Exhibit 10.1

 

 

 

22705 NEWHOPE DRIVE

Single Tenant Industrial/Commercial Lease

(Net)

 

Between

 

WESTCORE II NEWHOPE, LLC,

a Delaware limited liability company

(LESSOR)

 

and

 

SKECHERS U.S.A., INC.,

a Delaware corporation

(LESSEE)

 

 

Date: December 27, 2017

 

 

 

 

 

SIC: _________________

 

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TABLE OF CONTENTS

 

SUBJECT MATTER

PAGE

1.

Basic Provisions

1

2.

Premises and Parking

2

3.

Term

4

4.

Rent

5

5.

Security Deposit

7

6.

Use

7

7.

Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations

9

8.

Insurance; Indemnity

11

9.

Damage or Destruction

14

10.

Real Property Taxes

15

11.

Utilities

16

12.

Assignment and Subletting

16

13.

Default; Breach; Remedies

19

14.

Condemnation

21

15.

Brokers

22

16.

Estoppel Certificates and Financial Statements

22

17.

Lessor’s Liability

22

18.

Severability

22

19.

Interest on Past-Due Obligations

22

20.

Time of Essence; Recording

22

21.

Rent Defined

22

22.

No Prior or Other Agreements

23

23.

Notices

23

24.

Waivers

23

25.

Access to the Premises

23

26.

No Right To Holdover

23

27.

Cumulative Remedies

23

28.

Covenants and Conditions

23

29.

Binding Effect; Choice of Law

24

30.

Subordination; Attornment; Non-Disturbance

24

31.

Attorneys’ Fees

24

32.

Lessor’s Access; Showing Premises; Repairs

24

33.

Auctions

24

34.

Signs

25

35.

Termination; Merger

25

36.

Consents

25

37.

Guarantor

25

 

(i)

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38.

Quiet Possession

25

39.

Rules and Regulations

25

40.

Security Measures

25

41.

Reservations

25

42.

OFAC Compliance

25

43.

Authority

26

44.

Conflict; Counterparts

26

45.

Offer

26

46.

Amendments

26

47.

Multiple Parties

26

48.

Construction

26

 

Exhibit A

PREMISES

Exhibit B

LESSOR’S WORK

Exhibit C

INTENTIONALLY OMITTED

Exhibit D

RULES AND REGULATIONS

Exhibit E

NOTICE OF LEASE TERM DATES

Exhibit F

HAZARDOUS SUBSTANCES SURVEY FORM

Exhibit G

MOVE OUT STANDARDS

Exhibit H

RENT PAYMENT INSTRUCTIONS

 

 

 

(ii)

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22705 NEWHOPE DRIVE

Single-Tenant Industrial/Commercial Lease

(Net)

1.

Basic Provisions.

1.1Parties:  This Lease (“Lease”) effective December 27, 2017 (“Effective
Date”), is made by and between WESTCORE II NEWHOPE, LLC, a Delaware limited
liability company (“Lessor”), and SKECHERS U.S.A., INC., a Delaware corporation
(“Lessee”) (collectively the “Parties,” or individually a “Party”).

1.2Premises; Parking.

(a)Premises:  That certain real property, including all improvements therein,
including that certain building (the “Building”) consisting of approximately
three hundred sixty-six thousand six hundred ninety-eight (366,698) square feet,
commonly known by the street address of 22705 Newhope Drive, Moreno Valley,
California, as outlined on Exhibit A attached hereto (“Premises”).  (Also see
Paragraph 2.)

(b)Parking:  Lessee shall be entitled to use all of the vehicle parking spaces
located within the Premises (“Parking Spaces”).  (Also see Paragraph 2.6.)

1.3Term:  The term of this Lease shall be for a period of thirty-seven (37) full
calendar months (“Original Term”) commencing on February 1, 2018 (the
“Commencement Date”).  The term “Expiration Date” shall mean the date which is
the last day of the thirty-seventh (37th) full calendar month after the
Commencement Date.  For purposes of this Lease, the “Term” of this Lease shall
refer to the Original Term, as it may be extended or renewed by any properly
exercised options granted hereunder.  (Also see Paragraph 3.)

1.4Early Access:  Lessee shall be entitled to early possession of the Premises
on the date of the execution and delivery of this Lease by both Lessor and
Lessee, provided that Lessee has delivered to Lessor advance rent required under
Paragraph 1.6 below, the Security Deposit required under Paragraph 1.8 below and
the insurance certificates required under Paragraph 8 below (the “Early
Possession Date”).  Lessee shall coordinate such early possession with Lessor
and shall not interfere with the performance of the Lessor’s Work by Lessor and
its contractors and subcontractors.  (Also see Paragraphs 3.2 and 3.3.)

1.5Base Rent:  Payable monthly, on the first day of each month, in the amount
described below, calculated on a net basis (“Base Rent”), and commencing on the
Commencement Date. (Also see Paragraph 4.)

