Exhibit 10.16

 

 

STANDARD OFFICE LEASE

 

VALLEY CORPORATE CENTER

 

By and Between

 

 

VCC INVESTORS L.P., A CALIFORNIA LIMITED PARTNERSHIP

 

 

as Landlord

 

 

and

 

 

PACIFIC CREST BANK, A CALIFORNIA CORPORATION

 

 

as Tenant

 

 

Dated: August 11, 2003

 

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TABLE OF CONTENTS

 

 

1.

Basic Lease Provisions (“Basic Lease Provisions”)

2.

Premises, Parking and Common Areas

3.

Term

4.

Rent

5.

Security Deposit

6.

Permitted Use

7.

Maintenance, Repairs, Alterations and Common Area Services

8.

Insurance; Indemnity

9.

Damage or Destruction

10.

Real Property Taxes

11.

Utilities

12.

Assignment and Subletting

13.

Default; Remedies

14.

Condemnation

15.

Broker’s Fee

16.

Estoppel Certificate

17.

Landlord’s Liability

18.

Severability

19.

Interest on Past-due Obligations

20.

Time of Essence

21.

Additional Rent

22.

Incorporation of Prior Agreements; Amendments

23.

Notices

24.

Waivers

25.

Recording

26.

Holding Over

27.

Covenants and Conditions

28.

Binding Effect; Choice of Law

29.

Subordination

30.

Attorneys’ Fees

31.

Landlord’s Access

32.

Auctions

33.

Signs

34.

Merger

35.

Construction

36.

Guarantor

37.

Quiet Possession; Authority

38.

Security Measures—Landlord’s Reservations

39.

Easements

40.

Building Planning

41.

Landlord’s Right to Perform

42.

Limitation on Landlord’s Liability

43.

Toxic Materials

44.

Authority

45.

Conflict

46.

No Offer

47.

Lender Modification

48.

Multiple Parties

49.

Work Letter

50.

Waiver of Jury Trial

51.

Counterparts

52.

Force Majeure

53.

Best Efforts

54.

Signage

55.

Option to Extend

56.

Attachments

 

 

EXHIBIT A PREMISES FLOOR PLAN

EXHIBIT B LEGAL DESCRIPTION

EXHIBIT C RULES AND REGULATIONS

EXHIBIT D WORK LETTER

EXHIBIT E ACCEPTANCE OF OFFICE SPACE

EXHIBIT F SUBOIRDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT

 

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STANDARD OFFICE LEASE
Valley Corporate Center

 

1.                                      Basic Lease Provisions (“Basic Lease
Provisions”).

 

1.1                               Parties.  This Lease (“Lease”), dated for
reference purposes August 11, 2003, is made and entered into by and between VCC
Investors, L.P., a California limited partnership (“Landlord”), and Pacific
Crest Bank, a California corporation (“Tenant”).

 

1.2                               Premises.  A total of approximately 5,178
rentable square feet, more or less, of the building described in paragraph 1.3,
as defined further in paragraph 2 and as shown on Exhibit A hereto and known as
Suite 1010 (“Premises”).

 

1.3                               Building.  Commonly described as being located
at 591 Camino de la Reina, in the City of San Diego, County of San Diego, State
of California, the legal description of which is set forth in Exhibit B hereto,
and as further defined in paragraph 2.

 

1.4                               Permitted Use.  General office use, subject to
paragraph 6.

 

1.5                               Term. Sixty-One (61) months, commencing as set
forth in paragraph 3.1 (“Term”), subject to extension (see paragraph 55).

 

1.6                               Base Rent.  Subject to the terms of paragraphs
1.7, 1.8 and 4.1, $11,236.26 per month, payable on the 1st day of each month, in
advance, as provided in paragraph 4.1 (“Base Rent”).

 

1.7                               Base Rent Increase.  The monthly Base Rent
payable under paragraph 1.6 above shall be adjusted as provided in paragraph 4.1
below.

 

1.8                               Rent Paid Upon Execution.  The second month’s
Base Rent of $11,236.26.

 

1.9                               Security Deposit. $0.00 (“Security Deposit”);
see paragraph 5.

 

1.10                        Tenant’s Expense Share and Tenant’s Tax Share. Three
and two one-hundredths percent (3.02%), subject to paragraph 4.2, and subject to
adjustment (pursuant to paragraph 4.2.5) to the actual rentable square footage
of the Premises (see paragraph 4.2.5 for definition).

 

1.11                        Expense Base Year.  Calendar Year 2004, see
paragraph 4.2.1.

 

1.12                        Tax Base Year.  Calendar Year 2004; see paragraph
4.2.2.

 

1.13                        Target Commencement Date.  November 1, 2003; see
paragraph 3.2.

 

1.14                        Payee.

VCC INVESTORS, L.P.

 

1.15                        Landlord’s Address.

Birtcher Anderson Properties

 

591 Camino de la Reina, Suite 104

 

San Diego, CA 92108

 

1.16                        Brokers:

Landlord’s Broker:

BRE Commercial

 

 

Tenant’s Broker:

The Sande Company

 

2.                                      Premises, Parking and Common Areas.

 

2.1                               Premises.  The Premises are a portion of a
building, herein sometimes referred to as the “Building” identified in paragraph
1.3 of the Basic Lease Provisions.  The Premises, the Building, the Common
Areas, the land described in Exhibit B, upon which the same are located, along
with all other buildings and improvements thereon or thereunder, are herein
collectively referred to as the “Project”.  Landlord hereby leases to Tenant and
Tenant leases from Landlord for the term, at the rental, and upon all of the
conditions set forth herein, the real property referred to in the Basic Lease
Provisions, paragraph 1.2, as the “Premises.”

 

2.2                               Vehicle Parking.  So long as Tenant is not in
default, and subject to the rules and regulations set forth in Exhibit C hereto
(as the same may be modified by Landlord from time to time), Tenant shall be
entitled to use, for parking for its employees and guests, its pro rata share of
parking spaces in common with other tenants at the Project, which shall, until
further notice from Landlord, be unreserved spaces.  If Tenant commits, permits
or allows any of the prohibited activities described in this Lease or the rules
then in effect with regard to the use of parking, then Landlord shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove or tow away the vehicle involved and charge the cost to Tenant,
which cost shall be immediately payable upon demand of Landlord.  Vehicle
parking shall be at no cost to Tenant and its employees and guests.

 

2.3                               Common Areas - Definition.  The term “Common
Areas” is defined as all areas and facilities outside the Premises and within
the exterior boundary line of the Project that are provided and

 

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designated by Landlord from time to time for the general non-exclusive use of
Landlord, Tenant and of other tenants of the Project and their respective
employees, suppliers, shippers, customers and invitees, including, but not
limited to, common entrances, lobbies, corridors, stairways and stairwells,
public restrooms, elevators, escalators, parking areas to the extent not
otherwise prohibited by this Lease, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, ramps, driveways, landscaped areas and
decorative walls.

 

2.4                               Common Areas - Rules and Regulations.  Tenant
agrees to abide by and conform to the rules and regulations set forth in Exhibit
C with respect to the Project and Common Areas as the same may be reasonably
amended from time to time, and to cause its employees, suppliers, shippers,
customers, and invitees to so abide and conform.  Landlord or such other
person(s) as Landlord may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations.  Landlord shall not be
responsible to Tenant for non-compliance with said rules and regulations by
other tenants of the Project or their agents, employees and invitees.

 

2.5                               Common Areas - Changes.  Landlord shall have
the right, in Landlord’s sole discretion, from time to time:

 

2.5.1                        To make changes to the Building interior and
exterior and Common Areas, including, without limitation, changes in the
location, size, shape, number and appearance thereof, including but not limited
to the lobbies, windows, stairways, air shafts, elevators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;

 

2.5.2                        To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises, the parking
areas, and the common restrooms remains available;

 

2.5.3                        To designate other land and improvements outside
the boundaries of the Project to be a part of the Common Areas, provided that
such other land and improvements have a reasonable and functional relationship
to the Project;

 

2.5.4                        To add additional buildings and improvements to the
Common Areas;

 

2.5.5                        To use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Project, or any portion
thereof;

 

2.5.6                        To do and perform such other acts and make such
other changes in, to or with respect to the Common Areas and Project as Landlord
may deem to be appropriate.

 

3.                                      Term.

 

3.1                               Term.  The Term of this Lease shall be for the
number of months specified in paragraph 1.5 of the Basic Lease Provisions,
commencing upon the Commencement Date.  The “Commencement Date” of this Lease
shall be the earlier of (i) the date on which Tenant takes possession of or
commences business operations upon the Premises or any portion thereof; or (ii)
the date of the Tender of Possession under paragraph 3.2.1 below.  If the
Commencement Date is a date other than the first day of the calendar month, the
Term shall be for the number of months specified in paragraph 1.5 of the Basic
Lease Provisions in addition to the remainder of the month following the
Commencement Date.

 

3.2                               Delay in Possession.  Notwithstanding the
Target Commencement Date, as specified in paragraph 1.13 of the Basic Lease
Provisions, if for any reason Landlord cannot deliver possession of the Premises
to Tenant in the condition called for by the work letter of even date herewith
being entered into by and between Landlord and Tenant, a copy of which is
attached hereto as Exhibit D (the “Work Letter”), on said date and subject to
paragraph 3.2.2, Landlord shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease or the obligations of
Tenant hereunder; but, in such case, Tenant shall not be obligated to pay rent
or perform any other obligation of Tenant under the terms of this Lease, except
as may be otherwise provided in this Lease, until possession of the Premises is
tendered to Tenant, as hereinafter defined.  Except for Tenant’s acts or
omissions and subject to “Force Majeure” (as that term is defined in paragraph
52 below), Tenant shall have the right to cancel this Lease in the event
Landlord has not delivered the Premises to Tenant within ninety (90) days after
the Target Commencement Date, as such date may be modified by the provisions of
the “Work Letter” set forth in Exhibit “D” hereto, which right is exercisable by
Tenant by delivering written notice to Landlord within five (5) business days
following expiration of said ninety (90) day period.  Tenant acknowledges and
agrees that Landlord has established a reasonable target date for occupancy
based upon schedule for planning, construction and/or substantial completion of
Tenant’s interior improvements (“Target Commencement Date”).  The current Target
Commencement Date is as specified in paragraph 1.13 of the Basic Lease
Provisions.

 

3.2.1                     Possession Tendered - Defined.  Provided that Tenant
shall not have cancelled this Lease as provided in paragraph 3.2, possession of
the Premises shall be deemed tendered to Tenant (“Tender of Possession”) when
(i) the improvements to be provided by Landlord under this Lease and the Work
Letter are substantially completed in accordance with the Work Letter, except
for only minor punch list items, (ii) the Building utilities are ready for use
in the Premises,  (iii) Tenant has reasonable access to

 

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the Premises, and (iv) if required, a Certificate of Occupancy (or its legal
equivalent) has been issued by the City of San Diego.  Notwithstanding the
foregoing, if Tenant is leasing the Premises in its “as-is” condition, then the
Tender of Possession shall be deemed to occur on the Target Commencement Date.

 

3.2.2                     Delays Caused by Tenant.  There shall be no abatement
of rent, to the extent of any delays caused by acts or omissions of Tenant, its
agents, employees and contractors.

 

3.3                               Early Possession.  If Tenant occupies the
Premises prior to said Target Commencement Date, such occupancy shall be subject
to all provisions of this Lease, such occupancy shall not change the Expiration
Date, and Tenant shall pay prorated rent for such occupancy based on the actual
number of days in the applicable month.

 

3.4                               Uncertain Commencement.  Upon the
determination of the actual Commencement Date, Tenant and Landlord shall, upon
request by Landlord, execute an Acceptance of Office Space in substantially the
form of Exhibit “E” attached hereto establishing the Commencement Date and
Expiration Date pursuant to paragraph 3.1 above.

 

4.                                      Rent.

 

4.1                               Base Rent.  Except as may be otherwise
specifically and expressly provided in this Lease, Tenant shall pay to Landlord
the Base Rent for the Premises set forth in paragraph 1.6 of the Basic Lease
Provisions, without offset or deduction.  Tenant shall pay Landlord upon
execution hereof the advance Base Rent described in paragraph 1.8 of the Basic
Lease Provisions.  If the Commencement Date occurs on a day other than the first
day of a calendar month, Base Rent and additional rent (as described in
paragraphs 4.2 through 4.6, inclusive) shall be paid as if for a full month and
Base Rent and additional rent for the second month shall be prorated on a daily
basis based upon the actual number of days of the calendar month involved.  Rent
shall be payable in lawful money of the United States to the Payee specified in
paragraph 1.14 of the Basic Lease Provisions and at the address specified in
paragraph 1.15 of the Basic Lease Provisions or to such other persons or at such
other places as Landlord may designate in writing.  The monthly Base Rent shall
be as follows:

 

Months

 

Monthly Base Rent

 

1

 

$

0.00

 

2–13

 

$

11,236.26

 

14–25

 

$

11,598.72

 

26–37

 

$

11,909.40

 

38–49

 

$

12,271.86

 

50–61

 

$

12,634.32

 

 

Landlord and Tenant agree that no portion of the base rent paid by Tenant after
the expiration of any period during which such rent was abated shall be
allocated by Landlord or Tenant to such abatement period, nor is such rent
intended by the parties to be allocable to any abatement period.

 

In the event that Tenant is in default of this Lease and this Lease is
terminated, Tenant shall be responsible for the reimbursement of the entire rent
abatement in the amount of Eleven Thousand Two Hundred Thirty Six and 26/100
Dollars ($11,236.26).  Said sum shall become immediately due and payable to
Landlord by Tenant at the time this Lease is terminated due to a default by the
Tenant.

 

4.2                               Definitions.  The following definitions shall
apply to this Article 4:

 

4.2.1                        “Expense Base Year” shall be as specified in
paragraph 1.11 of the Basic Lease Provisions.

 

4.2.2                        “Tax Base Year” shall be as specified in paragraph
1.12 of the Basic Lease Provisions.

 

4.2.3                        “Expense Comparison Year” shall mean each
successive calendar year after the Expense Base Year during the Lease Term.

 

4.2.4                        “Tax Comparison Year” shall mean each successive
calendar year after the Tax Base Year during the Lease Term.

 

4.2.5                        “Tenant’s Expense Share” shall mean the percentage
set forth in paragraph 1.10 of the Basic Lease Provisions, which percentage has
been determined by dividing the approximate rentable square footage of the
Premises by the total approximate rentable square footage contained in the
Project.  It is understood and agreed that the square footage figures set forth
in the Basic Lease Provisions are approximations which Landlord and Tenant agree
are reasonable and shall not be subject to revision except in connection with an
actual change in the size of the Premises or a change in the space available for
lease in the Project, including a reduction in the total square footage of the
Project due to the sale or other transfer of any portion of the Project to
another party.  It is further agreed that Tenant shall in no event be entitled
to a credit to or adjustment of Tenant’s Expense Share payable hereunder, even
if the ratio of Operating Expenses actually paid by Tenant compared to total
Operating Expenses actually paid by other tenants of the Project exceeds
Tenant’s Expense Share (as it might, by way of example only and not limitation,
if some leases of the Project are made on a “full gross” basis, in

 

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which case the tenants under such leases would not directly pay any portion of
the Operating Expenses or any increase therein).

 

4.2.6                        “Tenant’s Tax Share” shall mean the percentage
specified in paragraph 1.10 of the Basic Lease Provisions, which percentage has
been determined by dividing the approximate rentable square footage of the
Premises by the total approximate rentable square footage contained in the
Project.  It is understood and agreed that the square footage figures set forth
in the Basic Lease Provisions are approximations which Landlord and Tenant agree
are reasonable and shall not be subject to revision except in connection with an
actual change in the size of the Premises or a change in the space available for
lease in the Project.  It is agreed that Tenant shall in no event be entitled to
a credit to or adjustment of Tenant’s Tax Share payable hereunder, even if the
ratio of Applicable Taxes actually paid by Tenant compared to total applicable
Taxes actually paid by other tenants of the Project exceeds Tenant’s Tax Share.

 

4.2.7                        “Operating Expenses” is defined, for purposes of
this Lease, to include any and all costs and expenses incurred or paid by
Landlord for:

 

4.2.7.1               The operation, management, repair, maintenance, and
replacement, in neat, clean, safe, good order and condition, of the Project,
including, but not limited to, the following:

 

4.2.7.1.1  The Common Areas, including, but not limited to, their surfaces,
coverings, decorative items, carpets, drapes and window coverings, and including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, stairways, parkways, driveways, landscaped areas, striping bumpers,
irrigation systems, Common Area lighting facilities, building exteriors
(including exterior glass) and roofs, fences and gates;

 

4.2.7.1.2  All heating, air conditioning, plumbing, electrical systems, life
safety equipment, telecommunication and other equipment used in common by, or
for the benefit of, tenants or occupants of the Project, including elevators and
escalators, tenant directories, fire detection systems including sprinkler
system maintenance and repair.

 

4.2.7.2               Trash disposal and any security services (with respect to
security services, see paragraph 38.1);

 

4.2.7.3               Any other service to be provided by Landlord that is
elsewhere in this Lease stated to be an “Operating Expense”;

 

4.2.7.4               The cost of, including the premiums for, insurance
policies to be maintained by Landlord;

 

4.2.7.5               The cost of water, sewer, gas, electricity, and other
services to the Project;

 

4.2.7.6               Subject to paragraph (o) below, labor, salaries and
applicable fringe benefits and costs, materials, supplies and tools, used in
managing, operating, maintaining and/or cleaning the Project and accounting and
a management fee attributable to the operation of the Project;

 

4.2.7.7               Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby, including
without limitation, for seismic safety or compliance with the Americans with
Disabilities Act, such costs to be amortized over its useful life according to
Federal income tax regulations or guidelines for depreciation thereof (including
interest on the unamortized balance as is then reasonable in the judgment of
Landlord’s accountants);

 

4.2.7.8               Structural maintenance, replacements of equipment or
improvements, as amortized over such equipment or improvement’s useful life for
depreciation purposes according to federal income tax guidelines;

 

For purposes of this Lease, Operating Expenses shall not include taxes covered
under paragraph 4.2.8 below, interest expense (except as provided in paragraph
4.2.7.7 above), leasing commissions, depreciation on the improvements contained
in the Building (except as provided in paragraph 4.2.7.7 above), or any costs
which are paid by any tenant directly to third parties or as to which Landlord
is otherwise reimbursed by any other tenant, third party or by insurance
proceeds.  Notwithstanding the foregoing, Operating Expenses shall not include:

 

(a)                                  Costs incurred by Landlord due to the
violation by Landlord or any other tenant of the terms of any other lease;

 

(b)                                 Costs for sculpture, paintings or other
objects of art;

 

(c)                                  Any entertainment, dining or travel
expenses for any purpose;

 

(d)                                 If the Expense Base Year does not include a
premium for earthquake or terrorism insurance, and if Landlord thereafter
obtains such insurance, the initial premium shall be added to the Expense Base
Year amount of Operating Expenses and thereafter only increases in the premium
over the initial premium shall be passed through to Tenant as an Operating
Expense;

 

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(e)                                  Costs arising from the presence of
hazardous materials or substances in, about or below the Project or the land,
including without limitations, hazardous substances in the groundwater or soil;

 

(f)                                    Depreciation, interest and principal
payments on mortgages, late charges, penalties, liquidated damages, interest,
and other finance charges and debt costs;

 

(g)                                 Leasing commissions, marketing costs, legal
fees, space planners’ fees, advertising and promotional expenses;

 

(h)                                 Bad debt loss or rent loss;

 

(i)                                     Reserves of any kind;

 

(j)                                     Tax penalties;

 

(k)                                  Costs associated with the operation of the
business of the limited liability company or entity which constitutes the
Landlord, as the same are distinguished from the costs of operation of the
Project, including partnership accounting and legal matters, costs of defending
any lawsuits with any mortgagee (except as the actions of Tenant may be in
issue), costs of selling, syndicating, financing, mortgaging or hypothecating
any of Landlord’s interest in the Project, and costs incurred in connection with
any disputes between Landlord and its employees, between Landlord and Project
management, or between Landlord and other tenants or occupants;

 

(l)                                     Landlord’s general corporate overhead
and general and administrative expenses;

 

(m)                               Costs directly resulting from the gross
negligence, willful misconduct or breach of law or ordinance by Landlord, its
employees, agents, contractors or employees;

 

(n)                                 Costs for which Landlord receives or will
receive reimbursement (from insurance, warranties, other tenants, or other third
parties);

 

(o)                                 Salaries, wages or other compensation paid
to employees of Landlord at or above the grade of senior property manager, to
employees of Landlord who are not assigned full-time to the operation,
management, maintenance or repair of the building (provided that operating costs
may include Landlord’s reasonable allocation of salaries, wages or other
compensation paid to employees who are assigned part-time to the operation,
management, maintenance or repair of the building);

 

(p)                                 Rent for any office space occupied by
Project management personnel to the extent the size or rental rate of such
office space exceeds the size or fair market rental value of office space
occupied by management personnel of the buildings comparable to and in the
vicinity of the Building, with adjustment where appropriate for the size of the
applicable project;

 

(q)                                 Charitable or political contributions;

 

(r)                                    Legal fees and other expenses incurred by
Landlord or agents in connection with negotiations or disputes with tenants or
prospective tenants (other than with Tenant’s sublessee or assignees) for the
Project;

 

(s)                                  Costs associated with improvements or
alterations to tenant spaces; and

 

(t)                                    Costs of providing any service directly
to any single tenant, or costs incurred for the benefit of a single tenant.

