time after the commencement of the Abatement Event during which Tenant is so prevented from effectively conducting its business therein, the Base Rent and Tenant's Share of increases in Direct Expenses and Tenant's obligation to pay for parking for the entire Premises shall be abated for such time as Tenant continues to be so prevented from using, and does not use, the Premises for the purpose of conducting business therein. If, however, Tenant reoccupies any portion of the Premises during such period for the purpose of conducting business therein, the Rent allocable to such reoccupied portion, based on the proportion that the rentable area of such reoccupied portion of the Premises bears to the total rentable area of the Premises, shall be payable by Tenant during the period Tenant reoccupies such portion of the Premises. If Tenant's right to abatement occurs during a free rent period which arises after the Lease Commencement Date, Tenant's free rent period shall be extended for the number of days that the abatement period overlapped the free rent period (the " Overlap Period "). Landlord shall have the right to extend the expiration date of this Lease for a period of time equal to the Overlap Period if Landlord sends a notice to Tenant of such election within ten (10) days following the end of the extended free rent period. Subject to the provisions of Section 10.1 respecting personal injury or damage to Tenant's property, such right to abate Base Rent, Tenant's Share of Direct Expenses and parking charges shall be Tenant's sole and exclusive remedy at law or in equity for an Abatement Event; provided, however, that if Landlord has not cured such Abatement Event within one hundred eighty (180) days after receipt of notice from Tenant, Tenant shall have the right to terminate this Lease during the first five (5) business days of each calendar month following the end of such 180-day period until such time as Landlord has cured the Abatement Event, which right may be exercised only by delivery of notice to Landlord (the " Abatement Event Termination Notice ") during such five business-day period, and shall be effective as of a date set forth in the Abatement Event Termination Notice (the " Abatement Event Termination Date "), which Abatement Event Termination Date shall not be less than ten (10) business days, and not more than six (6) months, following the delivery of the Abatement Event Termination Notice. If Tenant's right to abatement occurs because of an eminent domain taking and/or because of damage or destruction to the Premises, Tenant's abatement period shall continue until Tenant has been given sufficient time and sufficient access to the Premises to rebuild that portion of the Premises, if any, which it is required to rebuild pursuant to this Lease and to install its property, furniture, fixtures, and equipment and to move in over a weekend. To the extent Tenant is entitled to abatement without regard to the Eligibility Period, because of an event described in Articles 11 or 13 of this Lease, then the Eligibility Period shall not be applicable. Notwithstanding the foregoing, Tenant shall not have the right to terminate this Lease pursuant to the terms of this Section 19.7.2, if (A) as of the date of delivery by Tenant of the Abatement Event Termination Notice, the first trust deed holder of the Building (the " Bank ") has recorded a notice of default on the Building or filed a notice evidencing a legal action by the Bank against Landlord on the Building, and (B) within ten (10) business days following the date of the Abatement Event Termination Notice the Bank notifies Tenant of its intent to proceed to gain possession of the Building, the Bank diligently proceeds to gain possession of the Building, and, to the extent the Bank does gain possession of the Premises, the Bank diligently proceeds to cure such Abatement Event. In addition, Tenant shall not have the right to terminate this Lease pursuant to the foregoing terms of this Section 19.7.2 if the Abatement Event otherwise giving rise to such termination right is due to a casualty pursuant to Article 11 or a taking pursuant to Article 13, it being agreed that Tenant's termination rights, if any, with respect to any such

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damage or destruction or taking shall be governed by and set forth in Articles 11 and 13, respectively, and not this Section 19.7.2. Except as provided in this Section 19.7.2, nothing contained herein shall be interpreted to mean that Tenant is excused from paying Rent due hereunder.
ARTICLE 20
COVENANT OF QUIET ENJOYMENT
Landlord covenants that Tenant, on paying the Rent, charges for services and other payments herein reserved and on keeping, observing and performing all the other terms, covenants, conditions, provisions and agreements herein contained on the part of Tenant to be kept, observed and performed, shall, during the Lease Term, peaceably and quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof without interference by any persons lawfully claiming by or through Landlord.
ARTICLE 21
BUILDING RENOVATION
21.1     Elevator Operating Systems; Re-Painting of Building Exterior . On or before the Extended Term Commencement Date, subject to delays caused by Tenant and/or Force Majeure events, Landlord shall, at is expense (which shall not be included in Operating Expenses), complete the following work (collectively, the " Upgrade Work "): (i) upgrade the elevator operating system in the Building in accordance with the plans and specifications attached hereto as Exhibit I ; and (ii) re-paint the exterior of the Building based upon a color scheme selected by Landlord from the color schemes identified on Exhibit J attached hereto.
21.2     Building Enhancement . On or before December 31, 2009, subject to delays caused by Tenant and/or Force Majeure events, Landlord shall complete a Building enhancement program, which program shall consist of completing a lighting retrofit in the Building Parking Area, converting exit signs in the Building to LED exit signs and installing stairwell motion sensors in the Building. Such Building enhancement program shall be completed at Landlord's sole cost and expense, and shall not be included as a part of Operating Expenses. Furthermore, Landlord may, in its sole discretion, at any time during the Lease Term and any Option Term otherwise renovate portions of the Building or the Real Property, as long as such additional renovation work (i) does not materially impair the overall quality of the Building and Real Property, (ii) is performed in such a manner so as to minimize interference with Tenant's access to the Premises, (iii) does not alter Tenant's Current Monument Sign (as defined below), except to the extent permitted under Article 23 of this Lease, and (iv) does not violate the restrictions set forth in Section 29.39 below. Landlord shall have the sole right to determine the nature, extent, and specifications for such Building enhancement program and any other such renovations, provided that in no event shall such Building enhancement program and/or any other such renovations lessen the value or materially impair the overall quality of the Building and the Real Property.

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21.3     Limitation on Liability . In connection with the Upgrade Work, the Building enhancement or other renovation work described above in this Article 21, Landlord may, among other things, erect scaffolding or other necessary structures in the Building or on the Real Property, limit or eliminate access to portions of the Real Property, including portions of the common areas, or perform work in the Building or on the Real Property, which work may create noise, dust or leave debris in the Building or on the Real Property. Subject to the provisions of Section 19.7.2, Tenant hereby agrees that such Upgrade Work, Building enhancement or other renovation work shall in no way constitute a constructive eviction of Ten ant nor entitle Tenant to any abatement of Rent, and Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant's business arising from such Upgrade Work, Building enhancement work or other renovations, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or, subject to the provisions of Section 10.1 of this Lease, of Tenant's personal property or improvements resulting from such work or Landlord's actions in connection therewith. Landlord shall provide Tenant with reasonable prior notice of any substantial Upgrade Work, Building enhancement work or other renovations to the Building or Real Property affecting Tenant's access to the Building or the Premises. Notwithstanding anything above to the contrary, Landlord agrees that, except in case of emergency, in connection with the performance of the Upgrade Work, the Building enhancement or other renovation work (excluding any repair or restoration work following a casualty), such work will be performed (i) in such a manner and at such time as Tenant, its employees and customers will not be denied use of, and access to, the Premises, and (ii) prior to 8:00 a.m. or after 5:00 p.m. on weekdays or anytime on weekends or Holidays if such work will create unreasonably prolonged loud noise or vibrations that can be heard or felt in the Premises and unreasonably interfere with Tenant's conduct of normal business operations in the Premises.
ARTICLE 22
EXISTING LEASE TERMINATION
Prior to the Lease Commencement Date, Tenant has occupied portions of the Office Space and Storage Space, along with certain additional space in the Building, pursuant to that certain Office Lease dated January 31, 1992 (the " Original Existing Office Lease ") between The Equitable-Nissei Figueroa Company, a California joint venture (" Equitable "), Landlord's predecessor-in-interest, and Union Bank, a California corporation (" Union Bank "), Tenant's predecessor-in-interest, as amended by (i) that certain letter agreement dated August 17, 1992, (ii) that certain letter agreement dated January 9, 1993, (iii) that certain letter agreement dated July 28, 1993, (iv) that certain letter agreement dated October 1, 1993, (v) that certain Amendment to Lease and Agreement Re Added Space dated August 20, 1998, (vi) that certain Second Amendment to Lease Re: Extension of Term dated February 18, 2000, and (viii) that certain Third Amendment to Lease Agreement Re: Added Space dated August 25, 2000 (the Original Existing Office Lease together with such amendments, collectively, the " Existing Office Lease "). In addition, prior to the Lease Commencement Date, Tenant has occupied portions of the Retail Space and Vault Space pursuant to that certain Retail Lease dated January 31, 1992 (the " Original Existing Retail Lease ") between Equitable and Union Bank, as amended by (A) that certain letter agreement dated August 17, 1992, (B) that certain Amendment to Lease and Agreement Re Added Space dated August 20, 1998 and (C) that certain Second

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Amendment to Lease Re: Extension of Term (Retail Lease) dated February 18, 2000 (the Original Existing Retail Lease together with such amendments, collectively, the " Existing Retail Lease "). The Existing Office Lease and the Existing Retail Lease are collectively referred to herein as the " Existing Leases ". The parties hereby acknowledge and agree that, except as otherwise provided herein below, the Existing Leases shall terminate as of 11:59 P.M. on the day before the Lease Commencement Date (the " Existing Leases Termination Date "); provided, however, that notwithstanding such termination or anything in the Existing Leases to the contrary, except as provided in Section 2.3 of the Tenant Work Letter attached hereto, Tenant shall not be obligated to vacate and surrender possession of the Premises to Landlord since Tenant will be leasing the Premises from Landlord pursuant to this Lease immediately following such termination of the Existing Leases. Notwithstanding the termination of the Existing Leases as provided hereinabove, Landlord and Tenant shall each remain liable for (1) all of their respective obligations under the Existing Leases arising prior to, and attributable to the period of time prior to, the Existing Leases Termination Date, and (2) all of their respective indemnification and other obligations which expressly survive termination of the Existing Leases, including the obligation of (x) Landlord to pay to Tenant any applicable Tenant Refund (as defined in and pursuant to Section 4.3.2 of the Original Existing Office Lease and Original Existing Retail Lease, as applicable), and (y) Tenant to pay to Landlord any applicable Excess (as defined in Section 4.3.1 of the Original Existing Office Lease and Original Existing Retail Lease), less the amounts, if any, paid during such Expense Year as Estimated Excess (as defined in Section 4.3.3 of the Original Existing Office Lease and Original Existing Retail Lease) pursuant to Section 4.3.2 of the Original Existing Office Lease and Original Existing Retail Lease, as applicable.
ARTICLE 23
SIGNS
23.1     Exterior Signage . As long as the Original Tenant and/or a Qualified Transferee satisfy the Minimum Occupancy Threshold (as such terms are defined in Section 23.6 below): (i) the Building and the "superblock" on which it is located shall continue be called " Union Bank Plaza " or any replacement name for the Original Tenant or any Qualified Transferee described in Section 23.5 below; (ii) Tenant shall be entitled to maintain its current exterior signage, in its form existing as of the date of this Lease, (A) located on the east and west facing Building top parapet walls (the " Current Rooftop Sign "), and (B) located on the exterior wall above the ground floor of the Building (the " Current Above Ground Floor Exterior Sign" ); (iii) the Current Rooftop Sign (as may be modified and/or replaced by the Modified/New Rooftop Sign, as defined and provided below) and the Current Second Floor Exterior Sign (collectively, the " Exterior Building Signs ") shall be the sole and exclusive signage located on the east and west facing Building top parapet walls, or anywhere on the exterior of the Building above the ground floor wall of the Building; provided, however, that with Tenant's prior written consent, which consent shall not be unreasonably withheld or delayed, Landlord shall have the right (at its sole cost and expense and not as part of Operating Expenses) to make modifications to all or a portion of the Exterior Building Signs, as long as such modifications do not, in Tenant's reasonable judgment, alter the color, or decrease the visibility or dimensions, of the Exterior Building Signs or change in any other way Tenant's then current standard logo or identification criteria and scheme (excluding size criteria, so long as such exclusion does not require Tenant to accept a

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reduction in the size of Tenant's current Exterior Building Signs) so long as such current standard logo or identification criteria and scheme (excluding size criteria, so long as such exclusion does not require Tenant to accept a reduction in the size of Tenant's current Exterior Building Signs) is comparable to that of other major national banks and financial institutions (the " Tenant Signage Criteria "); (iv) Landlord shall not place or permit to be placed any sign in or on the Building or Real Property (excluding any signs currently existing in or on the Building or Real Property as of the Lease Commencement Date) which is a Prohibited Sign (as defined below); and (v) Landlord shall not place or permit to be placed any sign on the Building or any other areas of the Real Property located outside the Building which contains the name and/or logo of an entity whose primary business is the operation of a retail bank (except to identify (A) any tenant which leases the Retail Space from Landlord or any other space in the Real Property after the date the Retail Space is no longer leased to Tenant or a Qualified Transferee under this Lease, if applicable, but, notwithstanding the foregoing, which identification sign shall not be placed anywhere on the exterior of the Building above the ground floor wall of the Building, and/or (B) any existing tenant of the Real Property [and/or such existing tenant's assignees or sublessees] pursuant to signage rights contained in such existing tenant's lease as of the date of this Lease that are identified on Exhibit M attached hereto which sets forth the identity of each such tenant and lease and the provision contained in each such lease which allows for such signage), Tenant shall be responsible, at its sale cost and expense, throughout the Lease Term, to repair and maintain the Exterior Building Signs in a first-class condition and appearance. In the event that at any time during the Lease Term or any Option Term the Original Tenant and/or a Qualified Transferee fails to satisfy the Minimum Occupancy Threshold and such failure continues for thirty (30) days following receipt of notice from Landlord, Landlord shall at any time thereafter have the right to (1) require Tenant to remove all or any of the Exterior Building Signs and/or (2) change the name of the Building and the "superblock" on which it is located to another name (or discontinue naming the Building and the "superblock" on which it is located as "Union Bank Plaza" or any replacement name for the Original Tenant or any Qualified Transferee described in Section 23.5 below). Upon the expiration or earlier termination of this Lease, or upon the earlier exercise by Landlord of its right to cause the removal of any of the Exterior Building Signs due to the failure by the Original Tenant and a Qualified Transferee to satisfy the Minimum Occupancy Threshold as set forth in Section 23.6 below, Tenant shall, at its cost and expense, cause all of the Exterior Building Signs (or those designated by Landlord for removal due to the failure by the Original Tenant and a Qualified Transferee to satisfy the Minimum Occupancy Threshold) to be removed and repair all damage to the Building resulting from such removal.
23.1.1     Modified/New Rooftop Sign . Subject to the approval of all applicable governmental authorities, compliance with all applicable laws, and compliance with all recorded covenants, conditions and restrictions affecting the Real Property as of the date of execution and delivery of this Lease (and any hereafter recorded covenants, conditions and restrictions affecting the Real Property) (collectively, the " Signage Restrictions "), Tenant may (i) modify the Rooftop Sign to install an illumination system therefor, or (ii) replace the Current Rooftop Sign with a new exterior rooftop sign which may be illuminated and shall in all events be located in the same approximate location on the east and west facing Building top parapet walls as exists as of the Lease Commencement Date (collectively, the " Modified/New Rooftop Sign ").

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23.1.2     Specifications . The graphics, materials, color, design, lettering, lighting, size, specifications, manner of affixing and location of the Modified/New Rooftop Sign shall be consistent with Tenant's signage and graphics program and subject to Landlord's prior approval, which approval shall not be unreasonably withheld, conditioned or delayed and shall be granted if (i) the size of the Modified/New Rooftop Sign is substantially the same size or smaller than the Current Rooftop Sign, and (ii) the composition of the Modified/New Rooftop Sign is either comparable or better in quality to the Current Rooftop Sign or consistent with the Tenant Signage Criteria (but the Modified/New Rooftop Sign shall in all events contain the same name and logo as exist on the Current Rooftop Sign as of the Lease Commencement Date or such other replacement name and logo permitted pursuant to Section 23.5 below). Notwithstanding anything in this Lease to the contrary, (A) Tenant shall be solely responsible for obtaining all required governmental approvals with respect to the Modified/New Rooftop Sign, provided that Landlord shall fully cooperate, at no expense to Landlord, and otherwise use its commercially reasonable efforts to assist Tenant in connection with Tenant's efforts to obtain such approvals, (B) provided such failure is not due to the negligence or willful misconduct of Landlord, Landlord shall have no liability to Tenant in the event Tenant fails to obtain such required approvals, and (C) such required approvals shall in no event be considered a condition precedent to Tenant obligations under this Lease.
23.1.3     Costs of Installation . Except as provided in Section 23.1.4 below, Tenant shall pay for all costs and expenses related to the design, installation and construction of the Modified/New Rooftop Sign. Tenant shall install the Modified/New Rooftop Sign in compliance with all applicable laws, utilizing contractors reasonably approved by Landlord, and subject to the applicable provisions of Article 8 above. In connection with the installation of the Modified/New Rooftop Sign, Landlord shall fully cooperate, at no expense to Landlord, with Tenant to provide Tenant's contractors access to the roof for purposes of installing such Modified/New Rooftop Sign.
23.1.4     Signage Allowance . Notwithstanding anything to the contrary contained in the foregoing, Tenant shall be entitled to receive from Landlord a one-time tenant improvement allowance (the " Signage Allowance ") in an amount up to, but not exceeding, Five Hundred Thousand Dollars ($500,000.00) to help reimburse Tenant for the costs (collectively, the "Signage Costs") actually incurred and paid for by Tenant for the design, purchase, construction, permitting and installation of the Modified/New Rooftop Sign (collectively, the " Signage Work ") performed during the period from and after the Lease Commencement Date until the Outside Disbursement Date (as defined in the Tenant Work Letter) (the " Signage Allowance Period "). Landlord shall disburse the Signage Allowance on a progress payment basis as the Signage Work is performed pursuant to Landlord's commercially reasonable draw cycle and disbursement process, and following Landlord's receipt of: (i) written request for payment from Tenant accompanied by appropriate invoices and paid receipts evidencing that such amounts were paid and mechanic's lien releases from all contractors, subcontractors and other persons or entities performing such Signage Work reasonably satisfactory to Landlord; and (iii) all other information reasonably requested by Landlord. In no event shall Landlord be obligated to make disbursements pursuant to this Section 23.1.4: (A) in a total amount which exceeds the Signage Allowance; (B) for any Signage Work undertaken prior to or after the Signage Allowance Period; or (C) with respect to a request for disbursement received by Landlord prior to or after the Signage Allowance Period. Tenant shall not be entitled to receive

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in cash or as a credit against any rental or otherwise, any portion of the Signage Allowance not used to reimburse Tenant for the actual Signage Costs paid for by Tenant.
23.2     Monument Signage . During the Lease Term, as long as the Original Tenant and/or a Qualified Transferee satisfy the Minimum Occupancy Threshold, Tenant shall be entitled to maintain its current exterior monument signage located on the plaza adjacent to the Building, in the form of such signage existing as of the date of this Lease (" Current Monument Signage ", together with the Building Exterior Signs, collectively, the " Exterior Signs "); provided that with Tenant's prior written consent, which consent shall not be unreasonably withheld or delayed, Landlord shall have the right (at its sole cost and expense and not as part of Operating Expenses) to make modifications to all or a portion of the Current Monument Signage, as long as such modifications do not, in Tenant's reasonable judgment, alter the color or decrease the visibility or dimensions or deviate from the Tenant Signage Criteria, of the Current Monument Signage. Tenant shall be responsible, at its sole cost and expense, throughout the Lease Term, to repair and maintain the Current Monument Signage in a first-class condition and appearance, and any warranties given by the manufacturers of the Current Monument Signage, if the same is modified by Landlord, shall inure to Tenant's benefit. In the event that at any time during the Lease Term or any Option Term the Original Tenant or a Qualified Transferee fails to satisfy the Minimum Occupancy Threshold, and if such failure continues for thirty (30) days after notice from Landlord, Landlord shall at any time thereafter have the right to require Tenant to remove the Current Monument Signage. Upon the expiration or earlier termination of this Lease or loss of use of such Current Monument Signage pursuant to the foregoing, Tenant shall, at its cost and expense, cause the Current Monument Signage to be removed and repair all damage to the Real Property caused by such removal.
23.3     Interior Signage . Tenant shall be entitled, at its sole cost and expense (subject to application of the Tenant Improvement Allowance, as defined in the Tenant Work Letter), to identification signage outside the entry doors of those portions of the Premises which are other than the Retail Space and Vault Space (but Tenant may retain all existing signage relating to the Retail Space and Vault Space located within such spaces or inside of the Building on or adjacent to such spaces). The location, quality, design, style, lighting and size of such signage shall be subject to Landlord's prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed, and with respect to multi-tenant floors in the Building, shall be consistent with the Landlord's Building standard signage program; provided, however, Landlord hereby approves of Tenant's identification signs currently existing as of the date of this Lease that are located outside of the Premises on the floors on which the of the Premises are located. Upon the expiration or earlier termination of this Lease, Tenant shall be responsible, at its sole cost and expense, for the removal of such signage and the repair of all damage to the Building caused by such removal.
23.4     Prohibited Signage and Other Items . Except for the Exterior Signs, any signs, notices, logos, pictures, names or advertisements which are installed and that have not been individually approved by Landlord may be removed upon thirty (30) days' prior notice by Landlord to Tenant at the sole expense of Tenant. Other than as specifically permitted in Sections 23.1, 23.2 or 23.3 above, Tenant may not install any signs on the exterior or roof of the Building or in the common areas of the Building or the Real Property. Any signs (other than the Exterior Signs), window coverings, or blinds (even if the same are located behind the Landlord

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approved window coverings for the Building), or other items visible from the exterior of the Premises or Building (other than Alterations, the standard of approval for which shall be governed by the provisions of Section 8.1) are subject to the prior approval of Landlord acting reasonably and in good faith based upon standards generally employed by Comparable Landlords for the Comparable Buildings (except that Landlord may, other than with respect to signs located within the Retail Space that are consistent with the Tenant Signage Criteria, withhold such approval in its sole discretion with respect to any signs, window coverings or blinds which are visible from the exterior of the Building other than Building standard window coverings or blinds); provided, however, Landlord hereby approves of Tenant's signs, window coverings and blinds that are currently visible from the exterior of the Premises or Building as of the date of this Lease.
23.5     Transferability of Exterior Signs and Right to Building Name . Except as expressly set forth below in this Section 23.5, the rights to the Exterior Signs and the right to have the Building named "Union Bank Plaza" pursuant to Section 23.1 above or any replacement name for the Original Tenant or any Qualified Transferee described herein below are personal to the Original Tenant and when appropriate, any Qualified Transferee, and may not be transferred by the Original Tenant and when appropriate, any Qualified Transferee, or used by anyone else, and the name and accompanying logo on the Exterior Signs, and the name of the Building, may not be changed. Notwithstanding the foregoing, subject to Tenant's compliance with the conditions set forth in clauses (1) and (2) herein below, the Original Tenant and when appropriate, any Qualified Transferee, shall have the right, at its sole cost and expense, to: (i) transfer its rights to the Exterior Signs and the rights to the name of the Building as "Union Bank Plaza" to a Qualified Transferee in connection with and as part of a Transfer to a Qualified Transferee, and (A) change the name and accompanying logo on the Exterior Signs to reflect the name and accompanying logo of such Qualified Transferee so long as such changed name and logo are the same name and logo on all Exterior Signs and are the only name and logo on each such Exterior Sign, and (B) change the name of the Building to reflect the name of such Qualified Transferee; and (ii) in the event the Original Tenant (or such Qualified Transferee to which any such signage and Building name rights have been transferred pursuant to clause (i) hereinabove) changes its company name, to change the name and accompanying logo on the Exterior Signs, and the name of the Building, to reflect such applicable company name change. In connection with and as a condition precedent to any such transfer of Tenant's rights to the Exterior Signs and Building name to a Qualified Transferee and/or any such name and/or logo changes described hereinabove: (1) Tenant shall reimburse Landlord for all costs, including without limitation the Name Change Costs (as defined herein below), incurred by Landlord in connection with any such changes, which reimbursement shall be made within thirty (30) days after Tenant's receipt of Landlord's invoices therefor; and (2) any name and/or logo changes on the Exterior Signs and Building name change to reflect the identity of any Qualified Transferee pursuant to clause (i) hereinabove or any such name change pursuant to clause (ii) hereinabove shall: (x) be subject to Landlord's prior approval, which shall not be withheld so long as such name and logo changes do not constitute Objectionable Names/Logos (as defined in Section 23.6 below); and (y) not result in an increase in the size of any of the Exterior Signs. " Name Change Costs " as used hereinabove shall mean the reasonable costs incurred by Landlord in connection with discontinuing the use of the name "Union Bank Plaza" and adopting a new name for the Building, including, without limitation, costs incurred in connection with press releases announcing the new name for the Building and/or modifying Landlord's printed marketing

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materials, advertising, website, stationery and signage, and the postage costs incurred in connection with the distribution of such modified marketing materials.
23.6     Certain Definitions . As used herein, a " Qualified Transferee " shall mean (i) any Affiliate that is an assignee of Tenant's entire interest in this Lease, (ii) any other assignee of Tenant's entire interest in this Lease approved by Landlord pursuant to the terms and conditions of Article 14 above, and (iii) any sublessee of all or a portion of the Premises which is approved by Landlord pursuant to the terms and conditions of Article 14 above, the term of which sublease is for the entirety of the then-remaining Lease Term. As used herein, the " Minimum Occupancy Threshold " shall mean either: (A) the physical occupancy by the Original Tenant or a Qualified Transferee (pursuant to this Lease, or an assignment of this Lease in compliance with the terms and conditions of Article 14 above, or a sublease of the Premises in compliance with the terms and conditions of Article 14 above for the entirety of the then-remaining Lease Term) of at least 100,000 rentable square feet of the Office Space portion of the Premises; or (B) the lease by the Original Tenant or a Qualified Transferee (pursuant to this Lease, or an assignment of this Lease in compliance with the terms and conditions of Article 14 above, or a sublease of the Premises in compliance with the terms and conditions of Article 14 above for the entirety of the then-remaining Lease Term) of at least 200,000 rentable square feet of the Office Space portion of the Premises and physical occupancy by the Original Tenant or such Qualified Transferee of at least 50,000 rentable square feet of the Office Space portion of the Premises. As used herein, a " Prohibited Sign " shall mean any sign which relates to an entity that is associated with sexism ( e.g. , Chippendales, Hooters, Playboy, Hustler, etc.), racism (e.g., the Ku Klux Klan, the Nazi Party, etc.), or sexual performance or hygiene products. As used herein, the term " Objectionable Names/Logos " shall mean any name or logo which: (1) relates to an entity which is of a character or reputation, or is associated with a political orientation or faction, which is inconsistent with the quality of the Building as a first-class multi-tenant office building, or which would otherwise reasonably offend a landlord of a Comparable Building, including, without limitation, any Prohibited Signs; or (2) relates to an entity that (x) would not be considered of a character, reputation or stature that is generally comparable with companies that have comparable exterior signage on the Comparable Buildings owned or controlled by Hines, Brookfield Properties, Thomas Properties or Maguire Properties or any of their respective affiliates (collectively, the " Comparable Landlords "), or (y) is a law firm or securities brokerage firm; or (3) would violate any restrictions on signs or Building name changes currently set forth in the Signage Restrictions. For purposes of this Section 23.6, the phrase " controlled by " shall mean the ultimate control over all of the ownership, operational and managerial decisions regarding the assets of the owner.
ARTICLE 24
COMPLIANCE WITH LAW
Tenant shall not do anything or suffer anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or other governmental rule, regulation or requirement now in force or which may hereafter be enacted or promulgated, applicable to the Premises or the use or occupancy thereof. At its sole cost and expense, Tenant shall promptly comply with all such laws to the extent that such laws relate to the Premises and/or Tenant's use of or access to the Premises, including, without limitation, the making of any alterations and/or

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improvements to the Premises, but the foregoing shall not modify the provisions of Section 5.4 above regarding the Excluded Hazardous Materials. Notwithstanding the foregoing to the contrary, Landlord shall be responsible, as part of Operating Expenses to the extent permitted under Article 4 of this Lease, for making all alterations and improvements required by applicable laws with respect to the items which are Landlord's responsibility to repair and maintain pursuant to Section 7.1 of this Lease; provided, however, that Tenant shall reimburse Landlord, within thirty (30) days after invoice, for the costs of any such improvements and alterations and other compliance costs to the extent necessitated by or resulting from (i) any Alterations or New Tenant Improvements installed by or on behalf of Tenant (but this clause (i) shall not modify or otherwise affect (A) Landlord's obligations to perform, and pay for the costs (which shall not be included in Operating Expenses) of, the Landlord Work as provided in Section 1 of the Tenant Work Letter, or (B) the provisions of Section 5.4 above which limit Tenant's liability regarding the Excluded Hazardous Materials), (ii) the negligence or willful misconduct of Tenant or any Tenant Parties that is not covered by insurance obtained, or required to be obtained by, Landlord as part of Operating Expenses and as to which the waiver of subrogation applies, and/or (iii) Tenant's specific manner of use of the Premises for other than general business office purposes.
ARTICLE 25
LATE CHARGES
Tenant hereby acknowledges that late payment by Tenant to Landlord of Rent or other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which is extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Landlord by the terms of any mortgage, deed of trust, or ground or underlying lease covering the Premises. Accordingly, if any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within five (5) business days after notice of Tenant's failure to pay such amount, then Tenant shall pay to Landlord a late charge equal to two percent (2.0%) of the amount; provided, however, that the first (1 st ) late charge in any consecutive twelve (12) month period shall not exceed $10,000.00, and no late charge may be assessed unless a notice of, and invoice for, such assessment is sent to Tenant within sixty (60) days after such failure to pay occurs. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of the late payment of Rent by Tenant. Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner. In addition to the late charge described above, any Rent or other amounts owing hereunder which are not paid within five (5) business days after notice of such failure to pay such amounts shall thereafter bear interest until paid at a rate per annum equal to Interest Rate.


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[Union Bank Lease]


ARTICLE 26
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
26.1     Landlord's Cure . All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any reduction of Rent, except as expressly provided in this Lease. 1fTenant shall fail to perform any of its obligations under this Lease, within a reasonable time after such performance is required by the terms of this Lease (including after the expiration of all applicable cure periods), Landlord may, but shall not be obligated to, after reasonable prior written notice to Tenant, make any such payment or perform any such act on Tenant's part without waiving its right based upon any default of Tenant and without releasing Tenant from any obligations hereunder.
26.2     Tenant's Reimbursement . Except as may be specifically provided to the contrary in this Lease, Tenant shall pay to Landlord, within fifteen (15) days after delivery by Landlord to Tenant of documented, reasonably detailed statements therefor, sums equal to expenditures reasonably made and obligations reasonably incurred by Landlord in connection with the remedying by Landlord of Tenant's defaults pursuant to the provisions of Section 26.1. Tenant's obligations under this Section 26.2 shall survive the expiration or sooner termination of the Lease Tenn.
ARTICLE 27
ENTRY BY LANDLORD
Landlord reserves the right at all reasonable times and upon reasonable prior notice to the Tenant to enter the Premises to: (i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees or ground or underlying lessors, or, during the last fifteen (15) months of the Lease Term (as the same may be extended pursuant to Section 2.2 or shortened with respect to certain portions of the Premises pursuant to Sections 2.4 and/or 2.5 of this Lease), to tenants; (iii) post notices of nonresponsibility; (iv) alter, improve or repair the Premises or the Building if necessary to comply with current building codes or other applicable laws, or for structural alterations, repairs or improvements to the Building; or (v) perform services or other obligations required of Landlord under this Lease which are other than regularly scheduled services and/or maintenance obligations. Notwithstanding anything to the contrary contained in this Article 27, Landlord may enter the Premises at any time to (A) perform regularly scheduled services and/or maintenance obligations required of Landlord under this Lease; and (B) perform, in accordance with the provisions of Article 26 of this Lease, any covenants of Tenant which Tenant fails to perform. Any such entries shall be without the abatement of Rent, except as otherwise expressly provided in Section 19.7.2 of this Lease, and shall include the right to take such reasonable steps as required to accomplish the stated purposes; provided, however, that any such entry shall be accomplished as expeditiously as reasonably possible and in a manner so as to cause as little interference to Tenant as reasonably possible. Subject to the provisions of Section 19.7.2 of this Lease, Tenant hereby waives any claims for damages or for any injuries or inconvenience to or interference with Tenant's business, lost profits, or any loss of occupancy or quiet enjoyment of the Premises, For each of the above purposes, Landlord shall at all times have a key with which

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to unlock all the doors in the Premises, excluding Tenant's vaults, safes and special security areas designated in advance by Tenant. In an emergency, Landlord shall have the right to use any means that Landlord may deem proper to open the doors in and to the Premises so long as Landlord repairs any damage caused thereby. Any entry into the Premises in the manner herein before described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises. Tenant may, after reasonable prior notice to and consultation with Landlord, reasonably designate certain areas of the Premises as " Secured Areas " should Tenant require such areas for the purpose of securing certain valuable property or confidential information. Landlord may only enter such Secured Areas upon two (2) business days' notice to Tenant which notice shall specify the date and time of such entry by Landlord (and Tenant shall have the right to escort Landlord); provided, however, that Landlord may enter the Secured Areas without notice to Tenant and without escort in the event of an emergency, in which case Landlord shall provide Tenant with notice of such entry promptly thereafter.
ARTICLE 28
TENANT PARKING
28.1     Parking Passes .
28.1.1     Number of Parking Passes . Except as provided below in this Section 28.1, Tenant shall rent 453 parking passes in the Building Parking Area and 107 unreserved parking passes in the Off-Site Parking Area (as defined below), for a total of 560 parking passes. Tenant's 453 parking passes in the Building Parking Area shall consist of 60 executive reserved spaces (i.e., 13.25% of the Building Parking Area Passes (as defined below)), 111 non-executive reserved spaces (i.e., 24.50% of the Building Parking Area Passes), and 282 unreserved passes (i.e., 62.25% of the Building Parking Area Passes), and shall sometimes collectively be referred to as the " Building Parking Area Passes" . Tenant's executive reserved spaces and non-executive reserved spaces shall be located in the areas of the Building Parking Area depicted on Exhibit K attached hereto. Landlord shall have the right to utilize attendant parking with respect to Tenant's unreserved parking passes.
28.1.2     Tenant's Right to Reduce Parking Passes . Subject to Section 28.1.3 below, Tenant shall have the right to reduce the number of Building Parking Area Passes for the last Lease Year of the Extended Term (or the last Lease Year of any Option Term) in accordance with the terms and provisions of this Section 28.1.2; provided, however, in no event shall Tenant have the right to reduce its Building Parking Area Passes for such last Lease Year to less than 188 passes. Tenant's right to reduce its Building Parking Area Passes for such last Lease Year shall be exercisable, if at all, by sixty (60) days' prior written notice (" Return Notice ") to Landlord. The Return Notice shall specify the number of Tenant's Building Parking Area Passes which Tenant does not desire to lease (collectively, the " Returned Privileges "), along with the number of each specific category of Building Parking Area Passes (either executive reserved, non-executive reserved and/or unreserved), constituting the Returned Privileges. Tenant shall have no right to reduce or increase the number of Off-Site Parking Area passes rented by Tenant hereunder. Notwithstanding any contrary provision of this Lease, (i) Tenant shall have no right or obligation to rent the Off-Site Parking Area passes during any Option Term, and (ii) Landlord

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may at any time and from time to time relocate some or all of the unreserved Off-Site Parking Area passes to the Building Parking Area (but such relocation of all or any such passes shall not change the designation of such passes to "Building Parking Area Passes" for purposes of Section 28.1.3 below). " Off-Site Parking Area " shall mean that certain parking structure located at 350 South Figueroa Street, Los Angeles, California, subject to Landlord's right to substitute such parking structure for a different off-site parking area pursuant to Section 28.1.3.1 below.
28.1.3     Expansion or Contraction of the Premises . If Tenant is required or elects to expand the rentable square footage of the Premises which is other than the Storage Space pursuant to the terms of Sections 1.4, 1.5 and/or 1.6 above, or reduce the rentable square footage of the Premises which is other than the Storage Space pursuant to the terms of Sections 2.2, 2.4 and/or 14.3 above, Tenant's allotment of Building Parking Area Passes shall be increased or reduced, as the case may be, as follows:
28.1.3.1 If Tenant leases additional non-storage space in the Building in accordance with the provisions of this Lease (including the 20th Floor Space or any Expansion Space and/or First Offer Space leased by Tenant) such that the rentable square footage of the Premises (excluding the Storage Space) is in excess of (i) 304,764 rentable square feet during the Initial Period, and (ii) 311,904 rentable square feet during the Extended Term (each, a " RSF Threshold "), then Tenant shall be obligated to rent and pay parking charges, pursuant to the terms of Section 28.3 below, for an additional 1.45 Building Parking Area Passes for each 1,000 rentable square feet of such additional space so leased by Tenant (such ratio is referred to herein as the " 1.45 Ratio ") during the entirety of the lease term that such additional space is leased by Tenant pursuant to the terms of this Lease. Notwithstanding the foregoing to the contrary, if Landlord loses its right to allocate parking spaces for tenants of the Building at the Off-Site Parking Area, and Landlord does not, in its sole discretion, procure a substitute off-site parking facility (the " Substitute Facility ") to provide for such off-site parking (the " Lost Off-Site Parking Event "), then, at Landlord's election, Tenant's hereinabove described obligation to rent and pay parking charges for Building Parking Area Passes based upon the 1.45 Ratio for any such additional space that has previously been added or is subsequently added to the Premises under this Lease shall be reduced such that Tenant shall be obligated to rent and pay parking charges, pursuant to the terms of Section 28.3 below, for an additional 1.00 Building Parking Area Passes for each 1,000 rentable square feet of such additional space so previously or subsequently leased (such ratio is referred to herein as the " 1.00 Ratio "). The offsite Substitute Facility must be located within a three (3) block radius of the Real Property, but in any event east of the 110 Freeway. If the Lost Off-Site Parking Event occurs prior to the commencement date of the lease term for such additional space, such reduction shall be effective as of such commencement date; if such Lost Off-Site Parking Event occurs after the commencement date of the lease term for such additional space has already occurred, such reduction shall be effective as of the date which is the later of (A) the date such Lost Off-Site Parking Event occurs and (B) thirty (30) days after Landlord notifies Tenant of such reduction. The number of each category of Building Area Parking Passes (i.e., unreserved, executive reserved, and non-executive reserved) Tenant shall rent pursuant to the terms of this Section 28.1.3.1 shall be based upon the same percentages of unreserved, executive reserved and non-executive reserved parking passes as described in the first sentence of Section 28.1.1 above.