 

 

 

Period

Monthly
Installment
of Base Rent

February 1, 2018 – January 31, 2019*

$154,013.16

February 1, 2019 – January 31, 2020

$158,633.55

February 1, 2020 – January 31, 2021

$163,392.56

February 1, 2021 – February 28, 2021

$168,294.33

*Subject to abatement of monthly Base Rent for the second (2nd) and third (3rd)
full calendar months of the Original Term in accordance with Paragraph 4.1 of
this Lease.

1.6Advance Rent Paid Upon Execution:  One Hundred Ninety Six Thousand One
Hundred Eighty Three and 43/100 Dollars ($196,183.43) representing Lessee’s
first installment of Base Rent and Lessee’s Share of estimated Operating
Expenses due for the Original Term.

1.7Intentionally Deleted.

1.8Security Deposit:  One Hundred Fifty Five Thousand Eight Hundred Forty Six
and 65/100 Dollars ($155,846.65) (“Security Deposit”). (Also see Paragraph 5)

 

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1.9Permitted Use: Lessee shall use and occupy the Premises solely for the
purpose of storage, warehousing, distribution and related general office use and
incidental and accessory uses thereto, as may be permitted under existing laws
governing the Premises and for no other use or purpose (“Permitted Use”).  (Also
see Paragraph 6.)

1.10(a)Real Estate Brokers.  The following real estate broker(s) (collectively,
the “Brokers”) and brokerage relationships exist in this transaction and are
consented to by the Parties (check applicable boxes):

☑CBRE and Kidder Mathews represents Lessor exclusively (“Lessor’s Broker”);

☑CBRE represents Lessee exclusively (“Lessee’s Broker”); or

 

____________________________ represents both Lessor and Lessee (“Dual
Agency”).  (Also see Paragraph 15.)

(b)Payment to Brokers.  Following the execution of this Lease by both Parties,
Lessor shall pay to said Broker(s) jointly, or in such separate shares as they
may mutually designate in writing, a fee as set forth in a separate written
agreement between Lessor and said Broker(s).

1.11Guarantor(s):  None.  (See also Paragraph 37)

1.12Lessee Insurance Coverage Minimums:

(a)Liability:  $3,000,000 per occurrence/$5,000,000 general aggregate

(b)Property:  Full Replacement Cost

(c)Umbrella:  $5,000,000

(d)Business Interruption:  12 months

(e)Automobile Liability:  $1,000,000

(f)Workers’ Compensation:  As required by law

(g)Employer’s Liability:  $1,000,000

1.13Exhibits.  Attached hereto are Exhibits A through H, all of which constitute
a part of this Lease.

2.

Premises and Parking.

2.1Letting.  Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the Term, at the Rent (as defined below), and upon all
of the terms, covenants and conditions set forth in this Lease.  Unless
otherwise provided herein, any statement of square footage set forth in this
Lease, or that may have been used in calculating Base Rent is an approximation
which Lessor and Lessee agree is reasonable and any payments based thereon are
not subject to revision whether or not the actual square footage is more or
less.  For purposes of this Lease, the square footage of the Premises shall be
deemed to be as set forth in Paragraph 1.2 above.  Lessee represents and
warrants to Lessor that Lessee has had an opportunity to measure the actual
dimensions of the Premises and the Building and agrees to the square footage
figures set forth hereinabove for all purposes under this Lease (except in the
event of a condemnation or casualty that decreases the size of the Premises
and/or Building as more fully provided elsewhere in the Lease).

2.2Condition.  Lessee agrees (i) to accept the Premises on the Commencement Date
as then being suitable for Lessee’s intended use and in good operating order,
condition and repair in its then existing “AS IS” condition, except as otherwise
set forth in this Paragraph 2, and (ii) that neither Lessor nor any of Lessor’s
agents, representatives or employees has made any representations as to the
suitability, fitness or condition of the Premises for the conduct of Lessee’s
business or for any other purpose.  Lessee does hereby waive and disclaim any
objection to, cause of action based upon, or claim that its obligations
hereunder should be reduced or limited because of the condition of the Premises
or the suitability of same for Lessee’s purposes.  Notwithstanding the
foregoing, Lessor shall, at Lessor’s sole cost and expense using building
standard industrial materials, install warehouse lighting and thirty (30) 35,000
pound capacity mechanical dock levelers in the location shown on Exhibit B to
this Lease (collectively, “Lessor’s Work”). In addition, Lessor shall deliver
the Premises to Lessee clean and free of debris on the

 

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date Lessor tenders possession of the Premises to Lessee (the “Delivery Date”),
with the existing Building systems, including the plumbing, lighting, utilities,
heating, ventilation and air conditioning system and loading doors in the
Premises, the slab and the roof (collectively, the “Systems”), in good operating
condition on the Delivery Date and Lessor warrants that (a) the Systems shall
continue to operate in good working order for the period ending on the date six
(6) months after the Commencement Date (the “Building Warranty Period”), and (b)
the warehouse lighting and dock levelers comprising Lessor’s Work (the “Lessor’s
Work Improvements”) shall continue to operate in good working order for the
period ending on the date one (1) year after the Commencement Date (the
“Lessor’s Work Warranty Period”); except to the extent such failure in the
Systems or the Lessor’s Work Improvements to operate in good working order is
caused by Lessee’s use or alterations to the Premises or failure to properly
maintain the Systems or the Lessor’s Work Improvements to the extent required by
this Lease.  If a non-compliance with the foregoing exists at any time prior to
the expiration of the Building Warranty Period or Lessor’s Work Warranty Period,
as applicable, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, commence to rectify
same at Lessor’s expense.  If Lessee does not give Lessor written notice of a
non-compliance on or before the expiration of the Warranty Period, correction of
that non-compliance shall be the obligation of the Party responsible under this
Lease.