 

4.2.8                        “Applicable Taxes” shall mean all taxes,
assessments and charges levied on or with respect to the Building, the Project,
or any personal property of Landlord used in the operation thereof and payable
by Landlord.  Applicable Taxes shall include, without limitation, all general
real property taxes and general and special assessments, fees, assessments or
charges for transit, police, fire, housing, other governmental services, or
purported benefits of the Building, service payments in lieu of taxes, and any
tax, fee or excise on the act of entering into this Lease or on the use or
occupancy of the Building or any part thereof, or on the rent payable under any
lease or in connection with the business of renting space in the Building, that
are now or hereafter levied on or assessed against Landlord by, or payable by
Landlord as a result of, the requirements of the United States of America, the
State of California, or any political subdivision, public corporation, district
or other political or public entity, and shall also include any other tax, fee
or other excise, however described, that may be levied or assessed as a
substitute for, or as an addition to, in whole or in part, any other taxes. 
Applicable Taxes shall not include franchise, transfer, inheritance or capital
stock taxes or income taxes measured by the net income of Landlord from all
sources, unless, due to a change in the method of taxation, any of such taxes
are levied or assessed against Landlord as a substitute for, in whole or in
part, any other tax which would otherwise constitute an Applicable Tax. 
Applicable Taxes shall also include reasonable legal fees, costs and
disbursements incurred in connection with proceedings to contest, determine or
reduce Applicable Taxes.  Tax refunds shall be credited against Applicable Taxes
and refunded to Tenant regardless of when received, based on the Tax Comparison
Year to which the refund is applicable.

 

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4.3                               Payment of Increases.

 

4.3.1                        If, with respect to any Expense Comparison Year,
the Operating Expenses shall be greater than the Operating Expenses for the
Expense Base Year, Tenant shall pay to Landlord as additional rent Tenant’s
Expense Share of any such increase in Operating Expenses, in the manner provided
herein.  In the event the Operating Expenses for any Expense Comparison Year are
less than the Operating Expenses for the Expense Base Year, Tenant shall not be
entitled to any credit or reduction in the Base Rent.  Furthermore, in no event
shall Tenant be entitled to any credit or offset against any increase which may
be due pursuant to paragraph 4.3.2 hereinbelow as a result of any such decrease
in Operating Expenses.

 

4.3.2                        If, with respect to any Tax Comparison Year, the
Applicable Taxes shall be greater than the Applicable Taxes for the Tax Base
Year, Tenant shall pay to Landlord as additional rent Tenant’s Tax Share of any
such increase in Applicable Taxes, in the manner provided herein.  In the event
the Applicable Taxes for any Tax Comparison Year are less than the Applicable
Taxes for the Tax Base Year, Tenant shall not be entitled to any credit or
reduction in the Base Rent.  Furthermore, in no event shall Tenant be entitled
to any credit or offset against any increase which may be due pursuant to
paragraphs 4.3.1 hereinabove as a result of any such decrease in Applicable
Taxes.

 

4.4                               Time for Payment.  The payments contemplated
under paragraph 4.3 shall be made as follows:

 

4.4.1                        During each month of each Expense Comparison Year
and Tax Comparison Year, Tenant shall pay to Landlord, with each installment of
Base Rent, one-twelfth (1/12th) of the amounts as are estimated by Landlord to
be payable pursuant to paragraph 4.3 with respect to each Tax Comparison Year
and Expense Comparison Year; provided, however, that Landlord may, at any time
and from time to time, by written notice to Tenant, revise its estimates for
such year and subsequent payments shall be based upon such revised estimate.

 

4.4.2                        Within one hundred twenty (120) days, after the end
of each Tax and/or Expense Comparison Year, Landlord shall deliver to Tenant a
statement setting forth on a line-by-line basis in reasonable detail, the actual
Operating Expenses and Applicable Taxes for the respective Comparison Year, a
comparison with the Operating Expenses and Applicable Taxes for the Base Year
and a comparison of any amounts payable under paragraph 4.3 with the estimated
payments made by Tenant.  If the amounts payable under paragraph 4.3 are less
than the estimated payments made by Tenant with respect to such Comparison Year,
the statement shall be accompanied by a refund of the excess by Landlord, or, at
Landlord’s election, a notice that Landlord shall credit the excess to the next
succeeding monthly installment(s) of the Base Rent; provided, however, that in
no event shall Tenant be entitled to interest on any such overpayment.  If the
amounts payable under paragraph 4.3 are more than the estimated payments made by
Tenant with respect to such Comparison Year, Tenant shall pay the deficiency to
Landlord within thirty (30) days after delivery of such statement.  Statements
provided by Landlord shall be final and binding upon Tenant unless, in
accordance with paragraph 4.6, Tenant contests the same within thirty (30) days
after the date of delivery to Tenant.  Tenant shall not be responsible for any
Operating Expenses or Applicable Taxes which are first billed to Tenant more
than two (2) years after the expiration of the Expense Comparison Year or Tax
Comparison Year.

 

4.5                               Partial Year.  If this Lease expires or
terminates on a date other than the last day of a Comparison Year, Tenant’s Tax
Share and Tenant’s Expense Share for such Comparison Year shall be prorated
according to the ratio that the number of days during said Comparison Year that
the Lease was in effect bears to 365.

 

4.6                               Tenant’s Right to Audit.  If, within thirty
(30) days following Tenant’s receipt of Landlord’s annual statement of actual
Operating Expenses and Applicable Taxes pursuant to paragraph 4.4, Tenant
notifies Landlord that Tenant desires to audit Landlord’s statement, Landlord
shall cooperate with Tenant to permit such audit during normal business hours,
at Landlord’s office where the business records are normally kept.  The audit
shall be performed by an independent certified public accountant; the accountant
must be a member of a nationally recognized accounting firm and must not charge
a fee based on the amount of additional rent that the accountant is able to save
Tenant by the audit.  The cost of such audit shall be the sole responsibility
and liability of Tenant.  Tenant shall deliver to Landlord, any report,
statement or other documents indicating the outcome of such an audit within five
(5) days of Tenant’s receipt thereof.  In the event that such an audit discloses
that Tenant has underpaid its proportionate share of such Operating Expenses or
Applicable Taxes for the relevant period, Tenant shall pay the deficiency to
Landlord within thirty (30) days of Tenant’s receipt of the audit results.  In
the event that such an audit discloses that Tenant has overpaid its
proportionate share of such Operating Expenses or Applicable Taxes for the
relevant period, and Landlord fails to contest the same, within thirty (30) days
after the date of delivery of the (results of the) audit to Landlord, Landlord
shall credit such excess to the next succeeding monthly installment of the Base
Rent due from Tenant, but in no event shall Tenant be entitled to receive
interest on the amount of any such overpayment.  If it is determined that
Operating Expenses or Applicable Taxes were overstated by more than five percent
(5%), Landlord shall pay the cost of Tenant’s audit.  In the event Landlord
disputes the results of the audit conducted for Tenant, the Landlord shall, at
Tenant’s expense, have its independent certified public accountant provide a
certified statement; the certified statement shall be final and conclusive
absent manifest error.

 

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4.7                               Vacancy Adjustment.  Notwithstanding anything
to the contrary in the Lease, if during the Expense Base Year or any Expense
Comparison Year the Building is less than 95% occupied, for the purposes of
computing Tenant’s Expense Share for said year, those Operating Expenses which
vary based upon occupancy levels shall be adjusted as though the Building were
95% occupied; provided, however, in no event shall the aggregate amount
collected by Landlord from all tenants in the Building exceed the actual
Operating Expenses for said year.

 

5.                                      Security Deposit.  Tenant shall deposit
with Landlord upon execution hereof the Security Deposit set forth in paragraph
1.9 of the Basic Lease Provisions as security for Tenant’s faithful performance
of Tenant’s obligations hereunder.  If Tenant fails to pay rent or other charges
due hereunder, or otherwise defaults with respect to any provision of this
Lease, Landlord may use, apply or retain all or any portion of said deposit for
the payment of any rent or other charge in default or for the payment of any
other sum to which Landlord may become obligated by reason of Tenant’s default,
or to compensate Landlord for any loss or damage which Landlord may suffer
thereby.  If Landlord so uses or applies all or any portion of said deposit,
Tenant shall within ten (10) days after written demand therefor deposit cash
with Landlord in an amount sufficient to restore said deposit to the full amount
then required of Tenant plus an administrative fee of One Hundred Dollars
($100). Landlord shall not be required to keep said security deposit separate
from its general accounts.  If Tenant performs all of the Tenant’s obligations
hereunder, said deposit, or so much thereof as has not heretofore been applied
by Landlord, shall be returned, without payment of interest or other increment
for its use, to Tenant (or, at Landlord’s option, to the last assignee, if any,
of Tenant’s interest hereunder) at the expiration of the term hereof, and after
Tenant has vacated the Premises.  No trust relationship is created herein
between Landlord and Tenant with respect to said Security Deposit, and under no
circumstances shall Landlord be required to keep the Security Deposit separate
from its other funds or in an interest-bearing account, nor shall Tenant be
entitled to any interest on such amounts regardless of whether or not the
Security Deposit is deposited in an interest-bearing account.  Should Landlord
sell or transfer, voluntarily or otherwise, its interest in the Premises during
the term hereof and if Landlord deposits with the purchaser or transferee
thereof the then unappropriated funds deposited by Tenant as aforesaid, Landlord
shall thereupon be discharged from any further liability with respect to such
Security Deposit.

 

6.                                      Permitted Use.

 

6.1                               Permitted Use.

 

6.1.1                        The Premises shall be used and occupied only for
the purpose set forth in paragraph 1.4 of the Basic Lease Provisions and for no
other purpose.  Tenant shall control Tenant’s employee’s, agents, customers,
visitors, invitees, licensees, contractors, assignees and subtenants
(collectively, “Tenant’s Parties”) in such a manner that Tenant, and Tenant’s
Parties cumulatively do notuse more than Tenant’s pro rata share of parking at
the Project.

 

6.2                               Compliance with Law.

 

6.2.1                        Except as is otherwise specifically provided in
this Lease ( including in the Work Letter), Landlord makes no representation or
warranty to Tenant regarding the condition of the Premises or with respect to
whether or not the Premises, or the use for which Tenant will occupy the
Premises, will violate any covenants or restrictions of record, or any
applicable building code, regulation, law or ordinance in effect on the Lease
Commencement Date or at any other time.

 

6.2.2                        Subject to paragraph 6.2.1, Tenant shall, at
Tenant’s expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, orders, covenants, conditions and restrictions of record,
and requirements of any fire insurance underwriters or rating bureaus, now in
effect or which may hereafter come into effect, whether or not they reflect a
change in policy from that now existing, during the Term or any part of the Term
hereof, relating in any manner to the Premises and the occupation and use by
Tenant of the Premises.  Tenant shall conduct its business in a lawful manner
and shall not use or permit the use of the Premises or the Common Areas in any
manner that will tend to create waste or a nuisance or shall tend to disturb
other occupants of the Project.

 

6.3                               Condition of Premises.

 

6.3.1                        Landlord shall deliver the Premises to Tenant on
the Lease Commencement Date (unless Tenant is already in possession), but makes
no representation or warranty regarding the condition of the Premises except as
otherwise provided in this Lease.

 

6.3.2                        Except as is otherwise specifically provided in
this Lease, Tenant hereby accepts the Premises and the Project in their
condition existing as of the Lease Commencement Date or the date that Tenant
takes possession of the Premises, whichever is earlier, subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and any easements, covenants
or restrictions of record, and accepts this Lease subject thereto and to all
matters disclosed thereby and by any exhibits attached hereto.  Tenant
acknowledges that it has satisfied itself by its own independent investigation
that the Premises are suitable for its intended use, and that neither Landlord
nor Landlord’s agent or agents has made any representation or warranty as to the
present or future suitability of the Premises, Common Areas, or Project for the
conduct of Tenant’s business.

 

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7.                                      Maintenance, Repairs, Alterations and
Common Area Services.

 

7.1                               Landlord’s Obligations.  Landlord shall keep
the roof, foundations, bearing walls (excluding surface maintenance such as
painting) building systems (including with limitation mechanical, electrical,
telephone closets, life safety, common area plumbing [not within the Premises],
sprinkler systems and HVAC systems and common areas, in good condition and
repair; and subject to paragraph 4.2.7, the cost thereof shall be included in
Operating Expenses unless the cause for such maintenance or repairs are caused
in whole or in part by any act, fault or omission by Tenant or its agents,
servants, employees, invitees or caused by breaking and entering, in which case
Tenant shall pay the actual cost of such maintenance or repairs concurrently
with the next payment of Base Rent plus an administrative fee of ten percent
(10%) of such actual costs.  Except as provided in paragraph 8.7, 9.5 and 11.5,
there shall be no abatement of rent or liability to Landlord on account of any
injury or interference with Tenant’s business with respect to any improvements,
alterations or repairs made by Landlord to the Project or any part thereof, or
on account of any interruption of services or of access to the Premises,
Building or Project.  Tenant expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Tenant the right to make
repairs at Landlord’s expense or to terminate this Lease because of Landlord’s
failure to keep the Premises in good order, condition and repair, including
without limitation California Civil Code Sections 1941-1942.  Landlord shall
maintain the Building and the Project in good condition and repair consistent
with other buildings of similar age, type and quality in the San Diego area.  As
soon as reasonably possible after receipt of notice, Landlord shall make all
repairs, replacements, alterations or improvements needed to comply with
applicable laws, codes, statutes, ordinances, rules, regulations, orders,
covenants, conditions and restrictions of record, and requirements of any fire
insurance underwriters or ratings bureaus, etc. relating to the Building and the
Common Areas (including, without limitation the Americans with Disabilities
Act), provided that compliance with such laws is not the specific responsibility
of Tenant under this Lease, or if the compliance work is triggered by Tenant’s
occupancy, use, or alteration or addition.

 

7.2                               Tenant’s Obligations.

 

7.2.1                        Notwithstanding Landlord’s obligation to deliver
the Premises in good condition and repair, Tenant shall be responsible for
payment of the cost thereof to Landlord as additional rent for that portion of
the cost of any maintenance and repair of the Premises, or any equipment
(wherever located) that serves only Tenant or the Premises.  Tenant shall be
responsible for the cost of painting, repairing or replacing wall coverings, and
to repair or replace any Premises improvements that are not ordinarily a part of
the Building or that are above then Building standards.  Landlord may, at its
option, upon reasonable notice, elect to have Tenant perform any particular such
maintenance or repairs the cost of which is otherwise Tenant’s responsibility
hereunder.

 

7.2.2                        Tenant hereby covenants and agrees that Tenant
shall not commit, nor shall Tenant permit, waste on the Premises, or at any
location within the Project.  On the last day of the Term hereof, or on any
sooner termination, Tenant shall surrender the Premises to Landlord in the same
condition as received, ordinary wear and tear excepted, clean and free of
Tenant’s personal property and of any debris.  Any damage or deterioration of
the Premises shall not be deemed to be ordinary wear and tear to the extent that
such damage or deterioration is the result of waste committed on the Premises
during the Term hereof or the result of negligence, neglect, misuse or willful
misconduct on the part of Tenant, its agents, servants, employees, licensees or
invitees.  Tenant shall repair any damage to the Premises, the Building and the
Project occasioned by (a) waste committed on the Premises during the Term
hereof, (b) negligence, neglect, misuse or willful misconduct by Tenant, its
agents, servants, employees, licensees or invitees, or (c) the installation or
removal of Tenant’s trade fixtures, alterations, furnishings and equipment. 
Except as otherwise stated in this Lease, Tenant shall leave the power panels,
electrical distribution systems, lighting fixtures, air conditioning, window
coverings, carpets, wall paneling, ceilings and plumbing on the Premises in good
and clean operating condition.

 

7.3                               Alterations and Additions.

 

7.3.1                        Tenant shall not, without Landlord’s prior written
consent, which consent shall not be unreasonably withheld, make any alterations,
improvements additions, Utility Installations or repairs in, on or about the
Premises, or the Project.  As used in this paragraph 7.3 the term “Utility
Installation” shall mean carpeting, window and wall coverings, power panels,
electrical distribution systems, lighting fixtures, air conditioning, plumbing,
and telephone and telecommunication wiring and equipment.  At the expiration of
the term, Landlord may require the removal of any or all of said alterations,
improvements, additions or Utility Installations, and the restoration of the
Premises, the Building and the Project to their prior condition, at Tenant’s
sole cost and expense.  Should Landlord permit Tenant to make its own
alterations, improvements, additions or Utility Installations, Tenant shall use
only such contractor(s) as has (have) been expressly approved by Landlord, and
Landlord may require Tenant to provide Landlord, at Tenant’s sole cost and
expense, a lien and completion bond in an amount equal to one and one-half times
the estimated cost of such improvements, to insure Landlord against any
liability for mechanic’s and materialmen’s liens and to insure completion of the
work.  Should Tenant make any alterations, improvements, additions or Utility
Installations without the prior approval of Landlord, or use a contractor not
expressly approved by Landlord, Landlord may (in addition to the other rights
and remedies provided herein or by law or equity), at any time during the Term
of this Lease, require that Tenant remove any part or all of the same at
Tenant’s sole cost and expense.  Notwithstanding the foregoing, Tenant shall
have the right, without Landlord’s consent but upon five (5) business days prior
notice to Landlord, to make cosmetic, non-structural additions and alterations
to the Premises that do not involve the expenditure of more than $10,000 in the
aggregate in any calendar year.

 

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7.3.2                        Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Project that Tenant shall desire
to make shall be presented to Landlord in written form, with proposed detailed
plans.  Tenant agrees to reimburse Landlord upon written demand to Tenant for
all reasonable costs and expenses (including, without limitation, any
architect’s and or engineers’ fees) incurred by Landlord in approving or
disapproval of Tenant’s plans for such alteration, improvement, addition or
Utility Installation.  If Landlord shall give its consent to Tenant’s making
such alteration, improvement, addition or Utility Installation, the consent
shall be deemed conditioned upon Tenant acquiring a permit or permits to do so
from the applicable governmental agency or agencies, furnishing a copy or copies
thereof to Landlord prior to the commencement of the work, and compliance by
Tenant with all conditions of said permit in a prompt and expeditious manner.

 

7.3.3                        Tenant shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Tenant at or for
use in the Premises, which claims are or may be secured by any mechanic’s or
materialmen’s lien against the Premises, the Building or the Project, or any
interest therein.

 

7.3.4                        Tenant shall give Landlord not less than ten (10)
days’ notice prior to the commencement of any work in the Premises by Tenant,
and Landlord shall have the right to post notices of non-responsibility in, on
or about the Premises or the Building as provided by law. Tenant shall at all
times keep the Premises, the Building and the Project free and clear of liens
attributable in any way to a work of improvement commissioned by Tenant, or to
the acts or omissions of Tenant, any of Tenant’s employees, agents, or
contractors, or any of their employees, agents or sub-contractors.  If Tenant
shall, in good faith, contest the validity of any such lien, claim or demand,
then Tenant shall, at its sole expense defend itself and Landlord against the
same and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against Landlord or the Premises, the
Building or the Project, upon the condition that Tenant shall furnish to
Landlord a surety bond satisfactory to Landlord in an amount not less than one
hundred fifty percent (150%) of the amount of such contested lien, claim or
demand indemnifying Landlord against liability for the same and holding the
Premises, the Building and the Project, as well as Landlord, free from the
effect of such lien or claim. In addition, Landlord may require Tenant to pay
Landlord’s reasonable attorneys’ fees and costs in participating in such action
if Landlord shall decide it is to Landlord’s best interest so to do.