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28.1.3.2 If (i) Tenant elects pursuant to the terms of this Lease to reduce the rentable square footage of any additional space in the Building leased by Tenant pursuant to this Lease which is other than storage space (including the 20th Floor Space or any Expansion Space and/or First Offer Space leased by Tenant) or (ii) is required to reduce the rentable square footage of the Premises which is other than storage space as a result of Landlord's exercise of its recapture right in Section 14.3 above, such that the remaining rentable square footage of the Premises (excluding any storage space) after any such reduction equals the applicable RSF Threshold, then Tenant's obligation to rent and pay parking charges for Building Parking Area Passes shall be reduced such that Tenant shall rent and pay parking charges for, and Landlord shall provide parking for, the same total amount (and the same amount of each category of Building Area Parking Passes) described in the first sentence of Section 28.1.1 above (and any additional number and type of Building Parking Area Passes rented by Tenant as a result of any previous expansion of the Premises for non-storage space shall no longer be rented by Tenant).
28.1.3.3 If Tenant elects to reduce the rentable square footage of the Premises which is other than storage space in accordance with the provisions of this Lease (or is required to reduce the rentable square footage of the Premises which is other than storage space as a result of Landlord's exercise of its recapture right in Section 14.3 above) such that the remaining rentable square footage of the Premises (excluding any storage space but including any additional space leased by Tenant pursuant to Section 1.4. 1.5 and 1.6 above) falls below the applicable RSF Threshold, then, in addition to any reduction in Tenant's obligations to rent and pay parking charges for the number and type of Building Parking Area Passes described in Section 28.1.3.2 above, Tenant's obligation to rent and pay parking charges for Building Parking Area Passes shall be further reduced based upon the 1.45 Ratio ( i.e. , Tenant's obligation to rent and pay parking charges for Building Parking Area Passes shall be reduced by 1.45 Building Parking Area Passes for each 1,000 rentable square feet by which the rentable square footage of the Premises is so reduced). The number of each category of Building Area Parking Passes (i.e., unreserved, executive reserved, and non-executive reserved) Tenant shall rent pursuant to the terms of this Section 28.1.3.3 shall be based upon the same percentages of unreserved, executive reserved and non-executive reserved parking passes as described in the first sentence of Section 28.1.1 above.
28.2     Visitor Parking . Subject to the provisions of Section 28.3 set forth below, Landlord shall maintain a visitor parking area of a size not smaller than that customarily maintained by the landlords of the Comparable Buildings, for use during the Business Hours by customers and visitors of Tenant and the other office tenants in the Building. Tenant hereby acknowledges and agrees that, as of the Lease Commencement Date, Landlord is maintaining a visitor parking area in compliance with the foregoing sentence. Tenant shall be entitled to purchase from Landlord parking validations for use by Tenant's customers and visitors. Tenant shall have the right to purchase such validations at a cost equal to eighty-five percent (85%) of the prevailing rate charged by Landlord for visitor parking in the Building. Landlord shall have the right to utilize attendant parking with respect to any or all of the visitor parking described in this Section 28.2.
28.3     Parking Rates and Terms of Use .

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[Union Bank Lease]


28.3.1     Parking Rates Tenant shall pay to Landlord for the parking passes described in Section 28.1 above on a monthly basis the prevailing rate charged (and increased) from time to time (subject to the limitations on parking rate increases as set forth below in this Section 28.3) for parking passes at the location of such passes, except that during the Lease Term (but not any Option Term) the monthly charge for Tenant's 60 executive reserved spaces in the Building Parking Area shall be eighty-five percent (85%) of the then prevailing monthly rate charged for such category and location of parking in the Building Parking Area. The current prevailing rates to be charged to Tenant as of the Lease Commencement Date for parking passes in the Building Parking Area are as follows: (i) Two Hundred Forty Dollars ($240.00) per unreserved parking pass per month (plus all applicable parking taxes); (ii) Two Hundred Ninety Dollars ($290.00) per executive reserved space per month (plus all applicable parking taxes) (which $290.00 rate is inclusive of the eighty-five percent (85%) discount described hereinabove); and (iii) Three Hundred Forty Dollars ($340.00) per non-executive reserved space per month (plus all applicable parking taxes) (collectively, the " Current Prevailing Building Parking Area Parking Rate "). Notwithstanding the foregoing to the contrary, the parking charges for the various categories of Building Parking Area Passes (i.e., unreserved, executive reserved, and non-executive reserved) shall be fixed at the Current Prevailing Building Parking Area Parking Rate during the period from the Lease Commencement Date through December 31, 2008 (the " Building Parking Area Parking Rate Freeze Period" ). The unreserved parking passes in the Off-Site Parking Area shall not be subject to the foregoing fixed rate during the Building Parking Area Parking Rate Freeze Period, but instead shall be at the prevailing rate charged (and increased) from time to time for such Off-Site Parking Area.
28.3.2     Parking Rate Increases . After the expiration of the Building Parking Area Parking Rate Freeze Period, Landlord shall have the right to increase the parking charges for any of the various categories of Building Parking Area Passes (i.e., unreserved, executive reserved and non-executive reserved). In such event, Tenant may contest by written notice (" Tenant's Parking Contest Notice ") to Landlord the amount of any increases in parking charges for any of the various categories of Building Parking Area Passes; provided, however, that Tenant shall not have the right to contest (i) any increases in parking charges which are equal to the amount of any increase in applicable parking taxes, or (ii) any increases in the parking charges charged for the Off-Site Parking Area parking passes. Landlord shall, within thirty (30) days after its receipt of Tenant's Parking Contest Notice, conduct a survey (the " Parking Survey ") of the posted parking rates for reserved parking passes (from which the discount for the executive reserved parking privileges is determined) and/or unreserved parking passes, as applicable, in the on-site parking facilities of Comparable Buildings. If the parking charge for the applicable category of Building Parking Area Passes which is in dispute (the " Disputed Charge ") is in an amount greater than the second highest posted parking rate for such category of parking pass in the on-site parking facilities of Comparable Buildings (as determined pursuant to the Parking Survey, the " Survey Charge Amount "), then the amount of the Disputed Charge shall be reduced to equal the Survey Charge Amount. Notwithstanding the foregoing provisions of this Section 28.3 to the contrary, at no time shall parking charges for parking passes for any of the various categories of Building Parking Area Passes (i.e., unreserved, executive reserved, and non-executive reserved) during any calendar year of the Lease Term commencing with the calendar year 2009 increase by more than five percent (5%) per year, calculated on a cumulative and compounded basis, over the Current Prevailing Building Parking Area Parking Rate (but such annual cap shall not apply to any increases in applicable parking taxes imposed by the

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applicable governmental authorities). The provisions of this Section 28.3.2 shall apply during any Option Term, except that: (A) as of the commencement date of such Option Term, the parking charge for the applicable categories of Building Parking Area Passes (i.e., unreserved, executive reserved, and non-executive reserved) shall be reset by Landlord to equal the then current posted parking rates for such applicable categories of Building Parking Passes (but not in excess of the Survey Charge Amount then in effect) (such reset parking charges, collectively, the " Option Term Parking Rates "); and (B) in no event shall the Option Term Parking Rates during any year of such Option Term after the first year of such Option Term increase by more than five percent (5%) per year, calculated on a cumulative and compounded basis, over the Option Term Parking Rates in effect during the first (1") year of such Option Term (but such annual cap shall not apply to any increases in applicable parking taxes imposed by the applicable governmental authorities), and this provision shall be considered in connection with the determination of the Fair Market Rental Rate for such Option Term.
28.3.3     Terms of Use . Tenant shall comply with, and cause its employees to comply with, all reasonable rules and regulations which are prescribed from time to time for the orderly operation and use of the parking facility where the parking passes are located. Landlord specifically reserves the right to reasonably change the size, configuration, design, layout, location and all other aspects of the Parking Areas and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of Rent under this Lease, from time to time, temporarily relocate on a non-discriminatory basis Tenant's parking passes to other parking structures and/or surface parking areas within a reasonable distance of the Premises, and/or temporarily close-off or restrict access to the Parking Areas (as long as Tenant and its visitors are provided with other reasonable access or other parking within a reasonable distance of the Premises), in each case only for the purposes of permitting or facilitating any such construction, alteration or improvements with respect to the Parking Areas or to accommodate or facilitate renovation, alteration, construction or other modification of other improvements or structures located on the Real Property, or in connection with casualty (but subject to Section 19.7.2 above) or governmental mandate affecting the Parking Areas, provided that the total number of Tenant's parking passes and the number of visitor spaces described in Section 28.2 above shall not be reduced as a result thereof. Landlord may delegate its responsibilities hereunder to a parking operator in which case such parking operator shall have all the rights of control attributed hereby to Landlord. The parking rates charged by Landlord for Tenant's parking passes shall be exclusive of any parking tax or other charges imposed by governmental authorities in connection with the use of such parking, which taxes and/or charges shall be paid directly by Tenant or the parking users, or, if directly imposed against Landlord, Tenant shall reimburse Landlord for all such taxes and/or charges concurrent with its payment of the parking rates described herein.
28.3.4     Rights Personal . Tenant's rights to rent and use the Building Parking Area Passes and Off-Site Parking Area parking passes under this Article 28 are personal to the Original Tenant and any subtenant subleasing all or a portion of the Premises pursuant to Article 14 of this Lease or an assignee to which Tenant has assigned Tenant's entire interest in the Lease pursuant to Article 14 of this Lease (including Affiliate subtenants and assignees) and their respective employees.

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ARTICLE 29
MISCELLANEOUS PROVISIONS
29.1     Terms . The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may require, shall in all cases be assumed as though in each case fully expressed.
29.2     Binding Effect . Each of the provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective successors or assigns, provided this clause shall not permit any assignment or other Transfer by Tenant contrary to the provisions of Article 14 of this Lease.
29.3     No Air Rights . Except as provided in Section 29.39 below, no rights to any view or to light or air over any property, whether belonging to Landlord or any other person, arc granted to Tenant by this Lease. If at any time any windows of the Premises are temporarily darkened or the light or view therefrom is obstructed by reason of any repairs, improvements, maintenance or cleaning in or about the Building or Real Property, the same shall be without liability to Landlord and without any reduction or diminution of Tenant's obligations under this Lease.
29.4     Modification of Lease . Should any current or prospective mortgagee or ground lessor for the Building require a reasonable modification or modifications of this Lease, which modification or modifications will not cause an increased cost or expense to Tenant or in any other way materially and adversely change the rights and obligations of Tenant hereunder, then and in such event, Tenant agrees that this Lease may be so reasonably modified and agrees to execute whatever commercially reasonable documents are required therefor and are reasonably satisfactory to Tenant within twenty (20) days following delivery of such documents to Tenant for its signature. Landlord shall reimburse Tenant for all reasonable costs and expenses (based upon the nature and extent of the requested modifications), incurred by Tenant in connection with its execution of any such documents. Should Landlord or any such current or prospective mortgagee or ground lessor require execution of a short form of Lease for recording, containing, among other customary provisions, the names of the parties, a description of the Premises and the Lease Term, Tenant agrees to execute such short form of Lease and to deliver the same to Landlord within twenty (20) days following delivery thereof to Tenant.
29.5     Transfer of Landlord's Interest . Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the Real Property and Building and in this Lease. Tenant agrees that in the event of any such transfer, conditioned upon written agreement of the transferee to be bound by this Lease and to assume all of Landlord's obligations hereunder arising after the effective date of such transfer Landlord shall automatically be released from all liability under this Lease, other than with respect to obligations of Landlord which arose prior to the effective date of such transfer, and Tenant agrees to look solely to such transferee for the performance of Landlord's obligations hereunder arising after the effective date of such transfer. The liability of any transferee of Landlord shall be limited to the interest of such transferee in the Real Property and Building and such transferee shall be without personal liability under this Lease, and Tenant hereby expressly waives and releases such personal liability on behalf of itself

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and all persons claiming by, through or under Tenant. Tenant further acknowledges that Landlord may assign its interest in this Lease to a mortgage lender as additional security and agrees that such an assignment shall not release Landlord from its obligations hereunder and that Tenant shall continue to look to Landlord for the performance of its obligations hereunder.
29.6     Prohibition Against Recording . Except as provided in Section 29.4 of this Lease, neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant, and the recording thereof in violation of this provision shall make this Lease null and void at Landlord's election.
29.7     Landlord's Title . Landlord's title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to do any act which can, shall or may encumber the title of Landlord.
29.8     Captions . The captions of Articles and Sections are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections.
29.9     Relationship of Parties . Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant, it being expressly understood and agreed that neither the method of computation of Rent nor any act of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant.
29.10     Application of Payments . Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant's designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect.
29.11     Time of Essence . Time is of the essence of this Lease and each of its provisions.
29.12     Partial Invalidity . If any term, provision or condition contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law.
29.13     No Warranty . In executing and delivering this Lease, Tenant has not relied on any representation, including, but not limited to, any representation whatsoever as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not set forth herein or in one or more of the exhibits attached hereto.
29.14     Landlord Exculpation . It is expressly understood and agreed that notwithstanding anything in this Lease to the contrary, and notwithstanding any applicable law to the contrary, the liability of Landlord hereunder and any recourse by Tenant against Landlord under this Lease

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(but not including any claim against Landlord for tortious conduct separate and apart from a breach by Landlord of its obligations hereunder) shall be limited solely and exclusively to the interest of Landlord in and to the Real Property and Building and any insurance proceeds with respect to insurance carried by Landlord as part of Direct Expenses, and neither Landlord, nor any of its constituent partners or members (or subpartners or submembers), shall have any personal liability therefor, and Tenant hereby expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant. The provision contained in the preceding sentence is not intended to and will not limit any right that Tenant might otherwise have to obtain injunctive relief against Landlord or to pursue any suit or action in connection with enforcement or collection of amounts that may become owing or payable under or on account of insurance maintained by Landlord.
29.15     Entire Agreement . It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease and this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. This Lease contains all of the terms, covenants, conditions, warranties and agreements of the parties relating in any manner to the rental, use and occupancy of the Premises, shall be considered to be the only agreement between the parties hereto and their representatives and agents, and none of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by the parties hereto. All negotiations and oral agreements acceptable to both parties have been merged into and are included herein. There are no other representations or warranties between the parties, and all reliance with respect to representations and warranties is based totally upon the representations, warranties and agreements contained in this Lease.
29.16     Right to Lease . Landlord reserves the absolute right to effect such other tenancies in the Building as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building, as long as such tenancies are compatible with the operation of the Building in a manner consistent with that of the Comparable Buildings; provided, however, that in no event shall Landlord lease space (i) in the Building to any entity that is generally considered by the public to be associated with blatant and overt racism (e.g., the Ku Klux Klan, the Nazi Party, etc.), (ii) on the ground floor of the Building to an entity which will use its premises for the operation of what is normally referred to as a retail bank prior to the date the Retail Space is no longer leased to Tenant or a Qualified Transferee under this Lease, if applicable, or (iii) in the Building to any entity whose primary business operations in its premises consists of accepting on-site deposits and/or cashing checks on-site. Subject to the provisions of the immediately preceding sentence, Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type or number of tenants shall, during the Lease Term, occupy any space in the Building.
29.17     Force Majeure . Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil unrest, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant or Landlord pursuant to this Lease (collectively, the " Force Majeure "), notwithstanding anything to the contrary contained in

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this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party's performance caused by a Force Majeure.
29.18     No Waiver of Redemption by Tenant . Tenant does not waive any right now or hereafter existing to redeem by order or judgment of any court or by any legal process or writ, Tenant's right of occupancy of the Premises after any termination of this Lease.
29.19     Notices . All notices, demands, statements or communications (collectively, " Notices ") given or required to be given by either party to the other hereunder shall be in writing, shall be sent by United States certified or registered mail, postage prepaid, return receipt requested, or delivered personally: (i) to Tenant at the appropriate address set forth in Section 5 of the Summary, or to such other place as Tenant may from time to time designate in a Notice to Landlord; or (ii) to Landlord at the addresses set forth in Section 3 of the Summary, or to such other firm or to such other place as Landlord may from time to time designate in a Notice to Tenant. Any Notice will be deemed given on the third (3rd) business day after the date it is mailed as provided in this Section 29.19 or upon the date personal delivery is made. If Tenant is notified in writing of the identity and address of Landlord's mortgagee or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor written notice of any default by Landlord under the terms of this Lease by registered or certified mail.
29.20     Limitation on Consequential Damages . Notwithstanding anything to the contrary contained in this Lease, nothing in this Lease shall impose any obligation upon Tenant or Landlord to be responsible or liable for, and each hereby releases the other from all liability for, lost profits or other consequential damages, other than those consequential damages incurred by Landlord in connection with a holdover of the Premises by Tenant after the expiration or earlier termination of this Lease in accordance with and subject to the restrictions contained in Article 16 above. Notwithstanding the foregoing, for purposes of this Lease, consequential damages shall not be deemed to include property damage or personal injury damages, or any damages recoverable by the Landlord pursuant to Sections 19.2.1(iii) and (iv) above and/or Section 1951.2 of the California Civil Code following a default by Tenant under this Lease.
29.21     Authority . Tenant hereby represents and warrants to Landlord that (i) Tenant is a national association, (ii) Tenant is a duly formed and existing entity qualified to do business in California, (iii) Tenant has full right and authority to execute and deliver this Lease, and (iv) John Erickson on behalf of Tenant is singularly authorized to bind Tenant to this Lease by executing this Lease on behalf of Tenant. Landlord hereby represents and warrants to Tenant that (A) Landlord is a limited partnership, (B) Landlord and each general partner and member of Landlord is a duly formed and existing entity, (C) Landlord has full right and authority to execute and deliver this Lease, and (D) each person signing this Lease on behalf of Landlord is authorized to do so.
29.22     Attorneys' Fees . If either party commences litigation or other legal proceeding against the other for the specific performance of this Lease, for damages for the breach hereof or otherwise for enforcement of any remedy hereunder, any such matter shall be subject to the provisions of Section 29.31 below, and the prevailing party in such proceeding shall be entitled

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to recover from the other party such costs and reasonable attorneys' fees as may have been incurred and awarded by the court or referee in any such proceedings.
29.23     Governing Law . This Lease shall he construed and enforced in accordance with the laws of the State of California.
29.24     Submission of Lease . Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or an option for lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant.
29.25     Brokers . Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting Cushman & Wakefield, Inc., representing Tenant, and Hines Interests Limited Partnership, representing Landlord (collectively, the " Brokers "), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Landlord shall be solely responsible for the payment of a commission to the Brokers pursuant to a separate agreement or agreements between or among Landlord and the Brokers. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of the indemnifying party's dealings with any real estate broker or agent other than the Brokers.
29.26     Independent Covenants . This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not, except as expressly provided in this Lease to the contrary, be entitled to make any repairs or perform any acts hereunder at Landlord's expense or to any set off of the Rent or other amounts owing hereunder against Landlord; provided, however, that the foregoing shall in no way impair the right of Tenant to commence a separate action against Landlord for any violation by Landlord of the provisions hereof so long as notice is first given to Landlord and any holder of a mortgage or deed of trust covering the Building, Real Property or any portion thereof, of whose address Tenant has theretofore been notified in writing.
29.27     Building Name and Signage . Subject to the provisions of, and prohibitions and restrictions contained in, Section 23.1 of this Lease, Landlord shall have the right at any time to change the name of the Building and to install, affix and maintain any and all signs on the exterior and on the interior of the Building as Landlord may, in Landlord's sole discretion, desire. Tenant shall not use the name of the Building or use pictures or illustrations of the Building in advertising or other publicity, without the prior written consent of Landlord, provided that Landlord hereby consents to Tenant's use of the name, pictures or illustrations of the Building so long as the same remains "Union Bank Plaza" or any replacement name for the Original Tenant or any Qualified Transferee pursuant to Article 23 of this Lease.
29.28      Transportation Management . Tenant shall comply with all present or future programs imposed by a governmental entity or authority to manage parking, transportation or

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traffic in and around the Building, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation-related committees or entities. Such programs may include, without limitation: (i) restrictions on the number of peak-hour vehicle trips generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of an in-house ridesharing program and an employee transportation coordinator; (iv) working with employees and any Building or areawide ridesharing program manager; (v) instituting employer-sponsored incentives (financial or in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work shifts for employees.
29.29     Hazardous Material .
29.29.1 Definition . As used herein, the term " Hazardous Material " means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of California or the United States Government. The term "Hazardous Material" includes, without limitation, any material or substance which is (i) defined as a "hazardous waste," "extremely hazardous waste" or "restricted hazardous waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140 of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iii) defined as a "hazardous substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (iv) petroleum, (v) asbestos, (vi) listed under Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the California Administrative Code, division 4, Chapter 20, (vii) designated as a "hazardous substance" pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.c. § 1317), (viii) defined as a "hazardous waste" pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C § 6902 et seq. (42 U.S.C § 6903), or (ix) defined as a "hazardous substance" pursuant to Section 101 of the Compensation and Liability Act, 42 U.S.C. 9601 et seq. (42 U.S.C § 9601).
29.29.2 Compliance Cost . Tenant acknowledges that Landlord may incur costs (i) for complying with laws, codes, regulations or ordinances relating to Hazardous Material, or (ii) otherwise in connection with Hazardous Material, including, without limitation, the following: (A) Hazardous Material present in soil or ground water; (B) Hazardous Material that migrates, flows, percolates, diffuses or in any way moves onto or under the Real Property; (C) Hazardous Material present on or under the Real Property as a result of any discharge, dumping or spilling (whether accidental or otherwise) on the Real Property by other tenants of the Real Property or their agents, employees, contractors or invitees, or by others; and (D) material which becomes Hazardous Material due to a change in laws, codes, regulations or ordinances which relate to hazardous or toxic material, substances or waste. Except as provided below, Tenant agrees that the costs incurred by Landlord with respect to, or in connection with, complying with laws, codes, regulations or ordinances relating to Hazardous Material shall be an Operating Expense, unless the cost of such compliance, as between Landlord and Tenant, is made the responsibility of Tenant under this Lease. Notwithstanding the foregoing, the following costs shall not be included in Operating Expenses and shall not be the obligation of

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Tenant: (1) reporting, compliance, remediating, testing and removal costs incurred by Landlord with respect to any Hazardous Material (x) existing in the Building or in or at the Real Property as of the Lease Commencement Date and in violation of existing laws as of such date, and (y) not brought onto the Real Property or Building by Tenant or a Tenant Party; (2) reporting, compliance, remediating, testing and removal costs incurred by Landlord with respect to any asbestos in the Building or on or at the Real Property whether or not (x) existing in the Building or on or at the Real Property as of the Lease Commencement Date or thereafter or (y) in violation of applicable laws as of the Lease Commencement Date or thereafter; (3) reporting, compliance, remediating, testing and removal costs incurred by Landlord with respect to any Hazardous Materials in the ground water and/or soil of the Real Property whether or not (x) existing in the ground water and/or soil of the Real Property as of the Lease Commencement Date or thereafter or (y) in violation of applicable laws as of the Lease Commencement Date or thereafter; or (4) costs incurred in connection with the removal of Hazardous Material brought onto the Real Property or Building by another tenant of the Building. To the extent any Operating Expense relating to Hazardous Material is subsequently recovered or reimbursed through insurance, or recovery from responsible third parties, or other action, Tenant shall be entitled to a proportionate share of such recovery or reimbursement to the extent previously paid by Tenant as part of Tenant's Share of increases in Direct Expenses.
29.30     Confidentiality . Landlord and Tenant each hereby acknowledges that the content of this Lease and any related documents are confidential information. Landlord and Tenant shall each keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than (i) to their respective financial, legal, real estate and space planning consultants, (ii) as may be required by court order.
29.31     Dispute Resolution . To the fullest extent permitted by law, in connection with any claim, cause of action, proceeding or other disagreement or dispute under or pertaining to this Lease, including, without limitation, whether any particular matter constitutes, or with the passage of time would constitute, a default by Tenant or Landlord under this Lease (each a " Disputed Matter "), the parties to this Lease expressly, intentionally, and deliberately waive any right each may otherwise have to trial by jury. In the event that the waiver of jury trial set forth in the immediately preceding sentence is not enforceable under California law, the parties to this Lease hereby agree that any such Disputed Matter, including any question of law or fact relating thereto and whether sounding in contract, tort or otherwise, shall (except with respect to Exempt Matters, as defined below), at the written request of either party, be heard and resolved by judicial reference pursuant to the provisions of California Code of Civil Procedure Sections 638 and 641 through 645.1, inclusive (as the same may be amended, or any successor statutes thereto) (collectively, the " Referee Laws "). The venue of such judicial reference proceedings shall be in Los Angeles County. Within ten (10) business days after receipt by any party of a written request to determine any Disputed Matter by judicial reference pursuant to the provisions of this Section 29.31, the parties shall mutually select a single neutral and impartial referee to hear and resolve the Disputed Matter, who shall be a retired state or federal judge. If the parties cannot mutually agree upon such single referee within such 10-day business period, a judge of the Los Angeles County Superior Court (" Court ") shall appoint the single referee (who shall be a retired state or federal judge) pursuant to the Referee Laws to hear and resolve the Disputed Matter. If the referee is appointed by the Court, the proposed referee may be challenged by either party for any of the grounds listed in the Referee Laws. The referee shall have the power

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to decide all issues of fact and law with respect to a Disputed Matter and to issue all recognized remedies available at law or in equity for any cause of action that is before the referee, including but not limited to injunctive or equitable relief, monetary damages and an award of attorneys' fees and costs in accordance with this Lease, and shall report a statement of his or her decision and findings on such issues to the Court; provided, however, the referee shall not under any circumstances have the power to award punitive damages, nor any other damages which are prohibited by the provisions of this Lease. In the event that this prohibition against the award of punitive damages is held to be invalid, the parties intend that the remaining provisions of this judicial reference provision shall nevertheless be valid and enforceable, and severable from the prohibition against punitive damages. The referee shall also determine all issues relating to the applicability, interpretation, and enforceability of this Section 29.31. The parties shall be entitled to conduct all discovery as provided in the California Code of Civil Procedure, and the referee shall oversee discovery and may enforce all discovery orders in the same manner as any trial court judge, with rights to regulate discovery and to issue and enforce subpoenas, protective orders, sanctions and other limitations on discovery available under California law. The judicial reference proceeding shall be conducted in accordance with California law (including the rules of evidence), and in all regards, the referee shall follow California law applicable at the time of the judicial reference proceeding. The parties shall bear the fees and expenses of the referee equally, unless the referee orders otherwise. The parties acknowledge that if a referee is selected to determine the Disputed Matters, then the Disputed Matters will not be decided by a jury. Any decision of the referee and/or judgment or other order entered thereon shall be appealable to the same extent and in the same manner that such decision, judgment, or order would be appealable if rendered by a judge of the Los Angeles County Superior Court. It is the express intention of the parties that notwithstanding any other provision of this Lease to the contrary, the provisions of this Section 29.31 contain the sole and exclusive method, means and procedure to resolve any and all such Disputed Matters, but excluding the following which are defined individually and collectively as the " Exempt Matters ": (i) any determination of the Extended Term First Offer/Expansion Rent and Fair Market Rental Rate (which shall be determined as set forth in Sections 1.5.6.5 and 2.3 above, respectively); (ii) any determination of the fair market face or stated rental rate during any holdover period (which shall be determined as set forth in Article 16 above); (iii) any dispute or disagreement concerning the amount of Direct Expenses set forth in any Statement delivered by Landlord to Tenant pursuant to Article 4 above (which dispute or disagreement shall be subject to Tenant's audit rights and arbitration as set forth in Section 4.5 above); (iv) all claims of Landlord or Tenant which seek anything other than the enforcement of such party's rights under this Lease; or (v) any action by Landlord in unlawful detainer or to obtain possession of the Premises. The parties hereby irrevocably waive any and all rights to the contrary and shall at all times conduct themselves in strict, full, complete and timely accordance with the provisions of this Section 29.3I. Any and all attempts to circumvent the provisions of this Section 29.31 shall be absolutely null and void and of no force or effect whatsoever. Nothing in this Section 29.31, however, shall limit the right of any party at any time to exercise self-help remedies or obtain provisional remedies or other equitable remedies from a court of competent jurisdiction as shall otherwise be available under the California Code of Civil Procedure and/or applicable court rules (including but not limited to a temporary restraining order and preliminary injunction, right to attach order, receiver, and the like).
29.32     Directory Board . During the Lease Term, Tenant shall continue to have the right to the exclusive use of the directory board currently existing in the Building lobby that is

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currently used for the exclusive display of the names of Tenant's departments and/or employees. Such existing directory board must be used by Tenant solely for the display of the names of Tenant's departments and/or employees and for no other purpose. Any additions, deletions or other changes to the names displayed on such directory as of the Lease Commencement Date shall be Tenant's responsibility at Tenant's cost. Landlord shall have the right, in its sole discretion, to maintain any of the other existing directories (and/or install and/or anyone or more additional directories) in the Building lobby for the use by the other tenants of the Building.
29.33     Reasonable Consent . Except for matters for which there is a standard of consent or approval or standard for taking, making or exercising a Discretionary Act (as defined below) that is specifically set forth in this Lease, including the Tenant Work Letter and all other Exhibits hereto (which specific standard shall control): ,(i) any time the consent or approval of Landlord or Tenant is required under this Lease, such consent or approval shall not be unreasonably Withheld, conditioned or delayed; and (ii) in the event this Lease grants Landlord or Tenant the right to take action, exercise discretion, establish or modify rules and regulations or make an allocation or other determination (each, a " Discretionary Act "), Landlord and Tenant shall act reasonably and in good faith. The foregoing shall not, however, limit any party's rights or remedies in the event of a default by the other party under this Lease, nor apply to matters which (A) do not comply with applicable laws, or (B) could result in a Design Problem, in which case Landlord shall have the right to act and/or grant or deny consent in its sole and absolute discretion (but at all times in good faith) as to the matters described in items (A) and (B) hereinabove (unless a different standard for actions or consent pertaining to such matters is specifically set forth in this Lease). Notwithstanding the foregoing or any other provision contained in this Lease, Tenant shall not be required to obtain the consent of Landlord for matters relating to the exercise by Tenant of its right to make repairs (which Landlord failed to make) pursuant to Section 7.2 of this Lease, provided that Tenant shall act reasonably with respect to all such matters and otherwise comply with the provisions of Section 7.2 of this Lease.
29.34     Interest Rate . As used herein, the term " Interest Rate " means the lesser of (i) the "Prime Rate" published from time to time by The Wall Street Journal (or such reasonable comparable national business publication as is selected by Landlord in the event The Wall Street Journal ceases to publish a Prime Rate), plus two percent (2%), or (ii) the maximum rate permitted by law.
29.35     Telecommunication Equipment . Tenant shall have the right during the Lease Term, at no rental fee, to operate and maintain its existing telecommunication equipment located on the roof of the Building as of the Lease Commencement Date (the " Existing Equipment "), and to the extent additional space is available from time to time on the roof of the Building, and subject to Landlord's reasonable approval, to install, operate and maintain similar additional telecommunication equipment (" New Equipment "). The Existing Equipment and the New Equipment shall sometimes hereinafter be referred to collectively as the " Telecommunication Equipment ". Tenant's installation, operation and maintenance of the Telecommunication Equipment shall be governed by the following terms and conditions:
29.35.1 Tenant's right to install, operate and maintain the Telecommunication Equipment shall be subject to all governmental laws, rules and regulations and Landlord makes no representation that such laws, rules and regulations permit such installation and operation.