2.3Compliance with Covenants, Restrictions and Building Code.  To the actual
knowledge of Lessor, any existing improvements on or in the Premises comply with
all applicable covenants or restrictions of record and applicable building
codes, regulations and ordinances in effect on the Commencement Date.  Lessor
further warrants to Lessee that Lessor has no actual knowledge, without a duty
of inquiry or investigation, of any claim having been made by any governmental
agency that a violation or violations of applicable building codes, regulations,
or ordinances exist with regard to the Premises as of the Commencement
Date.  For purposes of the foregoing representation, Lessor’s actual knowledge
shall be limited to the actual knowledge, without a duty of inquiry or
investigation, of the person executing this Lease on behalf of Lessor.  Said
warranties shall not apply to any Alterations or Utility Installations (defined
in Subparagraph 7.3(a)) made or to be made by Lessee.  If the Premises do not
comply with said warranties, Lessor shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee given within six (6)
months following the Commencement Date and setting forth with specificity the
nature and extent of such non-compliance, take such action, at Lessor’s expense,
as may be reasonable or appropriate to rectify the non-compliance.  Lessor makes
no warranty that the Permitted Use in Paragraph 1.9 is permitted for the
Premises under Applicable Laws (as defined in Paragraph 2.4).

Lessee warrants that any improvements (other than those constructed by Lessor or
at Lessor’s direction) on or in the Premises, which are constructed or installed
by Lessee, shall comply with all applicable covenants or restrictions of record
and applicable building codes, regulations and ordinances in effect on the
Commencement Date and throughout the Term of this Lease.  Said warranty shall
specifically apply to any Alterations or Utility Installations made or to be
made by Lessee.  If the Premises do not comply with said warranty, Lessee shall,
except as otherwise provided in this Lease, promptly after receipt of written
notice from Lessor or any governmental authority, take such action, at Lessee’s
expense, as may be reasonable or appropriate to rectify the non-compliance.

2.4Acceptance of Premises.  Lessee hereby acknowledges: (a) that it has been
advised to satisfy itself with respect to the condition of the Premises
(including but not limited to the electrical and fire sprinkler systems,
security, environmental aspects, seismic and earthquake requirements, and
compliance with the Americans With Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, “Applicable Laws”) and the
present and future suitability of the Premises for Lessee’s intended use;
(b) that Lessee has made such investigation as it deems necessary with reference
to such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee’s occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor nor any
agent nor any employee of Lessor has made any representations, warranty,
estimation or promise of any kind or nature whatsoever relating to the physical
condition of the Building or the Premises, including, by way of example only,
the fitness of the Premises for Lessee’s intended use or the actual dimensions
of the Premises of the Building and Lessee expressly warrants and represents
that Lessee has relied solely on its own investigation and inspection of the
Premises and the Building  in its decision to enter into this Lease and let the
Premises in an “AS-IS” condition.  Pursuant to California Civil Code Section
1938, Lessor is required to inform Lessee whether the Premises has undergone
inspection by a Certified Access Specialist (“CASp”) to determine whether the
Premises meets all applicable construction-related accessibility standards
pursuant to Section 55.53 of the California Civil Code.  Lessor hereby informs
Lessee that the Premises have not been so inspected by a CASp.  Lessee hereby
acknowledges that the Premises has not undergone inspection by a CASp.  As
required by Section 1938(e) of the California Civil Code, Lessor hereby states
as follows:  "A Certified Access Specialist (CASp) can inspect the subject
premises and determine whether the subject premises comply with all of the
applicable construction-related accessibility standards under state
law.  Although state law does not require a CASp inspection of the subject
premises, the commercial property owner or lessor may not prohibit the lessee or
tenant from obtaining a CASp inspection of the subject premises for the
occupancy or potential occupancy of the lessee or tenant, if requested by the
lessee or tenant.  The parties shall mutually agree on the arrangements for the
time and manner of the CASp inspection, the payment of the fee for the CASp
inspection, and the cost of making any repairs necessary to correct violations
of construction-related accessibility standards within the premises."  In
furtherance of the foregoing, Lessor and Lessee hereby agree as follows:  (a)
any CASp inspection requested by Lessee shall be conducted, at Lessee's sole
cost and expense, by a CASp approved in advance by Lessor; and (b) pursuant to
this Lease, Lessee,

 

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at its cost, is responsible for making any repairs to the Premises to correct
violations of construction-related accessibility standards, in accordance with
the terms of this Lease.

2.5Intentionally Deleted.

2.6Vehicle Parking.  Lessee shall be entitled to use Parking Spaces in
accordance with Subparagraph 1.2 (b) of the Basic Provisions.