 

7.3.5                        All alterations, improvements, additions and
Utility Installations (whether or not such Utility Installations constitute
trade fixtures of Tenant), which may be made to the Premises by Tenant,
including but not limited to, floor coverings, panelings, doors, drapes,
built-ins, moldings, sound attenuation, and lighting and telephone or
communication systems, conduit, wiring and outlets, shall be made and done in a
good and workmanlike manner and of good and sufficient quality and materials and
shall be the property of Landlord and remain upon and be surrendered with the
Premises at the expiration of the Lease Term, unless Landlord requires their
removal pursuant to paragraph 7.3.1.  Provided Tenant is not in default,
notwithstanding the provisions of this paragraph 7.3.5, Tenant’s personal
property and equipment, other than that which is affixed to the Premises so that
it cannot be removed without material damage to the Premises or the Building,
and other than Utility Installations, shall remain the property of Tenant and
may be removed by Tenant subject to the provisions of paragraph 7.2.

 

7.3.6                        Tenant shall provide Landlord with as-built plans
and specifications for any alterations, improvements, additions or Utility
Installations.

 

7.4                               Utility Additions.  Landlord reserves the
right, but shall not be obligated, to install new or additional utility
facilities throughout the Project for the benefit of Landlord or Tenant, or any
other tenant, occupant or user of the Project, including, but not by way of
limitation, such utilities as plumbing, electrical systems, security systems,
communication systems, and fire protection and detection systems, so long as
such installations do not unreasonably interfere with Tenant’s use of the
Premises.

 

8.                                      Insurance; Indemnity.

 

8.1                               Liability Insurance-Tenant.  Tenant shall, at
Tenant’s expense, obtain and keep in force during the Term of this Lease a
policy of broad form commercial general liability insurance on an occurrence
basis, in an amount of not less than $2,000,000 per occurrence of bodily injury
and property damage combined or in such greater amount as reasonably determined
by Landlord and shall insure Tenant, together with Landlord and Landlord’s
manager as additional insureds, against liability arising out of the use,
occupancy or maintenance of the Premises.  Compliance with the above requirement
shall not, however, limit the liability of Tenant hereunder.

 

8.2                               Liability Insurance-Landlord.  Although
Landlord shall not be required to maintain any liability insurance, any premiums
for liability insurance maintained by Landlord relating to the Premises, the
Building or the Project shall be Operating Expenses hereunder.

 

8.3                               Property Insurance-Tenant.  Tenant shall, at
Tenant’s expense, obtain and keep in force during the Term of this Lease for the
benefit of Tenant, replacement cost all-risks insurance, including without
limitation fire and extended coverage insurance, with vandalism and malicious
mischief, sprinkler leakage and earthquake sprinkler leakage endorsements, in an
amount sufficient to cover not less than 100% of the full replacement costs, as
the same may exist from time to time, of all of Tenant’s personal property,
fixtures, equipment and tenant improvements.

 

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8.4                               Property Insurance-Landlord.  Landlord shall
obtain and keep in force during the Term of this Lease a policy or policies of
insurance covering loss or damage to the Project improvements, but not Tenant’s
personal property, fixtures, equipment or tenant improvements, in the amount of
the full replacement cost thereof (as reasonably determined by Landlord), as the
same may exist from time to time, utilizing Insurance Services Office standard
form, or equivalent providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief, plate
glass, and such other perils as Landlord deems advisable or may be required by a
lender having a lien on the Project.  In addition, Landlord shall obtain and
keep in force, during the Term of this Lease, a policy of rental value (or
rental loss or rental interruption) insurance covering a period of one year,
with loss payable to Landlord, which insurance shall also cover all Operating
Expenses for said period.  Tenant will not be named in any such policies carried
by Landlord and shall have no right to any proceeds therefrom.  The policies set
forth in paragraphs 8.2 and 8.4 shall contain such deductibles as Landlord or
the aforesaid lender may determine.  Tenant shall not do or permit to be done
anything which shall invalidate the insurance policies carried by Landlord. 
Tenant shall pay the entirety of any increase in the property insurance premium
for the Project over what it was immediately prior to the commencement of the
Term of this Lease if the increase is specified by Landlord’s insurance carrier
as being caused by the nature of Tenant’s occupancy or any act or omission of
Tenant.

 

8.5                               Insurance Policies.

 

8.5.1                        Tenant shall obtain and maintain in effect
throughout the Term of this Lease, a policy of workers compensation insurance in
accordance with applicable California law, which policy shall cover all
employees of Tenant working on or about the Premises.  Prior to taking
possession of the Premises, Tenant shall provide to Landlord a certificate of
insurance evidencing the insurance policy as required under this paragraph 8.

 

8.5.2                        Each policy required to be obtained by Tenant
hereunder shall (a) be issued by insurers authorized to do business in the state
of California and rated not less than financial class X, and not less than
policyholder rating A, in the most recent version of Best’s Key Rating Guide, or
the equivalent rating in any other comparable guide selected by Landlord
(provided that, in any event, the same insurance company shall provide the
coverages described in paragraphs 8.1 and 8.3 above), (b) be in form reasonably
satisfactory from time to time to Landlord, (c) name Tenant as named insured
thereunder and shall name Landlord, Landlord’s manager, and, at Landlord’s
request, Landlord’s mortgagees and ground lessors of which Tenant has been
informed in writing, as additional insureds, (d) not have a deductible amount
exceeding Twenty Five Thousand Dollars ($25,000.00), (e) specifically provide
that the insurance afforded by such policy for the benefit of Landlord,
Landlord’s manager and Landlord’s mortgagees and ground lessors shall be
primary, and any insurance carried by Landlord, Landlord’s manager or Landlord’s
mortgagees and ground lessors shall be excess and non-contributing, (f) except
for worker’s compensation insurance, contain an endorsement that the insurer
waives its right to subrogation as described in paragraph 8.6 below, and (g)
contain an undertaking by the insurer to notify Landlord and Landlord’s manager
(as well as the mortgagees and ground lessors of Landlord who are named as
additional insureds) in writing not less than thirty (30) days prior to any
material change, reduction in coverage, cancellation or other termination
thereof.  Tenant agrees to deliver to Landlord, as soon as practicable after the
placing of the required insurance, but in any event prior to the date Tenant
takes possession of all or any part of the Premises, certificates from the
insurance company evidencing the existence of such insurance and Tenant’s
compliance with the foregoing provisions of this paragraph 8.  Tenant shall
cause certificates of replacement policies to be delivered to Landlord not less
than thirty (30) days prior to the expiration of any such policy or policies. 
If any such initial or replacement certificates are not furnished within the
time(s) specified herein, Tenant shall be deemed to be in material default under
this Lease without the benefit of any additional notice or cure period provided
herein, and Landlord shall have the right, but not the obligation, to procure
such policies and certificates at Tenant’s expense, and Tenant shall promptly
reimburse Landlord for the costs and expenses incurred in so procuring such
policies or certificates within 10 days of Tenant’s receipt of demand therefor. 
Any such sums not paid by Tenant on or before the above referenced date shall
bear interest at the maximum legal rate (as specified in paragraph 19) until
paid in full.  Tenant may fulfill its insurance obligations under this paragraph
8.5 through a blanket insurance policy covering other locations of Tenant or its
affiliates.

 

8.6                               Waiver of Subrogation.  Tenant and Landlord
each hereby release and relieve the other, and waive their entire right of
recovery against the other, for direct or consequential loss or damage arising
out of or incident to the perils covered by property insurance carried by such
party, whether due to the negligence of Landlord or Tenant or their agents,
employees, contractors and/or invitees, to the extent (but only to the extent)
that the loss or damage is insured under the insurance policy.  All property
insurance policies required of Tenant under this Lease shall be endorsed to so
provide.

 

8.7                               Indemnity.  Unless due to the gross negligence
or willful misconduct of Landlord, Tenant shall indemnify and hold harmless
Landlord and its agents, shareholders, directors, employees, partners and
lenders, from and against any and all claims for damage to the person or
property of anyone or any entity arising from Tenant’s use of the Project, or
from the conduct of Tenant’s business or from any activity, work or things done,
permitted or suffered by Tenant in or about the Premises or elsewhere and shall
further indemnify and hold harmless Landlord from and against any and all
claims, demands, losses, liabilities, damages, costs and expenses arising from
any breach or default in the performance of any obligation on Tenant’s part to
be performed under the terms of this Lease, or arising from any act or omission
of Tenant, or any of Tenant’s agents, contractors, employees or invitees and
from and against all reasonable costs, attorneys’ fees, expenses and liabilities
incurred by Landlord as the result of any such use, conduct, activity, work,
things done, permitted or suffered, breach, default or negligence, and in

 

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dealing reasonably therewith, including but not limited to the defense or
pursuit of any claim or any action or proceeding involved therein; and in case
any action or proceeding be brought against Landlord by reason of any such
matter, Tenant upon notice from Landlord shall defend the same at Tenant’s
expense by counsel reasonably satisfactory to Landlord and Landlord shall
cooperate with Tenant in such defense.  Landlord need not have first paid any
such claim in order to be so indemnified.  Tenant’s obligations, liabilities and
duties under this paragraph 8.7 shall survive the expiration or earlier
termination of this Lease.  Because Landlord is required to maintain insurance
on the Building and Tenant compensates Landlord for such insurance as part of
Tenant’s Share of Operating Expenses and because of the waivers of subrogation
in section 8.6, Landlord shall, with counsel reasonably acceptable to Tenant,
indemnify, defend, and hold harmless Tenant from and against all claims for
damage to property outside the Premises to the extent that such claims are
covered by such insurance (or would have been covered had Landlord carried the
insurance required under this Lease), even if resulting from the negligent acts,
omissions, or willful misconduct of Tenant.  In addition, Landlord shall, with
counsel reasonably acceptable to Tenant, indemnify, defend, and hold harmless
Tenant from and against all claims resulting from the gross negligence or
willful misconduct of Landlord in connection with Landlord’s activities in, on,
or about the Project, except to the extent that such claim is for damage to the
tenant improvements and Tenant’s personal property, fixtures, furniture, and
equipment in the Premises and is covered by insurance that Tenant is required to
obtain under this Lease (or would have been covered had Tenant carried the
insurance required under this Lease).

 

8.8                               Exemption of Landlord from Liability.  Tenant,
as a material part of the consideration to Landlord for the granting of this
Lease, hereby assumes all risk of damage to property of Tenant or injury to
persons, in, upon or about the Project arising from any cause and Tenant hereby
waives all claims in respect thereof against Landlord and agrees that any claims
for such damages or injuries shall be made against the policies of insurance
required to be carried by Tenant pursuant to paragraphs 8.1 and 8.3 hereinabove
and any deductible amounts therein shall be deemed to be Tenant’s “self
insurance”. Tenant hereby agrees that Landlord shall not be liable for injury to
Tenant’s business or any loss of income therefrom or for loss of or damage to
the goods, wares, merchandise or other property of Tenant, Tenant’s employees,
invitees, customers, or any other person in or about the Premises or the
Project, nor shall Landlord be liable for injury to the person of Tenant,
Tenant’s employees, agents or contractors, whether such damage or injury is
caused by or results from theft, fire, steam, electricity, gas, water or rain,
or from the breakage, leakage, obstruction or other defects of pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures,
or from any other cause, whether said damage or injury results from conditions
arising upon the Premises or upon other portions of the Project, or from other
sources or places, or from new construction or the repair, alteration or
improvement of any part of the Project, or of the equipment, fixtures or
appurtenances applicable thereto, and regardless of whether the cause of such
damage or injury or the means of repairing the same is inaccessible. Landlord
shall not be liable for any damages arising from any act or neglect of any other
tenant, occupant or user of the Project, nor from the failure of Landlord to
enforce the provisions of any other lease of any other tenant of the Project.

 

8.9                               No Representation of Adequate Coverage. 
Landlord makes no representation that the limits or forms of coverage of
insurance specified in this paragraph 8 are adequate to cover Tenant’s property
or obligations under this Lease.

 

9.                                      Damage or Destruction.

 

9.1                               Definitions.

 

9.1.1                        “Premises Damage” shall mean if the Premises are
damaged or destroyed to any extent.

 

9.1.2                        “Building Partial Damage” shall mean if the
Building is damaged or destroyed to the extent that the cost to repair is less
than fifty percent (50%) of the then Replacement Cost of the Building.

 

9.1.3                        “Building Total Destruction” shall mean if the
Building is damaged or destroyed to the extent that the cost to repair is fifty
percent (50%) or more of the then Replacement Cost of the Building.

 

9.1.4                        “Insured Loss” shall mean damage or destruction
which was caused by an event required to be covered by the insurance described
in paragraph 8.  The fact that an Insured Loss has a deductible amount shall not
make the loss an uninsured loss.

 

9.1.5                        “Replacement Cost” shall mean the amount of money
necessary to be spent in order to repair or rebuild the damaged area to the
condition that existed immediately prior to the damage occurring, excluding all
improvements made by tenants, other than those installed by Landlord at Tenant’s
expense.

 

9.2                               Premises Damage; Premises Building Partial
Damage.

 

9.2.1                        Insured Loss:  Subject to the provisions of
paragraphs 9.4 and 9.5, if at any time during the Term of this Lease there is
damage which is an Insured Loss and which falls into the classification of
either Premises Damage or Building Partial Damage, then Landlord shall, as soon
as reasonably possible and to the extent insurance proceeds are available and
the required materials and

 

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labor are readily available through usual commercial channels, at Landlord’s
expense, repair such damage (but not Tenant’s fixtures, equipment, personal
property or tenant improvements, all of which Tenant shall restore at Tenant’s
expense) to its condition existing at the time of the damage, and this Lease
shall continue in full force and effect.

 

9.2.2                        Uninsured Loss:  Subject to the provisions of
paragraphs 9.4 and 9.5, if at any time during the Term of this Lease there is
damage which is not an Insured Loss and which falls within the classification of
Premises Damage or Building Partial Damage, unless caused by a negligent or
willful act of Tenant (in which event Tenant shall make the repairs at Tenant’s
expense), which damage prevents Tenant from making any substantial use of the
Premises, Landlord may at Landlord’s option either (i) repair such damage as
soon as reasonably possible at Landlord’s expense, in which event this Lease
shall continue in full force and effect, or (ii) give written notice to Tenant
within thirty (30) days after the date of the occurrence of such damage of
Landlord’s intention to cancel and terminate this Lease as of the date of the
occurrence of such damage, in which event this Lease shall terminate as of the
date of the occurrence of such damage.

 

9.3                               Building Total Destruction.  Subject to the
provisions of paragraphs 9.4 and 9.5, if at any time during the Term of this
Lease there is damage, whether or not it is an Insured Loss, which falls into
the classification of Building Total Destruction, then Landlord may at
Landlord’s option either (i) repair such damage or destruction as soon as
reasonably possible at Landlord’s expense (to the extent the required materials
are readily available through usual commercial channels) to its condition
existing at the time of the damage, but not Tenant’s fixtures, equipment,
personal property or tenant improvements (all of which Tenant shall restore at
Tenant’s expense), and this Lease shall continue in full force and effect, or
(ii) give written notice to Tenant within thirty (30) days after the date of
occurrence of such damage of Landlord’s intention to cancel and terminate this
Lease, in which case this Lease shall terminate as of the date specified by
Landlord in such notice.  Tenant shall have the right to terminate this Lease by
giving written notice to Landlord within 5 business days of receipt of
Landlord’s notice, if, in Landlord’s reasonable judgment, the repairs will
require an interruption of Tenant’s use of the Premises for more than one
hundred eighty (180) days after Landlord’s notice, and the Lease shall terminate
as of the date of Landlord’s notice.

 

9.4                               Damage Near End of Term.

 

9.4.1                        Subject to paragraph 9.4.2, if at any time during
the last twelve (12) months of the Term of this Lease there is substantial
damage to the Premises, Landlord or Tenant may at its option, cancel and
terminate this Lease as of the date of occurrence of such damage by giving
written notice to the other party of its election to do so within 30 days after
the date of occurrence of such damage.

 

9.4.2                        Notwithstanding paragraph 9.4.1, in the event that
Tenant has an option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired, Tenant shall exercise such
option, if it is to be exercised at all, no later than twenty (20) days after
the occurrence of an Insured Loss falling within the classification of Premises
Damage during the last twelve (12) months of the Term of this Lease.  If Tenant
duly exercises such option during said twenty (20) day period, Landlord shall,
at Landlord’s expense, to the extent insurance proceeds are available, and the
required materials and labor are readily available, repair such damage, but not
Tenant’s fixtures, equipment, personal property or tenant improvements (all of
which Tenant shall restore at Tenant’s expense), as soon as reasonably possible
and this Lease shall continue in full force and effect.  If Tenant fails to
exercise such option during said twenty (20) day period, then Landlord may at
Landlord’s option terminate and cancel this Lease as of the expiration of said
twenty (20) day period by giving written notice to Tenant of Landlord’s election
to do so within ten (10) days after the expiration of said twenty (20) day
period, notwithstanding any term or provision in the grant of option to the
contrary.

 

9.5                               Abatement of Rent; Tenant’s Remedies.

 

9.5.1                        If, in the event of Premises Damages, Landlord
repairs or restores the Building or Premises pursuant to the provisions of this
paragraph 9, and any part of the Premises are not usable (including loss of use
due to loss of access or essential services), the rent payable hereunder
(including Tenant’s Share of Operating Expenses) for the period during which
such damage, repair or restoration continues shall be abated, provided (i) the
damage was not the result of the negligence of Tenant, and (ii) such abatement
shall only be to the extent (i.e., shall be based upon the proportion that the
rentable square feet of the Premises which is unuseable because of such damage
bears to the total rentable square feet of the Premises) and only for the period
of time that the operation of Tenant’s business as operated from the Premises is
adversely affected.  Except for said abatement of rent, if any, Tenant shall
have no claim against Landlord for any damage suffered by reason of any such
damage, destruction, repair or restoration.

 

9.5.2                        If Landlord shall be obligated to repair or restore
the Premises or the Building under the provisions of this paragraph 9 and shall
not commence such repair or restoration within ninety (90) days after such
occurrence, or if Landlord shall not complete the restoration and repair within
six (6) months after Landlord commences such repair or restoration, Tenant may
at Tenant’s option cancel and terminate this Lease by giving Landlord written
notice of Tenant’s election to do so at any time prior to the commencement or
completion, respectively, of such repair or restoration.  In such event this
Lease shall terminate as of the date of such notice.

 

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9.5.3                        Tenant agrees to cooperate with Landlord in
connection with any such restoration and repair, including but not limited to
the approval and/or execution of plans and specifications required.

 

9.6                               Termination-Advance Payments.  Upon
termination of this Lease pursuant to this paragraph 9, an equitable adjustment
shall be made concerning advance rent and any advance payments made by Tenant to
Landlord.  Landlord shall, in addition, return to Tenant so much of Tenant’s
security deposit as has not theretofore been applied by Landlord.

 

9.7                               Waiver.  Landlord and Tenant waive the
provisions of any statute which relates to termination of leases when leased
property is destroyed, including without limitation California Civil Code
Section 1932, Subsection 2, as well as Section 1933, Subsection 4, and agree
that such event shall be governed by the terms of this Lease.

 

10.                               Real Property Taxes.

 

10.1                        Payment of Taxes.  Landlord shall pay the real
property tax, as defined in paragraph 10.3, applicable to the Project, subject
to reimbursement by Tenant of Tenant’s share of such taxes in accordance with
the provisions of paragraph 4.2 herein.

 

10.2                        Additional Improvements.  Tenant shall pay to
Landlord, at the time that the next scheduled rental payment comes due, the
entirety of any increase in real property tax if assessed solely by reason of
additional improvements placed upon the Premises by Tenant or at Tenant’s
request.

 

10.3                        Definition of “Real Property Tax.”  As used herein,
the term “real property tax” shall include any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed on the Project or any
portion thereof by any authority having the direct or indirect power to tax,
including without limitation any city, county, state or federal government, or
any school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, as against any legal or equitable interest of Landlord in the
Project or in any portion thereof, as against Landlord’s right to rent or other
income therefrom, and as against Landlord’s business of leasing the Project. 
The term “real property tax” shall also include any tax, fee, levy, assessment
or charge (i) in substitution of, partially or totally, any tax, fee, levy,
assessment or charge hereinabove included within the definition of “real
property tax,” or (ii) the nature of which was hereinabove included within the
definition of “real property tax,” or (iii) which is imposed for a service or
right not charged prior to June 1, 1978, or, if previously charged, has been
increased since June 1, 1978, or (iv) which is imposed as a result of a change
in ownership, as defined by applicable federal, state, local and other statutes
for property tax purposes, of the Project or which is added to a tax or charge
hereinbefore included within the definition of real property tax by reason of
such change of ownership, or (v) which is imposed by reason of this transaction,
any modifications or changes hereto, or any transfers hereof.

 

10.4                        Joint Assessment.  If the improvements or property,
the taxes for which are to be paid separately by Tenant under paragraph 10.2 or
10.5 are not separately assessed, Tenant’s portion of that tax shall be
equitably determined by Landlord from the respective valuations assigned in the
assessor’s work sheets or such other information (which may include the cost of
construction) as may be reasonably available.  Landlord’s reasonable
determination thereof, in good faith, shall be conclusive.