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Tenant, in conjunction with Landlord, but at Tenant's sole cost and expense, shall obtain all necessary governmental approvals and permits prior to the installation of any New Equipment.
29.35.2 All costs of installation, operation and maintenance of the Telecommunication Equipment (including, without limitation, costs of obtaining any necessary permits) shall 'be the responsibility of Tenant.
29.35.3 It is expressly understood that Landlord retains the right to use the roof of the Building for any purpose whatsoever provided that Landlord shall not unreasonably interfere with the use of the Existing Equipment, and any New Equipment the installation of which is reasonably approved by Landlord.
29.35.4 Tenant shall use the Telecommunication Equipment so as not to cause any interference to other tenants in the Building or with any other tenant's communication equipment and not to damage materially or interfere materially with the normal operation of the Building, including any mechanical system thereof. Any change in the location of the Existing Equipment and the location of the installation of any New Equipment shall be subject to Landlord's reasonable approval.
29.35.5 Landlord shall not have any obligation with respect to the Telecommunication Equipment nor shall Landlord be responsible for any damage that may be caused to Tenant or the Telecommunication Equipment by any other tenant or occupant of the Building. Landlord makes no representation that the Telecommunication Equipment will be able to receive or transmit communication signals without interference or. disturbance (even if by reason of the installation or use of similar equipment by others on the roof) and Tenant agrees that Landlord shall not be liable to Tenant therefor; provided, however, that Landlord agrees that if any other tenant or occupant of the Building shall be permitted to cause similar equipment to be installed on the roof of the Building, such tenant or occupant shall covenant not to use its equipment so as to cause any interference with Tenant's use of its Telecommunication Equipment.
29.35.6 Tenant shall (i) except to the extent Section 10.4 is applicable to such damage, be solely responsible for any damage caused to the Building or to persons or other property, as a result of the Telecommunication Equipment, including, but not limited to, any damage caused to the roof of the Building during the installation or maintenance of any Telecommunication Equipment, or caused by the Telecommunication Equipment itself, except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees, contractors or representatives, (ii) promptly pay any tax, license or permit fees charged pursuant to any laws or regulations in connection with the installation, maintenance or use of the Telecommunication Equipment, and comply with all precautions and safeguards recommended by all governmental authorities, (iii) pay all necessary repairs, replacements to or maintenance of the Telecommunication Equipment, and (iv) not bore any structural elements of the Building in connection with the installation of the Telecommunication Equipment. Tenant shall indemnify, defend, protect and hold harmless Landlord, its partners and members and their respective officers, agents, servants, employees, and independent contractors from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys' fees) incurred in connection with or arising from Tenant's installation, operation or maintenance

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of the Telecommunication Equipment except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees, contractors or representatives.
29.35.7 Tenant shall remove the Telecommunication Equipment and connecting cables at Tenant's expense upon the expiration or sooner termination of the Lease or upon the imposition of any governmental law or regulation that requires such removal, and shall repair the roof of the Building upon such removal to the extent of any damage caused thereby.
29.35.8 In no event shall Tenant be permitted to utilize more than one-half (112) of the area of the Building roof available for its Telecommunication Equipment.
29.36     Emergency Generator . Landlord hereby agrees that, so long as no Design Problem exists (except that for purposes of this Section 29.36, the term "Design Problem" shall not include clause (iii) of Section 8.1 above), Tenant shall have the right, at Tenant's sole cost and expense and subject to the provisions of this Section 29.36, to install one (1) back-up emergency generator. Such generator shall be of such size and specifications, and include such platforms, fencing, enclosures, sheds and other related materials and equipment, as shall be approved by Landlord prior to installation (collectively, the " Emergency Generator "). In addition, Tenant shall have the right, subject to available capacity of the Building, to install such connection equipment, such as conduits, cables, risers, feeders and materials (collectively, the " Generator Connecting Equipment ") in the shafts, ducts, conduits, chases, utility closets and other facilities of the Building as is reasonably necessary to connect the Emergency Generator to the Premises and Tenant's other machinery and equipment therein, subject, however, to the provisions of Section 29.36.3 below. Tenant shall also have the right of access, consistent with Section 29.36.4 below, to the areas where the Emergency Generator and any such Generator Connecting Equipment are located for the purposes of maintaining, repairing, testing and replacing the same.
29.36.1 Generator Site . Within six (6) months after receipt of written notice from Tenant in which Tenant elects to install the Emergency Generator, Landlord shall deliver space (the "Generator Site") in or on the Real Property to Tenant suitable for installation of the Emergency Generator, as determined by Landlord in Landlord's reasonable discretion. So long as the Generator Site is not comprised of storage space in the Building or at the Real Property existing as of the Lease Commencement Date, or parking or other rentable space in the retail or office portions of the Real Property (collectively, the " Rentable Space "), Landlord shall not charge Tenant any rent for Tenant's use of the Generator Site during the Lease Term (as such Lease Term may be extended pursuant to Section 2.2 of this Lease). Landlord shall use commercially reasonable efforts to deliver to Tenant a Generator Site that is other than Rentable Space. In the event that the Generator Site is comprised of Rentable Space, Tenant shall pay rent to Landlord (in advance on a monthly basis in accordance with the applicable provisions of this Lease) for such Generator Site from the date such Generator Site is delivered to Tenant and thereafter throughout the remainder of the Lease Term (and any Option Terms) at a rental rate per rentable square foot for such Rentable Space equal to the Landlord's then-current rental rate per rentable square foot for such Rentable Space (or, if Landlord has not then established a current rental rate for such Rentable Space, such projected rental rate per rentable square foot for such Rentable Space as determined by Landlord in its reasonable discretion), which rental rate shall be increased at the same rental rate per rentable square foot and at the same time as the

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rental rate applicable to the Rentable Space is increased (or reasonably projected by Landlord to be increased).
29.36.2 Generator Equipment . The installation of the Emergency Generator and related Generator Connecting Equipment (hereby referred to together and/or separately as the " Generator Equipment ") shall be performed in accordance with and subject to the provisions of this Section 29.36 and Article 8 above, and the Generator Equipment shall be treated for all purposes of this Lease as if the same were Tenant's property. For the purposes of determining Tenant's obligations with respect to its use of the Generator Site and Generator Equipment herein provided, the Generator Site shall be deemed to be a portion of the Premises; consequently, all of the provisions of this Lease with respect to Tenant's obligations hereunder shall apply to the installation, use and maintenance of the Generator Equipment, including without limitation, provisions relating to compliance with requirements as to insurance, indemnity, repairs and maintenance, and compliance with applicable laws.
29.36.3 Non-Exclusive Right . It is expressly understood that Landlord retains the right to grant third parties the right to utilize any portion of the Real Property located outside the Premises not utilized by Tenant as the Generator Site, provided in each event that Tenant shall have reasonable access to, and Landlord shall not unduly interfere with the use of, the Generator Equipment.
29.36.4 Tenant's Covenants . Tenant shall install, use, maintain and repair the Generator Equipment so as not to damage or interfere with the operation of the Real Property or Building, any portion thereof, including, without limitation, the Generator Site, the Systems and Equipment, and any other generators or power sources or similar equipment located in or on the Building or Real Property; and Tenant hereby agrees to indemnify, defend and hold Landlord and its partners and their respective officers, agents, servants, employees, and independent contractors harmless from and against any and all Claims (other than Claims to the extent arising from the negligence or willful misconduct of Landlord and not insured or required to be insured by Tenant under this Lease) arising out of Tenant's failure to comply with the provisions of this Section 29.36.
29.36.5 Landlord's Obligations . Except to fulfill its obligations under this Section 29.36, Landlord shall not have any obligations with respect to the Generator Site, the Generator Equipment or compliance with any requirements relating thereto, nor shall Landlord be responsible for any damage that may be caused to the Generator Equipment, except to the extent caused by the negligence or willful misconduct of Landlord and not insured or required to be insured by Tenant under this Lease. Landlord makes no representation that the Generator Equipment will be able to supply sufficient power to the Premises, and Tenant agrees that Landlord shall not be liable to Tenant therefor.
29.36.6 Condition of Generator Site . Tenant shall accept the Generator Site in its "AS-IS" condition, without any representations or warranties made by Landlord concerning same (including, but not limited to, the purposes for which such areas are to be used by Tenant), and Landlord shall have no obligation to contract or pay for any improvements or other work in or for the Generator Site, and Tenant shall be solely responsible, at its sole cost and expense, for preparing the Generator Site for the installation of the Generator Equipment and for constructing

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any improvements or performing any other work in such areas pursuant to and in accordance with the provisions of this Section 29.36. Tenant, at Tenant's sole cost and expense, shall maintain the Generator Equipment and install such enclosures, fencing and other protective equipment on or about the Generator Equipment as Landlord may reasonably require.
29.36.7 Repairs . Tenant shall (i) subject to the provisions of Section 10.4, be solely responsible for any damage caused as a result of the Generator Equipment, (ii) promptly pay any tax, license and permit fees charged pursuant to any requirements in connection with the installation, maintenance or use of the Generator Equipment and comply with all precautions and safeguards recommended by all governmental authorities, and (iii) make necessary repairs, replacements to or maintenance of the Generator Equipment and Generator Site. Tenant shall have the work which is Tenant's obligation to perform under this Section 29.36.7 (including, without limitation, all installation, modification and maintenance of the Generator Equipment) performed promptly and diligently in a first-class, workmanlike manner, by contractors and subcontractors approved by Landlord.
29.36.8 Installation . Tenant shall install and operate the Generator Equipment in compliance with all applicable laws and all recorded covenants, conditions and restrictions affecting the Real Property. Prior to the installation of the Generator Equipment, or the performance of any modifications or changes thereto, Tenant shall comply with the following:
29.36.8.1    Tenant shall submit to Landlord in writing all plans for such installations, modifications or changes for Landlord's approval, which approval shall not be withheld except in the event such plans contain a Design Problem (except that for purposes of this Section 29.36.8.1, the term "Design Problem" shall not include clause (iii) of Section 8.1 above);
29.36.8.2    prior to commencement of any work, Tenant shall obtain the required approvals of all federal, state and local governmental authorities; Tenant shall promptly deliver to Landlord written proof of compliance with all applicable laws and all recorded covenants, conditions and restrictions affecting the Real Property in connection with any work related to the Generator Equipment, including, but not limited to, a signed-off permit from the City of Los Angeles;
29.36.8.3    all of such work shall conform to Landlord's design specifications for the Real Property, Building and the Generator Site and Landlord's requirements, including, but not limited to, weight and loading requirements, and shall not adversely affect the structural components of the Building or interfere with any Systems and Equipment located in, upon or serving the Real Property, Building or the Generator Site; and
29.36.8.4    the Generator Equipment shall be clearly marked to show Tenant's name, address, telephone number and the name of the person to contact in case of emergency.
29.36.9 Hazardous Materials . Tenant shall not use any Hazardous Materials in connection with the Generator Equipment, except that Tenant may use diesel fuel stored in a double walled steel tank (the " Fuel Tank ") contained within the Emergency Generator (the exact

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location and size of which Fuel Tank shall be approved by Landlord), as long as such fuel and Fuel Tank are kept, maintained and used in accordance with all applicable laws and the highest safety standards for such use, and so long as such fuel is always stored within the Fuel Tank and is not used or stored in any area outside of the Emergency Generator. Tenant shall promptly, at Tenant's expense, take all investigatory and all remedial action required by applicable laws and reasonably recommended by Landlord, whether or not formally ordered or required by applicable laws, for the cleanup of any spill, release or other contamination of the Generator Site and/or the Real Property to the extent caused or contributed to by Tenant's use of the Generator Equipment (including, without limitation, the fuel for the Emergency Generator), or pertaining to or involving any such fuel or other Hazardous Materials brought onto the Generator Site during the Lease Term by Tenant or any of Tenant's agents, employees, contractors, licensees or invitees. Tenant shall indemnify, defend and hold Landlord and its partners and their respective officers, agents, servants, employees, and independent contractors harmless from and against any and all Claims (subject to Section 10.4 and other than Claims to the extent arising from the negligence or willful misconduct of Landlord and not insured or required to be insured by Tenant under this Lease) arising out of or involving any Hazardous Materials brought onto the Generator Site by or for Tenant in connection with Tenant's activities under this Section 29.36.9. Tenant's obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Tenant or any of Tenant's agents, employees, contractors, licensees or invitees, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease.
29.36.10 Security . Physical security of the Generator Site and the Generator Equipment is the sole responsibility of Tenant, who shall bear the sole cost, expense and liability of any security services, emergency alarm monitoring and other similar services in connection therewith. Landlord shall not be liable to Tenant for any direct, indirect, consequential or other damages arising out of or in connection with the physical security, or lack thereof, of the Generator Site and/or Generator Equipment.
29.36.11 Testing . The Generator Equipment shall be routinely tested and inspected by a qualified contractor selected by Tenant and reasonably approved by Landlord, at Tenant's expense, in accordance with testing and inspection service contracts reasonably approved by Landlord. Tenant will provide Landlord with copies of certificates and other documentation related to the testing of the Generator Equipment. Testing hours are restricted, however, to those specific hours reasonably set and determined by Landlord from time to time.
29.36.12 Default . If Tenant fails to perform any of its obligations under this Section 29.36, and does not correct such noncompliance within five (5) business days after receipt of notice thereof from Landlord or such longer period as may be reasonably necessary to correct such noncompliance, so long as Tenant commences to correct such noncompliance within such five (5) business day period and thereafter proceeds with due diligence to correct such noncompliance, then Tenant shall be deemed in breach of this Lease but shall not be in default under this Lease until Tenant receives the applicable notices required to be provided by Landlord to Tenant under Article 19 above and has failed to cure such breach within the applicable time periods set forth in Article 19 above (but Landlord may nonetheless exercise its self-help remedies otherwise set forth in this Lease without regard to the notice and cure periods provided in Article 19 above to the extent permitted in such other provisions of this Lease), and

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in addition to all other remedies Landlord may have under this Lease, Tenant shall, upon notice from Landlord, immediately discontinue its use of that portion of the Generator Equipment to which such noncompliance relates, and make such repairs and restoration as required under Section 29.36.13 below with respect thereto.
29.36.13 Removal at End of Term . Upon the expiration of the Lease Term or upon any earlier termination of this Lease, Tenant shall, subject to the control of and direction from Landlord, remove the Generator Equipment, including, without limitation all electrical switch gear, underground conduit and feeders, enclosures, fencing or other protective equipment and/or modifications to the Generator Site, repair any damage caused thereby, and restore the Generator Site and other facilities of the Building and Real Property to their condition existing prior to the installation of the Generator Equipment. Any and all removal of the Generator Equipment shall be performed by certified and licensed contractors previously approved in writing by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed) and in accordance with a previously approved removal plan, in a workmanlike manner, without any interference, damage or destruction to any other equipment, structures or operations at the Generator Site, the Building or the Real Property and/or any equipment of other licensees or tenants. If Tenant fails to timely make such removal and/or restoration, then Landlord may perform such work at Tenant's cost, which cost shall be immediately due and payable to Landlord upon Tenant's receipt of invoice therefor from Landlord.
29.36. 14 Rights Personal . Tenant's rights under this Section 29.36 are personal to the Original Tenant and any Approved Transferee, and may only be exercised or utilized by the Original Tenant or such Approved Transferee, as the case may be, and shal1 only be utilized when the Original Tenant or such Approved Transferee, as the case may be, is in actual and physical possession of any portion of the Premises.
29.37     Automatic Teller Machines .
29.37.1 The parties acknowledge that Tenant currently maintains and operates an automatic tel1er machine (the "Exterior ATM ") at a location on the exterior of the Building on the plaza level and connected to and part of the Retail Space (the " Exterior ATM Space "). At any time during the Lease Term, Tenant shall have the right, at its expense, to (i) remove the Exterior ATM from the Exterior ATM Space, and (ii) if instal1ed by Tenant pursuant to the fol1owing provisions of this Section 29.37, remove the New Banking Equipment (as defined below) from the Exterior ATM Space and/or the Interior East Lobby Wal1 (as defined below); provided, however, that in all events, upon the expiration or earlier termination of this Lease, Tenant shall, at its expense, remove the Exterior ATM and all New Banking Equipment installed by Tenant. In connection with any such optional or required removal, Tenant shall, at its expense, pay for all costs and expenses relating in any way to such removal and promptly (but in al1 events by the expiration or earlier termination of this Lease): (A) restore the Exterior ATM Space, the Interior East Lobby Wal1 (if applicable) and the Retail Space to a condition that is consistent with the general appearance of the Building and otherwise in a first class manner; and (B) repair any and all damage to the Building caused by or which occurs in connection with such removal and restoration.

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29.37.2 Tenant shall provide all security systems and shall institute and maintain all security procedures and maintain all insurance for the Exterior ATM and, if applicable, for any of the New Banking Equipment, that are customarily provided or maintained by retail bank branches and/or savings and loans in downtown Los Angeles for their automated teller machines (and, as to the New Banking Equipment, if applicable, other equipment substantially similar to the New Banking Equipment), and Landlord shall fully cooperate, at no cost to Landlord, with Tenant so that Tenant may install such additional lighting and security procedures and equipment reasonably required for the safety and security of its customers to the extent (i) required by applicable laws, or (ii) are customary for retail bank branches located in comparable locations within Comparable Buildings ( i.e. , those retail bank branches located near the main lobby entrance of such Comparable Buildings), provided that in any event such additional lighting and security procedures and equipment must (A) be in conformance with the style and design of Building, as reasonably determined by Landlord, (B) be approved by Landlord, which approval shall not be unreasonably withheld, and (C) otherwise comply with the provisions of this Section 29.37 (specifically including Sections 29.37.6 and 29.37.7.2 below). If Tenant does not perform any of Tenant's obligations hereunder, then Landlord shall have the right to perform such obligations and Tenant shall reimburse Landlord upon demand for any and all costs and expenses incurred by Landlord in connection therewith together with interest at the Interest Rate.
29.37.3 If Landlord renovates or otherwise undertakes construction with respect to the exterior of the Building (including in connection with the Upgrade Work and/or Building enhancement pursuant to Article 21 above), then Landlord may, upon at least forty-five (45) days' notice to Tenant, require Tenant to remove the Exterior ATM (and, if applicable, the New Banking Equipment installed in the Exterior ATM Space) at Tenant's sole cost and expense (unless such renovation is in connection with Landlord's construction of a new additional building in which case Landlord shall reimburse Tenant for such costs) until the renovation has been completed. If Landlord does so notify Tenant, Tenant may elect to re-install the Exterior ATM in the Exterior ATM Space (and/or, if applicable, the New Banking Equipment installed in the Exterior ATM Space) by written notice to Landlord given within thirty (30) days after Landlord gives Tenant written notice that the renovation or construction affecting the Exterior ATM Space is completed. If Tenant does not timely elect to re-install the Exterior ATM and/or, if applicable, the New Banking Equipment in the Exterior ATM Space, then Tenant shall, within ninety (90) days after Landlord's notice of completion, at Tenant's sole cost and expense except as provided above, restore the Exterior ATM Space to its condition prior to (i) with respect to the Exterior ATM, the installation of the Exterior ATM, and (ii) with respect to the New Banking Equipment, if applicable, that is located in the Exterior ATM Space, the installation of such New Banking Equipment. Landlord shall have no liability to Tenant for Tenant's or Tenant's customers' inability to use the Exterior ATM (and, if applicable, the New Banking Equipment located in the Exterior ATM Space) during any such period of renovation or construction. Tenant shall cooperate with Landlord in connection with any such renovation to the exterior of the Building or construction with respect thereto, including making minor changes in the location of the Exterior ATM and, if applicable, the New Banking Equipment located in the Exterior ATM Space, after the renovation or construction, as may be required by such renovation or construction. Once Landlord commences any such construction or renovation, subject to Force Majeure and Tenant delays, Landlord shall use commercially reasonable efforts to complete such construction and renovations in a diligent manner.

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29.37.4 In addition, Landlord may require Tenant to relocate the Exterior ATM, any New Banking Equipment located in the Exterior ATM Space, and/or any New Banking Equipment that is located on the Interior East Lobby Wall pursuant to Section 29.37.5 below, to such locations within the Building's curtain wall which comprises the demising wall of the Retail Space and/or other areas on the Interior East Lobby Wall (as the case may be) as are reasonably acceptable to Tenant upon at least three (3) months' prior notice to Tenant, but no more often than once during any four (4) year period during the Lease Term. All of the terms, provisions and conditions specified in this Section 29.37 shall apply to each further relocation and all costs of any further relocation shall be borne by Tenant. Upon Landlord's written notice of a further relocation, Tenant shall use its best efforts to promptly obtain all regulatory and other governmental permits and approvals, if any are required, in connection with the further relocation. For purposes hereof, the " Interior East Lobby Wall " shall mean the same wall (which may be a solid wall, glass or a combination thereof as long as it is consistent with the overall decor of the Building lobby) upon which the Lobby ATM Space is located (as depicted on Exhibit N attached hereto), but shall include the entirety of such wall measured from the eastern side of the Building's curtain wall to the easternmost portion of the existing main Building lobby interior entrance to the Retail Space.
29.37.5 During the Lease Term, so long as the Original Tenant and/or a Qualified Transferee meets the Minimum Occupancy Threshold and Tenant otherwise complies with the following provisions of this Section 29.37.5, Tenant shall have the right, but not the obligation, to install, at Tenant's sole cost and expense, any or all of the following banking equipment in the Retail Space in the locations described hereinbelow (collectively, the " New Banking Equipment "): (i) one (1) additional automated teller machine in the Interior East Lobby Wall of the Retail Space (the " Lobby ATM ") in the location of the Interior East Lobby Wall as depicted on Exhibit N attached hereto (the " Lobby ATM Space "); (ii) night deposit boxes in the Lobby ATM Space and/or the Exterior ATM Space; and (iii) new types of banking equipment that are devised under banking technologies to replace and/or supplement the Exterior ATM, the Lobby ATM and/or any such night deposit boxes (and/or any other equipment which mayor may not be similar to or supplement or replace ATMs or night deposit boxes) and are used in similar retail bank branches in the Comparable Buildings. In addition to any of the other applicable terms, conditions and provisions of this Section 29.37, the following conditions shall apply with respect to Tenant's installation of any of the New Banking Equipment: (A) the New Banking Equipment must be located entirely within and served from entirely within the Retail Space, and may not protrude beyond the demising walls of the Retail Space, except that any such New Banking Equipment (1) may also be located in the Lobby ATM Space and/or the Exterior ATM Space if such New Banking Equipment is integrated into, connected to and part of the Retail Space and is no otherwise t a free-standing structure or apparatus, (2) that is located in the Exterior ATM Space and complies with clause (1) hereinabove may protrude beyond the exterior of the Building's curtain wall up to the same (or greater, but only on a de minimus basis) extent as the existing protrusions of the Exterior ATM as of the date of execution of this Lease, (3) may also be located in space on the Interior East Lobby Wall that is other than the Lobby ATM Space if (x) such New Banking Equipment is integrated into, connected to and part of the Retail Space and is not otherwise a free-standing structure or apparatus, and (y) landlords of the Comparable Buildings permit similar New Banking Equipment for similar retail bank branches in such Comparable Buildings to be located in similar locations near the main entrance, and within the main lobbies, of such Comparable Buildings, and (4) that is located in the Lobby ATM Space

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(and/or any other such space on the Interior East Lobby Wall) and complies with clauses (1) and (3) hereinabove may protrude in the space directly in front of and/or immediately adjacent to the Lobby ATM Space (and/or such other space on the Interior East Lobby Wall where such New Banking Equipment may be located as permitted hereinabove, as the case may be) but only on a de minimus basis to the extent landlords of the Comparable Buildings permit similar New Banking Equipment for similar retail bank branches in such Comparable Buildings to protrude in similar locations near the main entrance, and within the main lobbies, of such Comparable Buildings (Landlord shall not charge Tenant any additional Rent for Tenant's use of the Exterior ATM Space, the Interior Lobby Wall and/or any such permitted protrusions of the New Banking Equipment located therein); (B) the size and dimensions of the Lobby ATM in the Lobby ATM Space must not be of greater size and dimensions of the Exterior ATM currently located in the Exterior ATM Space; (C) the size and dimensions of any New Banking Equipment located in any space on the Interior East Lobby Wall that is other than the Lobby ATM Space shall not be larger than the size and dimensions of such similar New Banking Equipment generally permitted by landlords of Comparable Buildings in similar locations near the main entrance, and within the main lobbies, of such Comparable Buildings (D) Tenant must comply with the reasonable requirements of Landlord as to the installation and design of the New Banking Equipment; (E) the installation of the New Banking Equipment must not constitute or cause a Design Problem (except that for purposes of this clause (E), the term "Design Problem" shall not include clause (iii) of Section 8.1 above); (F) the New Banking Equipment must be consistent with the quality, nature, operation and appearance of the Building as a first-class multi-tenant office building; (G) there must exist sufficient available space adequate for the installation of the New Banking Equipment; and (H) Tenant shall pay to Landlord all costs incurred by Landlord in connection with the installation of any such New Banking Equipment, and shall pay directly for all costs of operation and maintenance of the New Banking Equipment.
29.37.6 Where Tenant's compliance with applicable laws with respect to the Exterior ATM and/or, if applicable, the New Banking Equipment, requires additions, improvements or changes to the existing Building security, safety and/or lighting equipment (collectively, the " Lighting Improvements "), such Lighting Improvements shall be subject to the provisions of Section 29.37.2 above and Section 29.37.7.2 below and shall be performed by Landlord (or, at Landlord's election in Landlord's sole discretion, by Tenant in accordance with the provisions of the Tenant Work Letter and/or Article 8 above, as applicable), at Tenant's sole cost and expense. Tenant shall, within thirty (30) days after invoice from Landlord, reimburse Landlord for all costs and expenses actually incurred by Landlord with respect to such Lighting Improvements (which costs may be paid out of the Tenant Improvement Allowance to the extent such Lighting Improvements are performed in conjunction and concurrently with the New Tenant Improvements installed by Tenant under the Tenant Work Letter), including, but not limited to, the cost of consultants, plans, permits and construction costs.
29.37.7 Tenant's use of the Exterior ATM, and Tenant's use and installation of the New Banking Equipment (if applicable), and other banking equipment shall be subject to the following provisions of this Section 29.37.7:
29.37.7.1    Tenant shall be deemed the sole " Operator " and "controller of the access area" and shall be solely responsible at its own cost and expense for

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lighting and safety and all other similar safety obligations pursuant to California Financial Code Section 13020 et seq. "Automated Teller Machines: User Safety" or any other applicable law;
29.37.7.2    Tenant shall not be entitled to use any space other than the Exterior ATM Space in connection with Tenant's operation, alteration, improvement, repair, or removal of the Exterior ATM and, if applicable, Tenant shall not be entitled to use (except as expressly provided above in this Section 29.37) any space other than the interior of the Retail Space, the Exterior ATM Space and/or the Interior East Lobby Wall in connection with Tenant's operation, alteration, improvement, repair, or removal of the New Banking Equipment;
29.37.7.3    Any alteration, improvement, repair, or removal of the Exterior ATM, the New Banking Equipment (if applicable), and other banking equipment, whenever done, shall be in conformity with plans, as may be amended from time to time, that are prepared by Tenant in accordance with applicable laws and reasonably approved by Landlord and shall be performed by Tenant at its sole cost and expense; and
29.37.7.4    Under no circumstances shall Tenant permit the location, operation, repair, or alteration of the Exterior ATM, the New Banking Equipment (if applicable), and other banking equipment to unreasonably interfere with the flow of pedestrian traffic, to cause any structural problems, or to otherwise unreasonably disrupt other tenants of the Building or cause operational interference in or about the Building or Real Property.
29.37.8 Landlord hereby agrees that, subject to the terms and conditions set forth below in this Section 29.37.8, Landlord shall not grant any other person or entity the right to install or operate an automated teller machine at the Real Property which is accessible from outside such person or entity's premises or in any common areas of the Real Property. Landlord's agreement to restrict the use and the granting of automated teller machine rights as set forth hereinabove is specifically subject to (i) Original Tenant and/or a Qualified Transferee satisfying the Minimum Occupancy Threshold, and (ii) all existing and subsequently adopted governmental laws which prohibit or modify such restrictions. Furthermore, Landlord's agreement to restrict the use and the granting of automated teller machine rights as set forth hereinabove shall not apply to any existing tenant's lease for space at the Real Property (herein, an " Other Tenant Existing Lease ") or any sublease or assignment thereof; provided, however, (A) Landlord agrees not to amend any Other Tenant Existing Lease to expressly grant such tenant the right to install or operate an automated teller machine at the Real Property, and (B) if any Other Tenant Existing Lease expressly permits Landlord to withhold consent of any sublease or assignment thereunder to a subtenant or assignee which would operate in such space an automated teller machine, then Landlord shall not consent to any such proposed sublease or assignment in accordance with the provisions of such Existing Lease. In addition, the foregoing restrictions contained above in this Section 29.37.8 shall be of no further force or effect if at any time during the Lease Term the Original Tenant and/or a Qualified Transferee (1) is not leasing the Retail Space under this Lease, or (2) except in the event of a casualty, is not in physical occupancy and possession of the Retail Space for a period of more than one hundred twenty (120) consecutive days.
29.38     Property Management . So long as Original Tenant and/or a Qualified Transferee meets the Minimum Occupancy Threshold, the Building may not be managed by property

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management firms that do not provide a comparable level and quality of property management services as those provided for other multi-tenant office buildings by Hines, Brookfield Properties, CB Richard Ellis, Cushman & Wakefield, Lincoln Properties, Tishman Speyer, Jones Lang Lasalle, and Broadway Partners. This Section 29.38 shall be binding upon all successors and assigns of Landlord's interests in this Lease, and Landlord prior to the sale of the Building by Landlord, Landlord shall advise each purchaser of the restrictions contained in this Section 29.38.
29.39     Future Development . Landlord may, in its sole discretion, at any time during the Lease Term, construct additional buildings, structures, or other improvements on the Real Property (each a " New Structure "); provided, however, so long as Original Tenant and/or a Qualified Transferee meets the Minimum Occupancy Threshold, Landlord shall obtain Tenant's prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed) to the construction of any New Structure if such proposed New Structure would block more than fifty percent (50%) of the view from the northern corridor above the ninth (9th) floor of the Building (the " Northern View "), as such Northern View shall be measured on a one-hundred eighty degree (180°) radius from the center-point of the northern face of the Building. A visual example of the Northern View is attached to this Lease as Exhibit L . Notwithstanding anything to the contrary contained hereinabove or elsewhere in this Lease, in the event Landlord actually constructs any New Structure on the Real Property, (i) Tenant shall not be responsible to pay as Additional Rent, and Landlord shall not charge Tenant for, any increases in Direct Expenses attributable to the development or operation of the New Structure, (ii) any signage affixed to the New Structure shall comply with the provisions and be subject to the restrictions contained in Section 23.6 above, and (iii) Landlord shall continue to provide Tenant with the number of parking passes to which Tenant would otherwise be entitled pursuant to Article 28 above.
[SIGNATURES APPEAR ON THE FOLLOWING PAGES]



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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be exeucted the day and date first above written.
"Landlord":
HINES VAF UB PLAZA, L.P.,
a Delaware limited partnership
By:
Hines VAF UB Plaza GP LLC,
its general partner
By:
Hines VAF UB Plaza Mezz, L.P.,
its sole member
By:
Hines VAF UB Plaza GP2 LLC,
its general partner
By:
Hines U.S. Office Value Added Fund, L.P.,
its sole member
By:
Hines U.S. Office Value Added Fund, LLC,
its general partner
By:
Hines Interests Limited Partnership,
its managing member
By:
Hines Holdings, Inc.
its general partner
By:
/s/ Colin P. Shepherd
Name:
Colin P. Shepherd
Title:
Senior Vice President

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[Union Bank Lease]


"Tenant":
UNION BANK OF CALIFORNIA, N.A.,
a national association
By:
/s/ Craig Poletti
Name: Craig Poletti
Title: Vice President
By:
/s/ Kenneth Holdway
Name: Kenneth Holdway
Title: Senior Vice President
By:
/s/ John Erickson
Name: John Erickson
Title: Vice Chairman


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[Union Bank Lease]


EXHIBIT A
UNION BANK PLAZA
OUTLINE OF FLOOR PLANS OF PREMISES

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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]




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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]



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EXHIBIT A
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[Union Bank Lease]


EXHIBIT B
TENANT WORK LETTER
This Tenant Work Letter shall set forth the terms and conditions relating to the renovation of the leasehold improvements in the Initial Premises, the 20 th Floor Space and the 28 th Floor Expansion Space (if Tenant exercises its Expansion Option for the 28 th Floor Expansion Space pursuant to Section 1.6 of this Lease). All references in this Tenant Work Letter to Articles or Sections of "this Lease" shall mean the relevant portions of Articles I through 29 of the Lease to which this Tenant Work Letter is attached as Exhibit B, and all references in this Tenant Work Letter to Sections of "this Tenant Work Letter" shall mean the relevant portions of Sections I through 5 of this Tenant Work Letter. All terms not defined in this Tenant Work Letter shall have the same meaning as set forth in this Lease.
SECTION 1

LANDLORD WORK

Landlord shall perform, at its sole cost and expense and without deduction from the Tenant Improvement Allowance (as defined below), the following work (collectively, " Landlord Work ") with respect to each Full TI Floor (as defined below) following Tenant's vacation of any Existing Full TI Floor (as defined below) pursuant to Section 2.3.1 below, and in conjunction with Landlord's delivery to Tenant of the 20 th Floor Space and the 28 th Floor Expansion Space (if Tenant exercises its Expansion Option for the 28 th Floor Expansion Space pursuant to Section 1.6 of this Lease):
1.1    demolition and removal of the existing tenant improvements within those areas on such Full TI Floor depicted by hatch marks on Schedule I attached hereto; such demolition and removal work shall not pertain to any tenant improvements or other improvements located within, or any portions of: (i) the restrooms; (ii) the mechanical rooms, elevator and mechanical shafts, storage closets, risers, chases, telephone rooms, janitorial closets, electrical closets and stairwell shafts of such Full TI Floor, and any other enclosed core areas of such Full TI Floor consisting of the areas not depicted by hatch marks on Schedule I attached hereto (collectively, the " Enclosed Core Areas "); (iii) the Premises Base Building HVAC/Sprinkler Equipment; and (iv) to the extent designated by Tenant in a written notice delivered to Landlord at least sixty (60) days prior to Tenant's Delivery Date (as defined below) for such Full TI Floor, those systems and equipment providing for the distribution within the Premises of the Premises Base Building HVAC/Sprinkler Equipment (such items so designated by Tenant pursuant to this clause (iv), collectively, the " Retained Distribution Systems ");
1.2    abatement of the asbestos contained on such Full TI Floor in accordance with the General Abatement Standard (as defined below); and
1.3    any work required within the restrooms and the Enclosed Core Areas of such Full TI Floor described in Section 1.1 above, in order for such restrooms and Enclosed Core Areas to comply with applicable codes including the Americans with Disabilities Act (collectively, the " Code ") pertaining to such restrooms and Enclosed Core Areas in effect as of the Lease

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EXHIBIT B
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[Union Bank Lease]


Commencement Date, determined on an unoccupied basis (other than with respect to the restrooms which shall not be subject to such qualification), and only to the extent that any such work is required by the City of Los Angeles in order to issue permits for the New Tenant Improvements (as defined below) construction work to be performed by Tenant on such Full TI Floor (collectively, the " Code Compliance Work ").
As used herein, the " General Abatement Standard " shall mean the removal, encapsulation, enclosure and/or repair of all asbestos contained on each applicable Full TI Floor (or with respect to any First Offer Space or Expansion Space for which Landlord has the obligation to abate asbestos pursuant to Section 1.5.5.3 of the Lease) to the extent such asbestos is readily accessible, as reasonably determined by a State of California certified asbestos consultant engaged by Landlord (" Landlord's Asbestos Consultant ") (i) pursuant to asbestos abatement specifications for each such applicable Full TI Floor (or First Offer Space or Expansion Space, as the case may be), prepared by Landlord's Certified Asbestos Consultant and delivered to Tenant prior to the commencement of any such abatement work on each such applicable Full TI Floor (or First Offer Space or Expansion Space, as the case may be), which asbestos abatement specifications shall be in the general form of, and propose asbestos abatement work substantially similar to that specified in, the asbestos abatement specifications for the 20 th Floor Space (a copy of which is attached hereto as Schedule 3 ), as may be modified to take into account the specific physical layout of, and the location and accessibility of any asbestos contained on, each such applicable Full TI Floor (or First Offer Space or Expansion Space, as the case may be), and (ii) in accordance with EPA standards and all applicable laws, rules, ordinances and regulations governing asbestos in office buildings. Within thirty (30) days after the completion of the asbestos abatement work described in Section 1.2 above with respect to each applicable Full TI Floor (or First Offer Space or Expansion Space, as the case may be), Landlord shall deliver to Tenant a certification from Landlord's Asbestos Consultant certifying that the asbestos air level for such applicable Full TI Floor (or First Offer Space or Expansion Space, as the case may be) is equal to or less than 0.001 fibers per cc.
If Tenant timely designates that Landlord not demolish and remove any of the Retained Distribution Systems in accordance with the provisions of Section 1.1 above, and Landlord incurs increased actual out-of-pocket demolition costs as a result of not demolishing and removing such designated Retained Distribution Systems than Landlord would have incurred had Landlord demolished and removed such designated Retained Distribution Systems, then Tenant shall, within thirty (30) days after receipt of an invoice therefor, reimburse Landlord for all such increased costs.
Landlord shall cause the Landlord Work to be performed by contractors selected by Landlord, and in a good and workmanlike manner.
The parties hereby acknowledge and agree, however, that with respect to Landlord's obligation to perform the Landlord Work for the 28 th Floor Expansion Space (if leased pursuant to Section 1.6 of this Lease), Landlord shall only be required to perform the Code Compliance Work (and not the work described in Sections 1.l and 1.2 above).