3.

Term.

3.1Term.  The Commencement Date, Expiration Date and Original Term of this Lease
are as specified in Paragraph 1.3.  After the Commencement Date, upon Lessor’s
request, Lessee shall promptly execute a “Notice of Lease Term Dates” in the
form attached hereto as Exhibit E to this Lease, which shall specify the
Commencement Date, the Expiration Date and certain other matters specified
therein.  If Lessee fails to execute a Notice of Term Dates, such failure shall
not affect Lessee’s obligation to commence paying rent upon the occurrence of
the Commencement Date.

3.2Early Possession.  If an Early Possession Date is specified in Paragraph 1.4,
Lessee shall be entitled to early occupancy of the Premises solely for the
purpose of installing Lessee's furniture, fixtures, equipment and other
specialized leasehold improvements approved by Lessor in writing pursuant to
this Lease and otherwise preparing the Premises for Lessee's occupancy, but in
no event for conducting Lessee's business; provided, however, that Lessee shall
not interfere with Lessor's work or activities, if any, in preparing the
Premises for Lessee's occupancy.  Lessor and Lessee shall coordinate their
respective work to be performed at the Premises during Lessee's early
occupancy.  All other terms of this Lease, however (including, but not limited
to, the obligations to pay for all utilities and Operating Expenses and to carry
the insurance required by Paragraph 8), shall be in effect during such
period.  Lessee’s early occupancy shall in no way interfere with Lessor’s
completion of any improvements in the Premises required to be completed by
Lessor under this Lease prior to the Commencement Date and Lessee agrees that
Lessor’s completion of any improvements in the Premises during the period of
Lessee’s early occupancy of the Premises shall in no way constitute a
constructive eviction of Lessee nor entitle Lessee to any abatement of
Rent.  Furthermore, Lessor shall have no responsibility and shall not be liable
to Lessee for, and Lessee hereby waives any claim against Lessor in connection
with, (a) any injury or damage to persons or property at the Premises, (b) any
interference with Lessee's business, (c) any loss of the use of the whole or any
part of the Premises or of Lessee's personal property or improvements, or (d)
any inconvenience or annoyance, occasioned by or arising from the completion of
any improvements in the Premises performed by Lessor or its agents during
Lessee’s early occupancy of the Premises.  Any such early possession shall not
affect nor advance the Expiration Date of the Term.

3.3Delay in Possession.  If for any reason Lessor cannot deliver possession of
the Premises to Lessee by the Early Possession Date, if one is specified in
Paragraph 1.4, or if no Early Possession Date is specified, by the Commencement
Date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease, or the obligations of Lessee
hereunder, or extend the Term hereof, but in such case, Lessee shall not, except
as otherwise provided herein, be obligated to pay rent or perform any other
obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee.

3.4Option to Extend.  Lessee shall have one (1) option (the “Option”) to extend
the Term for a period of three (3) years (the “Option Term”), which Option shall
be exercisable by written notice delivered by Lessee to Lessor as provided in
this Paragraph 3.4, provided that Lessee has not at any time been in Breach
under this Lease.  The Option shall be exercisable only by the originally named
Lessee under this Lease (the “Original Lessee”) and only if the Original Lessee
is in possession of one hundred percent (100%) of the Premises.

(a)Exercise of Option.  The Option may be exercised by Lessee, if at all, by
delivering written notice (the “Option Notice”) to Lessor not more than twelve
(12) months, nor less than six (6) months, prior to the expiration of the Term,
stating that Lessee is exercising the Option.  In the event that Lessee fails to
exercise the Option by timely written notice, the Option shall lapse and be of
no further force or effect.  Lessor, after receipt of Lessee’s notice, shall
deliver notice (the “Option Rent Notice”) to Lessee within thirty (30) days of
Lessor’s receipt of the Option Notice setting forth the “Option Rent,” as that
term is defined in subparagraph (b) below, which shall be applicable to the
Lease during the Option Term.  On or before the date ten (10) business days
after Lessee’s receipt of the Option Rent Notice, Lessee may, at its option,
object to the Option Rent contained in the Option Rent Notice by delivering
written notice thereof to Lessor, in which case the Parties shall follow the
procedure, and the Option Rent shall be determined, as set forth in subparagraph
(c) below.  If Lessee does not so object within such ten (10) business day
period, the Option Rent applicable during the Option Term shall be the amount
set forth in the Option Rent Notice and the Option Rent Notice shall be binding
upon Lessee.

(b)Option Rent.  The Base Rent payable by Lessee during the Option Term (the
“Option Rent”) shall be equal to ninety-five percent (95%) of the prevailing
annual market rental value for comparable space in the market area

 

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in which the Premises are located (including additional rent and considering any
“base year” or “expense stop” applicable thereto), including all escalations, at
which tenants, as of the commencement of the Option Term, are leasing
non-sublease, non-renewal, non-encumbered, non-equity space in comparable
buildings for a comparable term.  