 

10.5                        Personal Property Taxes.

 

10.5.1                  Tenant shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the Premises or elsewhere.

 

10.5.2                  If any of Tenant’s said personal property shall be
assessed with Landlord’s real property, Tenant shall pay to Landlord the taxes
attributable to Tenant within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Tenant’s property.

 

11.                               Utilities.

 

11.1                        Services Provided by Landlord.  Subject to paragraph
11.5 and provided that Tenant is not in default hereunder, Landlord shall
provide heating, ventilation and air conditioning, electricity for lighting and
office machines, water for drinking and lavatory use, janitorial service, and
non-attended automatic elevators. Costs incurred by Landlord in providing such
services shall be Operating Expenses.  Janitorial service (including trash
disposal) shall occur every business day, excluding only Saturdays, Sundays and
holidays and shall be provided by a licensed and bonded janitorial service. 
Except as otherwise provided in this Lease, Tenant shall have access to the
Premises 24 hours per day, 365 days per year.

 

11.2                        Services Exclusive to Tenant.  Tenant shall pay for
all water, gas, heat, light, power, telephone, and other utilities and services
specially or exclusively supplied and/or metered exclusively to the Premises or
to Tenant, together with any taxes thereon and for all replacement light bulbs
and/or fluorescent tubes and ballasts for standard overhead fixtures within the
Premises.  If any such services are not separately metered to the Premises,
Tenant shall pay a reasonable proportion to be determined

 

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by Landlord of all charges jointly metered with other premises in the Building,
and in such cases, Landlord’s determination thereof, shall be conclusive.

 

11.3                        Hours of Service.  Said services and utilities shall
be provided during the hours between 7:00 a.m. and 6:00 p.m. on Monday through
Friday and 8:00 a.m. and 1:00 p.m. on Saturday or such other days or hours as
may hereafter be set forth in the Rules and Regulations or any amendments
thereto.  Utilities and services required at other times shall be subject to
advance request and reimbursement by Tenant to Landlord of the cost of forty
Dollars ($40.00) per hour, subject to change from time to time.

 

11.4                        Excess Usage by Tenant.  Tenant shall not make
connection to the utilities except by or through existing outlets and shall not
install or use machinery or equipment in or about the Premises that uses excess
water, lighting or power, or suffer or permit any act that causes extra burden
upon the utilities or services, including but not limited to security services,
over standard office usage for the Project.  Landlord shall require Tenant to
reimburse Landlord for any excess expenses or costs that may arise out of a
breach of this subparagraph by Tenant.

 

11.5                        Interruptions.  There shall be no abatement of rent
and Landlord shall not be liable in any respect whatsoever for the inadequacy,
stoppage, interruption or discontinuance of any utility or service, regardless
of whether or not the cause thereof was within Landlord’s control. 
Notwithstanding the foregoing, in the event Tenant is prevented from using, and
does not use, the Premises or any portion thereof, for four (4) consecutive
business days or ten (10) days in any 12-month period (the “Eligibility Period”)
as a result of any repair, maintenance or alteration performed by Landlord, any
failure by Landlord to make repairs which are Landlord’s responsibility, any
failure by Landlord to provide the services to the Premises described in this
Paragraph 11 or elsewhere under this Lease, or any exercise by Landlord of its
rights under Paragraph 31 of this Lease, then Tenant’s rent shall be abated or
reduced, as the case may be, after expiration of the Eligibility Period for such
time that Tenant continues to be so prevented from using 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 bears to the total rentable area of
the Premises.

 

11.6                        Separate Metering.  Nothing contained in this
paragraph 11 shall restrict Landlord’s right to require at any time separate
metering of utilities furnished to the Premises.  In the event utilities are
separately metered, Tenant shall pay promptly upon demand for all utilities
consumed at utility rates charged by the local public utility plus any
additional expense incurred by Landlord in keeping account of the utilities so
consumed.  Tenant shall be responsible for the maintenance and repair of any
such meters at its sole cost.

 

12.                               Assignment and Subletting.

 

12.1                        Landlord’s Consent Required.  Tenant shall not
voluntarily or by operation of law assign, transfer, mortgage, sublet, or
otherwise transfer or encumber all or any part of Tenant’s interest in this
Lease or in the Premises, without Landlord’s prior written consent, which
Landlord shall not unreasonably withhold, delay, or condition any attempted
assignment, transfer, mortgage, encumbrance or subletting without such consent
shall be void and, at Landlord’s election, shall constitute a material,
non-curable default and breach of this Lease without the need for notice to
Tenant under paragraph 13.1.  “Transfer” within the meaning of this paragraph 12
shall include the transfer or transfers aggregating (a), if Tenant is a
corporation, more than twenty-five percent (25%) of the voting stock of such
corporation or more than twenty-five (25%) of the voting stock of Tenant’s
parent, (b) if Tenant is a partnership, more than twenty-five percent (25%) of
the profit and loss participation in such partnership, or (c), if Tenant is a
limited liability company, more than 25% of the membership interests in such
limited liability company.  A transfer does not include: (a) a transferee which
is the resulting entity of a merger or consolidation of Tenant with another
entity, (b) an assignment to a transferee of all or substantially all of the
assets of Tenant, and (c) an assignment or subletting of all or a portion of the
Premises to a Tenant Affiliate (so long as such transaction is not entered into
as a subterfuge to avoid the restrictions of the Lease).  “Tenant Affiliate”
means (A) Pacific Crest Capital, Inc., and (B) any other entity which is
controlled by, controls, or is under common control with Tenant.

 

12.2                        Terms and Conditions Applicable to Assignment and
Subletting.

 

12.2.1                  Regardless of Landlord’s consent, no assignment or
subletting shall release Tenant of Tenant’s obligations hereunder or alter the
primary liability of Tenant to pay the rent and other sums due Landlord
hereunder including Tenant’s Expense Share and Tenant’s Tax Share, and to
perform all other obligations to be performed by Tenant hereunder.

 

12.2.2                  Landlord may accept rent from any person other than
Tenant pending approval or disapproval of such assignment or subletting without
being deemed to have consented thereto.

 

12.2.3                  Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a waiver
or estoppel of Landlord’s right to exercise its remedies for the breach of any
of the terms or conditions of this paragraph 12 or any other term or provision
of this Lease.

 

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12.2.4                  If Tenant’s obligations under this Lease have been
guaranteed by a third party or third parties, then an assignment or sublease,
and Landlord’s consent thereto, shall not be effective unless said guarantors
give their written consent to such assignment or sublease and the terms thereof.

 

12.2.5                  The consent by Landlord to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Tenant or to any subsequent or successive assignment or subletting by the
subtenant or assignee, as the case may be.  However, Landlord may consent to
subsequent sublettings and assignments or any amendments or modifications
thereto without notifying Tenant or anyone else liable on the Lease or sublease
and without obtaining their consent and such action shall not relieve such
persons from liability under this Lease or said sublease; provided, however,
such persons shall not be responsible to the extent any such amendment or
modification enlarges or increases the obligations of the Tenant or subtenant
under this Lease or such sublease.

 

12.2.6                  In the event of any default under this Lease, Landlord
may proceed directly against Tenant, any guarantors or anyone else responsible
for the performance of this Lease, including the subtenant or assignee, without
first exhausting Landlord’s remedies against any other person or entity
responsible therefor to Landlord, or any security held by Landlord.

 

12.2.7                  Landlord’s written consent to any assignment or
subletting of the Premises by Tenant shall not constitute an acknowledgment that
no default then exists under this Lease of the obligations to be performed by
Tenant nor shall such consent be deemed a waiver of any then existing default.

 

12.2.8                  The discovery of the fact that any financial statement
or other information provided by Tenant and intended to be relied upon by
Landlord in giving its consent to an assignment or subletting was materially
false shall, at Landlord’s election, render Landlord’s said consent null and
void.

 

12.2.9                  Any disapproval by Landlord of any proposed assignee or
subtenant based on the fact that such party is an existing tenant of the Project
(“Existing Tenant”) shall be deemed to be reasonable.  With respect to any such
proposed assignment or sublease to an Existing Tenant, Landlord shall have the
right, at its election, to recapture the Premises or a portion thereof as
applicable for the purpose of directly marketing the Premises or a portion
thereof to any third party, including the Existing Tenant, selected by Landlord,
for the length of time, in the case of a sublease, offered by Tenant.  Such
recapture shall be effective as of the date specified by Tenant in its request
for consent of Landlord as the proposed commencement date for the assignment or
sublease or, if no date is so specified, on the date selected by Landlord.  In
the event of such recapture by Landlord, this Lease shall be amended to document
the elimination of the applicable portion of the Premises for the applicable
period.  Any necessary documents in connection with such recapture shall be
prepared by Landlord.

 

12.3                        Additional Terms and Conditions Applicable to
Subletting.  Regardless of Landlord’s consent, the following terms and
conditions shall apply to any subletting by Tenant of all or any part of the
Premises and shall be deemed included in all subleases under this Lease whether
or not expressly incorporated therein:

 

12.3.1                  Tenant hereby assigns and transfers to Landlord all of
Tenant’s interest in all rentals and income arising from any sublease heretofore
or hereafter made by Tenant, and Landlord may collect such rent and income and
apply same (or the balance thereof after application of the provisions of
paragraph 12.3.6 hereinbelow) toward Tenant’s obligations under this Lease;
provided, however, that until a default shall occur in the performance of
Tenant’s obligations under this Lease, Tenant may, subject to the provisions of
paragraph 12.3.6 hereinbelow, receive, collect and enjoy the rents accruing
under such sublease.  Landlord shall not, by reason of this sublease or any
assignment of such sublease to Landlord nor by reason of the collection of the
rents from a subtenant, be deemed liable to the subtenant for any failure of
Tenant to perform and comply with any of Tenant’s obligations to such subtenant
under such sublease.  Tenant hereby irrevocably authorizes and directs any such
subtenant, upon receipt of a written notice from Landlord stating that a default
exists in the performance of Tenant’s obligations under this Lease, to pay to
Landlord the rents due and to become due under the sublease.  Tenant agrees that
such subtenant shall have the right to rely upon any such statement and request
from Landlord, and that such subtenant shall pay such rents to Landlord without
any obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Tenant to the contrary.  Tenant
shall have no right or claim against said subtenant or Landlord for any such
rents so paid by said subtenant to Landlord.

 

12.3.2                  No sublease entered into by Tenant shall be effective
unless and until it has been approved in writing by Landlord.  Any subtenant
shall, by reason of entering into a sublease under this Lease, be deemed, for
the benefit of Landlord, to have assumed and agreed to conform and comply with
each and every obligation herein to be performed by Tenant.

 

12.3.3                  In the event Tenant shall default in the performance of
its obligations under this Lease, Landlord, at its option and without any
obligation to do so, may require any subtenant to attorn to Landlord, in which
event Landlord shall undertake the obligations of Tenant under such sublease
from the time of the exercise of said option to the termination of such
sublease; provided, however, Landlord shall not be liable for any prepaid rents
or security deposit paid by such subtenant to Tenant or for any other prior
defaults of Tenant under such sublease.

 

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12.3.4                  No subtenant shall further assign or sublet all or any
part of the Premises without Landlord’s prior written consent.

 

12.3.5                  The subtenant shall have the right to cure a default of
Tenant within the time period specified in said notice of default and the
subtenant shall have a right of reimbursement and offset from and against Tenant
for any such defaults cured by the subtenant.

 

12.3.6                  Notwithstanding anything to the contrary in the
foregoing, fifty percent (50%) of any rent or other economic consideration
received by Tenant as a result of an assignment or subletting which exceeds, on
a square foot basis, in the aggregate, (i) the total rent which Tenant is
obligated to pay to Landlord under the Lease (prorated to reflect obligations
allocable to any portion of the Premises subleased), plus (ii) any reasonable
and customary brokerage commissions (not to exceed five percent (5%) of base
rent payable under the assignment or sublease) actually paid by Tenant in
connection with such assignment or subletting, reasonable tenant improvements
costs, advertising costs, and reasonable attorneys fees, shall be paid to
Landlord within ten (10) days after receipt thereof as additional rent
hereunder, without altering or reducing any other obligations of Tenant
hereunder.

 

12.4                        Landlord’s Expenses.  In the event Tenant shall
assign this Lease or sublet the Premises or request the consent of Landlord to
any assignment or subletting or if Tenant shall request the consent of Landlord
for any act Tenant proposes to do then Tenant shall pay, within ten (10) days of
Tenant’s receipt of demand therefor, (i) an administrative fee not to exceed
Five Hundred Dollars ($500.00) representing Landlord’s cost of reviewing
Tenant’s request and the information pertaining thereto and (ii) Landlord’s
reasonable costs and expenses incurred in connection therewith, including
without limitation attorneys’, architects’, engineers’ and other consultants’
fees.

 

12.5                        Conditions to Consent.  Landlord reserves the right
to condition any approval to assign or sublet upon Landlord’s determination that
(a) the proposed assignee or subtenant shall conduct a business on the Premises
of a quality substantially equal to that of Tenant and consistent with the
general character of the other occupants of the Project and not in violation of
any exclusives or rights then held by other tenants, and (b) the proposed
assignee or subtenant be at least as financially responsible and have a similar
net worth as Tenant was expected to be at the time of the execution of this
Lease or of such assignment or subletting, whichever is greater.

 

13.                              Default; Remedies.

 

13.1                        Default.  The occurrence of any one or more of the
following events shall constitute a material default of this Lease by Tenant:

 

13.1.1                  [Intentionally Deleted]

 

13.1.2                  The breach by Tenant of any of the covenants, conditions
or provisions of paragraphs 7.3 (alterations and additions), 12 (assignment or
subletting), 13.1.5 (insolvency), 13.1.6 (false statement), 16.1 (estoppel
certificate), 29.3 (subordination), 32 (auctions), or 39.1 (easements), all of
which are hereby deemed to be material, non-curable defaults without the
necessity of any notice by Landlord to Tenant thereof.  Nothing herein shall
preclude Landlord from waiving, in writing, any such default.

 

13.1.3                  The failure by Tenant to make any payment of rent or any
other payment required to be made by Tenant hereunder, as and when due, where
such failure shall continue for a period of three (3) business days after
written notice thereof from Landlord to Tenant.  In the event that Landlord
serves Tenant with a Notice to Pay Rent or Quit pursuant to applicable Unlawful
Detainer statutes, such Notice to Pay Rent or Quit shall also constitute the
notice required by this paragraph.  Following each second consecutive late
payment of any installment of rent or additional rent, Landlord shall have the
option (i) to require that, beginning with the first payment of rent next due,
rent shall no longer be paid in monthly installments but shall be payable
quarterly three (3) months in advance and/or (ii) to require that the Tenant
increase the amount, if any, of the Security Deposit required under paragraph
1.9 and paragraph 5 above by one hundred percent (100%), which additional
Security Deposit shall be retained by Landlord, and may be applied by Landlord,
in the manner provided in paragraph 5.

 

13.1.4                  The failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Tenant other than those referenced in paragraphs 13.1, 13.2 and 13.3 above,
where such failure shall continue for a period of thirty (30) days after written
notice thereof from Landlord to Tenant; provided, however, that if the nature of
Tenant’s noncompliance is such that more than thirty (30) days are reasonably
required for its cure, then Tenant shall not be deemed to be in default if
Tenant commences such cure within said thirty (30) day period and thereafter
diligently pursues such cure to completion, so long as such completion occurs
within ninety (90) days after the previously referenced written notice from
Landlord.  To the extent permitted by law, such thirty (30) day notice shall
constitute the sole and exclusive notice required to be given to Tenant under
applicable Unlawful Detainer statutes.

 

13.1.5                  (i) The making by Tenant of any general arrangement or
general assignment for the benefit of creditors; (ii) Tenant becoming a “debtor”
as defined in 11 U.S.C. §101 or any successor statute thereto (unless, in the
case of a petition filed against Tenant, the same is dismissed within sixty (60)
days; (iii) the appointment of a trustee or receiver to take possession of
substantially all of Tenant’s assets located at the Premises or of Tenant’s
interest in this Lease, where possession is not restored to

 

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Tenant within sixty (60) days; or (iv) the attachment, execution or other
judicial seizure of substantially all of Tenant’s assets located at the Premises
or of Tenant’s interest in this Lease, where such seizure is not discharged
within sixty (60) days.  In the event that any provision of this paragraph
13.1.5 is contrary to any applicable law, such provision shall be of no force or
effect.

 

13.1.6                  The discovery by Landlord that any financial statement
or other information given to Landlord by Tenant, or its successor in interest
or by any guarantor of Tenant’s obligation hereunder, was materially false.

 

13.2                        Landlord’s Remedies.

 

13.2.1                  Termination.  In the event of any default by Tenant, in
addition to any other remedies available to Landlord under this Lease, at law or
in equity, Landlord shall have the immediate option to terminate this Lease and
all rights of Tenant hereunder.  In the event that Landlord shall elect to so
terminate this Lease, then Landlord may recover from Tenant:

 

13.2.1.1  the worth at the time of award of any unpaid rent which had been
earned at the time of such termination; plus

 

13.2.1.2  the worth at the time of the 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

 

13.2.1.3  the worth at the time of award of the amount by which the unpaid rent
for the balance of the Term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonable avoided; plus

 

13.2.1.4  Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant’s failure to perform its obligations
under this Lease or which, in the ordinary course of things, would be likely to
result therefrom, including, but not limited to:  “Unreimbursed Leasehold
Improvement Costs” (as defined below); attorneys’ fees; brokers’ commissions;
the costs of refurbishment, alterations, renovation and repair of the Premises;
and costs of removal (including the repair of damage caused by such removal) and
storage (or disposal) of Tenant’s personal property, equipment, fixtures,
Tenant’s alterations, additions, leasehold improvements and any other items
which Tenant is required under this Lease to remove but does not remove.  As
used herein, the term “Unreimbursed Leasehold Improvement Costs” shall mean the
product obtained by multiplying (i) the sum of any leasehold improvement
allowance plus any other costs provided, paid or incurred by Landlord in
connection with the design and construction of the initial leasehold
improvements installed in the Premises on or prior to the Commencement Date
pursuant to the Work Letter, by (ii) a fraction, the numerator of which is the
number of months of the Term of this Lease not yet fully elapsed as of the date
on which this Lease is terminated (excluding any unexercised renewal options),
and the denominator of which is the total number of months of the Term of this
Lease (excluding any unexercised renewal options).  For example, if the total
costs paid or incurred by Landlord with respect to the initial leasehold
improvements was $100,000.00, the Lease term was sixty (60) months, and the
Lease was terminated by reason of Tenant’s default at the end of twelve (12)
months, the Unreimbursed Leasehold Improvement Costs would be equal to
$80,000.00 (i.e., $80,000.00 equals $100,000.00 x 48/60).

 

13.2.1.5  As used in subparagraphs 13.2.1.1 and 13.2.1.2 above, the “worth at
the time of award” is computed by allowing interest at the lesser of (a) twelve
percent (12%) or (b) the maximum interest rate which Landlord is permitted by
law to charge Tenant (the “Lease Rate”).  As used in subparagraph 13.2.1.3
above, the “worth at the time of award” is 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%).

 

13.2.2                  Re-Entry Rights.  In the event of any default by Tenant,
in addition to any other remedies available to Landlord under this Lease, at law
or in equity, Landlord shall also have the right, with or without terminating
this Lease, to re-enter the Premises and remove all persons and property from
the Premises; such property may be removed, stored and/or disposed of pursuant
to this Lease or any other procedures permitted by applicable law, all at
Tenant’s expense.  No re-entry or taking possession of the Premises by Landlord
pursuant to this paragraph 13.2.2, and no acceptance of surrender of the
Premises or other action on Landlord’s part, shall be construed as an election
to terminate this Lease unless a written notice of such intention be given to
Tenant or unless the termination thereof be decreed by a court of competent
jurisdiction.

 

13.2.3                  Continuation of Lease.  In the event of any default by
Tenant, in addition to any other remedies available to Landlord under this
Lease, at law or in equity, Landlord shall have the right to continue this Lease
in full force and effect and to recover rent as it becomes due, whether or not
Tenant shall have abandoned the Premises.  The foregoing remedy shall also be
available to Landlord pursuant to California Civil Code Section 1951.4 and any
successor statute thereto in the event Tenant has abandoned the Premises.  In
the event Landlord elects to continue this Lease in full force and effect
pursuant to this paragraph 13.2.3, then Landlord shall be entitled to enforce
all of its rights and remedies under this Lease, including the right to recover
rent as it becomes due.  Landlord’s election not to terminate this Lease
pursuant to this paragraph 13.2.3 or pursuant to any other provision of this
Lease, at law or in equity, shall not preclude Landlord from subsequently
electing to terminate this Lease or pursuing any of its other remedies.