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EXHIBIT B
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[Union Bank Lease]


SECTION 2
NEW TENANT IMPROVEMENTS
2.1     Tenant Improvement Allowance . Tenant shall be entitled to receive a tenant improvement allowance (the " Full Floor Tenant Improvement Allowance ") in the amount of up to, but not exceeding, Fifty-Two and 5011 00 Dollars ($52.50) per rentable square foot of floors 2, 3, 4, 5, 6, 7, 9, II, 14 and 18 of the Initial Premises (collectively, the " Existing Full TI Floors "), the 20 th Floor Space and the 28 th Floor Expansion Space (if Tenant exercises its Expansion Option for the 28 th Floor Expansion Space pursuant to Section 1.6 of this Lease) (collectively with the Existing Full TI Floors, the " Full TI Floors "). In addition, Tenant shall be entitled to receive a tenant improvement allowance (" Remaining Floors Tenant Improvement Allowance ") in the amount of up to, but not exceeding, Ten and 0011 00 Dollars ($10.00) per rentable square foot of floors 8, 10, 12, 13, IS, 16, 17, 21 and 24 of the Initial Premises and the Vault Space plus Thirty-One and 25/100 Dollars ($31.25) per rentable square foot of the Retail Space. Floors 8,10,12,13,15,16,17,21 and 24 of the Initial Premises, the Vault Space and the Retail Space may be collectively referred to herein as the " Remaining Floors ." The Full Floor Tenant Improvement Allowance and the Remaining Floors Tenant Improvement Allowance may be collectively referred to herein as the " Tenant Improvement Allowance ." The Tenant Improvement Allowance may be used by Tenant to help Tenant pay for the costs of the Tenant Improvement Allowance Items (as defined below) pertaining to the initial tenant improvements which are to be installed by Tenant pursuant to this Tenant Work Letter and affixed to the Full TI Floors and/or the Remaining Floors, all as set forth on the Approved Working Drawings (as defined below) for such Full TI Floors and/or the Remaining Floors (collectively, the " New Tenant Improvements "). In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the sum of (i) the Tenant Improvement Allowance plus (ii) those costs incurred by Landlord to complete the Landlord Work. Notwithstanding the designation of space as a Full TI Floor or a Remaining Floor as provided above, the Full Floor Tenant Improvement Allowance and the Remaining Floor Tenant Improvement Allowance may be used for the Tenant Improvement Allowance Items with respect to any or all of such spaces and such amounts may be commingled subject, however, to the conditions and limitations in Section 2.2.2 below regarding the availability of the Tenant Improvement Allowance for Full TI Floors and the limitations in Sections 2.2.1.8 and 2.2.1.9 below.
2.2     Disbursement of the Tenant Improvement Allowance .
2.2.1     Tenant Improvement Allowance Items . Except as otherwise set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be disbursed by Landlord (each of which disbursements shall be made pursuant to Landlord's disbursement process as described below) only for the following items and costs (collectively the " Tenant Improvement Allowance Items "):
2.2.1.1    Payment of the fees of the "Architect" and the "Engineers" (as those terms are defined in Section 3.1 of this Tenant Work Letter) in connection with the design and construction of the New Tenant Improvements;

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EXHIBIT B
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[Union Bank Lease]


22.1.2    The payment of plan check, permit and license fees relating to construction of the New Tenant Improvements;
2.2.1.3 The cost of construction of the New Tenant Improvements, including, without limitation, testing and inspection costs, freight elevator usage, hoisting and trash removal costs, costs of non-Business Hours HVAC (as determined pursuant to Section 62 of this Lease), demolition costs (other than the costs incurred by Landlord as a result of the work performed pursuant to Sections 1.1 and 12 above which will be paid and absorbed by Landlord without deduction from the Tenant Improvement Allowance), costs of materials and services, and contractors' fees and general conditions (but specifically excluding certain costs as set forth in Section 5.5 below);
2.2.1.4 Except for the cost of any Code Compliance Work which is Landlord's obligation to perform at Landlord's expense pursuant to Section 1.3 above, the cost of any changes in the Base, Shell and Core when such changes are required by the Construction Drawings (including if such changes are due to the fact that such work is prepared on an unoccupied basis), such cost to include all direct architectural and/or engineering fees and expenses reasonably incurred in connection therewith;
22.1.5 The cost of any changes to the Construction Drawings (as defined below) or New Tenant Improvements required by Code (except to the extent the same are otherwise Landlord's responsibility under Section 1.3 above);
2.2.1.6 Sales and use taxes, gross receipts taxes, Title 24 fees, art fees and taxes and any other taxes imposed on or pertaining to the Tenant Improvements;
2.2.1.7 All other reasonable, actual and documented out-of-pocket costs reasonably expended by Landlord in connection with the design and construction of the New Tenant Improvements;
2.2.1.8 The cost of free-standing workstations, furniture, fixtures and equipment, telecommunication equipment costs and installation charges (collectively, the " Non-Construction Items ") on Full TI Floors, only, up to a maximum of Five and 00/100 Dollars ($5.00) per rentable square foot of the applicable Full TI Floor for such Non-Construction Items; and
2.2.1.9 The cost of moving Tenant's furniture and other personal property to and from Full TI Floors, only, up to a maximum of Three Dollars ($3.00) per rentable square foot of each such Full TI Floor, but Tenant shall not be entitled to use the Tenant improvement Allowance for such moving costs pertaining to any particular Existing Full TI Floor unless such Existing Full TI Floor has been vacated by Tenant and delivered by Tenant to Landlord as a Returned Floor (as defined in and pursuant to Section 2.3.1 below) on or before the Outside Disbursement Date (as defined in Section 2.4 below).
2.2.2     Payments . Notwithstanding anything to the contrary contained in this Tenant Work Letter, as a condition to Landlord's obligation to disburse any portion of the Full Floor Tenant Improvement Allowance allocable to any particular Full TI Floor (including, without limitation, for commingling as described in Section 2.1 above for use by Tenant for any

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EXHIBIT B
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[Union Bank Lease]


Tenant Improvement Allowance Items for any other portions of the Premises, the 20 th Floor Space and/or the 28 th Floor Expansion Space, and/or as a Base Rent credit pursuant to Section 2.4.2 below), Tenant must (at a minimum) have improved such particular Full TI Floor to a condition that would make such particular Full TI Floor suitable for occupancy for general office purposes and may not just improve a portion of such floor (i.e., Tenant must install floor covering, ceiling system with lighting, electricity, sprinkler heads and HVAC distribution throughout such entire Full TI Floor). In addition, Landlord shall only be obligated to disburse the Full Floor Tenant Improvement Allowance allocable to any particular Existing Full TI Floor from and after Landlord's Delivery Date for such particular Existing Full TI Floor pursuant to Section 2.3.1 below. Otherwise, during the construction of the New Tenant Improvements for each applicable Full TI Floor or Remaining Floor, Landlord shall make monthly disbursements of the Tenant Improvement Allowance for Tenant Improvement Allowance Items for such applicable floor for the benefit of Tenant and shall authorize the release of monies for the benefit of Tenant as follows:
2.2.2.1 Monthly Disbursements . Not more often than once each calendar month during the design and construction of the New Tenant Improvements for each applicable Full TI Floor or Remaining Floor and on or before the first (1st) day of each such calendar month (the " Submittal Date "), Tenant shall deliver to Landlord the following (collectively, " Monthly Draw Request "): (i) a request for payment of the "Contractor," as that term is defined in Section4.1 of this Tenant Work Letter, approved by Tenant, pursuant to AlA Document G702, showing the schedule, by trade, of percentage of completion of the New Tenant Improvements for such applicable Full TI Floor or Remaining Floor (as the case may be), detailing the portion of the work completed; (ii) invoices from all of "Tenant's Agents," as that term is defined in Section 4.1.2 of this Tenant Work Letter, for labor rendered and materials delivered as part of such New Tenant Improvements; (iii) executed mechanic's lien releases from all of Tenant's Agents which shall comply with the appropriate provisions, as reasonably determined by Landlord, of California Civil Code Section 3262(d); provided, however, that with respect to fees and expenses of the Architect or Engineers, or the Non-Construction Items, Tenant shall only be required to deliver to Landlord on or before the applicable Submittal Date, reasonable evidence that Tenant incurred the cost for the fees and expenses of the Architect or Engineers or the applicable Non-Construction Items for such applicable Full TI Floor or Remaining Floor, as the case may be (unless Landlord has received a preliminary notice in connection with such costs in which event conditional lien releases must be submitted in connection with such costs); and (iv) all other information reasonably requested by Landlord so long as (A) such other information is typically requested by landlords of Comparable Buildings as a condition to making any such disbursements, and (B) Landlord has given Tenant at least thirty (30) days' prior notice specifically identifying such other information. Tenant's Monthly Draw Request shall be deemed Tenant's acceptance and approval of the work furnished and/or the materials supplied as set forth in Tenant's Monthly Draw Request vis-a-vis Landlord. On or before the date occurring thirty (30) days after Landlord's receipt of a substantially factually correct Monthly Draw Request, Landlord shall deliver to Tenant a check made payable to Tenant (or at Landlord's election, made jointly payable to Contractor and Tenant, except that in connection with (I) the Non-Construction Items and (2) those amounts for which Tenant has already directly paid the Contractor and for which Tenant has delivered to Landlord paid receipts evidencing such payment as part of the Monthly Draw Request, Landlord shall also deliver to Tenant a check made payable solely to Tenant) in an aggregate amount equal to the lesser of: (x) the

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EXHIBIT B
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[Union Bank Lease]


amount so requested by Tenant in the Monthly Draw Request, as set forth in this Section 2.2.2.1 above (but the amount to be paid by Landlord with respect to each such Monthly Draw Request shall equal only that amount so requested in such Monthly Draw Request that is factually correct and for which Landlord has received factually correct lien releases therefor, it being agreed that with respect to those other amounts so requested in the Monthly Draw Request that are not factually correct and/or do not have appropriate lien releases therefor [collectively, the " Incorrect Amounts "], Landlord shall notify Tenant of such Incorrect Amounts and the reasons that the same are deemed by Landlord to qualify as Incorrect Amounts, and Landlord may withhold payment of any such applicable Incorrect Amounts (but shall pay for the amounts requested that do not constitute Incorrect Amounts) until Tenant delivers a new factually correct Monthly Draw Request with appropriate lien releases pertaining to, and correcting, such Incorrect Amounts), less a ten percent (10%) retention provided that the aggregate amount of such retentions shall not exceed ten percent (10%) of the Tenant Improvement Allowance (the aggregate amount of such retentions to be known as the " Final Retention "); provided, however, that no such retention shall be applicable to the Architect, Engineers, or the Non-Construction Items; and (y) the balance of any remaining available portion of the Tenant Improvement Allowance (not including the Final Retention) for such applicable Full TI Floor or Remaining Floor (as the case may be). Notwithstanding the foregoing, in no event shall Landlord be obligated to disburse more than $5,000,000.00 of the Tenant Improvement Allowance in any calendar year; provided, however, that the foregoing $5,000,000.00 annual cap on disbursement of the Tenant Improvement Allowance shall not be deemed to release Landlord from disbursing any Tenant Improvement Allowance which exceeds such $5,000,000.00 annual cap in the immediately succeeding calendar year or years until the Tenant Improvement Allowance is fully disbursed and the Outside Disbursement Date shall be extended to the extent necessary to allow Tenant to receive the full Tenant Improvement Allowance to the extent the $5,000,000.00 annual cap is the reason such amount is not being paid. Landlord's payment of such amounts shall not be deemed Landlord's approval or acceptance of the work furnished or materials supplied as set forth in Tenant's payment request.
2.2.2.2 Final Retention . Subject to the provisions of this Tenant Work Letter, a check for the Final Retention for such applicable New Tenant Improvements for such applicable Full TI Floor or Remaining Floor (as the case may be) payable jointly to Tenant and Contractor (or if Tenant so requests, payable solely to Tenant for those amounts for which Tenant has already directly paid the Contractor and for which Tenant has delivered to Landlord paid receipts evidencing such payment and unconditional and final mechanic's lien releases for such amounts) shall be delivered by Landlord to Tenant following the completion of construction of such New Tenant Improvements, provided that (i) Tenant has paid the entire costs of the design, permitting and construction of such applicable New Tenant Improvements with respect to such applicable Ful1 TI Floor or Remaining Floor in excess of the applicable Tenant Improvement Allowance which Tenant may allocate to such particular Full TI Floor or Remaining Floor pursuant to the foregoing provisions of this Tenant Work Letter (the " Improvement Excess "), and (ii) Tenant delivers to Landlord written request for payment of such Final Retention together with properly executed mechanics lien releases in compliance with both California Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or Section 3262(d)(4) with respect to all of such New Tenant Improvements for such applicable Full TI Floor or Remaining Floor and the costs thereof (including any such Improvement Excess). Tenant covenants to timely pay the Improvement Excess, if any, after Landlord's

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EXHIBIT B
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UNION BANK PLAZA
[Union Bank Lease]


disbursement of the applicable Tenant Improvement Allowance (excluding the Final Retention) and prior to Landlord's disbursement of the Final Retention. If Landlord has reasonably determined that a Design Problem exists with respect to such New Tenant Improvements, Tenant shall promptly correct such Design Problem, but Landlord may not withhold payment of the Final Retention for the applicable New Tenant Improvements as a result of such Design Problem.
2.2.2.3 Other Terms . Except as provided in Section 2.4.2 below, Landlord shall only be obligated to make disbursements from the Tenant Improvement Allowance to the extent costs are incurred by Tenant for Tenant Improvement Allowance Items.
2.3     Staging of Construction of Existing Full TI Floors . Landlord and Tenant acknowledge that Tenant presently intends to renovate each Existing Full TI Floor that it elects to vacate with the possible exception of the last Existing Full TI Floor it is scheduled to vacate pursuant to this Section 2.3 ("Last Vacated Floor") in a progression such that each full floor employee unit or business unit will only move once from its current location to a renovated floor.
2.3.1 Procedure . A Full TI Floor shall be deemed to be in " Delivery Condition " when Landlord has completed the Landlord Work on such floor, except for any Code Compliance Work to the restrooms and Enclosed Core Areas on such floor, which Code Compliance Work may be performed by Landlord simultaneously with the New Tenant Improvements to be constructed by Tenant for such Full TI Floor. However, to the extent Landlord's Code Compliance Work in the restrooms and Enclosed Core Areas of any such Full TI Floor that has not been completed as of the date Landlord delivers such Full TI Floor to Tenant (for Tenant to commence its New Tenant Improvements work therein) actually delays Tenant in obtaining a permit for and/or completing the construction of such New Tenant Improvements, or moving back into such Full TI Floor, the same may be a Landlord Delay (as defined in and determined in accordance with the provisions of Section 2.3.2 below). In addition, to the extent Tenant's out-of-pocket costs of construction of such New Tenant Improvements are increased as a result of any such delay by Landlord pertaining to such incomplete Landlord's Code Compliance Work which constitutes a Landlord Delay pursuant to Section 2.3.2 below, Landlord shall pay such increased out-of-pocket costs in addition to, and separate and apart from, the Tenant Improvement Allowance, which payments shall be made in accordance with the procedure set forth in Section 2.2.2 above. After Landlord delivers the 20 th Floor Space to Tenant in the Delivery Condition and Tenant completes its New Tenant Improvements in the 20 th Floor Space, Tenant may vacate each remaining individual Existing Full TI Floor (each, a " Returned Floor ") and deliver each such individual Returned Floor to Landlord in the order determined by Tenant for Landlord to commence the Landlord Work therefor (but Tenant may only deliver to Landlord one (I) Returned Floor at a time, and no Returned Floor may be delivered to Landlord until Landlord has delivered the Returned Floor that Landlord previously received from Tenant back to Tenant in the Delivery Condition). The date that Tenant fully vacates each such Returned Floor and delivers such Returned Floor to Landlord shall be referred to as " Tenant's Delivery Date "; however, Tenant's Delivery Date shall not be deemed to have occurred until Landlord has received a factually correct sixty (60) day prior notice from Tenant that such Returned Floor will be vacated and delivered to Landlord. After Landlord receives a Returned Floor and causes such Returned Floor to be in Delivery Condition, Landlord shall promptly deliver such Returned Floor back to Tenant (the actual date

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EXHIBIT B
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UNION BANK PLAZA
[Union Bank Lease]


upon which Landlord delivers such Returned Floor back to Tenant shall be referred to as " Landlord's Delivery Date "); however, Landlord's Delivery Date shall not be deemed to have occurred until Tenant has received a factually correct fourteen (14) day prior notice from Landlord that such Returned Floor will be delivered to Tenant in the Delivery Condition. Subject to Force Majeure and delays attributable to Tenant, its agents, employees or contractors, Landlord shall use commercially reasonable efforts to cause the applicable Landlord's Delivery Date for a Returned Floor to occur within four (4) months after Tenant's Delivery Date for such Returned Floor.
2.3.2 CD Date . From and after Tenant's Delivery Date for each such Returned Floor and continuing until the date (the " CD Date ") which is the earlier of (i) the date Tenant commences business operations from any portion of such Returned Floor and (ii) four (4) months after Landlord's Delivery Date for such Returned Floor (which 4-month period shall be extended on a day-for-day basis for "Uncontrollable Delays" (as defined below), Tenant shall not be obligated to pay Base Rent or Tenant's Share of Direct Expenses with respect to such Returned Floor. The term " Uncontrollable Delays " shall mean any actual delays in the design, permitting and completion of the New Tenant Improvements (minor punch-list items excepted) and move into the Returned Floor beyond such 4-month period resulting from (i) " Landlord Delays ", which for purposes hereof shall mean any such delays caused by Landlord (including any delays regarding any incomplete Landlord Code Compliance Work described in Section 2.3.1 above and/or failure to comply with any of the time periods for approval of the Construction Drawings, as defined in and pursuant to Section 3 of this Tenant Work Letter), failure to provide Tenant sufficient access to the Returned Floor and the Building to construct its New Tenant Improvements and move into the Returned Floor (subject to Tenant's compliance with Landlord's reasonable rules and regulations regarding move-in and construction), failure to comply with any other provision of the Lease and/or this Tenant Work Letter, failure to timely disburse the Tenant Improvement Allowance, and/or (ii) Force Majeure events. In addition, no Landlord Delay or other Uncontrollable Delay shall be deemed to have occurred unless Tenant has given Landlord written notice that an event giving rise to such Landlord Delay or other Uncontrollable Delay is about to occur or has occurred which will cause a delay in the design, permitting and completion of the New Tenant Improvements (minor punch-list items excepted) and move into the Returned Premises beyond such 4-month period and Landlord has failed to remedy the situation giving rise to the potential Landlord Delay or other Uncontrollable Delay within one (I) business day after Landlord's receipt of such notice, in which ease the number of days of actual delay after such notice shall be a Landlord Delay or other Uncontrollable Delay. The foregoing procedure shall be repeated so that each time a Full TI Floor is vacated and becomes a Returned Floor, Tenant shall not be required to pay Base Rent and Tenant's Share of Direct Expenses with respect to such Returned Floor from Tenant's Delivery Date for such Returned Floor until the CD Date for such Returned Floor. Following Tenant's vacation and delivery of a Returned Floor to Landlord, Landlord shall then take possession of such newly vacated and delivered Returned Floor, cause it to be placed in the Delivery Condition as provided above, and deliver such Returned Floor back to Tenant in the Delivery Condition in accordance with the procedures outlined above, whereupon Tenant shall (if Tenant elects to construct New Tenant Improvements on such TI Floor) construct its New Tenant Improvements on such Full TI Floor pursuant to the same terms and conditions that applied to the initial Full TI Floor with no Base Rent payment or Tenant's Share of Direct Expenses due for such Full TI Floor from Tenant's Delivery Date until the CD Date. The CD Date shall be computed for each Returned Floor in the same manner applicable to

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the initial Full Tl Floor that was the first Returned Floor. This procedure shall be repeated until the CD Date occurs for the last Full Tl Floor (subject, however, to Tenant's right set forth in Section 2.3.3 below to terminate the Lease with respect to the Last Vacated Floor).
2.3.3 Last Vacated Floor . With respect to the Last Vacated Floor, Tenant shall have the right to either: (i) vacate and deliver such last Vacated Floor to Landlord as a Returned Floor pursuant to the foregoing provisions of this Section 2.3; or (ii) terminate this Lease as to such Last Vacated Floor, but Tenant shall only be entitled to exercise such termination right if (A) such Last Vacated Floor is located on the 10 th floor of the Building or higher, (B) Tenant has not elected to convert such Full Tl Floor to a Remaining Floor pursuant to Section 2.3.5 below (unless Tenant pays to Landlord the full amount of the Tenant Improvement Allowance so received by Tenant for such converted floor, which payment shall be made prior to the Effective Termination Date (as defined below) for such converted floor), (C) Tenant has previously vacated and delivered to Landlord all of the other Full TI Floors (that have not been so converted pursuant to Section 2.3.5 below) pursuant to this Section 2.3, and (D) the last CD Date for all such other Full TI Floors which constituted a Returned Floor has occurred (such last date may be referred to herein as the " Last CD Date "). In order to properly exercise its termination option for such Last Vacated Floor pursuant to clause (ii) hereinabove: (l) Tenant must provide written notice to Landlord of its irrevocable election to terminate this Lease (the " Last Vacated Floor Termination Notice ") with respect to such Last Vacated Floor; (2) such Last Vacated Floor Termination Notice must be delivered to Landlord, if at all, following the Last CD Date but on or before the date (the " Outside Termination Notice Date ") which is the earlier of (x) the Outside Disbursement Date, and (y) ninety (90) days following the later of (I) the Last CD Date and (1I) the date upon which Landlord delivers to Tenant notice that the Last CD Date has occurred; (3) such Last Vacated Floor Termination Notice must stipulate the floor Tenant has elected to terminate and the termination date designated by Tenant for such floor, which termination date (" Effective Termination Date ") shall be no sooner than five (5) days after Landlord's receipt of such Last Vacated Floor Termination Notice nor later than five (5) days after the Outside Termination Notice Date; and (4) Tenant may not be in default under the Lease beyond any applicable cure periods at the time Tenant provides its notice to terminate to Landlord. If Tenant timely and properly delivers such Last Vacated Floor Termination Notice to Landlord, this Lease shall terminate with respect to the Last Vacated Floor designated by Tenant in such Last Vacated Floor Termination Notice as of the Effective Termination Date, and Tenant shall vacate and surrender exclusive possession of such Last Vacated Floor to Landlord in accordance with the terms of Article 15 of this Lease on or before such Effective Termination Date.
2.3.4 Remaining Floors . Notwithstanding anything to the contrary contained herein, Tenant shall be required to pay full Rent on the Remaining Floors during Tenant's construction of the New Tenant Improvements therein and Tenant shall be entitled to schedule such work during evenings and weekends and/or at other times which are convenient to Tenant.
2.3.5 Conversion to Remaining Floor . Tenant may elect, at any time by one or more notices delivered to Landlord on or prior to the Outside Disbursement Date, not to vacate one or more particular Existing Full TI Floor(s) and instead convert such applicable Existing Full Tl Floor(s) to a Remaining Floor(s) in which case: (i) Tenant shall be entitled to receive a Tenant Improvement Allowance for each such converted Full TI Floor equal to $10.00 per

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rentable square foot of such converted Existing Full TI Floor instead of $52.50 per rentable square foot; (ii) the restrictions in the first two (2) sentences of Section 2.2.2 above shall not apply; and (iii) Tenant shall not be entitled to exercise its one floor termination option pursuant to Section 2.3.3 above for any such converted Existing Full Tl Floor for which Tenant receives such $10.00 per rentable square foot Tenant Improvement Allowance unless Tenant satisfies the terms and provisions of Section 2.3.3 above for such converted floor.
2.4     Unused Tenant Improvement Allowance . If the Reminder Notice was sent to Tenant after February 1,2016 and prior to March 10,2016 and the entire Tenant Improvement Allowance is not fully utilized, to pay for the Tenant Improvement Allowance Items pursuant to Section 2.2 above, by January 31,2017 (the " Outside Disbursement Date "), Tenant shall forfeit any such unused amounts (subject, however, to the following provisions of this Section 2.4).
2.4.1     Potential Extension of Outside Disbursement Date . Notwithstanding the above, if Tenant has not submitted Monthly Draw Request to Landlord for full reimbursement of the Tenant Improvement Allowance on or before February 1, 2016, Landlord shall provide a written reminder notice to Tenant (" Reminder Notice ") on or before March 10, 2016 reminding Tenant that Tenant must submit such Monthly Draw Request to Landlord by such January 31, 2017 Outside Disbursement Date so as to avoid such forfeiture. If Landlord does not provide such Reminder Notice to Tenant after February 1, 2016 and on or before March 10, 2016, as Tenant's sole remedy, the Outside Disbursement Date shall be extended on a day-for-day basis until Landlord delivers such Reminder Notice to Tenant. In addition, if Tenant has timely submitted Monthly Draw Request for Tenant's final reimbursement request, but has not yet secured final unconditional lien releases for the work which is subject to such reimbursement pursuant to Section 2.2.2.2 above, such Outside Disbursement Date (as may previously have been extended as provided hereinabove) shall be extended a maximum of one (I) month to provide Tenant with an additional period to secure such lien releases. In addition, if during the one (I) year period prior to January 31, 2017, Tenant (i) is in the process of constructing New Tenant Improvements for which the Tenant Improvement Allowance is payable to Tenant pursuant to Section 2.2 above, (ii) encounters substantial delays in the construction of such New Tenant Improvements due to a Landlord Delay, act of God, civil unrest or a fire or other casualty which causes Tenant not to complete such New Tenant Improvements by the Outside Disbursement Date (and as a result Tenant does not submit a reimbursement request and the other Monthly Draw Request to Landlord for the costs of any such incomplete work by the Outside Disbursement Date), and (iii) notifies Landlord of such Landlord Delay, act of God, civil unrest or fire or other casualty promptly after Tenant becomes aware of same, then the Outside Disbursement Date (which may already be subject to extension as provided hereinabove) shall be further extended on a day-for-day basis for each such day of such delay caused by a Landlord Delay, act of God, civil unrest or fire or other casualty that exists after Landlord has received such notice (up to a maximum of twelve (12) months of extension for such delays caused by an act of God, civil unrest or fire or other casualty, and an unlimited extension for Landlord Delays).
2.4.2     Base Rent Credit . Subject to Tenant satisfying the requirements outlined herein, Tenant may apply up to fifty percent (50%) of any unused amount of the Tenant Improvement Allowance as a credit against the Base Rent next due commencing as of the date which is sixty (60) days after the Outside Disbursement Date (as may be extended pursuant to

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Section 2.4.1 above). However, in lieu of such Base Rent credit, Landlord shall have the right, at its election, to make a cash payment to Tenant in the amount of the credit which would otherwise apply, provided such payment is made to Tenant on or before the date which is fifteen (15) days prior to the date such Base Rent credit would otherwise commence. Notwithstanding the foregoing, if Tenant is in default under this Lease after expiration of applicable notice and cure periods at the time that a credit against Base Rent would otherwise be due or Landlord would otherwise be required to make a cash payment to Tenant pursuant to the foregoing provisions of this Section 2.4.2, Landlord may postpone such credit or such payment until such default has been fully cured.
2.5     Tenant's Right of Offset . Notwithstanding anything to the contrary set forth in this Tenant Work Letter or elsewhere in this Lease, if Landlord fails to timely disburse any monthly payment of the Tenant Improvement Allowance or the Final Retention of the Tenant Improvement Allowance within the time periods set in Section 2.2.2 above, Tenant shall be entitled to deliver written notice (" Payment Notice ") thereof to Landlord and to any holder of a mortgage or deed of trust encumbering the Building. If Landlord still fails to fulfill any such obligation within ten (10) business days after Landlord's receipt of the Payment Notice from Tenant and if Landlord fails to deliver written notice to Tenant within such ten (10) business day period explaining Landlord's reasons that the amounts described in Tenant's Payment Notice are not due and payable by Landlord (" Refusal Notice "), Tenant shall be entitled to fund such amount(s) itself and to offset such amount(s) (provided Tenant obtains all appropriate lien releases with respect to any such amount(s) prior to Tenant's offset thereof), together with interest at the Interest Rate (as defined in Section 29.34 of this Lease) from the date of payment by Tenant until the earlier of the date of offset and subsequent payment by Landlord, against Tenant's next obligations to pay Base Rent under this Lease. However, Tenant shall not be entitled to any such offset while Tenant is in default under this Lease after expiration of any applicable notice and cure periods. If Landlord delivers a Refusal Notice, and if Landlord and Tenant are not able to agree on the amounts to be so paid by Landlord, if any, within ten (10) business days after Tenant's receipt of a Refusal Notice, Landlord shall pay the amount that is not disputed and either Landlord or Tenant may elect to have such dispute resolved pursuant to the proceeding set forth in Section 29.31 of the Lease. If Tenant obtains a judgment in its favor in any such proceedings, Tenant shall be entitled to offset the amount determined to be payable by Landlord in such proceedings together with any attorneys' fees and costs awarded therein to Tenant together with interest at the Interest Rate from the date of payment by Tenant to the date of such offset or subsequent payment by Landlord against Tenant's next obligations to pay Base Rent (but Tenant shall not be entitled to any such offset while Tenant is in default under this Lease after expiration of any applicable notice and cure periods).
SECTION 3
CONSTRUCTION ORAWINGS
3.1     Selection of Architect/Construction Drawings . Tenant shall retain an architect/space planner approved by Landlord (the " Architect ") (which approval shall not be unreasonably withheld or conditioned, and shall be granted or denied within five (5) business days after written request therefor from Tenant is received by Landlord) to prepare the Construction Drawings for the New Tenant Improvements. Tenant shall retain engineering and

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[Union Bank Lease]


other consultants reasonably approved by Landlord (collectively, the " Engineers ") (which approval shall not be unreasonably withheld or conditioned, and shall be granted or denied within five (5) business days after written request therefor from Tenant is received by Landlord) to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler work in connection with the New Tenant Improvements, which work is not part of the Landlord Work; provided, however, Tenant shall use the same structural and mechanical/life safety system engineers (collectively, the " Key Engineers ") engaged by Landlord for structural and mechanical/life safety system work (as applicable) with respect to the Building to prepare the engineering plans and drawings (" Key Engineering Plans '') for such work for the Premises, so long as such engineers agree to meet the schedule set forth in this Tenant Work Letter for preparing same, and Landlord shall cause such engineers to charge fees for their services which are competitive with the fees charged for comparable services in Comparable Buildings. Alternatively, Tenant may select, subject to Landlord's prior approval, which shall not be unreasonably withheld or delayed, Key Engineers of its own choosing to prepare the Key Engineering Plans in which case Tenant shall reimburse Landlord, out of the Tenant Improvement Allowance, for the amounts Landlord pays engineers of its choosing to review the Key Engineering Plans. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the " Construction Drawings ." Unless otherwise approved or designated by Landlord, all Construction Drawings shall comply with the drawing format and specifications attached hereto as Schedule 2 . In connection therewith, Landlord shall supply Tenant with blue-line floorplate backgrounds and Building standard details. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the base building plans (including the Landlord Work), and Tenant and Architect shall be solely responsible for the same, and Landlord shall have no responsibility in connection therewith. Landlord's review of the Construction Drawings as set forth in this Section 3, shall be for its sole purpose and shall not imply Landlord's review of the same, or obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord's space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings, except to the extent Landlord has specifically requested a modification to the Construction Drawings as a condition to Landlord's approval thereof (it being understood that nothing in this Section 3.1 shall relieve Landlord from its repair and maintenance obligations under the Lease). Construction Drawings for each of the Full TI Floors may be submitted separately to Landlord for its review and approval.
3.2     Final Space Plan . Tenant shall have the right to supply Landlord with four (4) copies signed by Tenant of its final space plan for the New Tenant Improvements for the applicable Full TI Floor or Remaining Floor. The final space plan for each such particular Full TI Floor or Remaining Floor if so submitted by Tenant (the " Final Space Plan ") shall include a layout and designation of all offices, rooms and other partitioning and their intended use. Landlord may request clarification or more specific drawings for special use items not included in the Final Space Plan. Landlord shall, within five (5) business days after Landlord receives such Final Space Plan, (i) approve the Final Space Plan, (ii) approve the Final Space Plan subject to specified conditions stated in a reasonably clear manner to be complied with by Tenant when