(c)Determination of Option Rent.  In the event Lessee timely and appropriately
objects to the Option Rent, Lessor and Lessee shall attempt to agree upon the
Option Rent using their best good-faith efforts.  If Lessor and Lessee fail to
reach agreement within ten (10) days following Lessee’s objection to the Option
Rent (the “Outside Agreement Date”), then Lessee may give written notice
(“Appraisal Notice”) to Lessor that Lessee desires to have the Option Rent
determined by appraisal pursuant to the procedures set forth in subparagraphs
(i) through (iv) below (“Appraisal Notice”).  If Lessee fails to give the
Appraisal Notice on or before the Outside Agreement Date, the Option Rent
applicable during the Option Term shall be the amount set forth in the Option
Rent Notice.

(i)Within ten (10) days after Lessor’s receipt of the Appraisal Notice in
accordance with this Section, Lessor and Lessee shall agree upon a list of three
(3) independent, unaffiliated real estate brokers with at least five (5) years’
full-time experience brokering commercial properties within ten (10) miles of
the Premises.  Within five (5) days after agreement upon the list of brokers,
Lessor and Lessee shall meet and each shall have the right to disqualify one (1)
of the brokers until only one (1) broker (the “Arbitrator”) has not been
disqualified by either Lessor or Lessee.

(ii)Within fifteen (15) days after the appointment of the Arbitrator, the
Parties shall each submit their determination of the Option Rent to the
Arbitrator and the Arbitrator shall independently determine the Option
Rent.  The Option Rent shall equal the Option Rent submitted by Lessor or Lessee
that is closest to the Option Rent determined by the Arbitrator.  The Arbitrator
shall not divulge to Lessor or Lessee the Option Rent determined by the
Arbitrator until both Parties instruct it to do so in writing.  The
determination of the Arbitrator in accordance with this subsection (c) shall be
final and binding on the Parties and a judgment may be rendered thereon in a
court of competent jurisdiction.

(iii)If the Parties fail to select the three (3) qualified brokers or the
Arbitrator, either Lessor or Lessee by giving ten (10) days’ notice to the other
Party, can apply to the American Arbitration Association office in the county in
which the Premises is located for the selection of the Arbitrator who meets the
qualifications stated in this Paragraph.

(iv)The cost of arbitration shall be paid by Lessor and Lessee equally.

During the period requiring the adjustment of monthly Base Rent to Option Rent,
Lessee shall pay, as monthly Base Rent pending such determination, one hundred
five percent (105%) of the monthly Base Rent in effect for the Premises
immediately prior to such adjustment; provided, however, that upon the
determination of the Option Rent, Lessee shall pay Lessor the difference between
the amount of monthly Base Rent Lessee actually paid and Option Rent immediately
upon the determination of the Option Rent.  Any amount of Base Rent Lessee has
actually paid to Lessor which exceeds the Option Rent determined in accordance
herewith shall be credited against Lessee’s future Option Rent obligations.

4.

Rent.

4.1Base Rent.  Lessee shall pay Base Rent and other rent or charges
(collectively referred to from time to time as “Rent”), to Lessor in lawful
money of the United States, without offset or deduction, on or before the day on
which it is due under the terms of this Lease.  Rent for any period during the
Term hereof which is for less than one (1) full month shall be prorated on the
basis of a thirty (30) day month.  Payment of Rent shall be made to Lessor at
its address stated in, and in accordance with, the Rent Payment Instructions
attached as Exhibit H to this Lease or to such other persons or at such other
addresses as Lessor may from time to time designate in writing to
Lessee.  Notwithstanding anything to the contrary contained in this Lease,
Lessor and Lessee hereby agree that for the second (2nd) and third (3rd) full
calendar months of the Original Term, the monthly Base Rent due hereunder shall
be abated; provided, that (i) Lessee is at no time in Default under any of the
terms and provisions of this Lease, and (ii) Lessee agrees that notwithstanding
the foregoing monthly Base Rent abatement, Lessee shall observe and perform all
of the other terms, covenants and provisions set forth in this Lease, including
without limitation, payment of all other Rent required to be paid by Lessee
under this Lease.

 

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4.2Operating Expenses.  Lessee shall pay to Lessor during the Term hereof, in
addition to the Base Rent, all Operating Expenses, as hereinafter defined,
during each calendar year of the Term of this Lease, in accordance with the
following provisions:

(a)“Operating Expenses” are defined, for purposes of this Lease, as all costs
incurred by Lessor relating to the ownership and operation of the Premises,
including the following:

(i)The costs of management, administration and operation of the Premises,
including, without limitation,

(A)a property management fee, accounting, salaries and benefits for employees,
and legal and accounting costs;

(B)any fees or charges under any covenants, conditions and restrictions or
reciprocal easement agreements recorded against the Premises and all fees,
licenses and permits related to the ownership, operation and management of the
Premises;

(C)the actual and reasonable cost or repairs and replacements to the exterior
areas of the Premises, including the parking areas, loading and unloading areas,
trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped
areas, striping, bumpers, irrigation systems, storm water systems, lighting
facilities, fences and gates, and the roof, and painting of the exterior of the
building; and

(D)the cost of any maintenance contracts maintained by Lessor pursuant to
Paragraph 7.2 of this Lease.