 

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13.2.4                  In the event of a Chronic Delinquency (as hereinafter
defined), at Landlord’s option, Landlord shall have the right, in addition to
all other remedies under this Lease and at law or equity, to require that Rent
be paid by Tenant quarterly, in advance.  This provision shall not limit in any
way nor be construed as a waiver of the rights and remedies of Landlord provided
herein or by law or equity in the event of delinquency. “Chronic Delinquency”
shall mean failure by Tenant to pay Rent, or any other payments required to be
paid by Tenant under this Lease, within three (3) days after written notice
thereof for any three (3) months (consecutive or nonconsecutive) during any
twelve (12) month period.

 

13.2.5                  Rights and Remedies Cumulative.  All rights, options and
remedies of Landlord contained in this paragraph 13.2 and elsewhere in this
Lease shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Landlord shall have the right to pursue any one or
all of such remedies or any other remedy or relief which may be provided by law
or in equity, whether or not stated in this Lease.  Nothing in this paragraph
13.2 shall be deemed to limit or otherwise affect Tenant’s indemnification of
Landlord pursuant to any provision of this Lease.

 

13.3                        Default by Landlord.  Landlord shall not be in
default unless Landlord fails to perform obligations required of Landlord within
thirty (30) days after written notice by Tenant to Landlord and to the holder of
any first Mortgage or deed of trust covering the Premises whose name and address
shall have theretofore been furnished to Tenant in writing, specifying wherein
Landlord has failed to perform such obligation; provided, however, that if the
nature of Landlord’s obligation is such that more than thirty (30) days are
required for performance then Landlord shall not be in default if Landlord
commences performance within such 30-day period and thereafter diligently
pursues the same to completion but in all events not beyond one hundred twenty
(120) days after Tenant’s original notice to Landlord.  In no event shall Tenant
have the right to terminate this Lease as a result of Landlord’s default and
Tenant’s remedies shall be limited to damages and/or an injunction.

 

13.4                        Late Charges.  Tenant hereby acknowledges that late
payment by Tenant to Landlord of Base Rent, Tenant’s Expense Share, Tenant’s Tax
Share or other sums due hereunder will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult and impractical to ascertain.  Such costs include, but are not limited
to, processing and accounting charges, loss of use of such funds by Landlord and
late charges which may be imposed on Landlord by the terms of any mortgage or
trust deed covering the Project.  Accordingly, if any installment of Base Rent,
Operating Expenses, or any other sum due from Tenant shall not be received by
Landlord or Landlord’s designee within five (5) business days after written
notice that such amount shall be due, Tenant shall pay to Landlord a late charge
equal to ten percent (10%) of such overdue amount.  The parties hereby agree
that such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of late payment 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. 
Notwithstanding the foregoing, Landlord shall waive the first late charge during
any 12-month period provided that payment is made within ten (10) business days
after written notice from Landlord.

 

14.                               Condemnation.  If the Premises or any portion
thereof or the Project are taken under the power of eminent domain, or sold
under the threat of the exercise of said power (all of which are herein called
“condemnation”), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first occurs;
provided, however, that, if so much of the Premises or the Project are taken by
such condemnation as would in Landlord’s opinion substantially and adversely
affect the operation and profitability of Tenant’s business conducted from the
Premises, Tenant shall have the option, to be exercised only in writing within
thirty (30) days after Landlord shall have given Tenant written notice of such
taking (or in the absence of such notice, within thirty (30) days after the
condemning authority shall have taken possession), to terminate this Lease as of
the date the condemning authority takes such possession.  If Tenant does not
terminate this Lease in accordance with the foregoing, this Lease shall remain
in full force and effect as to the portion of the Premises remaining, except
that the rent and Tenant’s Expense Share and Tenant’s Tax Share shall be reduced
in the proportion that the rentable square feet of the Premises taken bears to
the total rentable square feet of the Premises.  Common Areas taken shall be
excluded from the Common Areas usable by Tenant and no reduction of rent shall
occur with respect thereto or by reason thereof.  Landlord shall have the option
in its sole discretion to terminate this Lease as of the taking of possession by
the condemning authority, by giving written notice to Tenant of such election
within thirty (30) days after receipt of notice of a taking by condemnation of
any part of the Premises or the Project.  Any award for the taking of all or any
part of the Premises or the Project under the power of eminent domain or any
payment made under threat of the exercise of such power shall be the property of
Landlord, whether such award shall be made as compensation for diminution in
value of the leasehold or for the taking of the fee, or as severance damages;
provided, however, that Tenant shall be entitled to any separate award for loss
of or damage to Tenant’s trade fixtures, removable personal property and
unamortized tenant improvements that have been paid for by Tenant.  For that
purpose the cost of such improvements shall be amortized over the original term
of this Lease excluding any options.  In the event that this Lease is not
terminated by reason of such condemnation, Landlord shall to the extent of
severance damages received by Landlord in connection with such condemnation,
repair any damage to the Premises caused by such condemnation except to the
extent that Tenant has been reimbursed therefor by the condemning authority. 
Tenant shall pay any amount in excess of such severance damages required to
complete such repair.  Notwithstanding the foregoing, Landlord shall only have
the right to terminate this Lease if Landlord terminates the leases of other
tenants similarly affected by the taking.

 

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15.                               Broker’s Fee.

 

15.1                           The parties recognize as the broker(s) who
negotiated this Lease the party (or parties) whose name (or names) is (are)
stated in paragraph 1.16 of the Basic Lease Provisions.  Landlord shall pay to
Landlord’s Broker a fee as set forth in a separate agreement between Landlord
and Landlord’s Broker.

 

15.2                           Tenant and Landlord each represents and warrants
to the other that neither has had any dealings with any person, firm, broker or
finder (other than the person(s), firm(s), broker(s) or finder(s), if any, whose
names are set forth in paragraph 1.16 of the Basic Lease Provisions in
connection with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and no other broker or other person, firm or
entity is entitled to any commission or finder’s fee in connection with said
transaction and Tenant and Landlord do each hereby indemnify and hold the other
harmless from and against any costs, expenses, attorneys’ fees or liability for
compensation or charges which may be claimed by any such unnamed person, firm,
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying party; the foregoing indemnity by Tenant shall also apply to
any claim by Tenant’s Broker.

 

16.                               Estoppel Certificate.

 

16.1                           Tenant shall at any time upon not less than ten
(10) business days’ prior written notice from Landlord execute, acknowledge and
deliver to Landlord a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Lease, as so modified, is in full
force and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not any uncured defaults
on the part of Landlord, or specifying such defaults if any are claimed, and
(iii) certifying as to such other matters as may be reasonably requested by
Landlord or by a prospective purchaser or encumbrancer of all or any part of the
Project.  Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Project.

 

16.2                           At Landlord’s option, the failure to deliver such
statement within such time shall be a material, non-curable default of this
Lease by Tenant, subject, however to the following.  In the event that Landlord
has not received the estoppel certificate within five (5) business days of
Landlord’s written notice, Landlord shall provide Tenant a second written notice
from Landlord as set forth above.  In the event that Landlord does not receive
the statement set forth above from Tenant, than it shall be conclusive upon such
party that (i) this Lease is in full force and effect, without modification
except as may be represented by Landlord, (ii) there are no uncured defaults in
Landlord’s performance, (iii) not more than one month’s rent has been paid in
advance, and (iv) there are no remaining obligations of Landlord under this
Lease yet to be performed.

 

16.3                           Tenant shall furnish Landlord, concurrently with
any Estoppel Certificate, or, at Landlord’s discretion within ten (10) business
days following Landlord’s written reasonable request therefor, such financial
statements of Tenant and any obligor or other persons or entities legally
responsible for any of the obligations of Tenant under the Lease (collectively,
including without limitation all guarantors, co-tenants, general partners,
cosigners, sub-tenants, or assignees, and predecessors in interest to Tenant,
the “Obligor”) of the Lease as may be reasonably required by Landlord or any
lender, purchaser, or prospective lender or purchaser from or to Landlord, and
any information reasonably required by Landlord, which shall include, without
limitation, at Landlord’s request, balance sheets and profit and loss statements
of Tenant or any such Obligor, and operating statements relating to operations
at the Premises, certified by Tenant’s chief financial officer or certified
public accountant, for the last three complete fiscal years of Tenant and any
such Obligor and fiscal year-to-date through the last day of the month preceding
Landlord’s request for such statements, all prepared in accordance with
generally accepted accounting principles consistently applied.  Any failure of
Tenant to deliver such statements and certifications requested by Landlord
within fifteen (15) days following Landlord’s request therefor shall be deemed
to be a non-curable event of default under this Lease, notwithstanding any other
provision of the Lease to the contrary.

 

17.                               Landlord’s Liability.  The term “Landlord” as
used herein shall mean only the owner or owners, at the time in question, of the
fee title or a Tenant’s interest in a ground lease of the Project, and in the
event of any transfer of such title or interest, Landlord herein named (and in
case of any subsequent transfers the then grantor) shall be relieved from and
after the date of such transfer of all liability as respects Landlord’s
obligations thereafter to be performed, provided that any funds in the hands of
Landlord or the then grantor at the time of such transfer in which Tenant has an
interest, shall be delivered to the grantee.  The obligations contained in this
Lease to be performed by Landlord shall, subject as aforesaid, be binding on
Landlord’s successors and assigns, only during their respective periods of
ownership.

 

18.                               Severability.  The invalidity of any provision
of this Lease as determined by a court of competent jurisdiction shall in no way
affect the validity of any other provision hereof.

 

19.                               Interest on Past-due Obligations.  Except as
expressly herein provided, any amount due to Landlord not paid when due shall
bear interest at the lesser of (i) fifteen percent (15%) per annum or (ii) the
maximum rate then permitted by law.  Payment of such interest shall not excuse
or cure any

 

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default by Tenant under this Lease; provided, however, that interest shall not
be payable on late charges incurred by Tenant.

 

20.                              Time of Essence.  Time is of the essence with
respect to the obligations to be performed under this Lease, including with
respect to the Work Letter attached hereto.

 

21.                               Additional Rent.  All monetary obligations of
Tenant to Landlord under the terms of this Lease, including expenses payable by
Tenant hereunder, shall be deemed to be rent.

 

22.                               Incorporation of Prior Agreements;
Amendments.  This Lease contains all agreements of the parties with respect to
any matter mentioned herein.  No prior or contemporaneous agreement or
understanding pertaining to any such matter shall be effective.  This Lease may
be modified in writing only, signed by the parties in interest at the time of
the modification.  Except as otherwise stated in this Lease, Tenant hereby
acknowledges that neither Landlord, Landlord’s employees, agents or manager, nor
Landlord’s Broker nor any cooperating broker on this transaction (including
without limitation Tenant’s Broker, if any) nor any employee or agents of any of
said persons has made any oral or written warranties or representations to
Tenant relative to the condition or use by Tenant of the Premises or the Project
and Tenant acknowledges and agrees that Tenant assumes all responsibility
regarding the Occupational Safety Health Act, the legal use and adaptability of
the Premises and the compliance thereof with all applicable laws and regulations
in effect during the Term of this Lease.

 

23.                               Notices.  Any notice required or permitted to
be given hereunder shall be in writing and may be given by personal delivery,
Federal Express or other similar overnight service, or by certified or
registered mail, and shall be deemed sufficiently given if delivered or
addressed to Tenant at the Premises or to Landlord at the address noted in
paragraph 1.15 of the Basic Lease Provisions, as the case may be.  Mailed
notices shall be deemed given upon actual receipt at the address required, or
forty-eight hours following deposit in the mail, postage prepaid, whichever
first occurs.  Either party may by notice to the other specify a different
address for notice purposes except that upon Tenant’s taking possession of the
Premises, the Premises shall constitute Tenant’s address for notice purposes.  A
copy of all notices required or permitted to be given to Landlord or Tenant
hereunder shall be concurrently transmitted to such party or parties at such
addresses as Landlord or Tenant may from time to time hereafter designate by
notice to the other party.

 

24.                               Waivers.  No waiver by Landlord of any
provision hereof shall be deemed a waiver of any other provision hereof or of
any subsequent breach by Tenant of the same or any other provision.  Landlord’s
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Landlord’s consent to or approval of any subsequent act by
Tenant.  The acceptance of rent hereunder by Landlord shall not be a waiver of
any preceding breach by Tenant of any provision hereof, other than the failure
of Tenant to pay the particular rent so accepted, regardless of Landlord’s
knowledge of such preceding breach at the time of acceptance of such rent.

 

25.                               Recording.  Tenant shall, upon request of
Landlord, execute, acknowledge and deliver to Landlord a “short form” memorandum
of this Lease for recording purposes.  At termination of this Lease, Tenant
shall execute, acknowledge and deliver to Landlord, within five (5) days after
written demand from Landlord to Tenant, any quitclaim deed or other document as
may be reasonably requested by any reputable title insurance company to remove
this Lease as a matter affecting title to the Premises.

 

26.                               Holding Over.  If Tenant, with Landlord’s
express prior written consent, remains in possession of the Premises or any part
thereof after the expiration of the term hereof, such occupancy shall be a
tenancy from month to month upon all the provisions of this Lease pertaining to
the obligations of Tenant, except that the rent payable shall be one hundred
fifty percent (150%) of the rent payable immediately preceding the expiration of
the Term of this Lease, and all options to extend the lease term, rights of
first refusal, opportunities to lease additional space and/or other options and
similar rights, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.  If
Tenant, without Landlord’s express prior written consent, remains in possession
of the Premises or any part thereof after the expiration of the Term of this
Lease, Tenant shall be responsible and liable for any and all claims, demands,
losses, liabilities, costs and expenses arising out of, resulting therefrom or
in any way connected therewith and, without limitation, the provisions of
paragraph 8.7 shall apply.

 

27.                               Covenants and Conditions.  Each provision of
this Lease performable by Tenant shall be deemed both a covenant and a
condition.

 

28.                               Binding Effect; Choice of Law.  Subject to any
provisions hereof restricting assignment or subletting by Tenant and subject to
the provisions of paragraphs 17 and 42, this Lease shall bind the parties, their
personal representatives, successors and assigns.  This Lease shall be governed
by the laws of the State of California applicable to contracts to be wholly
performed within such State, and any litigation concerning this Lease between
the parties shall be initiated in Orange, San Diego or Los Angeles Counties,
California.

 

29.                               Subordination.

 

29.1                           Landlord shall have the right to subordinate this
Lease, and Tenant shall, at Landlord’s request, subordinate its rights under
this Lease, to any existing or future ground lease, covenants, conditions and
restrictions, easements, rights of way or any construction, operation and
reciprocal

 

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easement agreements, deeds of trust or mortgages encumbering the Project, any
advances made on the security thereof and any renewals, modifications,
consolidations, replacements or extensions thereof, whenever made or recorded. 
However, Tenant’s right to quiet possession of the Premises during the Term
shall not be disturbed if Tenant pays the rent and performs all of Tenant’s
obligations under this Lease and is not otherwise in default.  If any ground
lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of
its ground lease, deed of trust or mortgage, and gives written notice thereof to
Tenant, then this Lease shall be deemed prior to such ground lease, deed of
trust or mortgage, whether this Lease is dated prior or subsequent to the date
of said ground lease, deed of trust or mortgage or the date of recording
thereof.

 

29.2                           If Landlord’s interest in the Premises is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord’s interest in the Premises and recognize such transferee
or successor as Landlord under this Lease, provided that the purchaser or lessor
shall acquire and accept the Premises subject to this Lease.  Tenant waives the
protection of any statute or rule of law which gives or purports to give Tenant
any right to terminate this Lease or surrender possession of the Premises upon
the transfer of Landlord’s interest.

 

29.3                           Tenant shall sign and deliver any instrument or
documents necessary or appropriate to evidence any such attornment or
subordination or agreement to do so provided that such interests or documents
recognize that Tenant’s right to quiet possession of the Premises shall not be
disturbed so long as Tenant is not in default of its obligations pursuant to
this Lease beyond any applicable notice and cure period.  If Tenant fails to do
so within ten (10) business days after written request, such failure shall be a
material, non-curable default and Tenant hereby makes, constitutes and
irrevocably appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.

 

29.4                           Landlord agrees that, prior to the Commencement
Date, it will use commercially reasonable efforts to provide Tenant with the
lender’s usual form non-disturbance agreement in favor of Tenant a copy of which
is attached hereto as Exhibit “F”.

 

30.                               Attorneys’ Fees.

 

30.1                           If either party brings an action to enforce the
terms hereof or declare rights hereunder, the prevailing party in any such
action, trial or appeal thereon, shall be entitled to its reasonable attorneys’
fees to be paid by the losing party as fixed by the court in the same or a
separate suit, and whether or not such action is pursued to decision or
judgment.

 

30.2                           The attorneys’ fee award shall not be computed in
accordance with any court fee schedule, but shall be such as to fully reimburse
all attorneys’ fees reasonably incurred in good faith.

 

30.3                           Landlord shall be entitled to reasonable
attorneys’ fees and all other costs and expenses incurred in the preparation and
service of notices of default and consultations in connection therewith, whether
or not a legal action is subsequently commenced in connection with such default.

 

31.                               Landlord’s Access.

 

31.1                           Landlord and Landlord’s agents shall have the
right to enter the Premises at reasonable times and upon reasonable notice to
Tenant (except in the case of an emergency) for the purpose of inspecting the
same, performing any services required of Landlord, showing the same to
prospective purchasers, lenders, or tenants, taking such safety measures,
erecting such scaffolding or other necessary structures, making such
alterations, repairs, improvements or additions to the Premises, the Building or
the Project as Landlord may reasonably deem necessary or desirable and the
erecting, using and maintaining of utilities, services, pipes and conduits
through the Premises and/or other premises as long as there is no material
adverse effect to Tenant’s use of the Premises.  Landlord may at any time place
on or about the Premises, the Building or the Project any “For Sale” signs and
Landlord may at any time during the last 180 days of the Term hereof place on or
about the Premises any “For Lease” signs.  Notwithstanding anything to the
contrary set forth in this Lease, Tenant may 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.  In connection
with the foregoing, Landlord shall not enter such Secured Areas except in the
event of an emergency.  Landlord need not clean any area designated by Tenant as
a Secured Area and shall only maintain or repair such secured areas to the
extent (i) such repair or maintenance is required in order to maintain and
repair the structure or systems of the Building; (ii) as required by applicable
law, or (iii) in response to specific requests by Tenant that are Landlord’s
obligation under this Lease, and in accordance with a schedule reasonably
designated by Tenant, subject to Landlord’s reasonable approval.

 

31.2                           All activities of Landlord pursuant to this
paragraph 31 shall be without abatement of rent, and Landlord shall not have any
liability to Tenant for the same except to the extent caused by the gross
negligence of Landlord.

 

31.3                           Landlord shall have the right to retain keys to
the Premises and to unlock all doors in or upon the Premises other than to
files, vaults and safes, and in the case of emergency to enter the Premises by
any reasonably appropriate means, and any such entry shall not be deemed a
forcible or

 

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unlawful entry or detainer of the Premises or an eviction.  Tenant waives any
charges for damages or injuries or interference with Tenant’s property or
business in connection therewith.

 

32.                               Auctions.  Tenant shall not conduct, nor
permit to be conducted, either voluntarily or involuntarily, any auction upon
the Premises or the Common Areas.  Notwithstanding anything to the contrary in
this Lease, Landlord shall not be obligated to exercise any standard of
reasonableness in determining whether to grant such consent.  The holding of any
auction on the Premises or Common Areas in violation of this paragraph shall
constitute a material, non-curable default of this Lease.

 

33.                               Signs.  Except as provided in paragraph 54,
Tenant shall not place any sign upon the Premises, the Building or the Project
without Landlord’s prior written consent.  Notwithstanding anything to the
contrary in this Lease, Landlord shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.  Tenant shall be
entitled to one (1) of Landlord’s standard suite entry signs, as mutually agreed
upon between Landlord and Tenant, at Landlord’s cost and expense, and in
accordance with all applicable laws, regulations, ordinances and recorded
covenants, conditions and restrictions.

 

34.                               Merger.  The voluntary or other surrender of
this Lease by Tenant, or a mutual cancellation thereof, or a termination by
Landlord, shall not work a merger, and shall, at the option of Landlord,
terminate all or any existing subtenancies or may, at the option of Landlord,
operate as an assignment to Landlord of any or all of such subtenancies.

 

35.                               Construction.  No remedy or election hereunder
shall be deemed exclusive but shall, wherever possible, be cumulative with all
other remedies at law or in equity.  The parties acknowledge that the parties
and their counsel have reviewed and revised this Lease and, therefore, further
acknowledge and agree that the normal rule of construction, to the effect that
any ambiguities are to be resolved against the drafting party, shall not be
employed in the interpretation of this Lease or any exhibits hereto or
amendments hereof and that this Lease shall not be interpreted in favor or
against either party.