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[Union Bank Lease]


the Final Working Drawings are submitted by Tenant to Landlord, or (iii) disapprove the Final Space Plan and return the same to Tenant with requested revisions; provided however that Landlord may only disapprove or conditionally approve the Final Space Plan if and to the extent the same contains a Design Problem (as defined in Section 8.1 of this Lease), which approval (or conditional approval) may be withheld in Landlord's sole discretion with respect to such Design Problem except as otherwise expressly provided in Section 8.1 of this Lease. If Landlord disapproves any draft of the Final Space Plan for a particular Full TI Floor or Remaining Floor because the same contains a Design Problem, Tenant shall cause the Final Space Plan for such particular Full TI Floor or Remaining Floor to be revised to correct such Design Problem and deliver such revised Final Space Plan to Landlord for approval in accordance with the criteria set forth above in this Section 3.2. The foregoing procedures shall be repeated until such applicable Final Space Plan is approved by Landlord.
3.3     Final Working Drawings and Approved Working Drawings . Tenant shall cause the Architect and the Engineers to prepare complete and detailed architectural and engineering drawings and the final architectural working drawings for such particular Full TI Floor or Remaining Floor where the performance of work will occur, which drawings shall be in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable Permits, as defined below, for such particular Full TI Floor or Remaining Floor (collectively, the " Final Working Drawings "), and shall submit the same to Landlord for Landlord's approval. Tenant shall supply Landlord with four (4) copies signed by Tenant of such Final Working Drawings. Landlord shall, within five (5) business days after Landlord receives the Final Working Drawings for a particular Full TI Floor or Remaining Floor, either (i) approve the Final Working Drawings, (ii) approve the Final Working Drawings subject to specified conditions stated in a reasonably clear manner to be satisfied by Tenant to eliminate a Design Problem, or (iii) disapprove and return the Final Working Drawings to Tenant with requested revisions if the Final Working Drawings contain a Design Problem (which approval may be withheld in Landlord's sole discretion with respect to a Design Problem except as otherwise expressly provided in Section 8.1 of this Lease). If Landlord disapproves any draft of the Final Working Drawings with respect to a particular Full TI Floor or Remaining Floor, Tenant shall cause such Final Working Drawings to be revised to correct any such Design Problem, and shall deliver such Final Working Drawings to Landlord for approval in accordance with the criteria set forth above in this Section 3.3. The Final Working Drawings may be submitted at one or more times and in one or more parts for each Full TI Floor or Remaining Floor and the approval, timing and procedures shall be applicable to each such part or portion. The foregoing procedures shall be repeated until such applicable Final Working Drawings are approved by Landlord (upon such approval such applicable Final Working Drawings shall be referred to herein as the " Approved Working Drawings ").
3.4     Permits . Tenant shall submit the Approved Working Drawings for a particular Full TI Floor or Remaining Floor to the City of Los Angeles for, and obtain, all applicable building permits necessary to allow the Contractor to commence and fully complete the construction of the New Tenant Improvements for such particular Full TI Floor or Remaining Floor (collectively, the " Permits "); provided, however, that after Landlord approves any portion of the Final Working Drawings for such particular Full TI Floor or Remaining Floor, Tenant shall have the right to submit the same to the appropriate municipal authorities to begin the process of obtaining the Permits therefor on a piece-by-piece basis. Tenant hereby agrees that

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neither Landlord nor Landlord's consultants shall be responsible for obtaining any Permits (except in connection with the Landlord Work) or certificate of occupancy for any such for a particular Full TI Floor or Remaining Floor, and that obtaining the same shall be Tenant's responsibility; provided, however, that Landlord shall cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such Permits or certificate of occupancy.
3.5     Tenant Changes . In the event Tenant desires to change the applicable Approved Working Drawings after Landlord's approval thereof (other than purely cosmetic changes which could not possibly cause a Design Problem), Tenant shall deliver notice (the " Drawing Change Notice ") of the same to Landlord, setting forth in detail the changes (each, a " Tenant Change ") Tenant desires to make to such Approved Working Drawings. Landlord shall, within five (5) business days after Landlord's receipt of a Drawing Change Notice either (i) approve the Tenant Change, or (ii) disapprove the Tenant Change and deliver a notice to Tenant specifying in reasonably sufficient detail the reasons for Landlord's disapproval; provided, however, that Landlord may only disapprove of the Tenant Change if the Tenant Change contains a Design Problem (in which case such approval may be withheld in Landlord's sole discretion with respect to any such Design Problem except as otherwise expressly provided in Section 8.1 of this Lease). Any additional costs which arise in connection with such Tenant Change shall be paid by Tenant; provided, however, that to the extent the applicable Tenant Improvement Allowance has not been disbursed, such payment shall be made out of the applicable Tenant Improvement Allowance subject to the terms of this Tenant Work Letter.
SECTION 4
CONSTRUCTION OF THE NEW TENANT IMPROVEMENTS
4.1     Tenant's Selection of Contractors .
4.1.1     The Contractor . Tenant shall retain a licensed general contractor (the " Contractor "), as contractor for the construction of the New Tenant Improvements, which Contractor shall be subject to the prior approval of Landlord, which approval shall not be unreasonably withheld or conditioned, and shall be granted or denied within five (5) business days of Tenant's request for Landlord's consent.
4.1.2     Tenant's Agents . All subcontractors, laborers, materialmen, and suppliers used by Tenant (such subcontractors, laborers, materialmen, and suppliers, and the Contractor to be known collectively as " Tenant's Agents ") must be approved in writing by Landlord, which approval shall not be unreasonably withheld or conditioned, and shall be granted or denied within five (5) business days of Tenant's request for Landlord's consent; provided that, in any event, Tenant must contract with Landlord's base building subcontractors for any work affecting any life safety work (the cost of which work shall be reasonably consistent with competitive based pricing, and Landlord shall cause such subcontractors to charge Tenant on the same price structure that Landlord obtains from such subcontractors when it performs work for Landlord when it is for Landlord's own account and Landlord is not being reimbursed for the work) or, alternatively, select its own subcontractors (subject to Landlord's prior approval, which shall not be unreasonably withheld or delayed) and reimburse Landlord from the remaining Tenant

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Improvement Allowance for Landlord's out-of-pocket costs incurred in having its base building contractors review such work. All of Tenant's Agents shall have labor union affiliations that are compatible with those affiliations (if any) of workmen employed by Landlord and its contractors and subcontractors.
4.2     Construction of New Tenant Improvements by Tenant's Agents .
4.2.1     Construction Contract . Prior to the commencement of construction of the New Tenant Improvements, Tenant shall submit to Landlord the construction contract and general conditions with Contractor (the " Contract ") as an accommodation only (and Landlord shall have no approval rights with respect thereto).
4.2.2     Tenant's Agents .
4.2.2.1     Landlord's General Conditions for Tenant's Agents and New Tenant Improvement Work . Tenant's and Tenant's Agent's construction of the New Tenant Improvements shall comply with the following: (i) the New Tenant Improvements shall be constructed in a good and workmanlike manner, in substantial conformance with the Approved Working Drawings for such particular Full TI Floor or Remaining Floor (subject to Tenant's right to make changes to the same pursuant to Section 3.5 of this Tenant Work Letter), and in compliance with all applicable Code; (ii) Tenant and Tenant's Agents shall not, in any way, materially interfere with, obstruct, or delay, the work of Landlord's contractor and subcontractors with respect to the Landlord Work or any other work in the Building; and (iii) Tenant shall abide by all reasonable rules made by Landlord's Building contractor or Landlord's Building manager with respect to the use of freight, loading dock and service elevators, storage of materials, coordination of work with the Code Compliance Work and the contractors of other tenants, and any other matter in connection with this Tenant Work Letter, including, without limitation, the construction of the New Tenant Improvements, which rules have been made available to Tenant; provided, however, that Landlord shall provide Tenant and Tenant's Agents with access to the loading docks and freight elevators sufficient to accommodate Tenant's reasonable needs, but subject to Landlord's prior scheduling of such loading docks and freight elevators.
4.2.2.2 Indemnity . Tenant's indemnity of Landlord as set forth in Section 10.1 of this Lease shall also apply, but subject to Section 10.4 of this Lease, with respect to any and all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Tenant or Tenant's Agents, or anyone directly or indirectly employed by any of them, or in connection with Tenant's non-payment of any amount arising out of the New Tenant Improvements and/or Tenant's disapproval of all or any portion of any request for payment.
4.2.2.3 Intentionally Deleted .
4.2.2.4 Insurance Requirements .
4.2.2.4.1 General Coverages . All of Tenant's Agents shall carry worker's compensation insurance covering all of their respective employees, and shall also carry public liability insurance, including property damage, all with limits, in form and with companies as are required to be carried by Tenant as set forth in Article 10 of this Lease, and the policies therefor shall insure Landlord and Tenant, as their interests may appear, as well as the Contractor

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and subcontractors; provided, however, that the types and amounts of such insurance shall not be greater than that required by landlords of the Comparable Buildings.
4.2.2.4.2 Special Coverages . Tenant or the Contractor shall carry "Builder's All Risk" insurance in an amount reasonably approved by Landlord covering the construction of the New Tenant Improvements, and such other insurance as Landlord may reasonably require, it being understood and agreed that the New Tenant Improvements shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon completion thereof. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by Landlord; provided, however, that the types and amounts of such insurance shall not be greater than that required by landlords of the Comparable Buildings.
4.2.2.4.3 General Terms . Certificates for all insurance carried pursuant to this Section 4.2.2.4 shall be delivered to Landlord before the commencement of construction of the New Tenant Improvements (or applicable portion thereof) and before the Contractor's equipment is moved onto the site. All such policies of insurance must contain a provision that the company writing said policy will give Landlord five (5) days' prior written notice of any cancellation or lapse of the effective date or any reduction in the amounts of such insurance below what is required hereunder. In the event that the New Tenant Improvements are damaged by any cause during the course of the construction thereof, Tenant shall immediately repair the same at Tenant's sole cost and expense, except to the extent caused by Landlord's negligence or willful misconduct, but then only to the extent the waiver of subrogation in Section lO.4 of the Lease is not applicable. Tenant's Agents shall maintain all of the foregoing insurance coverage in force until the New Tenant Improvements are fully completed and accepted by Landlord. All insurance, except Workers' Compensation, maintained by Tenant's Agents shall, to the extent commercially available, preclude subrogation claims by the insurer against anyone insured thereunder. Such insurance shall provide that it is primary insurance and that any other insurance maintained by Landlord is excess and noncontributing with the insurance required hereunder. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under Section 4.2.2.2 of this Tenant Work Letter and the parties' rights with respect to the waiver of subrogation set forth in Section 10.4 of the Lease.
4.2.3     Governmental Compliance . The New Tenant Improvements shall comply in all respects with the following: (i) the Code and other state, federal, city or quasigovernmental laws, codes, ordinances and regulations, as each may apply according to the rulings of the controlling public official, agent or other person; (ii) applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; and (iii) building material manufacturer's specifications, but none of the foregoing requirements shall restrict or limit Landlord's obligations to perform the Landlord Work pursuant to Section 1 of this Tenant Work Letter.
4.2.4     Inspection by Landlord . Landlord shall have the right to inspect the New Tenant Improvements at all reasonable times, provided however, that Landlord's failure to inspect the New Tenant Improvements shall in no event constitute a waiver of any of Landlord's rights hereunder nor shall Landlord's inspection of the New Tenant Improvements constitute Landlord's approval of the same. In the event that during an inspection Landlord shall discover a

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[Union Bank Lease]


Design Problem with respect to the New Tenant Improvements, and/or any defects in the New Tenant Improvements, and Landlord notifies Tenant thereof in writing specifying the particular Design Problem, non-compliance and/or defect, such matter shall be rectified by Tenant at no expense to Landlord to eliminate a Design Problem; provided however, that in the event Landlord determines that any such matter is or may create a Design Problem, Landlord may, following notice to Tenant and a reasonable period of time for Tenant to cure (not to exceed ten (10) business days), take such action as Landlord deems reasonably necessary, at Tenant's expense and without incurring any liability on Landlord's part, to correct any such matter that is or may create a Design Problem, including, without limitation, causing the cessation of performance of the construction of the Tenant Improvements until such time as such matter is corrected to Landlord's reasonable satisfaction.
4.2.5     Meetings . Commencing one (1) week prior to construction of the New Tenant Improvements taking place on each floor of the Premises, Tenant shall hold periodic meetings at reasonable times, with the Architect and the Contractor regarding the progress of the preparation of the Construction Drawings and the construction of the New Tenant Improvements, and Landlord and/or its agents shall receive prior notice of, and shall have the right to attend, all such meetings. In addition, minutes shall be taken at all such meetings, a copy of which minutes shall be delivered to Landlord. One such meeting each month shall include the review of Contractor's current request for payment.
4.3     Notice of Completion; Copy of "As Built" Plans . Within ten (10) days after completion of construction of the New Tenant Improvements for any particular Full TI Floor or Remaining Floor, Landlord shall cause a Notice of Completion to be recorded in the office of the Recorder of the County of Los Angeles in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and shall furnish a copy thereof to Tenant upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf of Tenant as Tenant's agent for such purpose, at Tenant's sole cost and expense. At the conclusion of construction of the New Tenant Improvements for each particular Full TI Floor or Remaining Floor: (i) Tenant shall cause the Architect and Contractor (A) to update the Approved Working Drawings for such particular Full TI Floor or Remaining Floor as to the mechanical drawing portion thereof, and to provide field-grade mark-ups of the remaining portion of such Approved Working Drawings, in all cases only as necessary to reflect all changes made to such Approved Working Drawings during the course of construction, (B) to deliver to Landlord two (2) sets of sepias of such as-built drawings, together with any Permits or similar documents issued by governmental agencies in connection with the construction of such New Tenant Improvements, within ninety (90) days following issuance of a certificate of occupancy for such particular Full TI Floor or Remaining Floor, and (C) to deliver to Landlord a computer disk containing such Approved Working Drawings in AutoCAD format; and (ii) Tenant shall deliver to Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, and systems for each such particular Full TI Floor or Remaining Floor in Tenant's possession or control. The failure of Tenant to do any of the foregoing shall not constitute a default under the Lease or be reason for Landlord to withhold or delay the disbursement of the Tenant Improvement Allowance, but Landlord may institute legal proceedings for specific performance with respect thereto.

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EXHIBIT B
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UNION BANK PLAZA
[Union Bank Lease]


4.4     Coordination with Landlord Work . Notwithstanding anything to the contrary contained in this Tenant Work Letter, Landlord and Tenant shall each use commercially reasonable efforts during Tenant's construction of such New Tenant Improvements and Landlord's construction of Landlord's Code Compliance Work, if any, for such particular Full TI Floor or Remaining Floor to minimize unreasonable interference by such party's work with the other party's work under this Tenant Work Letter.
SECTION 5
MISCELLANEOUS
5.1     Tenant's Representative . Tenant has designated Jeff Orsborn as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter.
5.2     Landlord's Representative . Landlord has designated Joe Tupy as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of Landlord as required in this Tenant Work Letter.
5.3     Time of the Essence in This Tenant Work Letter . Unless otherwise indicated, all references herein to a " number of days " shall mean and refer to calendar days. If any item requiring approval is timely disapproved by Landlord, the procedure for preparation of the particular item and the approval thereof shall be repeated until such item is approved by Landlord.
5.4     Tenant's Lease Default . Notwithstanding any provision to the contrary contained in this Lease, if (i) a default beyond the expiration of all applicable notice and cure periods as described in Section 19.1 of this Lease, or (ii) a breach of this Tenant Work Letter, which breach has not been cured within five (5) business days of reasonably detailed written notice to Tenant, has occurred at any time on or before the substantial completion of the New Tenant Improvements for any particular Full TI Floor or Remaining Floor, then (A) in addition to all other rights and remedies granted to Landlord pursuant to this Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance and/or Landlord may cause Contractor to cease the construction for such Full TI Floor or Remaining Floor (in which case, Tenant shall be responsible for any delay in the substantial completion of the New Tenant Improvements for such particular Full TI Floor or Remaining Floor caused by such work stoppage and such delay shall not have any effect upon Tenant's rental abatement periods described in Section 2.3 of this Tenant Work Letter), and (B) all other obligations of Landlord under the terms of this Tenant Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of this Lease (in which case, Tenant shall be responsible for any delay in the substantial completion of the New Tenant Improvements caused by such inaction by Landlord and such delay shall not have any effect upon Tenant's rental abatement periods described in Section 2.3 of this Tenant Work Letter).

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EXHIBIT B
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UNION BANK PLAZA
[Union Bank Lease]


5.5     Miscellaneous Charges . Throughout the course of construction of New Tenant Improvements for any Returned Floor until the CD Date for such Returned Floor, Tenant and its contractors shall receive free use of HVAC and electricity on such Returned Floor during Business Hours, and free water usage for such Returned Floor at all times and free use of the freight elevator (excluding after-hours use of the freight elevator). Neither the Contractor nor any of Tenant's Agents shall be permitted to park on-site at any time; however, subject to scheduling approved or designated by Landlord, the Contractor and Tenant's Agents shall have access to the Building's loading dock during the construction of the applicable New Tenant Improvements for loading and unloading of tools, personnel and materials.


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EXHIBIT B
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UNION BANK PLAZA
[Union Bank Lease]


SCHEDULE 1
DEPICTION OF DEMOLITION AND REMOVAL AREAS

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SCHEDULE 1
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[Union Bank Lease]


SCHEDULE 2
CONSTRUCTION DRAWINGS
FORMAT AND SPECIFICATIONS
FINAL SPACE PLAN REQUIREMENTS
1.
Final Space Plan . The Final Space Plan shall include floor plans (not less than 1/8" scale) indicating:
1.1
Quantity, location and type of all partitions.
1.2
Quantity, location and type of all doors.
1.3
Quantity, location and type of glass partitions and windows.
1.4
Size and location of telephone equipment room.
1.5
Critical dimensions necessary for construction.
1.6
Quantity and location of all electrical items (i.e., a reflected ceiling plan and power plan) including outlets, switches, telephone outlets, separate circuit or isolated ground outlets, floor corings and lighting, etc.
1.7
Quantity, location and type of equipment that will require special electrical requirements.
1.8
Quantity and location, including weight per square foot and description, of any exceptionally heavy equipment or filing system exceeding 50 pounds per square foot liveload.
1.9
Requirements of special air conditioning or ventilation.
1.10
Type of floor coverings.
1.11
Quantity, location and type of wall coverings.
1.12
Quantity, location and type of plumbing.
1.13
Quantity, location and type of appliances and kitchen equipment
1.14
Quantity, location and type of millwork.
1.15
Location and size of any floor openings required.

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SCHEDULE 2
- 1 -
UNION BANK PLAZA
[Union Bank Lease]


FINAL WORKING DRAWINGS REQUIREMENTS
2.     Architectural Floor Plans . The Architectural floor plans shall include floor plans (not less than 1/8" scale) indicating:
2.1
Room numbers and room descriptions.
2.2
Keyed partition types with complete dimensioned location (notations indicating that partition locations must be determined at the time of construction are not acceptable).
2.3
Keyed door types and hardware sets sufficient to determine all of the required details of construction and all hardware components.
2.4
Keyed architectural sections, elevations, and details of construction for such items as millwork, control joints, hanging rods, shelving, soffits, and special gyp board assemblies, etc.
2.5
All required materials, finishes, and assembly support relationships.
2.6
All required dimensional information. Please note that the excessive use of field verified dimensions will extend the construction period of custom New Tenant Improvements which is a schedule extension attributable to Tenant's custom requirements.
2.7
All detailed items should be coordinated and cross referenced with the plan drawings, especially such items as rough blocking and attachment locations. Cross references requiring the Architect's presence at the jobsite are unacceptable to Landlord.
2.8
Location of soffits and special ceiling construction should be dotted to show relationships to plan elements.
3.     Electrical Location Floor Plan . The Electrical location floor plan shall include floor plans (not less than 1/8" scale) indicating:
3.1
Room numbers and room descriptions.
3.2
Location of all telephone, data, and electrical outlets. The location of these items should be dimensioned only if final placement is critical. Unless specifically noted, the final placement of these items will be approximately to scale and to the nearest stud location. Dimension all floor mounted telephone and electrical outlets.
4.     Architectural Reflected Ceiling Plan . The architectural reflected ceiling plan (not less than 1/8" scale) indicating:
4. 1
Room numbers and room descriptions.

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[Union Bank Lease]


4.2
Location of all fixed ceiling elements such as fluorescent lighting fixtures, Tenant's custom lighting fixtures, exit signs, emergency lighting fixtures, emergency communication speakers, Tenant's sound and paging speakers, special integrated ceiling assemblies or details, etc.
4.3
Complete indication of the tile grid pattern in order to precisely locate all of the ceiling elements. Dimensions should be indicated only where the relationship to the tile grid pattern is not maintained or is ambiguous.
4.4
Indicate any special assemblies which either contact the ceiling or come within 1'6" of the ceiling such as full-height millwork assemblies, file or library shelving, etc.
4.5
Indicate all drywall ceilings, lightcoves, drapery pockets, soffits, etc" and keyed to details of work.
4.6
Indicate all doors and door swings.
4.7
Indicate all ceiling heights that are not standard (8'9").
5.     The Finish Plan . The Final Plan (not less than 1/8" scale) indicating:
5.1
Room numbers and room descriptions.
5.2
Wall finish plan indicating location, color and type of wall covering and paint.
5.3
Floor finish plan indicating location and color of carpeting, vinyl flooring and any special flooring materials.
6.     Millwork Details .
6.1
The architect shall prepare drawings in sufficient detail for construction or fabrication of all millwork components.
6.2
If required by Landlord, a separate 1/8" = 1'0" plan showing location of millwork shall be prepared.
7.     Custom Detail Sheets . The Architect shall prepare drawings in sufficient detail for construction or fabrication of any non-standard or custom treatments for leasehold improvements.
8.     Furniture Plan . The furniture plan (not less than 1/8" scale) indicating:
8.1
Room numbers and room descriptions.
8.2
All furniture and equipment (including seating arrangements thereof).
8.3
Equipment with special electrical and environmental characteristics, labeled and cross-referenced to the equipment schedule on the electrical engineered drawings.

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[Union Bank Lease]


8.4
Any areas with special environmental or structural design considerations (shown as a means of highlighting these requirements).
9.     Tenant Engineered Drawings .
9.1
The Architect will be responsible for providing structural, mechanical, and electrical input for special conditions. Particular reference to be made to the voltage and amperage requirements lor special outlets. In addition, dedicated circuits must be clearly identified and heat load of office equipment (including copiers), must also be identified.
9.2
The Architect will be responsible to submit mylar reproducibles (including electronic copies) of each of the following drawings to Landlord:
9.2.1
Electrical Power plan locating all telephone, data and electrical outlets. The location of these items should be dimensioned only if placement is critical; however, all floor mounted telephone and electrical outlets must be dimensional. Submit one mylar reproducible for electrical circuiting.
9.2.2
Reflected ceiling plan. Layout of the building ceiling grid and location of all light fixtures and light fixtures. Submit two mylar reproducibles for electrical circuiting and HVAC layout.
9.2.3
Plumbing plan. A copy of the floor plan indicating all locations of all items requiring water or waste. Submit one mylar reproducible (including an electronic copy) for plumbing layout.
9.2.4
Structural loading plan. For tenant spaces with concentrated loads, a plan indicating location, type weight and other information required by the structural engineer will be submitted for review. This information will be required for file rooms, libraries, or other heavy equipment or loading conditions. 80,12%,08/



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SCHEDULE 2
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UNION BANK PLAZA
[Union Bank Lease]


SCHEDULE 3
20th FLOOR ASBESTOS ABATEMENT SPECIFICATIONS
Attached

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SCHEDULE 3
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UNION BANK PLAZA
[Union Bank Lease]







SPECIFICATIONS
for
ASBESTOS ABATEMENT
UNION BANK PLAZA
445 SOUTH FIGUEROA STREET
20 TH FLOOR
LOS ANGELES, CALIFORNIA 90071
October 1, 2008
Prepared for:
Hines
445 South Figueroa Street, 37th floor
Los Angeles, California
Designed by:
CLARK SElF CLARK, INC.
8875 Research Drive
Irvine, California 92618


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SCHEDULE 3
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UNION BANK PLAZA
[Union Bank Lease]


ASBESTOS-RELATED DEMOLITION WORK

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SCHEDULE 3
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[Union Bank Lease]




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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]




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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]



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SCHEDULE 3
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[Union Bank Lease]




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SCHEDULE 3
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[Union Bank Lease]


EXHIBIT C
UNION BANK PLAZA
DEPICTION OF 20TH FLOOR SPACE

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EXHIBIT C
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[Union Bank Lease]


EXHIBIT D
UNION BANK PLAZA
RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the following Rules and Regulations. Landlord shall not be responsible to Tenant for the nonperformance of any of said Rules and Regulations by or otherwise with respect to the acts or omissions of any other tenants or occupants of the Building. Landlord's consent, when required under these Rules and Regulations, shall not be unreasonably withheld. Under no circumstances shall Landlord modify, change or supplement these Rules and Regulations in a manner which will unreasonably interfere with or restrict Tenant's conduct of its normal business operations from its Premises for the Permitted Use or to restrict any activity that Tenant has been conducting in compliance with the Existing Leases within any part of its Premises prior to April 2, 2008. Any capitalized terms used herein and not otherwise defined herein shall have the meaning as set forth in the Lease.
1.    Except with respect to Secured Areas, Tenant shall not alter any lock or install any new or additional locks or bolts on any doors or windows of the Premises without obtaining Landlord's prior written consent. Tenant shall bear the cost of any lock changes or repairs required by Tenant. Two keys will be furnished by Landlord for the Premises, and any additional keys required by Tenant must be obtained from Landlord at the actual cost incurred by Landlord for such additional keys.
2.    All doors opening to public corridors shall be kept closed at all times except for normal ingress and egress to the Premises, unless electrical hold backs have been installed or unless monitored by a receptionist.
3     Landlord reserves the right to close and keep locked all entrance and exit doors of the Building during such hours as are customary for the Comparable Buildings as long as Tenant and its employees have 24/7 access to its Premises (subject to card key entrance and other security restrictions reasonably employed by Landlord). Tenant, its employees and agents must be sure that the doors to the Premises are securely closed and locked when leaving the Premises if it is after Business Hours. Tenant's employees, agents or any other persons entering or leaving the Building at any time when it is so locked, or any time after Business Hours for the Building, may be required to sign the Building register when so doing. Access to the Building or Real Property may be refused unless the person seeking access has proper identification or has a previously arranged pass for access to the Building. Landlord and its agents shall in no case be liable for damages for any error with regard to the admission to or exclusion from the Building or Real Property of any person. In case of invasion, mob, riot, public excitement, or other commotion, Landlord reserves the right to prevent access to the Building or Real Property during the continuance of same by any means it deems appropriate for the safety and protection of life and property.
4.    Landlord shall have the right to prescribe the weight, size and position of all safes and other heavy property brought into the Building to the extent necessary to avoid a Design Problem. Safes and other heavy objects shall, if considered necessary by Landlord to the extent

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EXHIBIT D
- 1 -
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[Union Bank Lease]


necessary to avoid a Design Problem, stand on supports of such thickness as is necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property in any ease.
5.    No bulk furniture, freight, packages, supplies, equipment or merchandise will he brought into or removed from the Building or carried up or down in the elevators, except upon prior notice to Landlord, and in such manner, in such specific elevator, and between such hours as shall be reasonably designated by Landlord. Tenant shall provide Landlord with reasonable prior notice of the need to utilize an elevator for any such purpose, so as to provide Landlord with a reasonable period to schedule such use and to install such padding or take such other actions or prescribe such procedures as are appropriate to protect against damage to the elevators or other parts of the Building. Except in extraordinary circumstances, in no event shall Tenant's use of the elevators for any such purpose be permitted during the hours of 7:00 a.m. - 9:00 a.m., 11 :30 a.m. - 1:30 p.m. and 4:30 p.m. - 6:30 p.m.
6.    Landlord shall have the right to control and operate the public portions of the Building and Real Properly, the public facilities, the HVAC, and any other facilities furnished for the common use of tenants, in such manner as is customary for the Comparable Buildings.
7.    The requirements of Tenant will be attended to only upon application at the property management office of the Building or at such other on-site location at the Building reasonably designated by Landlord. Employees of Landlord shall not perform any work or do anything outside their regular duties unless under special instructions from Landlord.
8.    Tenant shall not disturb, solicit, or canvass any occupant of the Building and shall cooperate with Landlord or Landlord's agents to prevent same.
9.    The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein.
10.    Tenant shall not overload any floor of the Premises.
11.    Except for vending machines intended for the sole use of Tenant's employees and invitees, no vending machine or machines of any description other than fractional horsepower office machines shall be installed, maintained or operated upon the Premises without the written consent of Landlord.
12.    Except as expressly permitted in Section 29.36 of the Lease, Tenant shall not otherwise use or keep in or on the Premises, the Building or Real Property, any kerosene, gasoline or other inflammable or combustible fluid or material except normal quantities of such materials incidental to the normal and customary operation of general business offices.
13.    Tenant shall not use any method of heating or air conditioning other than that which may be supplied by Landlord or that utilized by Tenant and heretofor approved by Landlord as of the date of this Lease, without the prior written consent of Landlord.

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EXHIBIT D
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[Union Bank Lease]


14.    Tenant shall not use, keep or permit to be used or kept, any foul or noxious gas or substance in or on the Premises, the Building or the Real Property except normal quantities of such materials incidental to the normal and customary operation of general business offices, or permit or allow the Premises to be occupied or used in a manner unreasonably offensive or objectionable to Landlord or other occupants of the Building by reason of noise, odors, or vibrations, or unreasonably interfere in any way with other tenants or those having business therein.
15.    Tenant shall not bring into or keep within the Real Property, the Building or the Premises any animals (except seeing-eye dogs accompanied by their masters), birds, fish, bicycles or other vehicles.
16.    No cooking shall be done or permitted by Tenant on or in the Premises, nor shall the Premises be used for the storage of merchandise, or for lodging. Notwithstanding the foregoing, Underwriters' (or any such replacement standard then in effect) laboratory-approved equipment and microwave ovens may be used in the Premises for heating food and brewing coffee, tea, hot chocolate and similar beverages, provided that such use is in accordance with all applicable federal, state and city laws, codes, ordinances, rules and regulations, and does not cause odors which are reasonably objectionable to Landlord and other tenants.
17.    Landlord reserves the right to exclude or expel from the Building any person who, in the reasonable judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of these Rules and Regulations.
18.    Tenant and the Tenant Parties shall not loiter in the entrances or corridors, nor in any way obstruct the sidewalks, lobby, halls, stairways or elevators, and shall use the same only as a means of ingress and egress for the Premises.
19.    Tenant agrees to cooperate reasonably with Landlord to ensure the most effective operation of the Building's HVAC system, and shall refrain from attempting to adjust any controls.
20.    Tenant shall store all its trash and garbage within the interior of the Premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the Comparable Buildings without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made only through entry-ways and elevators provided for such purposes at such times as Landlord shall designate.
21.    Tenant shall comply with all safety, fire protection and evacuation procedures and regulations reasonably established by Landlord or any governmental agency.
22.    Tenant shall assume any and all responsibility for protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed, when the Premises are not occupied.
23.    Landlord may waive anyone or more of these Rules and Regulations for the benefit of any particular tenant or tenants, but no such waiver by Landlord shall (a) treat Tenant

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[Union Bank Lease]


in a discriminatory manner, (b) be construed as a waiver of such Rules and Regulations in favor of any other tenant or tenants, nor (c) prevent Landlord from thereafter enforcing any such Rules or Regulations against any or all tenants of the Building.
24.    No awnings or other projections shall be attached to the outside walls of the Building without the prior written consent of Landlord. Except for Building standard window coverings, no curtains, blinds, shades or screens, which may be visible from the exterior of the Premises, shall be attached to or hung in, or used in connection with, any window or door of the Premises without the prior written consent of Landlord. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent and/or of a quality, type, design and bulb color approved by Landlord.
25.    The sashes, sash doors, skylights, windows, and doors that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed by Tenant, except through use of Building standard window coverings.
26.    The washing and/or detailing of automobiles by Tenant or any of the Tenant Parties shall not be allowed on the Real Property.
27.    Food vendors shall be allowed in the Building to bring food prepared off-site to employees and guests of Tenant (but only via the Building's freight elevator to the extent such food is being delivered on a cart or other apparatus). Under no circumstance shall the food vendors display their products in a public or common area including corridors and elevator lobbies.
28.    Tenant shall comply with requests by Landlord concerning the informing of its employees of items of importance to Landlord.
29.    Tenant shall comply with any non-smoking ordinance adopted by the City of Los Angeles or any other applicable governmental authority.
30.    Upon reasonable notification to Tenant, Landlord reserves the right at any time to reasonably change or rescind anyone or more of these Rules and Regulations, or to make such other and further reasonable Rules and Regulations as in Landlord's judgment may from time to time be reasonably necessary for the management, safety, care and cleanliness of the Premises, the Building and/or the Real Property, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants therein; provided, however, that no such change, rescission, addition or amendment shall prevent Tenant's use of the Premises for the Permitted Use in accordance with Section 5.1 of the Lease. Landlord shall not be responsible to Tenant or to any other person for the nonobservance of the Rules and Regulations by another tenant or other person. Tenant shall be deemed to have read these Rules and Regulations and to have agreed to abide by them.
To the extent these Rules and Regulations are inconsistent with, or contrary to, the express provisions of the Lease, the Lease shall control.


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EXHIBIT D
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[Union Bank Lease]


EXHIBIT E
UNION BANK PLAZA
JANITORIAL SPECIFICATIONS
Except as indicated below, the following Building standard janitorial and cleaning services shall be done by Landlord after the normal business hours on Mondays through Fridays, and at such other times as may be mutually agreed upon.
A.
OFFICE AREAS
1.
Empty and clean all waste receptacles and remove waster paper and rubbish from the demised premises nightly.
2.
Vacuum all rugs and carpeted areas in the lobbies, corridors and shared office areas nightly. Vacuum carpeted areas of individual offices as needed.
3.
hand dust or wipe clean with damp or treated cloth office furniture, file cabinets, window sills and other horizontal surfaces lower than six (6) feet as needed, but not less often than weekly.
Note: Janitorial personnel do not dust computers, keyboards, copier machines, other office equipment, personal items, fragile items, areas containing personal or fragile items, paperwork on desks, or portions of desks or other furniture that contain paperwork.
4.
Hand dust or wipe clean with damp or treated cloth high moldings, high shelving, picture frames, tall office furniture, and other horizontal surfaces higher than six (6) feet as needed, but not less often than monthly.
5.
Damp wipe all counter tops in kitchens or file rooms nightly.
6.
Dust and remove finger marks and smudges from doors, door frames, glass, and light switch plates nightly.
7.
Sweep all private stairways nightly; vacuum nightly if carpeted.
8.
Damp mop spillage in non-carpeted office and public areas as necessary.
9.
Dust and spot clean all tile floors nightly. Damp mop clean all tile floors as needed.
10.
Tile floors in office areas will be buffed monthly with old wax removed and new wax applied as necessary.
11.
Spot clean carpets as needed. Spot cleaning of carpets to be provided at no additional charge. Carpet shampooing above the level of spot cleaning will be performed at Tenant's request and billed to Tenant pursuant to the terms of the Lease.