(ii)The cost of water systems serving the Premises, except to the extent paid
directly by Lessee pursuant to Paragraph 11.

(iii)Property management and security services (including security alarm systems
and telephone lines), fire/lifesafety systems, including fire alarm and/or smoke
detection, and the costs of any environmental inspections.

(iv)Real Property Taxes (as defined in Paragraph 10.2) to be paid by Lessor
under Paragraph 10 hereof.

(v)The costs of the premiums for the insurance policies maintained by Lessor
under Paragraph 8 hereof.

(vi)Any deductible portion of an insured loss concerning the Premises.

(vii)Replacing and/or adding improvements mandated by any governmental agency
and any repairs or removals necessitated thereby amortized over its useful life
according to sound accounting principles (including interest on the un-amortized
balance at eight percent per annum).

(viii)The cost of any capital improvements made to the Premises, amortized over
its useful life according to sound accounting principles (including interest on
the un-amortized balance at eight percent per annum).

Notwithstanding the foregoing, Operating Expense shall not include costs
incurred in connection with upgrading the Building to comply with Applicable
Laws in effect and being enforced prior to the Commencement Date, except to the
extent such obligations are triggered by Lessee’s specific use of the Premises
or Alterations or improvements in the Premises performed or requested by Lessee;
provided, however, that a change in the procedures for enforcing an existing law
will be the equivalent of a new law.

(b)The inclusion of the improvements, facilities and services set forth in
Subparagraph 4.2 (a) shall not be deemed to impose an obligation upon Lessor to
either have said improvements or facilities or to provide those services unless
the Premises already has the same, Lessor already provides the services, or
Lessor has agreed elsewhere in this Lease to provide the same or some of them.

(c)Operating Expenses shall be payable by Lessee within ten (10) days after a
reasonably detailed statement of actual expenses is presented to Lessee by
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Lessor from time to time of annual Operating Expenses and the same shall be
payable monthly or quarterly, as Lessor shall designate, during each 12-month
period of the Term, on the same day as the Base Rent is due hereunder.  Lessor
shall deliver to Lessee, within one hundred and twenty (120) days after the
expiration of each calendar year, a reasonably detailed statement showing the
actual Operating Expenses incurred during the preceding year.  If Lessee’s
payments under this Subparagraph 4.2 (c) during said preceding year exceed the
annual Operating Expenses as indicated on said statement, Lessor shall credit
the amount of such over-payment against Operating Expenses next becoming
due.  If Lessee’s payments under this Subparagraph 4.2 (c) during said preceding
year were less than the actual Operating Expenses as indicated on said
statement, Lessee shall pay to Lessor the amount of the deficiency within ten
(10) days after delivery by Lessor to Lessee of said statement.

(d)After delivery to Lessor of at least thirty (30) days prior written notice,
Lessee, at its sole cost and expense through any accountant designated by it,
shall have the right to examine and/or audit the books and records evidencing
such expenses for the previous one (1) calendar year, during Lessor’s reasonable
business hours but not more frequently than once during any calendar
year.  Lessee may not compensate any such accountant on a contingency fee
basis.  The results of any such audit (and any negotiations between the Parties
related thereto) shall be maintained strictly confidential by Lessee and its
accounting firm and shall not be disclosed, published or otherwise disseminated
to any other party other than to Lessor and its authorized agents or the
Lessee’s employees, accountants, real estate advisors, financial advisors and
attorneys and as may be required by law or in any litigation or dispute arising
out of such audit.  Lessor and Lessee each shall use its commercially reasonable
efforts to cooperate in such negotiations and to promptly resolve any
discrepancies between Lessor and Lessee in the accounting of such expenses.

5.

Security Deposit.

5.1Security Deposit.  Lessee shall deposit with Lessor upon Lessee’s execution
hereof the Security Deposit set forth in Paragraph 1.8 of the Basic Provisions
as security for Lessee’s faithful performance of Lessee’s obligations under this
Lease.  If Lessee fails to pay Base Rent or other Rent or charges due hereunder
before or after the termination or expiration of this Lease, or otherwise
Defaults under this Lease (as defined in Paragraph 13.1), Lessor may use, apply
or retain all or any portion of said Security Deposit for the payment of any
amount due Lessor or to reimburse or compensate Lessor for any liability, cost,
expense, loss or damage (including attorneys fees and costs) which Lessor may
suffer or incur by reason thereof.  If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease.  Lessor shall not be required
to keep all or any part of the Security Deposit separate from its general
accounts.  Lessor shall, at the expiration or earlier termination of the Term
hereof and after Lessee has vacated the Premises, return to Lessee (or, at
Lessor’s option, to the last approved assignee, if any, of Lessee’s interest
herein), that portion of the Security Deposit not used or applied by
Lessor.  Unless otherwise expressly agreed in writing by Lessor, no part of the
Security Deposit shall be considered to be held in trust, to bear interest or
other increment for its use, or to be prepayment for any monies to be paid by
Lessee under this Lease.  Lessee hereby waives (i) any and all rights under
California Civil Code Section 1950.7, as amended or recodified from time to
time, and any and all other laws, rules and regulations, now or hereafter in
force, applicable to security deposits in the commercial context (“Security
Deposit Laws”), and (ii) any and all rights, duties and obligations either Party
may now or, in the future, will have relating to or arising from the Security
Deposit Laws.  Notwithstanding anything to the contrary contained herein, the
Security Deposit may be retained and applied by Lessor (a) to offset Rent (as
defined in Section 4.1) which is unpaid either before or after the termination
of this Lease, and (b) against other damages suffered by Lessor before or after
the termination of this Lease, whether foreseeable or unforeseeable, caused by
the act or omission of Lessee or any officer, employee, agent, contractor or
invitee of Lessee.  If Lessee performs all of Lessee’s obligations hereunder,
the Security Deposit, or so much thereof as has not theretofore been applied by
Lessor, shall be returned, without payment of interest or other increment for
its use, to Lessee (or, at Lessor’s option, to the last assignee, if any, of
Lessee’s interest hereunder) at the expiration of the Term hereof, and after
Lessee has vacated the Premises.