 

36.                               Guarantor.  In the event that there is a
guarantor of this Lease, said guarantor shall have the same obligations as
Tenant under this Lease.

 

37.                               Quiet Possession; Authority.  Upon Tenant
paying the rent for the Premises and observing and performing all of the
covenants, conditions and provisions on Tenant’s part to be observed and
performed hereunder, Tenant shall have quiet possession of the Premises for the
entire Term hereof, subject, however (and always), to all of the provisions of
this Lease.

 

38.                               Security Measures—Landlord’s Reservations.

 

38.1                           Notwithstanding any other term or provision of
this Lease, Tenant hereby acknowledges and agrees that Landlord shall have no
obligation whatsoever to provide guard service or other security measures for
the benefit of Tenant, the Premises or the Project.  Tenant assumes all
responsibility for the protection of Tenant, its agents, representatives,
employees, contractors and invitees and the property of Tenant and of Tenant’s
agents and invitees from acts of third parties.  Nothing herein contained shall
prevent Landlord, at Landlord’s sole option, from providing security protection
for the Project or any part thereof, in which event the cost thereof shall be
included within the definition of Operating Expenses, as set forth in paragraph
4.2.7.  Subject to Landlord’s approval of the method of installation and the
location of equipment that is visible from outside of the Premises, Tenant may,
at its own expense, install its own security system in the Premises that is
independent of, and which does not affect Landlord’s security or life safety
system and which does not affect Landlord’s ability to operate the Project on a
commercially reasonable basis.  Tenant shall be solely responsible, at Tenant’s
sole cost and expense, for the monitoring, operation and removal of Tenant’s
security system.  Tenant, at its expense, may also engage the services of a
company providing guard or security personnel for the protection of the
Premises, so long as such services do not interfere with other tenants of the
Building.

 

38.2                           Without limiting its rights at law or elsewhere
under this Lease, Landlord shall have the following rights:

 

38.2.1                  To change the name, address or title of the Project or
building in which the Premises are located;

 

38.2.2                  To provide and install Building standard graphics on the
door of the Premises and such portions of the Common Areas as Landlord shall
reasonably deem appropriate;

 

38.2.3                  To permit any tenant the exclusive right to conduct any
business as long as such exclusive does not conflict with any rights expressly
given herein;

 

38.2.4                  To place such signs, notices or displays as Landlord
reasonably deems necessary or advisable upon the roof, exterior of the buildings
or the Project or on pole signs in the Common Areas.

 

38.3                           Tenant shall not:

 

38.3.1                  Use a representation (photographic or otherwise) of the
Building or the Project or their name(s) in connection with Tenant’s business;

 

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38.3.2                  Suffer or permit anyone, except in emergency, to go upon
the roof of the Building.

 

39.                               Easements.

 

39.1                           Landlord reserves to itself the right, from time
to time, to grant such easements, rights and dedications that Landlord deems
necessary or desirable, and to cause the recordation of Parcel Maps and
restrictions, so long as such easements, rights, dedications, Parcel Maps and
restrictions do not unreasonably interfere with the use of the Premises by
Tenant.  Tenant shall sign, so long as the same are reasonable, any of the
aforementioned documents upon request of Landlord and failure to do so shall, if
Landlord so elects, constitute a material, non-curable default of this Lease by
Tenant without the need for further notice to Tenant.

 

39.2                           The obstruction of Tenant’s view, air, or light
by any structure erected in the vicinity of the Building, whether by Landlord or
third parties, shall in no way affect this Lease or impose any liability upon
Landlord.

 

40.[Intentionally Deleted]

 

41.                               Landlord’s Right to Perform.  Except as
specifically provided otherwise in this Lease, all covenants and agreements by
Tenant under this Lease shall be performed by Tenant at Tenant’s sole cost and
expense and without any abatement or offset of rent.  If Tenant shall fail to
pay any sum of money (other than Basic Rent) or perform any other act on its
part to be paid or performed hereunder and such failure shall continue for three
(3) business days with respect to monetary obligations (or ten (10) days with
respect to non-monetary obligations) then, notwithstanding anything to the
contrary provided elsewhere herein, after Tenant’s receipt of written notice
thereof from Landlord, Landlord may, without waiving or releasing Tenant from
any of Tenant’s obligations, make such payment or perform such other act on
behalf of Tenant.  All sums so paid by Landlord and all necessary incidental
costs incurred by Landlord in performing such other acts, together with interest
at the Lease Rate (as defined in paragraph 13.2.1.5), shall be payable by Tenant
to Landlord within five (5) business days after demand therefor as additional
rent.  The foregoing rights are in addition to any and all remedies available to
Landlord upon Tenant’s default as described in paragraph13.2.

 

42.                               Limitation on Landlord’s Liability. 
Notwithstanding anything contained in this Lease to the contrary, the
obligations of Landlord under this Lease (including any actual or alleged breach
or default by Landlord) do not constitute personal obligations of the individual
partners, directors, officers, employees or shareholders of Landlord or
Landlord’s partners, and Tenant shall not seek recourse against the individual
partners, directors, officers, employees or shareholders of Landlord or
Landlord’s partners, or any of their personal assets for satisfaction of any
liability with respect to this Lease.  In addition, in consideration of the
benefits accruing hereunder to Tenant and notwithstanding anything contained in
this Lease to the contrary, Tenant hereby covenants and agrees for itself and
all of its successors and assigns that the liability of Landlord for its
obligations under this Lease (including any liability as a result of any actual
or alleged failure, breach or default hereunder by Landlord), shall be limited
solely to, and Tenant’s and its successors’ and assigns’ sole and exclusive
remedy shall be against, Landlord’s interest in the Project and proceeds
therefrom, and no other assets of Landlord.

 

43.                               Toxic Materials.

 

43.1                        Definitions.

 

43.1.1                  For purposes of this paragraph 43, “Hazardous Material”
shall mean any substance:

 

(i)  the presence of which requires investigation or remediation under any
federal, state or local statute, regulation, ordinance, order, action or policy;
or

 

(ii)  which is or becomes defined as a “hazardous waste” or “hazardous
substance” under any federal, state or local statute, regulation, ordinance or
amendments thereto, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. section 9601
et seq.) and or the Resource Conservation and Recovery Act (42 U.S.C.
section 6901 et seq.); or

 

(iii)  which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic, or otherwise hazardous or is or becomes regulated by
any governmental authority, agency, department, commission, board, agency or
instrumentality of the United States, the State of California or any political
subdivision thereof; or

 

(iv)  the presence of which on the Premises, Building or Project causes or
threatens to cause a nuisance upon the Premises, Building or Project or to
adjacent properties or poses or threatens to pose a hazard to the Premises,
Building or Project or to the health or safety of persons on or about the
Premises, Building or Project; or

 

(v)  without limitation which contains gasoline, diesel fuel or other petroleum
hydrocarbons; or

 

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(vi)  without limitation which contains polychlorinated bipheynols (PCBs),
asbestos or urea formaldehyde foam insulation; or

 

(vii)  which is or becomes defined as “medical waste” under the Medical Waste
Management Act (Health & Safety Code Sections 25015-25099.3).

 

43.1.2                  For purposes of this paragraph 43, “Environmental
Requirements” means all applicable present and future statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, approvals, plans,
authorizations, concessions, franchises and similar items, of all governmental
agencies, departments, commissions, boards, bureaus or instrumentalities of the
United States, states and political subdivisions thereof and all applicable
judicial and administrative and regulatory decrees, judgments and orders
relating to the protection of human health or the environment, including without
limitation:

 

(i)  all requirements, including but not limited to those pertaining to
reporting, licensing, permitting, investigation and remediation of emissions,
discharges, releases or threatened releases of Hazardous Materials, chemical
substances, pollutants, contaminants or hazardous or toxic substances, materials
or wastes, whether solid, liquid or gaseous in nature, into the air, surface
water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
chemical substances, pollutants, contaminants or hazardous or toxic substances,
materials, or wastes, whether solid, liquid or gaseous in nature; and

 

(ii)  all requirements pertaining to the protection of the health and safety of
employees or the public.

 

43.1.3                  For purposes of this paragraph 43, “Environmental
Damages” means all claims, judgments, damages, losses, penalties, fines,
liabilities (including strict liability), encumbrances, liens, costs and
expenses of investigation and defense of any claim, whether or not such claim is
ultimately defeated, and of any good faith settlement of judgment, of whatever
kind or nature, contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, including without limitation reasonable attorneys’ fees and
disbursements and consultants’ fees, any of which are incurred at any time as a
result of the existence on or after the date upon which Tenant takes possession
of the Premises (the “Possession Date”) of Hazardous Material upon, about,
beneath the Premises, Building or Project or migrating or threatening to migrate
to or from the Premises, Building or Project or the existence of a violation of
Environmental Requirements pertaining to the Premises, Building or Project,
regardless of whether the existence of such Hazardous Material or the violation
of Environmental Requirements arose prior to the present ownership or operation
of the Premises, Building or Project, and including without limitation:

 

(i)  damages for personal injury, or injury to property or natural resources
occurring upon or off of the Premises, Building or Project, foreseeable or
unforeseeable, including, without limitation, lost profits, consequential
damages, the cost of demolition and rebuilding of any improvements on real
property, interest and penalties including but not limited to claims brought by
or on behalf of employees of Tenant, with respect to which Tenant waives any
immunity to which it may be entitled under any industrial or worker’s
compensation laws;

 

(ii)  fees incurred for the service of attorneys, consultants, contractors,
experts, laboratories and all other costs incurred in connection with the
investigation or remediation of such Hazardous Materials or violation of
Environmental Requirements, including, but not limited to, the preparation of
any feasibility studies or reports or the performance of any cleanup, remedial,
removal, response, abatement, containment, closure, restoration or monitoring
work required by any federal, state or local governmental agency or political
subdivision, or reasonably necessary to make full economic use of the Premises,
Building or Project or any other property or otherwise expended in connection
with such conditions, and including without limitation any attorneys’ fees,
costs and expenses incurred in enforcing this Lease or collection of any sums
due hereunder;

 

(iii)  liability to any third person or governmental agency to indemnify such
person or agency for costs expended in connection with the items referenced in
subparagraph (ii) herein; and

 

(iv)  diminution in the value of the Premises, Building or Project, and damages
for the loss of business and restriction on the use of or adverse impact on the
marketing of rentable or usable space or of any amenity of the Premises,
Building or Project.

 

43.2                        Tenant’s Obligations.                         
Tenant, at its sole cost and expense, shall comply with all Environmental
Requirements relating to the storage, use and disposal of all Hazardous
Materials, including those materials identified in Sections 66680 through 66685
of Title 22 of the California Administrative Code, Division 4, Chapter 30
(“Title 22”), as the same may be amended from time to time.  If Tenant does
store, use or dispose of any Hazardous Materials other than copy machine toners
or similar commonly used office supplies, Tenant shall notify Landlord in
writing at least ten (10) days prior to the first appearance of such materials
on the Premises, Building or Project, and Landlord shall have the right to
disapprove of Tenant’s use thereof on the Premises (provided that Landlord’s
failure to disapprove thereof shall not constitute Landlord’s approval thereof
or excuse Tenant from complying with the terms of this paragraph 43), and
Tenant’s failure to so notify Landlord shall constitute a default under this
Lease.  Tenant shall be solely responsible for and shall protect, defend,
indemnify, and hold Landlord, its agents and contractors harmless from and
against all Environmental Damages arising out of

 

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or in connection with the storage, use and disposal of Hazardous Materials by
Tenant, its officers, employees, agents, representatives, servants, subtenants,
concessionaires, licensees, contractors, invitees or permittees.  If the
presence of Hazardous Materials on the Premises, Building or Project caused or
permitted by Tenant results in contamination or deterioration of water or soil
resulting in a level of contamination greater than the levels permitted or
established by any governmental agency having jurisdiction over such
contamination, then Tenant shall, at its sole cost and expense, promptly take
any and all action necessary to clean up such contamination if required by law
or as a condition to the issuance or continuing effectiveness of any
governmental approval which relates to the use of the Premises, Building or
Project.  If at any time prior to the expiration of the Lease Term, Landlord
shall reach a reasonable good faith determination that Tenant or its officers,
employees, agents, representatives, servants, subtenants, concessionaires,
licensees, contractors, invitees or permittees have at any time violated any
Environmental Requirements, discharged any Hazardous Material onto the Premises,
Building or Project, or surrounding areas or otherwise subjected Landlord or the
Project to liability for Environmental Damages, then Landlord shall have the
right to require Tenant, at Tenant’s expense, to conduct appropriate tests of
water and soil and to deliver to Landlord the result of such tests to
demonstrate that no contamination in excess of legally permitted levels has
occurred as a result of Tenant’s occupancy or use of the Premises, Building or
Project.  If the presence of Hazardous Materials on the Premises, Building or
Project is caused, contributed to or permitted by Tenant or its officers,
employees, agents, representatives, servants, subtenants, concessionaires,
licensees, contractors, invitees or permittees such that Landlord or Tenant
becomes obligated to conduct the necessary clean-up of such contamination as
required above, then Tenant shall further be solely responsible for, and shall
protect, defend, indemnify and hold Landlord, including Landlords’ agents,
representatives, employees, lenders and contractors, harmless from and against
any and all claims, demands, losses, costs and liabilities, including actual
attorneys’ fees, expert witness fees and costs, arising out of or in connection
with any removal, cleanup and restoration work and materials required hereunder
to return the Premises, Building or Project and any other property of whatever
nature to conditions which existed prior to Tenant’s use thereof and which are
within acceptable levels according to all Environmental Requirements or any
other Federal, State, local or other governmental requirements.  Tenant’s
obligations, liabilities and duties hereunder shall survive the expiration or
earlier termination of this Lease.

 

43.3                        Notwithstanding anything herein to the contrary, in
no event shall Tenant be responsible or liable for any pre-existing Hazardous
Materials on the Premises and Tenant shall not be responsible for any
Environmental Damages, to the extent caused by or contributed to by Landlord or
another party.  Landlord has no actual knowledge (and with no duty to
investigate) that there is present within the Premises, Building or Project, any
Hazardous Materials.

 

44.                               Authority.  If Tenant is a corporation, trust,
limited liability company or general or limited partnership, Tenant represents
and warrants that each individual executing this Lease on behalf of such entity,
is duly authorized to execute and deliver this Lease on behalf of said entity. 
If Tenant is a corporation, trust, limited liability company or partnership,
Tenant shall deliver to Landlord evidence of such authority satisfactory to
Landlord prior to its execution of this Lease.

 

45.                               [Intentionally Deleted]

 

46.                               No Offer.  Preparation of this Lease by
Landlord or Landlord’s agent and submission of same to Tenant shall not be
deemed an offer to Tenant to lease.  This Lease shall become binding upon
Landlord and Tenant only when fully executed by and delivery to both parties.

 

47.                               Lender Modification.  Tenant agrees to make
such reasonable modifications to this Lease as may be reasonably required by a
lender in connection with the obtaining of financing or refinancing of the
Project or any part thereof provided that any such modification 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.

 

48.                               Multiple Parties.  If more than one person or
entity is named as either Landlord or Tenant herein, except as otherwise
expressly provided herein, the obligations of the Landlord or Tenant herein
shall be the joint and several responsibility of all persons or entities named
herein as such Landlord or Tenant, respectively.

 

49.                               Work Letter.  This Lease is supplemented by
that certain Work Letter of even date executed by Landlord and Tenant, which
Work Letter is set forth in Exhibit D attached hereto.

 

50.                               Waiver of Jury Trial.  Landlord and Tenant
hereby waive their respective rights to trial by jury of any cause of action,
claim, counter-claim or cross-complaint in any action, proceeding and/or hearing
brought by either Landlord against Tenant or Tenant against Landlord on any
matter whatsoever arising out of, or in any way connected with, this Lease, the
relationship of Landlord and Tenant, Tenant’s use or occupancy of the Premises,
or any claim of injury or damage, or the enforcement of any remedy under any
law, statute, or regulation, emergency or otherwise, now or hereafter in
effect.  Notwithstanding the foregoing, Landlord and Tenant agree that this
waiver shall not be effective where the legal effect of such waiver would be to
invalidate, in whole or in part, or to limit or impair in any manner any policy
of insurance in force for the benefit of Landlord or Tenant or to limit or
impair any rights, remedies or coverage afforded by such policy or policies of
insurance.  Tenant agrees that any lawsuit brought by Tenant against Landlord
must be filed in a court of competent jurisdiction in Orange County, California.

 

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51.                               Counterparts.  This Lease may be executed in
any number of counterparts, each to be an original, but all of which shall
constitute one agreement, and it shall be sufficient if any party hereto signs
any counterpart.

 

52.                               Force Majeure.  Whenever a period of time is
herein prescribed for the taking of any action by Landlord, or a non-monetary
action by Tenant, neither party shall not be liable or responsible for, and
there shall be excluded from the computation of such period of time, any delays
due to strikes, riots, acts of God, shortages of labor or materials, war
governmental laws, regulations or restrictions, or any act, omission, delay, or
neglect of Tenant or any of Tenant’s employees or agents, or any other cause
whatsoever beyond the reasonable control of Landlord.  Nothing contained in this
paragraph 52 shall excuse or delay Tenant’s obligation to pay rent or other
charges under this Lease.

 

53.                               Best Efforts.  Whenever in this Lease there is
imposed upon Landlord the obligation to use Landlord’s best efforts or
reasonable efforts or reasonable efforts or diligence, Landlord will be required
to exert such efforts or diligence only to the extent the same are economically
feasible and will not impose upon Landlord extraordinary financial or other
burdens.

 

54.                              Signage.

 

54.1                                                   Landlord agrees that for
so long as Pacific Crest Bank, a California corporation, which is the original
Tenant under this Lease (“PCB”) leases and occupies more than 5,000 rentable
square feet (measured in accordance with the ANSI/BOMA 1996 Standard) of the
Building, PCB shall have the right to construct a monument sign on the Property;
provided that the design, dimensions, construction and location of such monument
signage shall be subject to Landlord’s reasonable approval and further provided
that: (1) such monument signage is not prohibited by any applicable code,
ordinance, statute, rule or regulation or by any action or rule of any landmark
commission having jurisdiction, and (2) all consents necessary from all
governmental authorities and landmark commissions having jurisdiction are
reasonably obtainable and are first obtained by PCB.  PCB shall provide Landlord
with three (3) sets of full color scale drawings showing the location and size
of the monument signage.

 

54.2                                                   PCB will bear the costs
and risk associated with creating, designing, manufacturing, installing and
insuring the monument signage set forth in Section (a) above.  PCB shall bear
the cost of maintaining said monument signage.

 

54.3                                                   If, and only if, PCB
leases, in the aggregate, less than 5,000 rentable square feet of the Building,
then upon not less than thirty (30) days’ prior notice, Landlord may require PCB
to remove its name from the monument signage.

 

54.4                                                   Upon termination or
expiration of this Lease or of PCB’s right to possession of the Premises set
forth in Section (a) above and the monument sign is to be removed, then at
Landlord’s election,  PCB shall, at PCB’s sole expense, remove such monument
signage and restore and repair all parts of the Property affected by the
installation or removal of said monument signage, to the condition existing
prior to its installation or to a condition reasonably acceptable to Landlord. 
If Landlord does not then desire that such monument signage be removed, then
such monument signage shall remain until such time as Landlord shall desire that
such monument signage be removed, in which event PCB shall remove such monument
signage and repair and restore all damage caused by such removal.

 

54.5                                                   PCB shall indemnify,
defend and hold Landlord free and harmless of, from and against any and all
claims, demands, losses, liabilities, damages, cost or expenses, including
reasonable attorney’s fees incurred or suffered by Landlord arising out of,
resulting from, or in any way connected to PCB’s installation, maintenance,
repair, and removal of the building monument signage or a breach, default, or
failure of performance by PCB under this paragraph 56.  Prior to installing
repairing or removing the building monument signage, PCB will give Landlord ten
(10) days prior notice and in connection with such installation, repair or
removal, PCB will either use a contractor selected by Landlord or if PCB selects
the contractor, PCB shall provide the name of the contractor for Landlord’s
reasonable approval, which approval shall not be unreasonably withheld.

 

55.                               Option to Extend.  Tenant shall have the right
to extend the Term of the Lease for two (2) additional periods of five (5) years
each (each an “Extension Period”), provided that Tenant (i) is not in default
under any provision of the lease, (ii) is occupying all of the Premises, and
(iii) has not assigned or subleased any portion of the Premises.