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EXHIBIT E
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UNION BANK PLAZA
[Union Bank Lease]


12.
Damp dust ceiling ventilating diffusers, wall grills, registers and other ventilating louvers as needed, no less than annually.
13.
Dust the exterior surfaces of lighting fixtures as needed, no less than annually.
B.
COMMON WASHROOMS
1.
Mop, rinse and dry floors using soap and water nightly.
2.
Scrub floors as necessary.
3.
Clean all mirrors, bright work and enameled surfaces nightly.
4.
Wash and disinfect all basins, urinals and bowls nightly using non-abrasive germicidal cleaners to remove stains.
5.
Wash both sides of all toilet seats with soap and water nightly.
6.
Was urinal partitions, spot clean individual stall partitions, and spot clean tile walls nightly.
7.
Clean outside surface of all dispensers and receptacles nightly.
8.
Refill toilet tissue, paper towel, soap, and sanitary napkin dispensers nightly.
9.
Clean flush valves, piping and other metal work nightly.
10.
Wash all tiled walls as needed.
11.
Clean ventilating grills and floor drain drills quarterly and clean light fixtures annually.
12.
Empty all trash bins after the lunch hour and then at night.
NOTE: It is the intention to keep the washrooms cleaned and not to use a disinfectant or air freshener to kill odor.
C.
COMMON AREA FLOORING
1.
Hard surface floors including stone, vinyl or composition to be swept nightly.
2.
Tile floors in common areas will be buffed as needed to maintain clean appearance with old wax removed and new wax applied as necessary.
3.
Common area carpeted areas and rugs to be vacuumed and spot cleaned nightly.
D.
GLASS
1.
Clean glass at main entrance doors and adjacent glass panels nightly.
2.
Spot clean partition glass, glass doors and lobby glass as needed.

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EXHIBIT E
- 2 -
UNION BANK PLAZA
[Union Bank Lease]


E.
DAY SERVOCE-WASHROOMS
1.
At least once, but not more than twice per day, check and supply as needed toilet tissue, paper towel and hand soap in men's restroom.
2.
At least once, but no more than twice per day, check and supply as needed toilet tissue, paper towel, sanitary napkin and hand soap in women's restroom.
3.
Supply toilet tissue, soap and towels in men's' and ladies' washrooms and sanitary napkin in ladies' washrooms.
F.
GENERAL
1.
Maintain Building lobby, corridors, elevators, escalators, plaza and other public areas in a clean condition.
2.
Clean on an as-needed basis emergency stairwells, freight elevator, loading dock and other service type areas.
3.
Provide frequent surveillance during Business Hours of all public areas to maintain a clean condition.
G.
SPECIAL
1.
It is understood that no services provided for in this Exhibit shall be provided on Saturdays, Sundays or Building Holidays, unless specifically stated above.
2.
Dust ceiling surfaces, other than acoustical ceiling material, once each year.
3.
Clean all building standard lenses once each year.
4.
On a quarterly basis, dust in place all pictures, frames, charts, graphs, and other wall hangings not reached in nightly cleaning.
5.
On a quarterly basis, dust all vertical surfaces and walls, doors, door bucks, partitions and other surfaces not reached in nightly cleaning.
6.
Dust all books in place quarterly.
7.
Dust all Venetian blinds quarterly.
8.
Dust exterior of lighting fixtures, air diffusers, return grilles and louvers quarterly.
9.
Dust exterior of lighting fixtures, air diffusers, return grilles and louvers quarterly.


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EXHIBIT E
- 3 -
UNION BANK PLAZA
[Union Bank Lease]


EXHIBIT F
UNION BANK PLAZA
HVAC SPECIFICATIONS
Landlord shall provide the following HVAC service to the Premises:
(a)    Subject to all governmental rules, regulations and guidelines applicable thereto, Landlord shall use commercially reasonable efforts to provide HVAC when necessary during Business Hours (as defined in Section 6.1.1 of the Lease) to meet the following temperature specifications under normal business and operating conditions:
(1)    Maintain average indoor dry bulb temperatures of not less than 70 degrees Fahrenheit and not more than 75 degrees Fahrenheit during the heating cycle whenever the outdoor dry bulb temperature, during Business Hours, is lower than 65 degrees Fahrenheit but not lower than 40 degrees Fahrenheit.
(2)    Maintain average indoor conditions not higher than 75 to 78 degrees Fahrenheit dry bulb during the cooling cycle whenever the outdoor temperature during Business Hours is not higher than 95 to 100 degrees Fahrenheit dry bulb.
(b)    Should Tenant require HVAC service on days or during hours other than Business Hours, Landlord shall, to the extent such service may be available without overloading the Building facilities, furnish such additional HVAC service in the manner and subject to the notice provisions set forth in Section 6.2 of the Lease), and Tenant shall pay Landlord for such HVAC service in accordance with Section 6.2 of the Lease.


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EXHIBIT F
- 1 -
UNION BANK PLAZA
[Union Bank Lease]


EXHIBIT G
UNION BANK PLAZA
FORM OF TENANT'S ESTOPPEL CERTIFICATE
The undersigned as Tenant under that certain Office/Retail Lease (the "Lease") made and entered into as of __________, 20___ and between HINES VAF UB PLAZA, L.P., a Delaware limited partnership, as Landlord, and the undersigned as Tenant, for Premises located at 445 South Figueroa Street, Los Angeles, California 90071 certifies as follows:
1.    Attached hereto as Exhibit A is a true and correct copy of the Lease and all amendments and modifications thereto. The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises.
2.    The Lease, currently undersigned has occupies the commenced occupancy of the Premises described in the Premises, and the Lease Term commenced on _______________________________________________.
3.    The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A .
4.    Tenant has not transferred, assigned, or sublet any portion of the Premises nor any license or concession agreements with respect thereto except as follows: _____________________________________________________________________________.
5.    Tenant shall not modify (except to document the exercise by Landlord or Tenant of a right or obligation under the Lease) the documents contained in Exhibit A or prepay any amounts owing under the Lease to Landlord in excess of thirty (30) days without the prior written consent of Landlord's mortgagee.
6.    Base Rent became payable ________________________________________.
7.    The Lease Term expires on __________________________________________.
8.    To the best of Tenant's knowledge, all conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder.
9.    No rental has been paid in advance and no security has been deposited with Landlord except as provided in the Lease and in Section 11 below.
10.    To the best of Tenant's knowledge, as of the date hereof, there are no existing offsets that the undersigned has, which preclude enforcement of the Lease by Landlord.

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EXHIBIT G
- 1 -
UNION BANK PLAZA
[Union Bank Lease]


11.    All monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through _________________. The current monthly installment of Base Rent is $____________.
12.    The undersigned acknowledges that this Estoppel Certificate may be delivered to Landlord's prospective mortgagee, or a prospective purchaser, and acknowledges that it recognizes that if same is done, said mortgagee, prospective mortgagee, or prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part, and in accepting an assignment of the Lease as collateral security, and that receipt by it of this Estoppel Certificate is a condition of making of the loan or acquisition of such property.
13.    If Tenant is a corporation or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in California and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each-person signing on behalf of Tenant is authorized to do so.
Executed at ________________on the ___ day of _______________, 20__.
"Tenant":
_____________________________________________,
a ____________________________________________
By:    __________________________________________
Its:_______________________________________
By:    __________________________________________
Its:_______________________________________




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EXHIBIT G
- 2 -
UNION BANK PLAZA
[Union Bank Lease]


EXHIBIT H
UNION BANK PLAZA
FORM OF SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (" Agreement ") is entered into as of October 8, 2008 (the " Effective Date ") by and between THE ROYAL BANK OF SCOTLAND PLC (together with its successors and assigns, " Mortgagee "), and UNION BANK OF CALIFORNIA, N.A., a national association (hereinafter, collectively " Tenant "), with reference to the following facts:
A.     Hines VAF VB Plaza, L.P., a Delaware limited partnership, whose address is 445 South Figueroa Street, Suite 2320 Los Angeles, California 90071 (the " Landlord ") owns fee simple title or a leasehold interest in the real property described in Exhibit "A" attached hereto (the " Property ").
B.     Greenwich Capital Financial Products, Inc. (" GCFP ") has made a loan to Landlord (the " Loan ").
C.     To secure the Loan, Landlord has encumbered the Property by entering into a deed of trust in favor of GCFP (as amended, increased, renewed, extended, spread, consolidated, severed, restated, or otherwise changed from time to time, " Original Mortgage "), which deed of trust was previously recorded in the Recorder of Deeds' Office in and for the County of Los Angeles, State of California.
D.     On or about May 30, 2008, GCFP assigned all of its interest in and to the Loan to Mortgagee.
E.     The Original Mortgage was assigned to Mortgagee pursuant to an assignment of deed of trust, which assignment of deed of trust (together with the Original Mortgage, the " Mortgage ") was previously recorded in the Recorder of Deeds' Office in and for the County of Los Angeles, State of California.
F.     Pursuant to the Lease dated as of October 8, 2008 (the " Lease "), Landlord demised to Tenant a portion of the Property consisting of the following (the " Leased Premises "): 317,509 rentable square feet located in the building located on the Property.
G.     Tenant and Mortgagee desire to agree upon the relative priorities of their interests in the Property and their rights and obligations if certain events occur.
NOW, THEREFORE, for good and sufficient consideration, Tenant and Mortgagee agree:

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EXHIBIT H
- 1 -
UNION BANK PLAZA
[Union Bank Lease]


1.      Definitions. The following terms shall have the following meanings for purposes of this Agreement.
a.     Foreclosure Event. A " Foreclosure Event " means: (i) foreclosure under the Mortgage; (ii) any other exercise by Mortgagee of rights and remedies (whether under the Mortgage or under applicable law, including bankruptcy law) as holder of the Loan and/or the Mortgage, as a result of which a Mortgagee becomes owner of the Property; or (iii) delivery by Landlord to Mortgagee (or its designee or nominee) of a deed or other conveyance of Landlord's interest in the Property in lieu of any of the foregoing.
b.     Former Landlord. A " Former Landlord " means Landlord and any other party that was landlord under the Lease at any time before the occurrence of any attornment under this Agreement.
c.     Offset Right. An " Offset Right " means any right or alleged right of Tenant to any offset, defense (other than one arising from actual payment and performance, which payment and performance would bind a Successor Landlord pursuant to this Agreement), claim, counterclaim, reduction, deduction, or abatement against Tenant's payment of Rent or performance of Tenant's other obligations under the Lease, arising (whether under the Lease or under applicable law) from Landlord's breach or default under the Lease.
d.     Rent. The " Rent " means any fixed rent, base rent or additional rent under the Lease.
e.     Successor Landlord . A " Successor Landlord " means any party that becomes owner of the property as the result of a Foreclosure Event.
f.     Superior Offset Rights. " Superior Offset Rights " means, individually and collectively, Tenant's offset rights in accordance with the terms and conditions of (i) Section 2.5 of the Tenant Work Letter, and (ii) Section 7.2 of the Lease.
g.     Termination Right. A " Termination Right " means any right of Tenant to cancel or terminate the Lease or to claim a partial or total eviction arising (whether under the Lease or under applicable law) from Landlord's breach or default under the Lease.
h.     Other Capitalized Terms. If any capitalized term is used in this Agreement and no separate definition is contained in this Agreement, then such term shall have the same respective definition as set forth in the Lease.
2.     Subordination . Subject to the terms and conditions of this Agreement, the Lease, as the same may hereafter be modified, amended or extended, shall be, and shall at all times remain, subject and subordinate to the terms conditions and provisions of the Mortgage, the lien imposed by the Mortgage, and all advances made under the Mortgage. Notwithstanding the foregoing, Mortgagee may elect, in its sole and absolute discretion, to subordinate the lien of the Mortgage to the Lease.

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EXHIBIT H
- 2 -
UNION BANK PLAZA
[Union Bank Lease]


3.     Non-disturbance, Recognition and Attornment.
a.     No Exercise of Mortgage Remedies Against Tenant . So long as the Tenant is not in default under this Agreement or under the Lease beyond any applicable grace or cure periods (an " Event of Default "), Mortgagee (i) shall not terminate or disturb Tenant's possession of the Leased Premises under the Lease, except in accordance with the terms of the Lease and this Agreement and (ii) shall not name or join Tenant as a defendant in any exercise of Mortgagee's rights and remedies arising upon a default under the Mortgage unless applicable law requires Tenant to be made a party thereto as a condition to proceeding against Landlord or prosecuting such rights and remedies. In the latter case, Mortgagee may join Tenant as a defendant in such action only for such purpose and not to terminate the Lease or otherwise adversely affect Tenant's rights under the Lease or this Agreement in such action.
b.     Recognition and Attornment . Upon Successor Landlord taking title to the Property (i) Successor Landlord shall be bound to Tenant under all the terms and conditions of the Lease (except as provided in this Agreement); (ii) Tenant shall recognize and attorn to Successor Landlord as Tenant's direct landlord under the Lease as affected by this Agreement; and (iii) the Lease shall continue in full force and effect as a direct lease, in accordance with its terms (except as provided in this Agreement), between Successor Landlord and Tenant. Tenant hereby acknowledges notice that pursuant to the Mortgage and assignment of rents, leases and profits, Landlord has granted to the Mortgagee an absolute, present assignment of the Lease and Rents which provides that Tenant continue making payments of Rents and other amounts owed by Tenant under the Lease to the Landlord and to recognize the rights of Landlord under the Lease until notified otherwise in writing by the Mortgagee. After receipt of such notice from Mortgagee, the Tenant shall thereafter make all such payments directly to the Mortgagee or as the Mortgagee may otherwise direct, without any further inquiry on the part of the Tenant. Landlord consents to the foregoing and waives any right, claim or demand which Landlord may have against Tenant by reason of such payments to Mortgagee or as Mortgagee directs.
c.     Further Documentation . The provisions of this Article 3 shall be effective and self-operative without any need for Successor Landlord or Tenant to execute any further documents. Tenant and Successor Landlord shall, however, confirm the provisions of this Article 3 in writing upon request by either of them within ten (10) days of such request.
4.     Protection of Successor Landlord . Notwithstanding anything to the contrary in the Lease or the Mortgage, Successor Landlord shall not be liable for or bound by any of the following matters:
a.     Claims Against Former Landlord . Any Offset Right that Tenant may have against any Former Landlord relating to any event or occurrence before the date of attornment, including any claim for damages of any kind whatsoever as the result of any breach by Former Landlord that occurred before the date of attornment. The foregoing shall not limit (i) Tenant's right to exercise against Successor Landlord any Offset Right otherwise available to Tenant because of events occurring after the date of attornment, (ii) Tenant's right to exercise against Successor Landlord any Offset Right resulting from events occurring prior to and continuing on and after the date of attornment, provided however Tenant may only use its Offset Rights against prior Landlord, and not Successor Landlord, with respect to rent attributable to the period of time

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EXHIBIT H
- 3 -
UNION BANK PLAZA
[Union Bank Lease]


prior to the date of attornment, (iii) Successor Landlord's obligation to correct any conditions that existed as of the date of attornment and violate Successor Landlord's obligations as Landlord under the Lease, or (iv) Tenant's right to exercise against Landlord or Successor Landlord its Superior Offset Rights, provided that in each case, the amount of such Superior Offset Right has been finally determined either in a court of competent jurisdiction or in arbitration in accordance with the terms of the Lease and shall in no event exceed the monthly Base Rent amount. For the purposes of this Agreement, references to arbitration and courts shall include judicial reference and in particular shall include any Dispute Resolution pursuant to the Referee Laws under Section 29.31 of the Lease, references to "finally determined" shall mean only the initial judgment or award and Tenant may offset without waiting for the appeal process to be concluded, and reference to monthly Base Rent shall not preclude Tenant from offsetting each month against Base Rent until it has recovered the full amount of the judgment or award.
b.     Prepayments . Any payment of Rent that Tenant may have made to Former Landlord more than thirty (30) days before the date such Rent was first due and payable under the Lease with respect to any period after the date of attornment other than, and only to the extent that, the Lease expressly required such a prepayment.
c.     Payment; Security Deposit; Work . Any obligation: (i) to pay Tenant any sums) that any Former Landlord owed to Tenant unless such sums, if any, shall have been actually delivered to Mortgagee by way of an assumption of escrow accounts or otherwise; (ii) with respect to any security deposited with Former Landlord, unless such security was actually delivered to Mortgagee but the parties agree that presently the Lease does not require a security deposit; (iii) to commence or complete any initial construction of improvements in the Leased Premises or any expansion or rehabilitation of existing improvements thereon, provided, however, Tenant may complete the work that was the obligation of Landlord under the Tenant Work Letter, the cost of which as finally determined either in a court of competent jurisdiction or in arbitration in accordance with the terms of the Lease, may be offset against Base Rent; (iv) to reconstruct or repair improvements following a fire, casualty or condemnation, provided, however, Tenant may complete the work that was the obligation of Landlord under Article 11 of the Lease, the cost of which, as finally determined either in a court of competent jurisdiction or in arbitration in accordance with the terms of the Lease, may be offset against Base Rent; or (v) arising from representations and warranties related to Former Landlord.
d.     Modification. Amendment or Waiver . Any modification or amendment of the Lease, or any waiver of the terms of the Lease, made without Mortgagee's written consent unless such amendment is required by the Lease to document the exercise of rights under the Lease.
e.     Surrender, Etc . Any consensual or negotiated surrender, cancellation, or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant, unless (i) effected unilaterally by Tenant pursuant to the express terms of the Lease or applicable laws or (ii) pursuant to Landlord's exercise of a recapture right under Section 14.3 of the Lease provided that Mortgagee has consented in writing to Landlord's exercise of such right to the extent Mortgagee has such consent right under the Mortgage or any of the other loan documents executed in connection therewith.

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EXHIBIT H
- 4 -
UNION BANK PLAZA
[Union Bank Lease]


5.     Exculpation o(Successor Landlord . Notwithstanding anything to the contrary in this Agreement or the Lease, Successor Landlord's obligations and liability under the Lease shall never extend beyond Successor Landlord's (or its successors' or assigns') interest, if any, in the Property from time to time, including insurance and condemnation proceeds, security deposits, escrows, Successor Landlord's interest in the Lease, and the proceeds from any sale, lease or other disposition of the Property (or any portion thereof) by Successor Landlord (collectively, the " Successor Landlord's Interest "). Tenant shall look exclusively to Successor Landlord's Interest (or that of its successors and assigns) for payment or discharge of any obligations of Successor Landlord under the Lease as affected by this Agreement. If Tenant obtains any money judgment against Successor Landlord with respect to the Lease or the relationship between Successor Landlord and Tenant, then Tenant shall look solely to Successor Landlord's Interest (or that of its successors and assigns) to collect such judgment. Tenant shall not collect or attempt to collect any such judgment out of any other assets of Successor Landlord.
6.     Mortgagee's Right to Cure . Notwithstanding anything to the contrary in the Lease or this Agreement, before exercising any Offset Right, Superior Offset Right or Termination Right (collectively, " Permanent Rights ") :
a.     Notice to Mortgage e. Tenant shall provide Mortgagee with notice of the breach or default by Landlord giving rise to same (the " Default Notice ") and, thereafter, the opportunity to cure such breach or default as provided for below.
b.     Mortgagee's Cure Period . After Mortgagee receives a Default Notice, Mortgagee shall have a period of thirty (30) days beyond the time available to Landlord under the Lease in which to cure the breach or default by Landlord. Mortgagee shall have no obligation to cure (and shall have no liability or obligation for not curing) any breach or default by Landlord, except to the extent that Mortgagee agrees or undertakes otherwise in writing. In addition, as to any breach or default by Landlord the cure of which requires possession and control of the Property, provided that Mortgagee undertakes by written notice to Tenant to exercise reasonable efforts to cure or cause to be cured by a receiver such breach or default within the period permitted by this paragraph, Mortgagee's cure period (but not with respect to the Offset Rights or Superior Offset Rights) shall continue for such additional time as Mortgagee may reasonably require to either: (i) obtain possession and control of the Property with due diligence and thereafter cure the breach or default with reasonable diligence and continuity; or(ii) obtain the appointment of a receiver and give such receiver a reasonable period of time in which to cure the default. Notwithstanding anything to the contrary herein contained, Mortgagee's election not to cure a breach or default by Landlord shall not in and of itself prevent Tenant from exercising its Permanent Rights.
7.     Miscellaneous .
a.     Notices . Any notice or request given or demand made under this Agreement by one party to the other shall be in writing, and may be given or be served by hand delivered personal service, or by depositing the same with a reliable overnight courier service or by deposit in the United States mail, postpaid, registered or certified mail, and addressed to the party to be notified, with return receipt requested or by telefax transmission, with the original machines generated transmit confirmation report as evidence of transmission. Notice deposited

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EXHIBIT H
- 5 -
UNION BANK PLAZA
[Union Bank Lease]


in the mail in the manner hereinabove described shall be effective from and after the expiration of three (3) days after it is so deposited; however, delivery by overnight courier service shall be deemed effective on the next succeeding business day after it is so deposited and notice by personal service or telefax transmission shall be deemed effective when delivered to its addressee or within two (2) hours after its transmission unless given after 3:00 p.m. on a business day, in which case it shall be deemed effective at 9:00 a.m. on the next business day. For purposes of notice, the addresses and telefax number of the parties shall, until changed as herein provided, be as follows:
i.
If to the Mortgagee, at:
The Royal Bank of Scotland p1c
c/o Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Greenwich, Connecticut 06830
Attn: Commercial Mortgage Loan Department
Telecopy No.: (203) 618-2052
ii.
If to the Tenant, at:
Property Management Department
Union Bank of California, N.A.
445 South Figueroa Street
Los Angeles, California 90071
With a copy to:
Cushman & Wakefield, Inc.
601 South Figueroa Street
Los Angeles, California 90017
Attention: Mr. Robert A. Ortiz
and
Union Bank of California, N.A.
Office of the General Counsel
400 California Street
San Francisco, California 94104
and
DLA Piper LLP (US)
550 South Hope Street, Suite 2300
Los Angeles, California 90071
Attention: Michael Meyer, Esq.
b.     Successors and Assigns . This Agreement shall bind and benefit the parties, their successors and assigns, any Successor Landlord, and its successors and assigns. If

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EXHIBIT H
- 6 -
UNION BANK PLAZA
[Union Bank Lease]


Mortgagee assigns the Mortgage, then upon delivery to Tenant of written notice thereof accompanied by the assignee's written assumption of all obligations under this Agreement, all liability of the assignor shall terminate.
c.     Entire Agreement . This Agreement constitutes the entire agreement between Mortgagee and Tenant regarding the subordination of the Lease to the Mortgage and the rights and obligations of Tenant and Mortgagee as to the subject matter of this Agreement.
d.     Interaction with Lease and with Mortgag e. If this Agreement conflicts with the Lease, then this Agreement shall govern as between the parties and any Successor Landlord, including upon any attornment pursuant to this Agreement. This Agreement supersedes, and constitutes full compliance With, any provisions in the Lease that provide for subordination of the Lease to, or for delivery of non-disturbance agreements by the holder of, the Mortgage.
e.     Mortgagee's Rights and Obligations . Except as expressly provided for in this Agreement, Mortgagee shall have no obligations to Tenant with respect to the Lease. If an attornment occurs pursuant to Section 3b of this Agreement, then all rights and obligations of Mortgagee under this Agreement shall terminate, without thereby affecting in any way the rights and obligations of Successor Landlord provided for in this Agreement, provided that it is expressly understood that the Successor Landlord shall remain obligated for the Superior Offset Rights.
f.     Interpretation, Governing Law . The interpretation, validity and enforcement of this Agreement shall be governed by and construed under the internal laws of the State of California, including such State's principles of conflict of laws.
g.     Amendments . This Agreement may be amended, discharged or terminated, or any of its provisions waived, only by a written instrument executed by the party to be charged.
h.     Due Authorization . Tenant, Landlord and Mortgagee each represent to each other that each has full authority to enter into this Agreement, which has been duly authorized by all necessary actions.
i.     Execution . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Mortgagee and Tenant have caused this Agreement to be executed as of the date first above written.
TENANT:
UNION BANK OF CALIFORNIA, N.A.,
a national association


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EXHIBIT H
- 7 -
UNION BANK PLAZA
[Union Bank Lease]



By:    
Name: Craig Poletti
Title: Vice President

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EXHIBIT H
- 8 -
UNION BANK PLAZA
[Union Bank Lease]


TENANT'S ACKNOWLEDGMENT


State of California                )
County of ___________________________ )


On 20_, before me, ___________________________________________,
___________________________________________(insert name and title of the officer)
personally appeared, _________________________________________________________,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the forgoing paragraph is true and correct.

WITNESS my hand and official seal.



Signature __________________________________________________(Seal)

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EXHIBIT H
- 9 -
UNION BANK PLAZA
[Union Bank Lease]


MORTGAGEE :

THE ROYAL BANK OF SCOTLAND PLC

B y:    Greenwich Capital Markets, Inc., its agent

By:    _________________________________
Name:    ___________________________
Title:    ___________________________

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EXHIBIT H
- 10 -
UNION BANK PLAZA
[Union Bank Lease]


MORTGAGEE'S ACKNOWLEDGMENT


State of _______________            )
County of ___________________________ )


On 20_, before me, ___________________________________________,
___________________________________________(insert name and title of the officer)
personally appeared, _________________________________________________________,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of ___________ that the forgoing paragraph is true and correct.

WITNESS my hand and official seal.



Signature __________________________________________________(Seal)


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EXHIBIT H
- 11 -
UNION BANK PLAZA
[Union Bank Lease]


LANDLORD'S CONSENT

Landlord consents and agrees to the foregoing Agreement which was entered into at Landlord's request. The foregoing Agreement shall not alter, waive or diminish any of Landlord's obligations under the Mortgage or the Lease. The above Agreement discharges any obligations of Mortgagee under the Mortgage and related loan documents to enter into a non-disturbance agreement with Tenant. Landlord is not a party to the above Agreement.

LANDLORD:

HINES VAF UB PLAZA, L.P. ,
a Delaware limited partnership
By:
Hines VAF UB Plaza GP LLC,
its general partner
By:
Hines VAF UB Plaza Mezz, L.P.,
its sole member
By:
Hines VAF UB Plaza GP2 LLC,
its general partner
By:
Hines U.S. Office Value Added Fund, L.P.,
its sole member
By:
Hines U.S. Office Value Added Fund, LLC,
its general partner
By:
Hines Interests Limited Partnership,
its managing member
By:
Hines Holdings, Inc.
its general partner
By:
_________________________
Name:
Colin P. Shepherd
Title:
Senior Vice President



Dated: _____________________


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EXHIBIT H
- 12 -
UNION BANK PLAZA
[Union Bank Lease]


LANDLORD'S ACKNOWLEDGMENT


State of California )
County of )


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

I certify under PENALTY OF PERJURY under the laws of the State of California that the forgoing paragraph is true and correct.

WITNESS my hand and official seal.



Signature __________________________________         (Seal)


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EXHIBIT H
- 13 -
UNION BANK PLAZA
[Union Bank Lease]


LIST OF EXHIBITS

If any exhibit is not attached hereto at the time of execution of this Agreement, it may thereafter be attached by written agreement of the parties, evidenced by initialing said exhibit.

Exhibit "A" - Legal Description of the Land



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EXHIBIT H
- 14 -
UNION BANK PLAZA
[Union Bank Lease]


EXHIBIT "A"
PROPERTY DESCRIPTION
PARCEL 1 :
LOT 1 OF TRACT 28794, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 738 PAGES 82 AND 83 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT FROM SAID LOT 1, THAT PORTION SHOWN ON SAID MAP AND DESIGNATED "FUTURE STREET".
ALSO EXCEPT ALL OIL, GAS AND MINERAL SUBSTANCES TOGETHER WITH THE RIGHT TO EXTRACT SUCH SUBSTANCES PROVIDED THAT THE SURFACE OPENING OF ANY WELL HOLE, SHAFT OR OTHER MEANS OF REACHING OR REMOVING SUCH SUBSTANCES SHALL NOT BE LOCATED WITHIN THE BUNKER HILL URBAN RENEWAL PROJECT AREA, AS RECORDED ON AUGUST 8, 1959 AS INSTRUMENT NO. 2893, IN BOOK M335 PAGE 106, OFFICIAL RECORDS, AND SHALL NOT PENETRATE ANY PART OR PORTION OF SAID PROJECT AREA WITHIN 500 FEET OF THE SURFACE THEREOF AS RESERVED IN THE FOLLOWING DEEDS:
DECEMBER 10, 1962 IN BOOK D1849 PAGE 352, OFFICIAL RECORDS AS TO A PORTION
APRIL 20, 1962 IN BOOK D1587 PAGE 576, OFFICIAL RECORDS AS TO A PORTION APRIL20, 1962 IN BOOK D1587 PAGE 578, OFFICIAL RECORDS AS TO A PORTION JUNE 15, 1962 IN BOOK D1650 PAGE 756, OFFICIAL RECORDS AS TO A PORTION MARCH 1, 1962 IN BOOK D1528 PAGE 313, OFFICIAL RECORDS AS TO A PORTION MAY 25, 1962 IN BOOK D1627 PAGE 55, OFFICIAL RECORDS AS TO A PORTION NOVEMBER 10, 1961 IN BOOK D1416 PAGE 668, OFFICIAL RECORDS AS TO A PORTION
DECEMBER 4, 1961 IN BOOK D1438 PAGE 542, OFFICIAL RECORDS AS TO A PORTION
SAID LAND IS SHOWN ON A RECORD OF SURVEY RECORDED AUGUST 13, 2001 IN BOOK 177 PAGE 2 OF RECORD OF SURVEYS, IN THE OFFICIAL RECORDS OF SAID COUNTY.
PARCEL 2 :
AN EASEMENT FOR INGRESS AND EGRESS OVER THOSE PORTIONS OF LOT 1 OF TRACT 28794, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 738 PAGES 82 AND 83 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER SAID COUNTY, DESIGNATED ON THE MAP OF SAID TRACT AS "FUTURE STREET".

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EXHIBIT "A"
- 1 -
UNION BANK PLAZA
[Union Bank Lease]


PARCEL 3 : (LEASEHOLD INTEREST IN GARAGE PARCEL 2)
THAT PORTION OF LOT 1 OF SAID TRACT 21464, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 795 PAGES 78 AND 79 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, INCLUDED WITHIN PARCEL BH-3-B, BH-2-B, BH+B, BH-GR, BH-GR-I, BH-2-L, BH-2L(R) AND BH-3-L, AS SHOWN ON THE PLAT ATTACHED AND MADE A PART OF THE AMENDED AND RESTATED DECLARATION OF ESTABLISHMENT OF EASEMENTS, COVENANTS, CONDITIONS AND RESTRICTIONS EXECUTED BY BUNKER HILL CENTER ASSOCIATES, A PARTNERSHIP, DATED JULY 10, 1972 AND RECORDED JULY 12, 1972 AS INSTRUMENT NO. 668 IN BOOK D5528 PAGE 518, OFFICIAL RECORDS, TOGETHER WITH THOSE CERTAIN FIXTURES APPURTENANT TO PARCELS BH-3-B, BH-2-B, BH-I-B, BH-GR, BH-GR-l, BH-2-L(R) AND BH-3-L, AND OWNED BY VESTEE PURSUANT TO THE SAID AMENDED AND RESTATED DECLARATION ABOVE MENTIONED.
PARCEL 4 : (EASEMENTS IN FAVOR OF PARCEL 3)
EASEMENTS IN FAVOR OF GARAGE PARCEL 2 AS SET FORTH IN AN INSTRUMENT ENTITLED "AMENDED AND RESTATED DECLARATION OF ESTABLISHMENT OF EASEMENTS, COVENANTS, CONDITIONS, AND RESTRICTIONS", EXECUTED BY BUNKER HILL CENTER ASSOCIATES, A PARTNERSHIP, COMPOSED OF BOISE CASCADE HOME & LAND CORPORATION, KENFIELD E. KENNEDY, HOWARD L. MATLOW, EDWARD RICE AND CONRAD BUILDING SYSTEMS, INC. DATED JULY 10, 1972, RECORDED JULY 12, 1972 AS INSTRUMENT NO. 668, IN BOOK D-5528 PAGE 518, OFFICIAL RECORDS.
EXCEPT FROM PARCEL3 ABOVE, ALL OIL, GAS AND MINERAL SUBSTANCES, TOGETHER WITH THE RIGHT TO EXTRACT SUCH SUBSTANCES, PROVIDED THAT THE SURFACE OPENING OF ANY WELL, HOLE, SHAFT OR OTHER MEANS OF REACHING OR REMOVING SUCH SUBSTANCES SHALL NOT BE LOCATED WITHIN THE BUNKER HILL URBAN RENEWAL PROJECT AREA, AS RECORDED IN BOOK M335 PAGE 106, OFFICIAL RECORDS, AND SHALL NOT PENETRATE ANY PART OF PORTION OF SAID PROJECT AREA, WITHIN FIVE HUNDRED (500) FEET OF THE SURFACE THEREOF, AS SAID OIL, GAS AND MINERAL SUBSTANCES ARE RESERVED IN VARIOUS DEEDS OF RECORD.