6.

Use.

6.1Use.  Lessee shall use and occupy the Premises only for the Permitted Use set
forth in Paragraph 1.9 of the Basic Provisions and for no other purpose.  Lessee
shall not use or permit the use of the Premises in a manner that is unlawful,
creates waste or a nuisance, or that disturbs owners and/or occupants of, or
causes damage to the Premises or neighboring premises or properties.  Lessee
further covenants and agrees that it shall not use, or suffer or permit any
person or persons to use, the Premises in violation of the laws of the United
States of America, the State of California, or the ordinances, regulations or
requirements of the local municipal or county governing body or other lawful
authorities having jurisdiction over the Premises.  Lessee shall comply with all
recorded covenants, conditions, and restrictions, and the provisions of all
ground or underlying leases, now or hereafter affecting the Premises.  Lessee
shall not use or allow another person or entity to use any part of the Premises
for the storage, use, treatment, manufacture or sale of "Hazardous Substances,"
as that term is defined in Subparagraph 6.2 (a) of this Lease.  Lessor
acknowledges, however, that Lessee will maintain products in the Premises which
are incidental to the operation of its offices, such as photocopy supplies,
secretarial supplies and limited janitorial supplies, which products contain
chemicals which are categorized as Hazardous Substances.  Lessor agrees that the
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Premises in compliance with Applicable Requirements and in the manner in which
such products are designed to be used shall not be a violation by Lessee of this
Paragraph 6.1.

6.2Hazardous Substances.

(a)Reportable Uses Require Consent.  The term “Hazardous Substance” as used in
this Lease shall mean any product, substance, chemical, material or waste whose
presence, nature, quantity and/or intensity of existence, use, manufacture,
disposal, transportation, spill, release or effect, either by itself or in
combination with other materials expected to be on the Premises, is either:
(i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory.  Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, PCBs, crude oil or any products or by-products
thereof.  Lessee shall not engage in any activity in or about the Premises,
which constitutes a Reportable Use (as hereinafter defined) of Hazardous
Substances without the express prior written consent of Lessor and compliance in
a timely manner (at Lessee’s sole cost and expense) with all Applicable
Requirements (as defined in Paragraph 6.3).  “Reportable Use” shall mean (i) the
installation or use of any above or below ground storage tank, (ii) the
generation, possession, storage, use, transportation, or disposal of a Hazardous
Substance that requires a permit from, or with respect to which a report,
notice, registration or business plan is required to be filed with, any
governmental authority, and (iii) the presence in, on or about the Premises of a
Hazardous Substance with respect to which any Applicable Requirements require
that a notice be given to persons entering or occupying the Premises or
neighboring properties.

(b)Duty to Inform Lessor.  If Lessee knows, or has reasonable cause to believe,
that a Hazardous Substance has come to be located in, on, under or about the
Premises, other than as previously consented to by Lessor, Lessee shall
immediately give Lessor written notice thereof, together with a copy of any
statement, report, notice, registration, application, permit, business plan,
license, claim, action, or proceeding given to, or received from, any
governmental authority or private party concerning the presence, spill, release,
discharge of, or exposure to, such Hazardous Substance including but not limited
to all such documents as may be involved in any Reportable Use involving the
Premises.  Lessee shall not cause or permit any Hazardous Substance to be
spilled or released in, on, under or about the Premises (including, without
limitation, through the plumbing or sanitary sewer system).

(c)Indemnification of Lessor.  Lessee shall indemnify, protect, defend and hold
Lessor (with counsel approved by Lessor), its directors, officers, agents,
partners, members, managers, employees, lenders and ground lessor, if any, and
their respective successors and assigns (collectively, “Lessor Parties”) and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys’ and
consultants’ fees and costs (collectively, “Claims”) arising out of or involving
any (i) Hazardous Substance brought, released or used or allowed to be brought,
released or used on the Premises by Lessee or by anyone under Lessee’s control,
or (ii) the breach of any term, condition, representation or warranty contained
in this Paragraph 6.  Lessee’s obligations under this Subparagraph 6.2 (c) shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the cost
of investigation (including consultants’ and attorneys’ fees and costs and
testing), removal, remediation, restoration and/or abatement thereof, or of any
contamination therein involved, and shall survive the expiration or earlier
termination of this Lease.  No termination, cancellation or release agreement
entered into by Lessor and Lessee shall release Lessee from its obligations
under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such agreement.  The provisions of
this Paragraph 6.2(c) shall survive the expiration or earlier termination of
this Lease.