 

55.1                           Exercise of Option.  Tenant shall exercise its
right to extend the Term only by delivering written notice to Landlord of
Tenant’s desire to so extend the Term no earlier than two hundred seventy (270)
days and not later than one hundred eighty (180) days prior to the commencement
of the applicable Extension Period (the “Extension Notice”).

 

55.2                           Extension Amendment.  Within fifteen (15)
business days after receipt of the Extension Notice, Landlord shall prepare and
deliver to Tenant an amendment to this Lease (the “Extension Amendment”).  The
Extension Amendment shall provide for a Monthly Rental equal to the greater of
(i) the Monthly Rental in effect during the calendar year immediately preceding
the Extension Period, or (ii) the comparable market rental for the Premises
determined by Landlord

 

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based primarily on rental rates for recent leases within the Project and
secondarily on the then prevailing rental rates in the immediate marketplace for
properties of equivalent quality, size, utility and location, with the length of
the lease term, and credit standing of the Tenant.

 

55.3                           Objection to Landlord’s Determination of
Comparable Market Rental.  If Tenant objects to Landlord’s determination of the
comparable market rental for the Premises, Landlord shall appoint a qualified
real estate professional with at least ten (10) years experience in commercial
real estate to appraise the Premises and/or otherwise determine the comparable
market rental (the “Landlord’s Appraisal”).  The Landlord’s Appraisal shall be
the comparable market rental for the purpose of determining the Monthly Rental
during the Extension Period if Tenant does not (i) within five (5) business days
after the date of notice of the Landlord’s Appraisal employ and pay a qualified
real estate professional with at least ten (10) years experience in commercial
real estate to determine the comparable market rental for the Premises (the
“Tenant’s Appraisal”), and (ii) within twenty (20) days thereafter, submit to
Landlord, Tenant’s Appraisal together with a written summary of the methods used
and data collected to make such determination.  If Landlord’s Appraisal and
Tenant’s Appraisal differ by (i) less than ten percent (10%), the greater of the
two shall be the comparable market rental for the premises or (ii) more than ten
percent (10%), Landlord and Tenant shall promptly instruct its real estate
professional to jointly appoint a third qualified real estate professional with
at least ten (10) years experience in commercial real estate to determine the
comparable market rental for the Premises (the “Third Appraisal”).  Landlord and
Tenant shall each pay one-half (1/2) of the expenses of the Third Appraisal. 
The appraisal among the three (3) that is furthest from the median of all of the
appraisals shall be disregarded and the average of the other two shall be the
comparable market rental for the Premises and binding upon Landlord and Tenant. 
Until appraisal procedures are final, Landlord and Tenant shall abide by the
provisions of the Extension Amendment or New Lease.

 

55.4                           Option Personal.  It is understood and agreed
that the Option is personal to Pacific Crest Bank, a California corporation, and
is not transferable; in the event of any assignment or subleasing of any or all
of the Premises said Option shall be null and void.

 

55.5                           Time of the Essence.  Time shall be of the
essence regarding all the periods set forth above for the exercise of the
options, execution of the Extension Amendment or New Lease and the objection to
the determination of the comparable market rental for the Premises.  The failure
of Tenant to timely exercise the options as provided in the second and third
paragraph above shall cause the option to automatically cease and terminate,
and, in such event, this lease shall terminate without extension.  If Tenant
fails to timely comply with the provisions set forth in the third paragraph
above, Tenant shall be deemed to have accepted the comparable market rental as
determined by Landlord.

 

56.                               Attachments.  Attached hereto are the
following documents which are incorporated herein and made a part of this Lease
for all purposes:

 

Exhibit A - Premises Floor Plan

Exhibit B - Valley Corporate Center Project

Exhibit C - Rules and Regulations

Exhibit D - Work Letter

Exhibit E - Acceptance of Office Space

Exhibit F – Subordination, Attornment and Non-disturbance Agreement

 

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LANDLORD AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN.  THE PARTIES HAVE ALSO HAD AMPLE OPPORTUNITY TO
HAVE THEIR RESPECTIVE ATTORNEYS REVIEW THE CONTENTS HEREIN, AND, BY EXECUTION OF
THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO.  THE PARTIES
HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE
ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD
AND TENANT WITH RESPECT TO THE PREMISES.

 

NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE LANDLORD, ITS COUNSEL, ANY
REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO;
THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO
THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

 

 

LANDLORD:

VCC INVESTORS, L.P.,

 

a California limited partnership

 

 

 

 

By:

BIRTCHER 2, L.P., a California limited partnership,

 

 

General Partner

 

 

 

 

 

By:

BIRTCHER 2 GP, LLC, a California limited liability company,
 its General Partner

 

 

 

 

 

 

By:

BIRTCHER ANDERSON PROPERTIES,

 

 

 

a California corporation, sole member

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

Robert M. Anderson, President

 

 

 

TENANT:

 

 

PACIFIC CREST BANK,

 

a California corporation

 

 

 

By:

 

 

 

 

 

 

Printed Name:

 

 

 

 

 

 

Title:

 

 

 

 

 

 

Date:

 

 

 

 

 

 

By:

 

 

 

 

 

 

Printed Name:

 

 

 

 

 

 

Title:

 

 

 

 

 

 

Date:

 

 

 

28

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EXHIBIT A

 

PREMISES FLOOR PLAN

 

(ATTACHED)

 

29

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EXHIBIT B

 

LEGAL DESCRIPTION

 

 

Parcel “A” of Parcel Map No. 261, in the City of San Diego, County of San Diego,
State of California, according to map thereof filed in the Office of the County
Recorder of San Diego County, being a division of a portion of Lots 10 and 11 of
E.W. Morse subdivision, according to map thereof No. 5732 filed in the Office of
County Recorder of San Diego County.

 

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EXHIBIT C

 

RULES & REGULATIONS

 

STANDARD OFFICE LEASE

 

GENERAL RULES

 

1.                                       Tenant shall not suffer or permit the
obstruction of any Common Areas, including driveways, walkways and stairways.

 

2.                                       Landlord reserves the right to refuse
access to any persons Landlord in good faith judges to be a threat to the
safety, reputation, or property of the Project and its occupants.

 

3.                                       Tenant shall not make or permit any
noise or odors that annoy or interfere with other tenants or persons having
business within the Project.

 

4.                                       Tenant shall not keep animals or birds
within the Project, and shall not bring bicycles, motorcycles or other vehicles
into areas not designated as authorized for same, except that Tenant shall be
permitted to bring one (1) bicycle into the Premises.

 

5.                                       Tenant shall not make, suffer or permit
litter except in appropriate receptacles for that purpose.

 

6.                                       No sign, advertisement or notice shall
be displayed, printed or affixed on or to the Premises or to the outside or
inside of the Building or so as to be visible from outside the Premises or
Building without Landlord’s prior written consent.  Landlord shall have the
right to remove any non-approved sign, advertisement or notice, without notice
to and at the expense of Tenant, and Landlord shall not be liable for damages
for such removal.  All approved signs or lettering on doors and walls shall be
printed, painted, affixed or inscribed by Landlord or by a person selected by
Landlord and in a manner and style acceptable to Landlord.  Furthermore, no
storage materials, debris, artwork, banners, or similar objects shall be placed
or left in front of windows so as to be visible from outside the premises, or
otherwise be unsightly or inconsistent with a first class office environment.

 

7.                                       The sidewalks, halls, passages, exits,
entrances, elevators and stairways and other portions of the common areas shall
not be obstructed by Tenant or used for any purpose other than for ingress and
egress from Tenant’s Premises.

 

8.                                       Toilet rooms, toilets, urinals, wash
bowls and other apparatus shall not be used for any purpose other than for which
they were constructed and no foreign substance of any kind whatsoever shall be
thrown therein.

 

9.                                       Tenant shall not overload the floor of
the Premises or mark, drive nails, screw or drill into the partitions, ceilings
or floor or in any way deface the Premises nor shall Tenant suffer or permit any
thing in or around the Premises or Building that causes excessive vibration or
floor loading in any part of the Project.

 

10.                                 Landlord shall have the right to prescribe
the weight, size and position of all safes and other heavy equipment brought
into the Building.  The times and manner of moving the same in and out of the
Building shall be prescribed by Landlord, and all such moving must be done under
the supervision of Landlord.  Landlord may exclude from the Building any such
heavy or bulky equipment or articles, the weight of which may exceed the floor
load for which the Building is designed, or such equipment or articles as may
violate any provisions of the Lease of which these rules and regulations are a
part.  Tenant shall not use any machinery or other bulky articles on the
Premises, even though its installation may have been permitted, which may cause
any noise, or jar, or tremor in the floors or walls, or which by its weight
might injure the floor of the Building.  Safes or other heavy equipment shall,
as considered necessary by Landlord, stand on a platform of such thickness as is
necessary to properly distribute the weight.

 

11.                                 Tenant shall not use or keep in the
Premises, Building or Project any kerosene, gasoline or inflammable, explosive
or combustible fluid or material, or use any method of heating or
air-conditioning other than that supplied by Landlord.

 

12.                                 Tenant shall not lay linoleum, tile, carpet
or other similar floor covering so that the same shall be affixed to the floor
of the Premises in any manner except as approved by Landlord.

 

13.                                 Tenant shall cooperate with Landlord in
obtaining maximum effectiveness of the cooling system by closing drapes and
blinds when the sun’s rays fall directly on windows of the Premises.  Tenant
shall not obstruct, alter, or in any way impair the efficient operation of
Landlord’s heating, ventilating and air-conditioning system.  Tenant shall not
tamper with or change the setting of any thermostats or control valves.

 

14.                                 The Premises shall not be used for
manufacturing or for the storage of merchandise.  Tenant shall not, without
Landlord’s prior written consent, occupy or permit any portion of the Premises
to be occupied or used for the manufacture or sale of liquor or tobacco in any
form, or as a barber or

 

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manicure shop, or as an employment bureau.  The Premises shall not be used for
lodging or sleeping or for any improper, objectionable or immoral purpose.  No
auction shall be conducted on the Premises.

 

15.                                 Tenant shall not make, or permit to be made,
any unseemly or disturbing noises, or disturb or interfere with occupants of the
Building, the Project or neighboring buildings or premises or those having
business with it by the use of any musical instrument, radio, phonographs or
unusual noise, or in any other way.  In an effort to maintain a professional
office environment, Tenant shall not permit groups (defined as three or more
individuals) of invitees and customers to gather in the Common Areas on regular
basis (defined as one class per month).

 

16.                                 No vehicles or animals of any kind shall be
brought into or kept in or about the Premises, and no cooking shall be done or
permitted by any tenant in the Premises, except that the preparation of coffee,
tea, hot chocolate and similar items for tenants, their employees and visitors
shall be permitted.  No tenant shall cause or permit any unusual or
objectionable odors to be produced in or permeate from or throughout the
Premises.

 

17.                                 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 any
tenant, nor shall any bottles, parcels or other articles be placed on the
windowsills.

 

18.                                 No additional locks or bolts of any kind
shall be placed upon any of the doors or windows by any tenant, nor shall any
changes be made in existing locks or the mechanisms thereof unless Landlord is
first notified thereof, gives written approval, and is furnished a key
therefor.  Each tenant must, upon the termination of its tenancy, give the
Landlord all keys of stores, offices, or toilets and toilet rooms, either
furnished to, or otherwise procured by, such tenant, and in the event of the
loss of any keys so furnished, such tenant shall pay Landlord the cost of
replacing the same or of changing the lock or locks opened by such key if
Landlord shall deem it necessary to make such change.

 

19.                                 Landlord shall have the right to prohibit
any advertising by any tenant which, in Landlord’s opinion, tends to impair the
reputation of the Building or the Project or its desirability as an office
building and upon written notice from Landlord any tenant shall refrain from and
discontinue such advertising.

 

20.                                 Any person employed by any tenant to do
janitorial work shall, while in the Building or the Project and outside of the
Premises, be subject to and under the control and direction of the office of the
Project (but not as an agent or servant of Landlord, and the tenant shall be
responsible for all acts of such persons).

 

21.                                 No air conditioning unit or other similar
apparatus shall be installed or used by any tenant without the prior written
consent of Landlord.  Tenant shall pay the cost of all electricity used for air
conditioning in the Premises if such electrical consumption exceeds normal
office requirements or is attributable to after hours use, regardless of whether
additional apparatus is installed pursuant to the preceding sentence.

 

22.                                 There shall not be used in any space, or in
the public halls of the Building, either by any tenant or others, any hand
trucks except those equipped with rubber tires and side guards.

 

23.                                 All electrical ceiling fixtures hung in
offices or spaces along the perimeter of the Building must be florescent and/or
of a quality, type, design and bulb color approved by Landlord.  Tenant shall
not permit the consumption in the Premises of more than 2 and 1/2 watts per net
usable square foot in the Premises in respect of office lighting nor shall
Tenant permit the consumption in the Premises of more than 1 and 1/2 watts per
net usable square foot of space in the Premises in respect of the power outlets
therein, at any one time.  In the event that such limits are exceeded, Landlord
shall have the right to remove any lighting fixture or any florescent tube or
bulb therein as it deems necessary and/or to charge Tenant for the cost of the
additional electricity consumed.

 

24.                                 Tenant shall be responsible for the
inappropriate use of any toilet rooms, plumbing or other utilities by Tenant or
its employees, agents, licensees or invitees.  No foreign substances of any kind
are to be inserted therein.

 

25.                                 Tenant shall not deface the walls,
partitions or other surfaces of the Premises or Project.

 

26.                                 Furniture, significant freight and equipment
shall be moved into or out of the Building only with Landlord’s knowledge and
consent, and subject to such reasonable limitations, techniques and timing, as
may be designated by Landlord.  Tenant shall be responsible for any damage to
the Project arising from any such activity.

 

27.                                 Tenant shall not employ any service or
contractor for services or work to be performed on or to the Building, except as
approved by Landlord.

 

28.                                 Landlord reserves the right to close and
lock the Building on Saturdays, Sundays and legal holidays, and on other days
between the hours of 6 P.M. and 8:00 A.M. of the following day, or such other
hours as Landlord may determine.  If Tenant uses the Premises during such
periods (which shall require advance written notice to Landlord and Landlord’s
prior written consent), Tenant shall be responsible for securely locking any
doors it may have opened for entry.

 

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29.                                 No window coverings, shades or awnings shall
be installed or used by Tenant.

 

30.                                 No Tenant, employee or invitee shall go upon
the roof of the Building.

 

31.                                 Tenant shall not suffer or permit smoking or
carrying of lighted cigars or cigarettes in areas reasonably designated by
Landlord or by applicable governmental agencies as non-smoking areas.

 

32.                                 Tenant shall not use any method of heating
other than as provided by Landlord.

 

33.                                 Tenant shall not install, maintain or
operate any vending machines upon the Premises without Landlord’s written
consent, which consent shall not be unreasonable withheld.

 

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

 

35.                                 Landlord reserves the right to waive any one
of these rules or regulations, and/or as to any particular tenant, and any such
waiver shall not constitute a waiver of any other rule or regulation or any
subsequent application thereof to such tenant.

 

36.                                 Tenant assumes all risks from theft or
vandalism and agrees to keep its Premises locked as may be required.

 

37.                                 Landlord reserves the right to make such
other reasonable rules and regulations as it may from time to time deem
necessary or appropriate for the operation or safety of the Project and its
occupants.  Tenant agrees to abide by these and such rules and regulations.

 

38.                                 All doors opening onto public corridors
shall be kept closed, except when being used for ingress and egress.

 

39.                                 Canvassing, soliciting and peddling in the
Building are prohibited and each tenant shall cooperate to prevent the same.

 

40.                                 Tenant shall be required to use chair pads
at each desk under all rolling desk chairs in the Premises.

 

41.                                 Tenant shall fully comply with all present
or future governmentally required programs intended to manage parking,
transportation or traffic in and around the Project or 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 Project,
Building or area-wide 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.

 

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PARKING RULES

 

1.                                       Parking areas shall be used only for
parking by vehicles no longer than full size passenger automobiles herein called
“Permitted Size Vehicles.”  Vehicles other than Permitted Size Vehicles are
herein referred to as “Oversized Vehicles.”

 

2.                                       Tenant shall not permit or allow any
vehicles that belong to or are controlled by Tenant or Tenant’s employees,
suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in
areas other than those designated by Landlord for such activities.

 

3.                                       Parking stickers or identification
devices shall be the property of Landlord and be returned to Landlord by the
holder thereof upon termination of the holder’s parking privileges.  Tenant will
pay such replacement charge as is reasonably established by Landlord for the
loss of such devices.

 

4.                                       Landlord reserves the right to refuse
the sale of monthly identification devices to any person or entity that
willfully refuses to comply with the applicable rules, regulations, laws and/or
agreements.

 

5.                                       Landlord reserves the right to manage
the parking by relocating all or a part of parking spaces and/or to reasonably
allocate them between compact and standard size spaces reserved and unreserved,
handicapped and non-handicapped.

 

6.                                       Users of the parking area will obey all
posted signs and park only in the areas designated for vehicle parking.

 

7.                                       Unless otherwise instructed, every
person using the parking area is required to park and lock his own vehicle. 
Landlord will not be responsible for any damage to vehicles, injury to persons
or loss of property, all of which risks are assumed by the party using the
parking area.

 

8.                                       Validation, if established, will be
permissible only by such method or methods as Landlord and/or its licensee may
establish at rates generally applicable to visitor parking.

 

9.                                       The maintenance, washing, waxing or
cleaning of vehicles in the parking structure or Common Areas is prohibited.

 

10.                                 Tenant shall be responsible for seeing that
all of its employees, agents and invitees comply with the applicable parking
rules, regulations, laws and agreements.

 

11.                                 Landlord reserves the right to modify these
rules and/or adopt such other reasonable and non-discriminatory rules and
regulations as it may deem necessary for the proper operation of the parking
area.

 

12.                                 Such parking use as is herein provided is
intended merely as a license only and no bailment is intended or shall be
created hereby.

 

13.                                 Landlord or its agent may tow or otherwise
remove any vehicles (i) which are parked illegally in the parking areas, (ii)
which constitute a nuisance or annoyance to other users of the Project or
parking areas or (iii), if not prohibited by law, which are in violation of
paragraph 14 below.  Such towing shall be at the sole cost and expense of the
tenant which is in any way responsible for the presence of such vehicle in the
parking area (for example, if the vehicle is parked by any particular tenant’s
invitee, customer or employee, such tenant shall be responsible for the cost of
towing such vehicle).

 

14.                                 Tenant shall not leave vehicles in the
parking areas overnight.

 

15.                                 Landlord reserves the right to designate
reserved parking spaces in the parking areas.

 

16.                                 Landlord reserves the right to require
Tenant and its employees to park vehicles on designated levels of the parking
structure.

 

17.                                 Tenant acknowledges that it is responsible
and agrees to comply with existing and future South Coast Air Quality Management
District (SCAQMD) mandates and requirements imposed on employers in Southern
California.

 

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EXHIBIT D

 

WORK LETTER

(If Plans are to be completed)

 

By and between VCC Investors, L.P., a California limited partnership, as
“Landlord,” and Pacific Crest Bank, a California corporation, as “Tenant.”

 

1.                                      APPLICATION OF EXHIBIT

 

Capitalized terms used and not otherwise defined herein shall have the same
definitions as set forth in the Lease.  The provisions of this Work Letter shall
apply to the planning and completion of leasehold improvements requested by
Tenant (the “Tenant Improvements”) for the fitting out of the initial Premises,
as more fully set forth herein.

 

2.                                      LANDLORD AND TENANT PRE-CONSTRUCTION
OBLIGATIONS

 

2.1                               Preliminary Space Plans.  Tenant’s space
planner has developed preliminary space plans for the Tenant Improvements (the
“Preliminary Space Plans”), which include, without limitation, sketches and/or
drawings showing locations of doors, partitioning, electrical fixtures, outlets
and switches, plumbing fixtures and other requirements, which are determined by
Tenant as required for its use of the Premises.  Landlord shall be entitled, in
all respects, to rely upon all information supplied by Tenant regarding the
Tenant Improvements.

 

2.2                               Working Drawings.  Within fourteen (14) days
of full execution of this Lease by both Landlord and Tenant, Tenant’s Architect
shall prepare working drawings (the “Working Drawings”) for the Tenant
Improvements based upon the approved Preliminary Space Plans.  The Working
Drawings shall include architectural drawings for the Tenant Improvements based
on the Preliminary Space Plans.  Notwithstanding the Preliminary Space Plans, in
all cases the Working Drawings (i) shall be subject to Landlord’s final
approval, which approval shall not be unreasonably withheld, (ii) shall not be
in conflict with building codes for the City, County or other applicable
authority or with insurance requirements for a fire resistive Class A Office
Tower, and (iii) shall be in a form satisfactory to appropriate governmental
authorities responsible for issuing permits and licenses required for
construction.