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EXHIBIT "A"
- 2 -
UNION BANK PLAZA
[Union Bank Lease]


EXHIBIT I
UNION BANK PLAZA
ELEVATOR UPGRADE WORK
PLANS AND SPECIFICATIONS

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EXHIBIT I
- 1 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 2 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 3 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 4 -
UNION BANK PLAZA
[Union Bank Lease]




804296.08/LA
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EXHIBIT I
- 5 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 6 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 7 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 8 -
UNION BANK PLAZA
[Union Bank Lease]



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EXHIBIT I
- 9 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 10 -
UNION BANK PLAZA
[Union Bank Lease]



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EXHIBIT I
- 11 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 12 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 13 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 14 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 15 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 16 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 17 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 18 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 19 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 20 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 21 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 22 -
UNION BANK PLAZA
[Union Bank Lease]




804296.08/LA
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EXHIBIT I
- 23 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT I
- 24 -
UNION BANK PLAZA
[Union Bank Lease]


EXHIBIT J
UNION BANK PLAZA
EXTERIOR BUILDING PAINT
COLOR SCHEMES



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EXHIBIT J
- 1 -
UNION BANK PLAZA
[Union Bank Lease]











EXHIBIT K
UNION BANK PLAZA
LOCATION OF TENANT'S EXECUTIVE AND NON-EXECUTIVE RESERVED
PARKING

804296.08/LA
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EXHIBIT K
- 1 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT K
- 2 -
UNION BANK PLAZA
[Union Bank Lease]


EXHIBIT L
UNION BANK PLAZA
VISUAL EXAMPLE OF NORTHERN VIEW

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EXHIBIT L
- 1 -
UNION BANK PLAZA
[Union Bank Lease]


EXHIBIT M
UNION BANK PLAZA
PRE-EXISTING EXEMPT SIGNATURE RIGHTS

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EXHIBIT M
- 1 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT M
- 2 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT M
- 3 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT M
- 4 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT M
- 5 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT M
- 6 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT M
- 7 -
UNION BANK PLAZA
[Union Bank Lease]



804296.08/LA
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EXHIBIT M
- 8 -
UNION BANK PLAZA
[Union Bank Lease]


EXHIBIT N
UNION BANK PLAZA
LOCATION OF SECURITY SCANNERS AND LOBBY ATM SPACE

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EXHIBIT N
- 1 -
UNION BANK PLAZA
[Union Bank Lease]


Exhibit 10.2

FIRST AMENDMENT TO OFFICE/RETAIL LEASE
This FIRST AMENDMENT TO OFFICE/RETAIL LEASE (this " First Amendment ") is dated for reference purposes as of November 17, 2008, by and between HINES VAF UB PLAZA, L.P., a Delaware limited partnership (" Landlord "), and UNION BANK OF CALIFORNIA, N.A., a national association (" Tenant ").
R E C I T A L S :
A.    Landlord and Tenant entered into that certain Office/Retail Lease dated as of October 8, 2008 (the " Lease "), pursuant to which Landlord leased to Tenant and Tenant leased from Landlord that certain space as more particularly described in the Lease (the " Existing Premises ") in that certain building located at 445 South Figueroa Street, Los Angeles, California 90071 (the " Building ").
B.     Tenant has exercised its first Expansion Option pursuant to Section 1.6.1 of the Lease to expand the Existing Premises to include certain space containing approximately 16,287 rentable square feet (as calculated in accordance with 1996 BOMA) and comprising the entire rentable square footage of the twenty-eighth (28 th ) floor of the Building, as depicted on Exhibit A attached hereto (the " 28 th Floor Expansion Space ").
C.     Landlord and Tenant now desire to amend the Lease to set forth the terms of Tenant's lease of the 28 th Floor Expansion Space and modify various terms and provisions of the Lease, all as hereinafter provided.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.     Capitalized Terms . Except as otherwise expressly provided herein to the contrary, all capitalized terms used in this First Amendment shall have the same meaning given such terms in the Lease.
2.     Addition of 28th Floor Expansion Space . The lease term for the 28 th Floor Expansion Space (the " 28 th Floor Expansion Space Term ") shall commence upon the CD Date for the 28th Floor Expansion Space (as determined pursuant to Sections 1.6.3 and 1.6.4 of the Lease and the Tenant Work Letter attached to the Lease as it pertains to the 28 th Floor Expansion Space, which CD Date shall be determined as if the 28 th Floor Expansion Space was a Returned Floor under Section 2.3.2 of the Tenant Work Letter, and shall occur after the expiration of the Construction Period for the 28 th Floor Expansion Space [as may be extended for Uncontrollable Delays]) (the " 28 th Floor Expansion Space Commencement Date ") and expire coterminously


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H4321-047/11-17-08/dbs/dbs
- 1 -
UNION BANK PLAZA
[Union Bank of California]


with the Lease Term (as the same may be extended pursuant to Section 2.2 of the Lease or shortened with respect to certain portions of the Premises pursuant to Section 2.4 of the Lease); provided, however, that the Delivery Date for the 28 th Floor Expansion Space shall not actually occur until Tenant has received at least fourteen (14) days' prior notice from Landlord that the 28 th Floor Expansion Space will be delivered to Tenant in the Delivery Condition for the 28 th Floor Expansion Space (as set forth in the Tenant Work Letter attached to the Lease as it pertains to the 28 th Floor Expansion Space). The 28 th Floor Expansion Space shall be leased on the same terms and conditions set forth in the Lease, subject to the modifications set forth in this First Amendment. Within a reasonable period of time after the 28th Floor Expansion Space Commencement Date, Landlord shall deliver to Tenant an amendment to the Lease, as hereby amended, setting forth, among other things, the actual 28th Floor Expansion Space Commencement Date, which amendment Tenant shall execute and return to Landlord within fifteen (15) days after Tenant's receipt thereof. Effective from and after the 28 th Floor Expansion Space Commencement Date, (A) the " Premises " shall mean the Existing Premises and the 28 th Floor Expansion Space, and (B) the Premises will contain a total of (1) approximately 326,926 rentable square feet during the remainder of the Initial Period ( i.e. , 310,639 rentable square feet of the Existing Premises, as calculated pursuant to 1980 Modified BOMA, plus 16,287 rentable square feet of the 28 th Floor Expansion Space), and (2) approximately 333,796 rentable square feet during the Extended Term ( i.e. , 317,509 rentable square feet of the Existing Premises, as calculated pursuant to 1996 BOMA, plus 16,287 rentable square feet of the 28 th Floor Expansion Space); provided, however, that if as of the 28 th Floor Expansion Space Commencement Date, the 20 th Floor Space Commencement Date has previously occurred pursuant to Section 1.4 of the Lease, then the foregoing definition of "Premises" shall be redefined to also include the 20 th Floor Space and the rentable square feet of such redefined Premises shall, as of the 28 th Floor Expansion Space Commencement Date, contain a total of (x) approximately 343,313 rentable square feet during the remainder of the Initial Period ( i.e. , 310,639 rentable square feet of the Existing Premises, as calculated pursuant to 1980 Modified BOMA, plus 16,287 rentable square feet of the 28 th Floor Expansion Space, plus 16,387 rentable square feet of the 20 th Floor Space), and (y) approximately 350,183 rentable square feet during the Extended Term ( i.e. , 317,509 rentable square feet of the Existing Premises, as calculated pursuant to 1996 BOMA, plus 16,287 rentable square feet of the 28 th Floor Expansion Space, plus 16,387 rentable square feet of the 20 th Floor Space).

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- 2 -
UNION BANK PLAZA
[Union Bank of California]


3.     Base Rent .    From and after the 28 th Floor Expansion Space Commencement Date and continuing throughout the 28 th Floor Expansion Space Term, the Base Rent payable by Tenant for the 28 th Floor Expansion Space shall be calculated separate and apart from the Base Rent payable for the Existing Premises, and shall be as set forth in the following schedule (to the extent applicable):
Portion of 28 th  Floor
Expansion Space
Term
 
Annual
Base Rent
 
Monthly Base Rent
 
Annual Base Rental
Rate Per Rentable
Square Foot of the
28 th  Floor
Expansion Space
Portion of 28 th  Floor
Expansion Space
Term occurring
during calender year
2009
 
$578,188.50
 
$48,182.38
 
$35.50
Portion of 28 th  Floor
Expansion Space
Term occurring
during calender year
2010
 
$600,388.82
 
$50,028.24
 
$36.86
Portion of 28 th  Floor
Expansion Space
Term occurring
during calender year
2011 continuing
through 1/31/12
 
$623,466.36
 
$51,955.53
 
$38.28
2/1/12 – 1/31/13
 
$647,408.25
 
$53,950.69
 
$39.75
2/1/13 – 1/31/14
 
$663,532.38
 
$55,294.37
 
$40.74
2/1/14 – 1/31/15
 
$680,145.12
 
$56,678.76
 
$41.76
2/1/15 – 1/31/16
 
$697,246.47
 
$58,103.87
 
$42.81
2/1/16 – 1/31/17
 
$714,673.56
 
$59,556.13
 
$43.88
2/1/17 – 1/31/18
 
$732,426.39
 
$61,035.53
 
$44.97
2/1/18 – 1/31/19
 
$750,830.70
 
$62,569.23
 
$46.10
2/1/19 – 1/31/20
 
$769,560.75
 
$64,130.06
 
$47.25
2/1/20 – 1/31/21
 
$788,779.41
 
$65,731.62
 
$48.43
2/1/21 – 1/31/22
 
$808,486.68
 
$67,373.89
 
$49.64


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- 3 -
UNION BANK PLAZA
[Union Bank of California]


4.     28th Floor Expansion Space Delivery Condition, New Tenant Improvements and Tenant Improvement Allowance . Landlord shall deliver to Tenant the 28 th Floor Expansion Space in the Delivery Condition therefor (it being acknowledged that, pursuant to Section 1 of the Tenant Work Letter attached to the Lease, Landlord shall only be required to perform the Code Compliance Work described in Section 1.3 of the Tenant Work Letter attached to the Lease (and not the work described in Sections 1.1 and 1.2 of the Tenant Work Letter attached to the Lease) with respect to the 28 th Floor Expansion Space), and Tenant shall construct the New Tenant Improvements in the 28 th Floor Expansion Space, all pursuant to and in accordance with the Tenant Work Letter attached to the Lease as it pertains to the 28 th Floor Expansion Space. Tenant shall receive a Tenant Improvement Allowance in an amount up to, but not exceeding, Fifty-Two and 50/100 Dollars ($52.50) per rentable square foot of the 28 th Floor Expansion Space as provided in Section 2. 1 of the Tenant Work Letter attached to the Lease. Subject to delays caused by (i) Force Majeure events and/or (ii) the unauthorized holdover by the existing tenant of a portion of the 28 th Floor Expansion Space, Landlord shall use commercially reasonable efforts to deliver the 28 th Floor Expansion Space to Tenant in tho Delivery Condition therefor on August 1, 2009.
5.     Tenant's Share . During the 28th Floor Expansion Space Term, Tenant's Share of increases in Direct Expenses for the 28 th Floor Expansion Space and Tenant's obligation to pay Tenant's Share of increases in Direct Expenses for the 28 th Floor Expansion Space shall be calculated separate and apart from the Existing Premises, and shall be as follows: (i) Tenant's Share for the 28 th Floor Expansion Space during the Initial Period shall be equal to 2.66% ( i.e. , 16,287 rentable square feet within the 28 th Floor Expansion Space/613,235 rentable square feet within the Building [including the retail/office tower portion of the Building and the existing retail portion of the Real Property located outside the retail/office tower portion of the Building]), and (ii) Tenant's Share for the 28 th Floor Expansion Space during the Extended Term shall be equal to 2.68% ( i.e. , 16,287 rentable square feet within the 28 th Floor Expansion Space/607,517 rentable square feet in the Building [excluding the existing retail portion of the Real Property located outside the retail/office tower portion of the Building]).
6.     28th Floor Expansion Space Annual Direct Expense Allowance . If (i) the 28 th Floor Expansion Space Commencement Date occurs during the calendar year 2009, the Annual Direct Expense Allowance for the 28 th Floor Expansion Space shall, during the period from the 28 th Floor Expansion Space Commencement Date through the end of the Initial Period, be the amount of Direct Expenses for the calendar year 2009 calculated in accordance with Section 4,2 of the Lease, (ii) the 28 th Floor Expansion Space Commencement Date occurs during the calendar year 2010, the Annual Direct Expense Allowance for the 28 th Floor Expansion Space shall, during the period from the 28 th Floor Expansion Space Commencement Date through the end of the Initial Period, be the amount of Direct Expenses for the calendar year 2010 calculated in accordance with Section 4.2 of the Lease, and (iii) the 28 th Floor Expansion Space Commencement Date occurs during the period from January 1, 2011 through and including January 31, 2012, the Annual Direct Expense Allowance for the 28 th Floor Expansion Space shall, during the period from the 28 th Floor Expansion Space Commencement Date through the end of the Initial Period, be the amount of Direct Expenses for the calendar year 2011 calculated in accordance with Section 4.2 of the Lease, During the Extended Term ( i.e. , from and after February 1, 2012), the Annual Direct Expense Allowance for the 28th Floor Expansion Space

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UNION BANK PLAZA
[Union Bank of California]


shall be the amount of Direct Expenses for the calendar year 2012 calculated in accordance with Section 4.2 of the Lease.
7.     28th Floor Expansion Space Additional Building Parking Area Passes . From and after the 28 th Floor Expansion Space Commencement Date, as a result of the addition of the 28 th Floor Expansion Space to the Existing Premises, in addition to its obligation to rent and pay for 453 Building Parking Area Passes as set forth in Section 28.1.1 of the Lease, Tenant shall rent and pay for an additional twenty-four (24) Building Parking Area Passes ( i.e. , 1.45 Building Parking Area Passes per 1,000 rentable square feet of the 28 th Floor Expansion Space), subject to the terms and conditions set forth in the Lease, as hereby amended (including, without limitation, the reduction provisions of 28.1.3 of the Lease and the provisions of Section 28.3 regarding parking charges), Such additional twenty-four (24) Building Parking Area Passes shall consist of three (3) executive reserved spaces ( i.e. , 13.25% of such additional Building Parking Area Passes), six (6) non-executive reserved spaces ( i.e. , 24.50% of such additional Building Parking Area Passes), and fifteen (15) unreserved passes ( i.e. , 62.25% of such additional Building Parking Area Passes).
8.     Brokers . Landlord and Tenant hereby represent and warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this First Amendment other than Cushman & Wakefield, Inc., representing Tenant, and Hines Interests Limited Partnership, representing Landlord (collectively, the " Brokers " ), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this First Amendment. Landlord shall be solely responsible for the payment of brokerage commissions to the Brokers with respect to this First Amendment pursuant to separate agreements between Landlord and the Brokers, Landlord and Tenant shall indemnify, defend and hold the other harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorney's fees) with respect to any leasing commission, compensation or fees claimed by any broker or agent in connection with this First Amendment or its negotiation by reason of any act of Landlord or Tenant other than the Brokers.
9.     No Further Modification . Except as set forth in this First Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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UNION BANK PLAZA
[Union Bank of California]


IN WITNESS WHEREOF, this First Amendment has been executed as of the day and year first above written.
LANDLORD:
HINES VAF UB PLAZA, L.P.,
a Delaware limited partnership
By:
Hines VAF UB Plaza GP LLC,
its general partner
By:
Hines VAF UB Plaza Mezz, L.P.,
its sole member
By:
Hines VAF UB Plaza GP2 LLC,
its general partner
By:
Hines U.S. Office Value Added Fund, L.P.,
its sole member
By:
Hines U.S. Office Value Added Fund, LLC,
its general partner
By:
Hines Interests Limited Partnership,
its managing member
By:
Hines Holdings, Inc.
its general partner
By:
/s/ James C. Buie, Jr.
Name:
James C. Buie, Jr.
Title:
Executive Vice President

[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]

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UNION BANK PLAZA
[Union Bank of California]


TENANT:
UNION BANK OF CALIFORNIA, N.A.,
a national association
By:
/s/ Craig Poletti
Name: Craig Poletti
Title: Vice President
By:
/s/ Kenneth Holdway
Name: Kenneth Holdway
Title: Senior Vice President


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UNION BANK PLAZA
[Union Bank of California]


EXHIBIT A
 
DEPICTION OF 28 th  FLOOR EXPANSION SPACE
 
[Attached as immediately following page.]


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EXHIBIT A
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UNION BANK PLAZA
[Union Bank of California]


Exhibit “A”



Exhibit 10.3

SECOND AMENDMENT TO OFFICE/RETAIL LEASE
This SECOND AMENDMENT TO OFFICE/RETAIL LEASE (this " Second Amendment ") is dated for reference purposes as of July 10, 2009, by and between HINES VAF UB PLAZA, L.P., a Delaware limited partnership (" Landlord "), and UNION BANK, N.A., a national association, formerly known as Union Bank of California, N.A. (" Tenant ").
R E C I T A L S :
A.    Landlord and Tenant entered into that certain Office/Retail Lease dated as of October 8, 2008 (the " Original Lease "), pursuant to which Landlord leased to Tenant and Tenant leased from Landlord that certain space as more particularly described in the Lease (the " Original Premises ") in that certain building located at 445 South Figueroa Street, Los Angeles, California 90071 (the " Building ").
B.    Landlord and Tenant entered into that certain First Amendment to Office/Retail Lease dated as of November 17, 2008 (the " First Amendment "), pursuant to which the Original Lease was amended to expand the Original Premises to include the 28 th Floor Expansion Space as more particularly described in the First Amendment.
C.     The Original Lease and the First Amendment are collectively referred to herein as the " Lease ". The Original Premises and the 28 th Floor Expansion Space are sometimes collectively referred to herein as the " Existing Premises ".
D.    The parties now desire to amend the Lease to: (i) expand the Existing Premises to include that certain space located on the twenty-second (22 nd ) floor of the Building, commonly known as Suite 2290, containing approximately 1,361 rentable square feet of space, and depicted on Exhibit A attached hereto (the " Second Amendment Expansion Space "); and (ii) otherwise modify the Lease, all upon the terms and conditions hereinafter provided.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.     Capitalized Terms . Except as otherwise expressly provided herein to the contrary, all capitalized terms used in this Second Amendment shall have the same meaning given such terms in the Lease.
2.     Expansion . The " Premises " leased by Tenant under the Lease shall be expanded and redefined to include the Second Amendment Expansion Space commencing upon the Second Amendment Expansion Space Commencement Date (as defined below) and expiring upon the

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[Union Bank of California]


Second Amendment Expansion Space Expiration Date (as defined below). The Second Amendment Expansion Space shall be leased on the same terms and conditions set forth in the Lease, subject to the modifications set forth in this Second Amendment. Landlord and Tenant hereby agree and have verified that the rentable area of the Second Amendment Expansion Space (as set forth in Recital D above) has been calculated in accordance with 1996 BOMA, and is not subject to adjustment or re-measurement by Landlord or Tenant. Notwithstanding the foregoing to the contrary, Tenant shall not be entitled to exercise Tenant's options to renew the Lease Term pursuant to Section 2.2 of the Original Lease with respect to the Second Amendment Expansion Space, it being understood that such options to renew shall not apply thereto; however, the Second Amendment Expansion Space shall be subject to Tenant's right of first offer set forth in Section 1.5 of the Original Lease (and if Tenant leases the Second Amendment Expansion Space as First Offer Space pursuant to Section 1.5 of the Original Lease, then such First Offer Space shall be subject to such options to renew to the extent provided in Section 1.5 of the Original Lease).
3.     Second Amendment Expansion Lease Term . The lease term for the Second Amendment Expansion Space (the " Second Amendment Expansion Space Lease Term ") shall: (i) commence upon the date (the " Second Amendment Expansion Space Commencement Date ") which is the earlier of (A) the date Tenant commences business operations in the Second Amendment Expansion Space, and (B) the date Landlord delivers the Second Amendment Expansion Space to Tenant Substantially Completed (as defined below), and otherwise in its "AS IS" condition; and (ii) expire upon the date (the " Second Amendment Expansion Space Expiration Date ") which is six (6) years after the Second Amendment Expansion Space Commencement Date. For purposes of this Second Amendment, the Second Amendment Expansion Space shall be deemed " Substantially Completed " upon completion of Landlord's Second Amendment Expansion Space Work (as defined in Section 7 below), with the exception of any punchlist items. If Landlord shall encounter any delays in causing the Second Amendment Expansion Space to be Substantially Completed as a result of any acts or omissions of Tenant, or its agents, or employees, then, notwithstanding anything to the contrary set forth in the Lease, as hereby amended, and regardless of the actual date the Second Amendment Expansion Space is Substantially Completed, the Second Amendment Expansion Space Commencement Date shall be deemed to be the date the Second Amendment Expansion Space Commencement Date would have occurred if no such Tenant delays, as set forth above, had occurred. Within a reasonable period of time after the Second Amendment Expansion Space Commencement Date, Landlord shall deliver to Tenant an amendment to the Lease, as hereby amended, setting forth, among other things, the actual Second Amendment Expansion Space Commencement Date, the Base Rent payable by Tenant for the Second Amendment Expansion Space and the Second Amendment Expansion Space Expiration Date. If the information in such amendment is accurate, then Tenant shall execute and return such amendment to Landlord within fifteen (15) days after Tenant's receipt thereof.
4.     Base Rent . The Base Rent payable for the Second Amendment Expansion Space during the Second Amendment Expansion Space Lease Term shall be calculated separate and apart from the Base Rent payable for the Existing Premises and shall be as follows:
(i) for the period from the Second Amendment Expansion Space Commencement Date through the end of the Initial Period (i.e., through January 31, 2012), such Base Rent shall

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[Union Bank of California]


equal (A) $35.50 per rentable square foot of the Second Amendment Expansion Space for that portion of the Second Amendment Expansion Space Lease Term which occurs during the calendar year 2009; (B) $36.86 per rentable square foot of the Second Amendment Expansion Space for that portion of the Second Amendment Expansion Space Lease Term which occurs during the calendar year 2010; and (C) $38.28 per rentable square foot of the Second Amendment Expansion Space for that portion of the Second Amendment Expansion Space Lease Term which occurs during the calendar year 2011 and continuing through January 31, 2012; and
(ii) for the period of the Second Expansion Space Lease Term from February 1, 2012 through the Second Amendment Expansion Space Expiration Date, such Base Rent shall equal the same Base Rent rate per rentable square foot as applicable to the portion of the Original Premises that excludes the Storage Space, subject to annual increases at the same time and at the same rate per rentable square foot as applicable to such portion of the Original Premises as set forth in Section 8.2(a) of the Summary attached to the Original Lease ( e.g. , if the Second Amendment Expansion Space Expiration Date is June 30, 2012, the Base Rent for the Second Amendment Expansion Space shall equal $39.75 per rentable square foot of the Second Amendment Expansion Space during the period from February 1, 2012 through June 30, 2012).
5.     Tenant's Share . During the Second Amendment Expansion Space Lease Term, Tenant's Share of increases in Direct Expenses for the Second Amendment Expansion Space and Tenant's obligation to pay Tenant's Share of increases in Direct Expenses for the Second Amendment Expansion Space shall be calculated separate and apart from the Existing Premises, and shall be equal to 0.22% calculated as follows: (i) during the period from the Second Amendment Expansion Space Commencement Date through the end of the Initial Period ( i.e. , through January 31, 2012), Tenants' Share of increases in Direct Expenses for the Second Amendment Expansion Space shall be calculated by dividing 1,361 rentable square feet within the Second Amendment Expansion Space, by 613,235 rentable square feet within the Building [including the retail/office tower portion of the Building and the existing retail portion of the Real Property located outside the retail/office tower portion of the Building]), and (ii) during the period from February 1, 2012 through the Second Amendment Expansion Space Expiration Date, Tenants' Share of increases in Direct Expenses for the Second Amendment Expansion Space shall be calculated by dividing 1,361 rentable square feet within the Second Amendment Expansion Space, by 607,517 rentable square feet in the Building [excluding the existing retail portion of the Real Property located outside the retail/office tower portion of the Building]).
6.     Annual Direct Expense Allowance . The Annual Direct Expense Allowance for the Second Amendment Expansion Space shall be the amount of Direct Expenses for the calendar year 2009 calculated in accordance with Section 4.2 of the Original Lease.
7.     Condition of Second Amendment Expansion Space . Except as otherwise expressly set forth below in this Section 7, Landlord shall deliver the Second Amendment Expansion Space to Tenant in its then "AS IS" condition, without any obligation on Landlord's part to construct or pay for, or provide any improvement allowance for, any improvements or alterations to or for the Second Amendment Expansion Space, it being expressly acknowledged and agreed to by the parties that (i) the Second Amendment Expansion Space does not contain any asbestos, (ii) the Tenant Work Letter attached to the Original Lease shall not apply to the Second Amendment Expansion Space, (iii) Tenant shall be responsible for

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[Union Bank of California]


constructing all tenant improvements and alterations in the Second Amendment Expansion Space pursuant to and in accordance with the terms and provisions of Articles 8 and 9 of the Original Lease. Notwithstanding the foregoing to the contrary, Landlord shall, at Landlord's cost and using Building standard materials, perform certain work in the Second Amendment Expansion Space as depicted on the space plan attached hereto as Exhibit B (" Landlord's Second Amendment Expansion Space Work ").
8.     Additional Building Parking Area Passes . During the Second Amendment Expansion Space Lease Term, as a result of the addition of the Second Amendment Expansion Space to the Existing Premises, in addition to its obligation to rent and pay for the number of Building Parking Area Passes as set forth in the Lease with respect to the Existing Premises, Tenant shall rent and pay for an additional two (2) Building Parking Area Passes ( i.e. , 1.45 Building Parking Area Passes per 1,000 rentable square feet of the Second Amendment Expansion Space), subject to the terms and conditions set forth in the Lease, as hereby amended (including, without limitation, the reduction provisions of 28.1.3 of the Original Lease and the provisions of Section 28.3 of the Original Lease regarding parking charges). Such additional two (2) Building Parking Area Passes shall consist of zero (0) executive reserved spaces ( i.e. , 13.25% of such additional Building Parking Area Passes), zero (0) non-executive reserved spaces ( i.e. , 24.50% of such additional Building Parking Area Passes), and two (2) unreserved passes ( i.e. , 62.25% of such additional Building Parking Area Passes).
9.     Early Termination Option . Notwithstanding anything to the contrary contained in the Lease, as hereby amended, Tenant shall have the one-time option to terminate the Lease, as hereby amended, with respect to the Second Amendment Expansion Space, only (but not with respect to any portion of the Existing Premises), effective as of the last day of the thirty-sixth (36th) month of the Second Amendment Expansion Space Lease Term (the " Second Amendment Expansion Space Termination Date "). To exercise such termination option, Tenant must deliver to Landlord on or before the last day of the twenty-seventh (27 th ) month of the Second Amendment Expansion Space Lease Term: (i) written notice of Tenant's exercise of such option (the " Second Amendment Expansion Space Termination Notice "); and (ii) cash in the amount equal to the Second Amendment Expansion Space Termination Consideration. As used herein, the " Second Amendment Expansion Space Termination Consideration " shall mean an amount equal to the unamortized portion of the cost of the design, permitting and construction of Landlord's Second Amendment Expansion Space Work (the " Landlord's Second Amendment Expansion Space Work Costs "). The Landlord's Second Amendment Expansion Space Work Costs shall be amortized on a straight-line basis over the scheduled six (6)-year Second Amendment Expansion Space Lease Term, together with interest at the rate of eleven percent (11%) per annum, and the unamortized portions thereof shall be determined based upon the unexpired portion of the Second Amendment Expansion Space Lease Term as of the Second Amendment Expansion Space Termination Date had the Lease, as hereby amended, not been so terminated pursuant to this Section 9. If Tenant properly and timely exercises the termination option in this Section 9, the Lease, as hereby amended, with respect to the Second Amendment Expansion Space, only (but not with respect to any portion of the Existing Premises), shall expire at midnight on the Second Amendment Expansion Space Termination Date, and Tenant shall be required to surrender the Second Amendment Expansion Space to Landlord on or prior to the Second Amendment Expansion Space Lease Term Termination Date accordance the applicable provisions Lease, as hereby amended. Notwithstanding

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[Union Bank of California]


the foregoing provisions of this Section 9 to the contrary, at Landlord's option and in addition to any and all remedies available to Landlord, Tenant shall not have the right to exercise such termination option, as provided above, if as of the date of the attempted exercise of such option, Tenant is in default under the Lease, as hereby amended, beyond all applicable notice and cure periods.
10.     Broker . Landlord and Tenant hereby represent and warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Second Amendment other than Hines Interests Limited Partnership, representing Landlord (the " Broker "), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Second Amendment. Landlord shall be solely responsible for the payment of brokerage commissions to the Broker with respect to this Second Amendment pursuant to a separate agreement between Landlord and the Broker. Landlord and Tenant shall indemnify, defend and hold the other harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorney's fees) with respect to any leasing commission, compensation or fees claimed by any broker or agent in connection with this Second Amendment or its negotiation by reason of any act of Landlord or Tenant other than the Broker.
11.     No Further Modification . Except as set forth in this Second Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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UNION BANK PLAZA
[Union Bank of California]


IN WITNESS WHEREOF, this Second Amendment has been executed as of the day and year first above written.
LANDLORD:
HINES VAF UB PLAZA, L.P.,
a Delaware limited partnership
By:
Hines VAF UB Plaza GP LLC,
its general partner
By:
Hines VAF UB Plaza Mezz, L.P.,
its sole member
By:
Hines VAF UB Plaza GP2 LLC,
its general partner
By:
Hines U.S. Office Value Added Fund, L.P.,
its sole member
By:
Hines U.S. Office Value Added Fund, LLC,
its general partner
By:
Hines Interests Limited Partnership,
its managing member
By:
Hines Holdings, Inc.
its general partner
By:
/s/ James C. Buie, Jr.
Name:
James C. Buie, Jr.
Title:
Executive Vice President


TENANT:
UNION BANK, N.A.,
a national association
By:
/s/ Craig Poletti
Name: Craig Poletti
Title:    Vice President


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UNION BANK PLAZA
[Union Bank of California]


EXHIBIT A
 
DEPICTION OF SECOND AMENDMENT EXPANSION SPACE
 
[Attached as immediately following page.]


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EXHIBIT A
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UNION BANK PLAZA
[Union Bank of California]


Exhibit “A”



EXHIBIT B
SPACE PLAN
[Attached as immediately following 4 pages]


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EXHIBIT B
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UNION BANK PLAZA
[Union Bank of California]














Exhibit 10.4




Exhibit 10.5

THIRD AMENDMENT TO OFFICE/RETAIL LEASE
This THIRD AMENDMENT TO OFFICE/RETAIL LEASE (this " Third Amendment ") is dated for reference purposes as of April 14, 2010, by and between HINES VAF UB PLAZA, L.P., a Delaware limited partnership (" Landlord "), and UNION BANK, N.A., a national association, formerly known as Union Bank of California, N.A. (" Tenant ").
R E C I T A L S :
A.    Landlord and Tenant entered into that certain Office/Retail Lease dated as of October 8, 2008 (the " Original Lease "), pursuant to which Landlord leased to Tenant and Tenant leased from Landlord that certain space as more particularly described in the Lease (the " Original Premises ") in that certain building located at 445 South Figueroa Street, Los Angeles, California 90071 (the " Building ").
B.    Landlord and Tenant entered into that certain First Amendment to Office/Retail Lease dated as of November 17, 2008 (the " First Amendment "), pursuant to which the parties (i) expanded the Original Premises to include the 28 th Floor Expansion Space, and (ii) otherwise modified the terms of the Original Lease, all as more particularly described in the First Amendment.
C.     Landlord and Tenant entered into that certain Second Amendment to Office/Retail Lease dated as of July 10, 2009 (the " Second Amendment "), pursuant to which the parties (i) expanded the Original Premises and the 28 th Floor Expansion Space to include the Second Amendment Expansion Space, and (ii) otherwise modified the terms of the Original Lease and the First Amendment, all as more particularly described in the Second Amendment.
D.    The Original Lease, First Amendment and Second Amendment are collectively referred to herein as the " Lease ". The Original Premises, 28 th Floor Expansion Space and Second Amendment Expansion Space are sometimes collectively referred to herein as the " Existing Premises ".
E.    The parties now desire to amend the Lease to: (i) confirm the 20 th Floor Space Commencement Date; (ii) confirm the Second Amendment Expansion Space Commencement Date; (iii) confirm the 28 th Floor Expansion Space Commencement Date and modify the terms of the Lease with respect to the 28 th Floor Expansion Space; (iv) confirm the manner in which the Tenant Improvement Allowance (as defined in Section 2.1 of the Tenant Work Letter attached to the Original Lease) may be commingled and is to be computed; and (v) otherwise modify the Lease, all upon the terms and conditions hereinafter provided.

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[Union Bank of California]


A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.     Capitalized Terms .     Except as otherwise expressly provided herein to the contrary, all capitalized terms used in this Third Amendment shall have the same meaning given such terms in the Lease.
2.     Confirmation of 20th Floor Commencement Date .    The parties hereby agree and confirm that the 20 th Floor Commencement Date occurred on November 1, 2009.
3.     Confirmation of Second Amendment Expansion Space Commencement Date .    The parties hereby agree and confirm that the Second Amendment Expansion Space Commencement Date occurred on August 17, 2009.
4.     28th Floor Expansion Space .
4.1.     28th Floor Expansion Space Commencement Date . The parties hereby acknowledge that Tenant leased a majority of the rentable area of the 28 th Floor Expansion Space (the " Short Term 28 th Floor Expansion Space ") on a temporary basis prior to the CD Date therefor pursuant to the following (collectively, the " Short Term Leases "): (i) that certain Short Term Office Lease dated as of August 20, 2008 between Landlord and Tenant, as amended by that certain First Amendment to Short Term Office Lease dated as of March 23, 2009 between Landlord and Tenant; and (ii) that certain Short Term Office Lease dated as of November 6, 2008 between Landlord and Tenant, as amended by that certain First Amendment to Short Term Office Lease dated as of December 1, 2008 between Landlord and Tenant, and that certain Second Amendment to Short Term Office Lease made effective as of February 9, 2009 between Landlord and Tenant. In addition, the parties hereby acknowledge that (A) Landlord delivered to Tenant possession of the portion of the 28 th Floor Expansion Space which (1) was other than the Short Term 28 th Floor Expansion Space, (2) is commonly known as Suite 2875 and (3) contains approximately 3,800 rentable square feet of space (the " Remaining 28 th Floor Expansion Space ") on August 1, 2009, (B) the Short Term Leases expired on July 31,2009 and effective as of August 1, 2009, Tenant leased the entire 28 th Floor Expansion Space from Landlord on a longer term basis pursuant to the Lease, as hereby amended, and (C) notwithstanding anything to the contrary contained in the Lease, as hereby amended (including, without limitation, the provisions of Section 2 of the First Amendment), the 28 th Floor Expansion Space Commencement Date occurred on August 1, 2009 without regard to any Construction Period. Accordingly: (a) Tenant has been paying and shall continue to pay Base Rent to Landlord for the 28 th Floor Expansion Space pursuant to Section 3 of the First Amendment effective as of the 28 th Floor Expansion Space Commencement Date ( i.e. , August 1, 2009); (b) the Annual Direct Expense Allowance for the 28 th Floor Expansion Space has been and shall continue to be, during the period from August 1, 2009 through the end of the Initial Period, the amount of Direct Expenses for the calendar year 2009 calculated in accordance with Section 4.2 of the Original Lease; (c) Tenant shall not be entitled to any Construction Period for the 28 th Floor Expansion

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[Union Bank of California]


Space; (d) Landlord was not obligated to perform the Code Compliance Work described in Section 1.3 of the Tenant Work Letter attached to the Original Lease with respect to the 28 th Floor Expansion Space, if any, prior to the 28 th Floor Expansion Space Commencement Date, and notwithstanding that such Code Compliance Work has not been performed, (x) the Delivery Date for the 28 th Floor Expansion Space is deemed to have occurred as of August 1, 2009, (y) Landlord is deemed to have satisfied the Delivery Condition for the 28 th Floor Expansion Space and all other obligations with respect to the delivery of the 28 th Floor Expansion Space as of August 1, 2009, and (z) Tenant accepted the 28 th Floor Expansion Space in its "AS-IS" condition as of August 1, 2009; and (e) the failure by Landlord to perform such Code Compliance Work as of the date Landlord delivered the 28 th Floor Expansion Space to Tenant (and any subsequent performance of such Code Compliance Work pursuant to Section 4.3 below, if applicable) shall not (I) be deemed to be a Landlord Delay, (II) require Landlord to pay to Tenant any increased out-of-pocket costs resulting therefrom, or (III) otherwise subject Landlord to the obligations set forth in Section 2.3.1 of the Tenant Work Letter attached to the Original Lease.
4.2.     28th Floor Expansion Space Tenant Improvement Allowance . The parties hereby acknowledge that; (i) pursuant to Section 4 of the First Amendment, Tenant shall receive a Tenant Improvement Allowance for the 28 th Floor Expansion Space (the " 28 th Floor Expansion Space TI Allowance ") in an amount up to, but not exceeding, Fifty-Two and 50/100 Dollars ($52.50) per rentable square foot of the 28 th Floor Expansion Space; (ii) pursuant to Section 2.2 of the Tenant Work Letter attached to the Original Lease, as a condition to Landlord's obligation to disburse any portion of the Tenant Improvement Allowance allocable to any particular Full TI Floor (including, without limitation, for commingling as described in Section 2.1 of the Tenant Work Letter attached to the Original Lease for use by Tenant for any Tenant Improvement Allowance Items for any other portions of the Premises, the 20 th Floor Space and/or the 28 th Floor Expansion Space, and/or as a Base Rent credit pursuant to Section 2.4.2 of the Tenant Work Letter attached to the Original Lease), Tenant must (at a minimum) have improved such particular Full TI Floor to a condition that would make such particular Full TI Floor suitable for occupancy for general office purposes (the " Occupancy Condition ") and may not just improve a portion of such floor ( i.e. , Tenant must install floor covering, ceiling system with lighting, electricity, sprinkler heads and HVAC distribution throughout such entire Full TI Floor [collectively, the " Requirements "]); provided, however, that the parties hereby acknowledge and agree that (A) as of the date of this Third Amendment, a multi-tenant type corridor currently exists in the 28 th Floor Expansion Space, and (B) notwithstanding the existence of a multi-tenant type corridor in the 28 th Floor Expansion Space during the Lease Term, the 28 th Floor Expansion Space shall nonetheless be deemed to be in the Occupancy Condition so long as Tenant has complied with the Requirements and the 28 th Floor Expansion Space is otherwise suitable for occupancy for general office purposes; and (iii) the tenant that occupied the 28 th Floor Expansion Space prior to Tenant's occupancy thereof performed certain improvements therein which caused the 28 th Floor Expansion Space to be in the Occupancy Condition, and as a result, the 28 th Floor Expansion Space was delivered to Tenant already in the Occupancy Condition without the need for further improvements by or on behalf of Tenant. Notwithstanding anything to the contrary contained in the Tenant Work Letter attached to the Lease, Tenant hereby acknowledges and agrees that so long as the 28 th Floor Expansion Space is in the Occupancy Condition prior to disbursement of the applicable portion of the 28 th Floor Expansion Space Tl Allowance, (A) a portion of the 28 th Floor Expansion

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[Union Bank of California]


Space TI Allowance in an aggregate amount up to, but not exceeding, $500,000.00 may, subject to the other limitations in the Tenant Work Letter attached to the Original Lease, be commingled for use by Tenant for any Tenant Improvement Allowance Items for any other portions of the Premises, and (B) the remaining portion of the 28 th Floor Expansion Space TI Allowance in excess of $500,000.00 shall be used solely and exclusively for the Tenant Improvement Allowance Items applicable to the New Tenant Improvements constructed in the 28 th Floor Expansion Space (without the right to commingle).
4.3.     Post-DeliverY Performance of Code Compliance Work for the 28th Floor Expansion Space .    Notwithstanding anything in Section 4.1 above to the contrary, Landlord shall be obligated to perform the Code Compliance Work for the 28 th Floor Expansion Space (if any) if, and only if, Tenant delivers written notice (the " 28 th Floor Expansion Space Code Compliance Work Notice ") to Landlord on or prior to September 30, 2010 (the " 28 th Floor Expansion Space Code Compliance Work Notice Outside Date ") which (i) identifies in reasonable detail such Code Compliance Work to be performed by Landlord pursuant to Section 1.3 of the Tenant Work Letter attached to the Original Lease (except that such Code Compliance Work shall not include any work required to be performed to any of the multi-tenant corridors, common areas or other multi-tenant aspects of the 28th floor of the Building as a result of the 28 th floor being a multi-tenant floor), and (ii) requests that Landlord perform such Code Compliance Work. Time is of the essence for the delivery of the 28 th Floor Expansion Space Code Compliance Work Notice under this Section 4.3; accordingly, if Tenant fails to timely deliver the 28 th Floor Expansion Space Code Compliance Work Notice on or prior to the 28 th Floor Expansion Space Code Compliance Work Notice Outside Date, Tenant's right to require Landlord to perform the Code Compliance Work with respect to the 28 th Floor Expansion Space shall expire and be of no further force or effect. If Tenant timely delivers to Landlord the 28 th Floor Expansion Space Code Compliance Work Notice, Landlord shall thereafter perform the Code Compliance Work, if any, for the 28 th Floor Expansion Space pursuant to a schedule mutually approved by Landlord and Tenant during Tenant's occupancy of the 28 th Floor Expansion Space under the Lease, as hereby amended, and Tenant agrees that: (A) Tenant shall cooperate with Landlord's performance of such Code Compliance Work during such occupancy so that Landlord may perform such Code Compliance Work without interference from Tenant; (B) Landlord shall be permitted to cause such Code Compliance Work to be performed during normal business hours as reasonably necessary to complete the same in a timely manner, without any obligation to pay overtime or other premiums; (C) Tenant shall accept any and all inconveniences associated with the performance of such Code Compliance Work which may occur during such occupancy, including without limitation, dust, noise, etc; (D) the performance of such Code Compliance Work shall in no way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of any Rent payable pursuant to the Lease, as hereby amended; (E) Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant's business arising from the performance of such Code Compliance Work; and (F) Tenant shall not be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the 28 th Floor Expansion Space or of Tenant's personal property or improvements therein resulting from the performance of such Code Compliance Work, or for any inconvenience or annoyance occasioned thereby, except for any injury to persons or damage to property (but not loss of business or other consequential damages) to the extent caused by Landlord's gross negligence or willful misconduct and not insured or required to be insured by Tenant under the Lease, as hereby amended.

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UNION BANK PLAZA
[Union Bank of California]


5.    Commingling and Computation of Tenant Improvement Allowance.
5.1.     Commingling of Full Floor Tenant Improvement Allowance and Remaining Floors Tenant Improvement Allowance . Notwithstanding the designation of space as a Full TI Floor or a Remaining Floor as provided in the Tenant Work Letter attached to the Original Lease (it being understood that Floors 8, 10, 12, 13, 15, 16, 17, 21 and 24 of the Initial Premises, the Vault Space and the Retail Space are included in the definition of "Remaining Floors"), the Full Floor Tenant Improvement Allowance and the Remaining Floor Tenant Improvement Allowance may be used for the Tenant Improvement Allowance Items with respect to any or all of such spaces and such amounts may be commingled subject, however, to the conditions and limitations in Section 4.2 above and Sections 2.2.1.8, 2.2.1.9 and 2.2.2 of the Tenant Work Letter attached to the Original Lease.
5.2.     Computation of Tenant Improvement Allowance per Rentable Square Foot . For purposes of computing the Tenant Improvement Allowance, the rentable square feet of (i) the applicable portion of the initial Premises and the 20 th Floor Space shall be deemed to be the stipulated 1996 BOMA figures therefor as set forth in Section 1.2 of the Original Lease, (ii) the 28 th Floor Expansion Space shall be deemed to be the stipulated 1996 BOMA figure therefor as set forth in Section 1.6.1 of the Original Lease, and (iii) any First Offer Space, Second Expansion Space or any other expansion space which hereafter becomes part of the Premises shall be calculated pursuant to 1996 BOMA.
6.     Broker . Landlord and Tenant each hereby represents and warrants to the other that it has had no dealings with any real estate broker or agent in connection with the negotiation of this Third Amendment other than Hines Interests Limited Partnership (the " Broker "), and that it knows of no other real estate broker or agent who is entitled to a commission in connection with this Third Amendment. Landlord and Tenant shall indemnify, defend and hold the other harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorney's fees) with respect to any leasing commission, compensation or fees claimed by any broker or agent in connection with this Third Amendment or its negotiation by reason of any act of Landlord or Tenant other than the Broker.
7.     No Further Modification . Except as set forth in this Third Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

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UNION BANK PLAZA
[Union Bank of California]


IN WITNESS WHEREOF, this Third Amendment has been executed as of the day and year first above written.
LANDLORD:
HINES VAF UB PLAZA, L.P.,
a Delaware limited partnership
By:
Hines VAF UB Plaza GP LLC,
its general partner
By:
Hines VAF UB Plaza Mezz, L.P.,
its sole member
By:
Hines VAF UB Plaza GP2 LLC,
its general partner
By:
Hines U.S. Office Value Added Fund, L.P.,
its sole member
By:
Hines U.S. Office Value Added Fund, LLC,
its general partner
By:
Hines Interests Limited Partnership,
its managing member
By:
Hines Holdings, Inc.
its general partner
By:
/s/ James C. Buie, Jr.
Name:
James C. Buie, Jr.
Title:
Executive Vice President

TENANT:
UNION BANK, N.A.,
a national association
By:
__________________________
Name: ____________________
Title: _____________________
By:
/s/ Kenneth Holdway
Name: Kenneth Holdway
Title: Senior Vice President


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UNION BANK PLAZA
[Union Bank of California]


Exhibit 10.6

FOURTH AMENDMENT TO OFFICE/RETAIL LEASE
This FOURTH AMENDMENT TO OFFICE/RETAIL LEASE (this " Fourth Amendment ") is dated for reference purposes as of August 10, 2010, by and between HINES VAF UB PLAZA, L.P., a Delaware limited partnership (" Landlord "), and UNION BANK, N.A., a national association, formerly known as Union Bank of California, N.A. (" Tenant ").
R E C I T A L S :
A.    Landlord and Tenant entered into that certain Office/Retail Lease dated as of October 8, 2008 (the " Original Lease "), pursuant to which Landlord leased to Tenant and Tenant leased from Landlord that certain space as more particularly described in the Lease (the " Original Premises ") in that certain building located at 445 South Figueroa Street, Los Angeles, California 90071 (the " Building ").
B.    Landlord and Tenant entered into that certain First Amendment to Office/Retail Lease dated as of November 17, 2008 (the " First Amendment "), pursuant to which the parties (i) expanded the Original Premises to include the 28 th Floor Expansion Space, and (ii) otherwise modified the terms of the Original Lease, all as more particularly described in the First Amendment.
C.    Landlord and Tenant entered into that certain Second Amendment to Office/Retail Lease dated as of July 10, 2009 (the " Second Amendment "), pursuant to which the parties (i) expanded the Original Premises and the 28 th Floor Expansion Space to include the Second Amendment Expansion Space, and (ii) otherwise modified the terms of the Original Lease and the First Amendment, all as more particularly described in the Second Amendment.
D.    Landlord and Tenant entered into that certain Third Amendment to Office/Retail Lease dated as of April 14, 2010 (the " Third Amendment "), pursuant to which the parties modified certain of the terms of the Original Lease, the First Amendment and the Second Amendment, all as more particularly described in the Third Amendment.
E.    The Original Lease, First Amendment, Second Amendment and Third Amendment are collectively referred to herein as the " Lease ". The Original Premises, 28 th Floor Expansion Space and Second Amendment Expansion Space are sometimes collectively referred to herein as the " Existing Premises ".
F.    The parties now desire to amend the Lease to: (i) expand the Existing Premises to include that certain space containing approximately 16,801 rentable square feet and comprising the entire rentable area of the thirty-fifth (35 th ) floor of the Building, as depicted on Exhibit A attached hereto (the " 35 th Floor Expansion Space "); and (ii) otherwise modify the Lease, all upon the terms and conditions hereinafter provided.

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UNION BANK PLAZA
[Union Bank of California]


A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.     Capitalized Terms . Except as otherwise expressly provided herein to the contrary, all capitalized terms used in this Fourth Amendment shall have the same meaning given such terms in the Lease.
2.     Expansion . The " Premises " leased by Tenant under the Lease shall be expanded and redefined to include the 35 th Floor Expansion Space for the three (3) year period commencing upon the 35 th Floor Commencement Date (as defined below) and expiring upon the 35 th Floor Expiration Date (as defined below). The 35 th Floor Expansion Space shall be leased on the same terms and conditions set forth in the Lease, subject to the modifications set forth in this Fourth Amendment. Landlord and Tenant hereby agree and have verified that the rentable square feet of the 35 th Floor Expansion Space (as set forth in Recital F above) has been calculated in accordance with 1996 BOMA, and is not subject to adjustment or re-measurement by Landlord or Tenant. Notwithstanding the expansion and redefinition of the Premises to include the 35 th Floor Expansion Space as provided herein above or the Second Amendment Expansion Space pursuant to the Second Amendment:
(i)    the provisions of Sections 4.3.4 and 14.7 of the Original Lease shall not be applicable to the 35 th Floor Expansion Space or the Second Amendment Expansion Space;
(ii)    Tenant shall not have any right to terminate the Lease (as amended hereby) with respect to the entire Premises pursuant to Sections 11.2, 13.1 or 19.7.2 of the Original Lease (and Landlord shall not have such termination right with respect to the entire Premises pursuant to Sections 11.2 or 13.1 of the Original Lease) in the event of any casualty damage, condemnation or Abatement Event, respectively, that pertains only to the 35 th Floor Expansion Space and/or the Second Amendment Expansion Space, but each party shall retain their respective termination rights to terminate the Lease (as amended hereby) as to either the 35 th Floor Expansion Space and/or the Second Amendment Expansion Space, only, if and to the extent such casualty damage, condemnation or Abatement Event affects such applicable space and otherwise satisfies the requirements for termination as set forth in Sections 11.2, 13.1 and/or 19.7.2, respectively, of the Original Lease;
(iii)    the Permitted Use for the 35 th Floor Expansion Space and the Second Amendment to Expansion Space shall be limited to Office Space Permitted Use, only; and
(iv)    Tenant shall not be entitled to exercise (A) Tenant's options to renew the Lease Term pursuant to Section 2.2 of the Original Lease with respect to the 35 th Floor Expansion Space or the Second Amendment Expansion Space, or (B) Tenant's option to terminate the Lease pursuant to Section 2.4 of the Original Lease with respect to the 35 th Floor Expansion Space or the Second Amendment Expansion Space, it being understood that such options to renew and terminate shall not apply thereto; however, the 3Sth Floor Expansion Space and the Second Amendment Expansion Space shall each be subject to Tenant's right of first offer

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UNION BANK PLAZA
[Union Bank of California]


set forth after the first three (3) sentences of Section 1.5 of the Original Lease ( i.e. , Tenant shall have no right to deliver to Landlord a Request Notice and Landlord shall have no obligation to deliver to Tenant a Response Notice with respect to the 35 th Floor Expansion Space or the Second Amendment Expansion Space), and if Tenant leases the 35 th Floor Expansion Space or the Second Amendment Expansion Space as First Offer Space pursuant to such provisions of Section 1.5 of the Original Lease, then such applicable First Offer Space shall be subject to such options to renew and terminate to the extent provided in Sections 1.5, 2.2 and/or 2.4 of the Original Lease (as applicable).
3.     35th Floor Lease Term . The lease term for the 35 th Floor Expansion Space (the " 35 th Floor Lease Term ") shall: (i) commence upon the date (the " 35 th Floor Commencement Date ") which is the earlier of (A) the date Tenant commences business operations in the 35 th Floor Expansion Space, and (B) the date which is one hundred twenty (120) days after Landlord delivers the 35 th Floor Expansion Space to Tenant in its "AS IS" condition, which l20-day period may be extended as provided herein below; and (ii) expire upon the date (the " 35 th Floor Expiration Date ") which is three (3) years after the 35 th Floor Commencement Date. Such 120day period shall be extended day for day for each day beyond such l20-day period that Tenant is actually delayed in substantially completing any 35 th Floor Refurbishment Work (as defined below) in the 35 th Floor Expansion Space (minor punch-list items excepted) due to " Uncontrollable 35 th Floor Delays ", which for purposes hereof shall mean any such actual delays caused by: (1) Force Majeure events; and/or (2) Landlord, including, without limitation, (w) failure by Landlord to provide Tenant sufficient access to the 35 th Floor Expansion Space to construct any such 35 th Floor Refurbishment Work and/or move into the 35 th Floor Expansion Space (subject to Tenant's compliance with Landlord's reasonable rules and regulations regarding construction and move-in), (x) failure by Landlord to comply with any other provision of the Lease (as amended hereby), (y) failure by Landlord to timely disburse the 35 th Floor Refurbishment Allowance (as defined below), and/or (z) Landlord's performance of, or failure to perform, the 35 th Floor Restroom Code Compliance Work (as defined below), but only if and to the extent (I) Landlord performs, or is required to perform, the 35 th Floor Restroom Code Compliance Work prior to the date which is one hundred twenty (120) days after Landlord delivers the 35 th Floor Expansion Space to Tenant in its "AS IS" condition, (II) the 35 th Floor Commencement Date has not otherwise occurred pursuant to clause (A) herein above, (III) such performance of, or failure to perform, the 35 th Floor Restroom Code Compliance Work by Landlord actually delays Tenant's occupancy of the 35 th Floor Expansion Space and substantial completion of the 35 th Floor Refurbishment Work (minor punch-list items excepted), and (IV) such delays described in this clause (z) were not caused or contributed by Tenant or any of Tenant's agents, employees, contractors, licensees or invitees (it being agreed by the parties that the fact that the 35 th Floor Refurbishment Work "triggers" or requires the 35 th Floor Restroom Code Compliance Work shall (a) not in and of itself, be deemed to have caused or contributed to such delays and (b) not relieve Landlord from its obligation to timely perform the 35 th Floor Restroom Code Compliance Work pursuant to Section 7.2.1 below). However, no such Uncontrollable 35 th Floor Delay shall be deemed to have occurred unless and until Tenant has given Landlord written notice that an event giving rise to such Uncontrollable 35 th Floor Delay is about to occur or has occurred and Landlord has failed to remedy the situation giving rise to such potential Uncontrollable 35 th Floor Delay within one (1) business day after Landlord's receipt of such notice (in which case the number of days of actual delay in substantial completion of such 35 th Floor Refurbishment Work after such notice shall be an Uncontrollable 35 th Floor Delay).

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UNION BANK PLAZA
[Union Bank of California]


Within a reasonable period of time after the 35 th Floor Commencement Date occurs, Landlord shall deliver to Tenant an amendment to the Lease, as hereby amended, setting forth, among other things, the actual 35 th Floor Commencement Date and the 35 th Floor Expiration Date. If the information in such amendment is accurate, then Tenant shall execute and return such amendment to Landlord within fifteen (15) days after Tenant's receipt thereof.
4.     Base Rent . The Base Rent payable for the 35 th Floor Expansion Space during the 35 th Floor Lease Term shall be calculated separate and apart from the Base Rent payable for the Existing Premises, and shall be as set forth in the following schedule:
Year of 35 th  Floor
Lease Term
 
Annual
Base Rent
 
Monthly Base Rent
 
Annual Base Rental
Rate Per Rentable
Square Foot of the 35 th
Floor Expansion Space
1
 
$596,435.50
 
$49,702.96
 
$35.50
2
 
$619,284.86
 
$51,607.07
 
$36.86
3
 
$643,142.28
 
$53,595.19
 
$38.28
5.     Tenant's Share . During the 35 th Floor Lease Term, Tenant's Share of increases in Direct Expenses for the 35 th Floor Expansion Space and Tenant's obligation to pay Tenant's Share of increases in Direct Expenses for the 35 th Floor Expansion Space shall be calculated separate and apart from the Existing Premises, and shall be equal to 2.766% (calculated by dividing 16,801 rentable square feet within the 35 th Floor Expansion Space by 607,517 rentable square feet in the Building [excluding the existing retail portion of the Real Property located outside the retail/office tower portion of the Building]).
6.     Annual Direct Expense Allowance . The Annual Direct Expense Allowance for the 35 th Floor Expansion Space shall be the amount of Direct Expenses for the calendar year 2010 calculated in accordance with Section 4.2 of the Original Lease.
7.     Condition of 35th Floor Expansion Space; 35th Floor Restroom Code Compliance Work; Refurbishment Allowance .
7.1     Condition of 35th Floor Expansion Space . Except as otherwise expressly set forth in Sections 7.2 and 7.3 below, Landlord shall deliver the 35th Floor Expansion Space to Tenant in its "AS IS" condition following the date the existing tenants' leases of the 35 th Floor Expansion Space (or portions thereof) terminate and such tenants have vacated and surrendered exclusive possession of the 35 th Floor Expansion Space to Landlord, without any obligation on Landlord's part to construct or pay for, or provide any improvement allowance for, any improvements or alterations in, to or for the 35 th Floor Expansion Space, it being expressly acknowledged and agreed to by the parties that (i) Landlord is not required to perform any asbestos abatement or remediation work for the 35 th Floor Expansion Space, (ii) the Tenant Work Letter attached to the Original Lease shall not apply to the 35 th Floor Expansion Space, and (iii) Tenant shall be solely responsible for constructing all tenant improvements and alterations in, to and for the 35th Floor Expansion Space pursuant to and in accordance with the terms and provisions of Articles 8 and 9 of the Original Lease, including, without limitation, any Code required modifications to the restrooms on the thirty-fifth (35th) floor of the Building and

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UNION BANK PLAZA
[Union Bank of California]


other portions of the 35 th Floor Expansion Space (collectively, the " 35 th Floor Code Required Modifications ").
7.2     35th Floor Restroom Code Compliance Work . Notwithstanding Sections 3 and 7.1 above to the contrary, if, as a condition to the issuance by the City of Los Angeles of (i) any applicable building permits for the 35 th Floor Refurbishment Work to be actually performed by Tenant during the 35 th Floor Refurbishment Period (as defined below), or (ii) any temporary certificate of occupancy or its equivalent permitting Tenant's commencement of business operations in the 35 th Floor Expansion Space for normal office use (and pertaining to the 35th Floor Refurbishment Work performed by Tenant during the 35 th Floor Refurbishment Period), the City of Los Angeles specifically requires in a written notice or other written document or communication (the " Supporting Documentation ") received by Tenant on or prior to the Outside Date (as defined below) that any modifications be made to the restrooms on the thirty-fifth (35 th ) floor of the Building in order for such restrooms to comply with applicable Code (including the Americans with Disabilities Act) pertaining to such restrooms in effect as of August 1, 2010 (collectively, the " 35 th Floor Restroom Code Compliance Work "), then the following provisions shall apply:
7.2.1    Landlord shall be responsible for performing the 35 th Floor Restroom Code Compliance Work but only if and to the extent that prior to the Outside Date (i) Tenant has received and delivered to Landlord the Supporting Documentation specifying the need for and scope of such 35 th Floor Restroom Code Compliance Work, and (ii) Tenant certifies in writing to Landlord that Tenant will perform the applicable 35 th Floor Refurbishment Work that triggered such 35 th Floor Restroom Code Compliance Work.
7.2.2    Landlord shall use commercially reasonable efforts to cause the 35 th Floor Restroom Code Compliance Work to be performed as soon as reasonably possible after Landlord's receipt of the Supporting Documentation (but without any obligation to pay overtime or other premiums).
7.2.3    Landlord and Tenant shall reasonably cooperate with each other such that Landlord may perform the 35 th Floor Restroom Code Compliance Work and Tenant may perform the 35 th Floor Refurbishment Work without unreasonable interference from the other party.
7.2.4    To the extent that Landlord performs the 35 th Floor Restroom Code Compliance Work after Tenant has commenced business operations in the 35 th Floor Expansion Space, Tenant agrees that: (i) there shall be no effect on or delay of the 35 th Floor Commencement Date; (ii) Landlord may cause the 35 th Floor Restroom Code Compliance Work to be performed during normal business hours as reasonably necessary to complete the same in a timely manner, but Landlord shall cause such work to be performed in a manner that will minimize any unreasonable interference with Tenant's business operations during normal business hours (but without any obligation to pay overtime or other premiums); and (iii) Tenant shall accept all reasonable inconveniences associated with the performance of the 35 th Floor Restroom Code Compliance Work and agrees that the performance of such work shall not constitute a constructive eviction of Tenant, nor entitle Tenant to any Rent abatement.

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UNION BANK PLAZA
[Union Bank of California]


7.2.5    Landlord shall pay for all costs incurred by Landlord in performing the 35 th Floor Restroom Code Compliance Work pursuant to the provisions of this Section 7.2 (collectively, the " 35 th Floor Restroom Code Compliance Costs ") and shall deduct from the 35 th Floor Refurbishment Allowance that is otherwise to be made available to Tenant pursuant to Section 7.3 below all such 35th Floor Restroom Code Compliance Costs so incurred by Landlord up to, but not exceeding, $42,002.50 ( i.e. , $2.50 per rentable square foot of the 35 th Floor Expansion Space) (the " Maximum Restroom Deductible Amount "), Notwithstanding Section 7.3 below to the contrary, Landlord shall retain (and not disburse or make available to Tenant from the 35th Floor Refurbishment Allowance) the Maximum Restroom Deductible Amount until either: (i) the Outside Date, if as of the Outside Date no 35 th Floor Restroom Code Compliance Work is required to be performed by Landlord (in which event, the entire Maximum Restroom Deductible Amount shall be made available to Tenant as a credit against the monthly installment(s) of Base Rent next due and payable by Tenant for the 35 th Floor Expansion Space after the Outside Date); or (ii) the later of (A) the Outside Date or (B) the date Landlord completes the 35 th Floor Restroom Code Compliance Work, if as of the Outside Date the 35 th Floor Restroom Code Compliance Work is required to be performed by Landlord (in which event, if the 35th Floor Restroom Code Compliance Costs for such 35 th Floor Restroom Code Compliance Work performed by Landlord are less than the Maximum Restroom Deductible Amount, then such difference shall be made available to Tenant as a credit against the monthly installment(s) of Base Rent next due and payable by Tenant for the 35 th Floor Expansion Space immediately following such later date).
7.3     35th Floor Refurbishment Allowance . Notwithstanding Section 7.1 above to the contrary, Tenant shall be entitled to receive from Landlord a refurbishment allowance (the " 35 th Floor Refurbishment Allowance ") in the amount of up to, but not exceeding, $126,007.50 ( i.e. , $7.50 per rentable square foot of the 35 th Floor Expansion Space) (subject, however, to Landlord's retention and deduction therefrom of the Maximum Restroom Deductible Amount pursuant to Section 7.2.5 above) to help reimburse Tenant for the out-of-pocket costs actually incurred and paid for by Tenant (collectively, the " 35 th Floor Refurbishment Costs ") for the design, construction, acquisition and installation of any permanently affixed tenant improvements, additions and alterations which are made and/or installed by or for Tenant in or to the 35 th Floor Expansion Space, including without limitation, any 35 th Floor Code Required Modifications, but specifically excluding any 35 th Floor Restroom Code Compliance Work if and to the extent required to be performed by Landlord pursuant to Section 7.2 above (collectively, the " 35 th Floor Refurbishment Work ") during the 35 th Floor Refurbishment Period. The 35 th Floor Refurbishment Work shall be considered "Alterations" as defined in Article 8 of the Original Lease, and shall be undertaken and performed by Tenant in accordance with and subject to the provisions of Articles 8 and 9 of the Original Lease (specifically including, without limitation, the provisions of Article 8 regarding the timing and standards for submission and approval of plans and specifications therefor). As used herein, the " 35 th Floor Refurbishment Period " shall mean the period commencing upon the date Landlord delivers the 35 th Floor Expansion Space to Tenant and continuing until the last day of the eighteenth (18 th ) month of the 35 th Floor Lease Term (the " Outside Date "); provided, however, Tenant's out-of-pocket costs paid to Tenant's architect for work pertaining to the 35 th Floor Refurbishment Work but performed prior to the date Landlord delivers the 35 th Floor Expansion Space to Tenant shall be deemed to have been incurred by Tenant during the 35 th Floor Refurbishment Period so long as such costs have been incurred by Tenant during the 2010 calendar year. In no event shall

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UNION BANK PLAZA
[Union Bank of California]


Landlord be obligated to make disbursements pursuant to this Section 7.3 in a total amount which exceeds the 35 th Floor Refurbishment Allowance. Landlord shall disburse the applicable portion of the 35 th Floor Refurbishment Allowance to be used to reimburse Tenant for the 35 th Floor Refurbishment Costs of the 35 th Floor Refurbishment Work within thirty (30) days after Landlord has received: (i) a request for payment by Tenant certifying that all of the 35 th Floor Refurbishment Work has been completed; (ii) factually correct invoices for labor and materials rendered in connection with and evidencing the 35 th Floor Refurbishment Work and the 35 th Floor Refurbishment Costs and Tenant's payment thereof; (iii) executed mechanic's lien releases from all contractors, subcontractors and other persons or entities performing the 35 th Floor Refurbishment Work, reasonably satisfactory to Landlord; and (iv) all other information reasonably requested by Landlord. Landlord shall have no obligation to disburse any portion of the 35 th Floor Refurbishment Allowance with respect to any 35 th Floor Refurbishment Work that is performed prior to the commencement of the 35 th Floor Refurbishment Period (except as otherwise expressly provided herein above) or after the Outside Date, or with respect to any request for disbursement delivered to Landlord prior to the commencement of the 35 th Floor Refurbishment Period or after the Outside Date. Tenant shall not be entitled to receive any portion of the 35 th Floor Refurbishment Allowance not used to pay for the 35 th Floor Refurbishment Costs of the 35 th Floor Refurbishment Work performed during the 35 th Floor Refurbishment Period, and any such unused portion of the .35 th Floor Refurbishment Allowance shall revert to Landlord and Tenant shall have no further rights with respect thereto; provided, however, (A) any unused portion of the 35 th Floor Refurbishment Allowance that is other than the Maximum Restroom Deductible Amount and is remaining as of the Outside Date shall be applied as a credit against the installment(s) of Base Rent next due and payable by Tenant for the 35 th Floor Expansion Space immediately following the Outside Date, and (B) any remaining unused balance of the Maximum Restroom Deductible Amount shall be applied as a credit against Base Rent if, as and to the extent provided in Section 7.2.5 above.
8.     Additional Building Parking Area Passes . During the 35 th Floor Lease Term, as a result of the addition of the 35 th Floor Expansion Space to the Existing Premises, in addition to its obligation to rent and pay for the number of Building Parking Area Passes as set forth in the Lease with respect to the Existing Premises, Tenant shall rent and pay for an additional twenty-four (24) Building Parking Area Passes ( i.e. , 1.45 Building Parking Area Passes per 1,000 rentable square feet of the 35 th Floor Expansion Space), subject to the terms and conditions set forth in the Lease, as hereby amended (including, without limitation, the reduction provisions of Sections 28.1.3 of the Original Lease and the provisions of Section 28.3 of the Original Lease regarding parking charges); provided, however, the eighty-five percent (85%) rate for executive reserved spaces set forth in Section 28.3.1 of the Original Lease shall not be applicable with respect to those additional Building Area Parking Passes for the 35 th Floor Expansion Space that are executive reserved spaces as provided herein below. Such additional twenty-four (24) Building Parking Area Passes shall consist of three (3) executive reserved spaces ( i.e. , 13.25% of such additional Building Parking Area Passes), six (6) non-executive reserved spaces ( i.e. , 24.50% of such additional Building Parking Area Passes), and fifteen (15) unreserved passes ( i.e. , 62.25% of such additional Building Parking Area Passes).
9.     Brokers . Landlord and Tenant each hereby represents and warrants to the other that it has had no dealings with any real estate broker or agent in connection with the negotiation of this Fourth Amendment other than Cushman & Wakefield of California, Inc., representing

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UNION BANK PLAZA
[Union Bank of California]


Tenant, and Hines Interests Limited Partnership, representing Landlord (collectively, the " Brokers "), and that it knows of no other real estate broker or agent who is entitled to a commission in connection with this Fourth Amendment. Landlord shall be solely responsible for the payment of the brokerage commissions to the Brokers with respect to this Fourth Amendment pursuant to separate agreements between and/or among Landlord and the Brokers. Landlord and Tenant shall indemnify, defend and hold the other harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorney's fees) with respect to any leasing commission, compensation or fees claimed by any broker or agent (other than the Brokers) in connection with this Fourth Amendment or its negotiation by reason of any act of the indemnifying party.
10.     No Further Modification . Except as set forth in this Fourth Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

866683.06/LA
I84321-00047/8-11-10/nng/dbs
- 8 -
UNION BANK PLAZA
[Union Bank of California]


IN WITNESS WHEREOF, this Fourth Amendment has been executed as of the day and year first above written.
LANDLORD:
HINES VAF UB PLAZA, L.P.,
a Delaware limited partnership
By:
Hines VAF UB Plaza GP LLC,
its general partner
By:
Hines VAF UB Plaza Mezz, L.P.,
its sole member
By:
Hines VAF UB Plaza GP2 LLC,
its general partner
By:
Hines U.S. Office Value Added Fund, L.P.,
its sole member
By:
Hines U.S. Office Value Added Fund, LLC,
its general partner
By:
Hines Interests Limited Partnership,
its managing member
By:
Hines Holdings, Inc.
its general partner
By:
/s/ James C. Buie, Jr.
Name:
James C. Buie, Jr.
Title:
Executive Vice President
TENANT:
UNION BANK, N.A.,
a national association
By:
/s/ Kenneth W. Holdway
Name:     Kenneth W. Holdway
Title:     Senior Vice President
Corporate Real Estate


866683.06/LA
I84321-00047/8-11-10/nng/dbs
- 9 -
UNION BANK PLAZA
[Union Bank of California]


EXHIBIT A
 
DEPICTION OF 35 TH  FLOOR EXPANSION SPACE
 

809866.04/LA
H4321-047/11-17-08/dbs/dbs

-1-
UNION BANK PLAZA
[Union Bank of California]


Exhibit 31.1
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Charles J. Schreiber, Jr., certify that:
1.
I have reviewed this quarterly report on Form 10-Q of KBS Real Estate Investment Trust II, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
November 12, 2014
By:
/ S / C HARLES  J. S CHREIBER , J R .     
 
 
 
Charles J. Schreiber, Jr.
 
 
 
Chairman of the Board,
Chief Executive Officer and Director
 
 
 
(principal executive officer)







Exhibit 31.2
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, David E. Snyder, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of KBS Real Estate Investment Trust II, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
November 12, 2014
By:
/ S / D AVID  E. S NYDER      
 
 
 
David E. Snyder
 
 
 
Chief Financial Officer
 
 
 
(principal financial officer)







Exhibit 32.1
Certification pursuant to 18 U.S.C. Section 1350,
as Adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of KBS Real Estate Investment Trust II, Inc. (the “Registrant”) for the quarter ended September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Charles J. Schreiber Jr., Chief Executive Officer and Director of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:
November 12, 2014
By:
/ S / C HARLES  J. S CHREIBER , J R .    
 
 
 
Charles J. Schreiber, Jr.
 
 
 
Chairman of the Board,
Chief Executive Officer and Director
 
 
 
(principal executive officer)
 







Exhibit 32.2
Certification pursuant to 18 U.S.C. Section 1350,
as Adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of KBS Real Estate Investment Trust II, Inc. (the “Registrant”) for the quarter ended September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, David E. Snyder, the Chief Financial Officer of the Registrant, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:
November 12, 2014
By:
/ S / D AVID  E. S NYDER 
 
 
 
David E. Snyder
 
 
 
Chief Financial Officer
 
 
 
(principal financial officer)