 

2.3                               Approval of Working Drawings.  Tenant’s
Architect shall submit the Working Drawings to Tenant for review to confirm
compliance with the Preliminary Space Plan, and Tenant shall notify Landlord and
Tenant’s Architect within three (3) business days after delivery thereof of any
requested revisions.  Within three (3) business days after receipt of Tenant’s
notice, Tenant’s Architect shall make all approved revisions to the Working
Drawings and submit two (2) copies thereof to Tenant and Landlord for their
final review and approval, which approval shall be given within three (3)
business days thereafter.  Concurrently with the above review and approval
process, Tenant’s Architect may submit all plans and specifications to City and
other applicable governmental agencies in an attempt to expedite City approval
and issuance of all necessary permits and Licenses to construct the Tenant
Improvements as shown on the Working Drawings.  Any changes which are required
by City or other governmental agencies shall be immediately submitted to
Landlord and Tenant for review and reasonable approval.

 

2.4                               Schedule of Critical Dates.  Set forth below
is a schedule of certain critical dates relating to Landlord’s and Tenant’s
respective obligations for the design and construction of the Tenant
Improvements.  Such dates and the respective obligations of Landlord and Tenant
are more fully described elsewhere in this Work Letter.  The purpose of the
following schedule is to provide a reference for Landlord and Tenant and to make
certain the Final Approval Date occurs as set forth herein.  Following the Final
Approval Date, Tenant shall be deemed to have released Landlord to commence
construction of the Tenant Improvements as set forth in Section 4 below.

 

Reference

 

Date Due

 

Responsible Party

 

 

 

 

 

A.

 

“Preliminary Space Plan Approval”

 

Completed

 

Landlord & Tenant

 

 

 

 

 

 

 

B.

 

“Working Drawings Completion”

 

Fourteen (14) days after execution of this Lease.

 

Tenant’s Architect

 

 

 

 

 

 

 

C.

 

“Working Drawings Review”

 

Three (3) business days after Landlord submits Working Drawings to Tenant

 

Tenant

 

 

 

 

 

 

 

D.

 

“Working Drawings Revisions”

 

Three (3) business days after Tenant returns the Working Drawings to Landlord.

 

Tenant’s Architect

 

 

 

 

 

 

 

E.

 

“Final Approval Date”

 

Three (3) business days after Landlord’s Architect submits the revised Working
Drawings to Tenant

 

Landlord & Tenant

 

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3.                                      BUILDING PERMIT

 

After the Final Approval Date has occurred, Tenant’s Architect shall, if
Tenant’s Architect has not already done so, submit the Working Drawings to the
appropriate governmental body or bodies for final plan checking and a building
permit.  Tenant’s Architect, with Tenant’s cooperation, shall cause to be made
any change in the Working Drawings necessary to obtain the building permit;
provided, however, after the Final Approval Date, no changes shall be made to
the Working Drawings without the prior written approval of both Landlord and
Tenant, and then only after agreement by Tenant to pay any excess costs
resulting from such changes.

 

4.                                      CONSTRUCTION OF TENANT IMPROVEMENTS

 

After the Final Approval Date has occurred and a building permit for the work
has been issued, Landlord shall, through a construction contract (“Construction
Contract”) with a reputable, licensed contractor selected by Landlord
(“Contractor”), cause the construction of the Tenant Improvements to be carried
out in substantial conformance with the Working Drawings in a good and
workmanlike manner using first-class materials.  The costs associated with the
construction of the Tenant Improvements shall be paid as set forth in Sections 5
and 6 of this Work Letter.

 

5.                                      TENANT IMPROVEMENT ALLOWANCE

 

5.1                                 Landlord shall pay for the cost of the
design, purchase and construction of the Tenant Improvements, including without
limitation design, engineering and consulting fees, the cost of any changes to
the Working Drawings or the Tenant Improvements required by any applicable
building codes, any increased cost resulting from any Hazardous Materials in the
Project, including without limitation asbestos, (collectively, the “Tenant
Improvement Costs”).  The Tenant Improvement Allowance shall be used for payment
of only the following Tenant Improvements Costs:

 

5.1.1                        The reasonable cost based on charges for these
services in the competitive marketplace, of the Preparation by Tenant’s
Architect of the Preliminary Space Plans and the Working Drawings as provided in
Section 2 of this Work Letter, including without limitation all fees charged by
City (including without limitation fees for building permits and plan checks) in
connection with the Tenant Improvements work in the Premises;

 

5.1.2                        Construction work for completion of the Tenant
Improvements as reflected in the Construction Contract;

 

5.1.3                        All contractors’ charges, general conditions,
performance bond premiums and construction fees; and

 

5.1.4                        Tenant Improvements which shall be depicted on the
approved Preliminary Space Plans.

 

5.2                                 In the event that Tenant does request
modifications, changes or alterations of the Tenant Improvements from what is
shown on the approved Preliminary Space Plans, or causes any Tenant Delays as
defined in Section 7 of this Work Letter, then all associated costs that exceed
the Tenant Improvement Allowance shall be borne by Tenant.  If Tenant does seek
to modify, change or alter the Tenant Improvements from the approved Preliminary
Space Plans, or does cause a Tenant Delay, Tenant shall pay to Landlord any
excess costs resulting therefrom in accordance with Section 6 of this Work
Letter.

 

6.                                      CHANGE ORDERS

 

Tenant may from time to time request and obtain change orders before or during
the course of construction provided that:  (i) each such request shall be
reasonable, shall be in writing and signed by or on behalf of Tenant, and shall
not result in any structural change in the Building, as reasonably determined by
Landlord, (ii) all additional charges and costs, including without limitation
architectural and engineering costs, construction and material costs, and
processing costs of any governmental entity shall be the sole and exclusive
obligation of Tenant, and (iii) any resulting delay in the completion of the
Tenant Improvements shall be deemed a Tenant Delay and in no event shall extend
the Commencement Date of the Lease.  Upon Tenant’s request for a change order,
Landlord shall as soon as reasonably possible submit to Tenant a written
estimate of the increased or decreased cost and anticipated delay, if any,
attributable to such requested change.  Within three (3) business days of the
date such estimated costs adjustment and delay are delivered to Tenant, Tenant
shall advise Landlord whether it wishes to proceed with the change order, and if
Tenant elects to proceed with the change order, Tenant shall remit, concurrently
with Tenant’s notice to proceed, the amount of the increased costs that exceed
the Tenant Improvement Allowance, if any, attributable to such change order. 
Unless Tenant includes in its initial change order request that the work in
process at the time such request is made be halted pending approval and
execution of a change order, Landlord shall not be obligated to stop
construction of the Tenant Improvements, whether or not the change order relates
to the work then in process or about to be started.

 

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7.                                      TENANT DELAYS

 

In no event shall the Commencement Date of the Lease be extended or delayed due
or attributable to delays due to the fault of Tenant (“Tenant Delays”).  Tenant
Delays shall include, but are not limited to, delays caused by or resulting from
any one or more of the following:

 

a)                                      Tenant’s failure to timely review and
reasonably approve the Working Drawings or to furnish information to Landlord or
Landlord’s Architect for the preparation by Landlord or Landlord’s Architect of
the Working Drawings;

 

b)                                     Tenant’s request for or use of special
materials, finishes or installations which are not readily available, provided
that Landlord shall notify Tenant in writing that the particular material,
finish, or installation is not readily available promptly upon Landlord’s
discovery of same;

 

c)                                      Change orders requested by Tenant;

 

d)                                     Interference by Tenant or by Tenant’s
Agents with Landlord’s construction activities;

 

e)                                      Tenant’s failure to approve any other
item or perform any other obligation in accordance with and by the dates, if
any, specified herein or in the Construction Contract;

 

f)                                        Tenant’s requested changes in the
Preliminary Space Plans, Working Drawings or any other plans and specifications
after the approval thereof by Tenant or submission thereof by Tenant to
Landlord;

 

g)                                     Tenant’s failure to approve written
estimates of costs in accordance with this Work Letter; and

 

h)                                     Tenant’s obtaining or failure to obtain
any necessary governmental approvals or permits for Tenant’s intended use of the
Premises, other than building permits that Landlord shall obtain.

 

If (but for the operation of the foregoing provisions of this paragraph 7) the
Commencement Date of the Lease is delayed by any Tenant delays, whether or not
within the control of Tenant, then the Commencement Date of the Lease and the
payment of Rent shall be accelerated by the number of days of such delay (i.e.,
the Commencement Date shall occur, or be deemed to have occurred, on the date
that it would have occurred but for the occurrence of such Tenant delays). 
Landlord shall give Tenant written notice within a reasonable time of any
circumstance that Landlord believes constitutes a Tenant Delay.

 

8.                                      TRADE FIXTURES AND EQUIPMENT

 

Tenant acknowledges and agrees that Tenant is solely responsible for obtaining,
delivering and installing in the Premises all necessary and desired furniture,
trade fixtures, equipment and other similar items, and that Landlord shall have
no responsibility whatsoever with regard thereto.  Tenant further acknowledges
and agrees that neither the Commencement Date of the Lease nor the payment of
Rent shall be delayed for any period of time whatsoever due to any delay in the
furnishing of the Premises with such items.

 

9.                                      FAILURE OF TENANT TO COMPLY

 

Any failure of Tenant to comply with any of the provisions contained in this
Work Letter within the times for compliance herein set forth shall be deemed a
default under the Lease.  In addition to the remedies provided to Landlord in
this Work Letter upon the occurrence of such a default by Tenant, Landlord shall
have all remedies available at law or equity to a Landlord against a defaulting
Tenant pursuant to a written lease, including but not limited to those set forth
in the Lease.

 

10.                               CERTIFICATE OF OCCUPANCY

 

The City of San Diego may require a new Certificate of Occupancy to be issued
for an office suite each time occupancy changes, based both on the Tenant’s
proposed activities to be performed in the suite, and the physical
characteristics of the suite.  Landlord and Tenant shall jointly cooperate in
furnishing the City with the information required to be provided on the
Application for Certificate of Occupancy.  With Tenant Improvements being
constructed for the subject Premises, Landlord and Tenant should provide the
application to the City contemporaneously with the application for building
permit.  Upon completion of the Tenant Improvements in conformity with the
building permit, and after the City inspectors give final approval of the Tenant
Improvement construction, it has been Landlord’s experience that a Certificate
of Occupancy for the Premises will be issued.  Landlord and Tenant agree to
cooperate in effecting the issuance of the Certificate of Occupancy should any
problems arise.

 

11.                               WARRANTY

 

Landlord shall warrant against all defects in workmanship and materials for a
period equal to the longer of (a) twelve months after full and final completion
of the Tenant Improvements(including all punch list items) and (b) the warranty
period provided by any applicable contractor or supplier.

 

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EXHIBIT E

 

ACCEPTANCE OF OFFICE SPACE

 

Date

 

 

 

 

Tenant

 

 

Address

 

 

 

 

 

 

 

 

 

Re:                               Commencement Letter with respect to that
certain Lease dated as of                                    by and between VCC
Investors, L.P., a California limited partnership, as Landlord, and Pacific
Crest Bank, a California corporation, as Tenant, for 5,178 rentable square feet
on the tenth floor of the Building located at 591 Camino de la Reina in the City
of San Diego, San Diego, California.

 

Dear                                          :

 

In accordance with the terms and conditions of the above referenced Lease,
Tenant accepts possession of the Premises and agrees:

 

1.                                       The Commencement Date of the Lease is
                                              ;

 

2.                                       The Expiration Date of the Lease is
                                                       .

 

Tenant hereby acknowledges that Landlord has fulfilled it obligations, if any,
regarding the construction of Tenant’s initial leasehold improvements under the
above referenced Lease, subject to paragraph 11 of Exhibit “D”.

 

This Acceptance of Office Space serves to fulfill the lease obligation of
paragraph 1.13 of the Basic Lease Provisions.

 

 

Please acknowledge your acceptance of possession and agreement to the terms set
forth above by signing all 4 counterparts of this Commencement Letter in the
space provided and returning 3 fully executed counterparts to my attention.

 

Sincerely,

 

 

 

 

 

Property Manager

 

 

 

Agreed and Accepted:

 

 

 

 

 

 

Tenant:

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Date:

 

 

 

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EXHIBIT F

 

SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT

 

THIS INSTRUMENT PREPARED BY AND

AFTER RECORDING RETURN TO:

 

 

 

 

 

 

 

 

SUBORDINATION, ATTORNMENT AND
NON-DISTURBANCE AGREEMENT

 

THIS SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE AGREEMENT (this “Agreement”),
dated this        day of                          , 200  , between
                                                                 , a
                                                            (“Tenant”), and
MERRILL LYNCH CAPITAL, a Division of Merrill Lynch Business Financial Services
Inc., a Delaware corporation, its successors and assigns (“Lender”), having its
principal place of business at 222 North LaSalle Street, 18th Floor, Attention:
Merrill Lynch Capital Services Department,  Chicago, Illinois 60601.

 

R E C I T A L S:

 

A.  Tenant is the lessee under that certain lease executed between Tenant and
                             , a                               (“[Prior
Landlord][Landlord]”), dated                              , 200    (the lease
and all amendments thereto are hereinafter referred to as the “Lease”), covering
all or a portion of property with a property address of
                                                             and legally
described in Schedule I attached hereto and made a part hereof (the “Property”).

 

B.  [Prior Landlord will transfer the Property and Prior Landlord’s interests in
the Lease to                                (“Landlord”).] OR
[                              (“Landlord”) is the successor or assignee to
Prior Landlord’s interest in the Property.] On             , 2002,  Lender made
a loan (the “Loan”) to Landlord which is secured, in part, by the lien of a
mortgage or deed of trust executed and delivered by Landlord to Lender
encumbering the Property (the “Mortgage”) and an assignment of all leases of and
rents from the Property.

C.  .  At Tenant’s request, Lender has agreed to enter into this Agreement
relating to the Lease and the Loan.

 

NOW, THEREFORE, in consideration of the covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:

 

1.                         Tenant hereby represents, acknowledges and agrees as
follows:

 

(a)                                  The Lease has not been amended, modified or
extended, except as follows:

 

 

 

 

(b)                                 The Lease does not contain any options to
purchase and/or lease additional space, rights of first refusal to purchase
and/or lease additional space or any similar provisions regarding acquisition of
ownership interests or additional leased space in the building, except as
follows:

 

 

 

 

(c)                                  The term of the Lease commenced on
                                                          and will terminate on
                                                                      .

 

(d)                                 The current monthly rent payment under the
Lease is $                               .  Rent has been paid through
                               . No advance rents have been prepaid except for
the current month.

 

(e)                                  In addition to monthly rent payments, the
following amounts are also payable on a                                        
basis for the following purposes:
                                                                                                               .

 

(f)                                    The improvements described in the Lease
have been completed and accepted by Tenant.

 

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(g)                                 Tenant has not sublet any portion of the
leased premises or assigned any of its rights under the Lease.

 

(h)                                 The Lease is in full force and effect,
Tenant has no existing claims, defenses or offsets under the Lease against
Landlord, no uncured default exists under the Lease, and no event has occurred
that would, except for the lapse of time, the giving of notice or both,
constitute a default.

 

(i)                                     No cancellation, modification,
amendment, extension, or assignment of the Lease, and no subletting or
prepayment of more than one month’s rent shall be made without Lender’s prior
written consent.

 

(j)                                     All rent payments shall be paid as
provided under the Lease until Tenant has been otherwise notified by Lender or
its successors and assigns.  All prepayments of more than one month’s rent and
any and all termination fees paid by Tenant, or at Tenant’s direction, shall be
payable jointly to Lender and Landlord.

 

(k)                                  The guaranty of the Lease, if any, is in
full force and effect

 

(l)                                     Tenant will deliver to Lender a copy of
all notices of default that Tenant delivers to Landlord.

 

(m)                               Tenant will not look to Lender or its
successors or assigns for the return of the security deposit, if any, under the
Lease, except to the extent that such funds are delivered to Lender.

 

2.                                       The Lease and all terms thereof,
including, without limitation, any options to purchase, rights of first refusal,
and any similar rights, are and shall be subject and subordinate to the
Mortgage, and to all amendments, modifications, replacements and extensions
thereof, to the full extent of the principal, interest, fees, expenses and all
other amounts secured thereby, subject, however, to the other provisions hereof.

 

3.                                       In the event Lender elects to foreclose
the Mortgage, Lender will not join Tenant in summary or foreclosure proceedings
unless required by applicable law (and then only to the extent so required) as
long as Tenant has not amended the Lease without Lender’s prior written consent
and is not in default under the Lease.

 

4.                                       In the event that Lender shall succeed
to the interest of Landlord under the Lease and there exists no default by
Tenant under the Lease,  which has continued beyond any applicable periods of
grace, notice, and/or cure,  and Tenant has not amended the Lease without
Lender’s prior written consent, Lender agrees not to disturb or otherwise
interfere with Tenant’s possession of the leased premises for the unexpired term
of the Lease, provided that Lender shall not be:

 

(a)                                  liable for any act or omission of Landlord
or any prior landlord under the Lease;  unless such act or omission continues
beyond the date that Lender acquires title to the Property but only to the
extent such act or omission continues beyond such date;

 

(b)                                 subject to any offsets or defenses which
Tenant might have against Landlord or any prior landlord; except any offsets or
defense relating to defaults of Landlord which continue beyond the date that
Lender acquires title to the Property but only to the extent such offset or
defense continues beyond such date;

 

(c)                                  bound by any rent or additional rent which
Tenant might have paid for more than the current month to Landlord or any prior
landlord;  unless and to the extent actually received by Lender;

 

(d)                                 bound by any material amendment or
modification of the Lease made without Lender’s prior written consent; or

 

(e)                                  liable for any security deposit Tenant
might have paid to Landlord or any prior landlord, except to the extent Lender
has actually received said security deposit.

 

5.                                       Upon Lender’s succeeding to Landlord’s
interest under the Lease, Tenant covenants and agrees to attorn to Lender or a
purchaser at a foreclosure or trustee’s sale, to recognize such successor
landlord as Tenant’s landlord under the Lease, and to be bound by and perform
all of the obligations and conditions imposed upon Tenant by the Lease.  If
requested by Lender or any subsequent owner, Tenant shall execute a new lease
with Lender, for a term equal to the remaining term of the Lease and otherwise
containing the same provisions and covenants of the Lease.

 

6.                                       Prior to terminating the Lease due to a
default by Landlord thereunder, Tenant agrees to notify Lender of such default
and give Lender the opportunity to cure such default within thirty (30) days of
Lender’s receipt of such notice (or, if such default cannot reasonably be cured
within such thirty (30) day period, Lender shall have such longer time as may be
necessary to cure the default (but not beyond an additional ninety (90) days);
provided that Lender commences the cure within such period and diligently
pursues the cure thereafter).

 

40

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7.                                       This Agreement shall be binding upon
and inure to the benefit of the respective heirs, personal representatives,
successors and assigns of the parties hereto.

 

8.                                       This Agreement can be modified only in
writing duly executed by both parties.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and
year first above written.

 

 

TENANT:

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Its:

 

 

 

 

 

 

LENDER:

 

 

 

 

 

MERRILL LYNCH CAPITAL, a Division of
Merrill Lynch Business Financial Services Inc.,
a Delaware corporation.

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Its:

 

 

 

41

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STATE OF                                  

)

 

)ss.

COUNTY OF                             

)

 

On                                  , 200   , before me, the undersigned, a
Notary Public in and for said State, personally appeared
                                             , personally known to me or proved
to me on the basis of satisfactory evidence, to be the person who executed the
within instrument as the                                  of
                                           , a                                
corporation, the general partner OR managing member of
                                               and acknowledged to me that such
corporation caused the foregoing instrument to be executed pursuant to its
Bylaws or a resolution of its Board of Directors.

 

 

WITNESS my hand and official seal.

 

 

 

 

 

 

 

Notary Public

 

[SEAL]

My commission Expires:

 

 

 

42

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STATE OF                                  

)

 

)ss.

COUNTY OF                             

)

 

On                                  , 200   , before me, the undersigned, a
Notary Public in and for said State, personally appeared
                                             , personally known to me or proved
to me on the basis of satisfactory evidence, to be the person who executed the
within instrument as           Vice President of Merrill Lynch Capital, a
Division of Merrill Lynch Business Financial Services Inc., a Delaware
corporation, the corporation that executed the within instrument and
acknowledged to me that such corporation caused the foregoing instrument to be
executed pursuant to its Bylaws or a resolution of its Board of Directors.

 

 

WITNESS my hand and official seal.

 

 

 

 

 

 

 

Notary Public

 

[SEAL]

My commission Expires:

 

 

 

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SCHEDULE I

 

ARTICLE I.                                                                      
LEGAL DESCRIPTION

 

44

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