(d)Environmental Questionnaire Disclosure.  Prior to the execution of this
Lease, Lessee shall complete, execute and deliver to Lessor a Hazardous
Substances Survey Form in the form of Exhibit F attached hereto (“Survey Form”),
and Lessee shall certify to Lessor that all information contained in the Survey
Form is true and correct.  The completed Survey Form shall be deemed
incorporated into this Lease for all purposes, and Lessor shall be entitled to
rely on the information contained therein.  Within ten (10) days following
receipt by Lessee of a written request therefore from Lessor, Lessee shall
disclose to Lessor in writing the names and amounts of all Hazardous Substances,
or any combination thereof, which were stored, generated, used or disposed of
on, under or about the Premises for the twelve (12) month period prior to and
after each such request, or which Lessee intends to store, generate, use or
dispose of on, under or about the Premises.  At Lessor’s option, Lessee’s
disclosure obligation under this Subparagraph shall include the requirement that
Lessee update, execute and deliver to Lessor the Survey Form, as the same may be
modified by Lessor from time to time.

(e)Pre-Existing Conditions; Indemnification of Lessee.  Notwithstanding anything
in this Lease to the contrary, Lessee shall not be responsible for any Hazardous
Substances existing on the Premises as of the date possession of the Premises is
delivered to Lessee.  Lessor shall indemnify, protect, defend and hold Lessee,
its directors, officers, members, agents and employees harmless from and against
any and all damages, liabilities, judgments, costs, claims, liens, expenses,
penalties, loss of permits and attorneys’ and consultants’ fees arising out of
or involving any Hazardous Substance brought onto the Premises by Lessor.

 

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6.3Lessee’s Compliance with Requirements.  Lessee shall, at Lessee’s sole cost
and expense, fully, diligently and in a timely manner, comply with all
“Applicable Requirements,” which term is used in this Lease to mean all laws
(including, without limitation, the Americans with Disabilities Act), rules,
regulations, ordinances, directives, covenants, easements and restrictions of
record, permits, the requirements of any applicable fire insurance underwriter
or rating bureau, and the recommendations of Lessor’s engineers and/or
consultants, relating in any manner to the Premises (including but not limited
to matters pertaining to (i) industrial hygiene, (ii) environmental conditions
on, in, under or about the Premises, including air quality, soil and groundwater
conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill, or release
of any Hazardous Substance), now in effect or which may hereafter come into
effect.  Lessee shall, within five (5) days after receipt of Lessor’s written
request, provide Lessor with copies of all documents and information, including
but not limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee’s compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.

6.4Inspection; Compliance with Law.  Lessor, Lessor’s agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises (“Lenders”) shall have the right
to enter the Premises at any time in the case of an emergency, and otherwise at
reasonable times upon reasonable prior notice, for the purpose of inspecting the
condition of the Premises and for verifying compliance by Lessee with this Lease
and all Applicable Requirements, and Lessor shall be entitled to employ experts
and/or consultants in connection therewith to advise Lessor with respect to
Lessee’s activities, including but not limited to Lessee’s installation,
operation, use, monitoring, maintenance, or removal of any Hazardous Substance
on or from the Premises.  The costs and expenses of any such inspections shall
be paid by the Party requesting same, unless a Default or Breach of this Lease
by Lessee or a violation of Applicable Requirements or a contamination, caused
or materially contributed to by Lessee, is found to exist or to be imminent, or
unless the inspection is requested or ordered by a governmental authority as the
result of any such existing or imminent violation or contamination.  In such
case, Lessee shall upon request reimburse Lessor or Lessor’s Lender, as the case
may be, for the costs and expenses of such inspections.

7.

Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.

7.1Lessee’s Obligations.

(a)Subject to the provisions of Paragraphs 9 (Damage or Destruction) and 14
(Condemnation), Lessee shall, at Lessee’s sole cost and expense and at all
times, keep the Premises, Utility Installations and Alterations and every part
thereof in good order, condition and repair (whether or not such portion of the
Premises requiring repair, or the means of repairing the same, are reasonably or
readily accessible to Lessee, and whether or not the need for such repairs
occurs as a result of Lessee’s use, any prior use, the elements or the age of
such portion of the Premises), including, without limiting the generality of the
foregoing, all equipment or facilities, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, foundations, ceilings, roof drainage systems, floors,
windows, doors, dock equipment, gates, plate glass, and skylights located in,
on, or adjacent to the Premises.  Lessee shall keep the Premises clean at all
times and contract directly for trash removal from the Premises and all utility
services, including electricity, telephone, security, gas and water.  Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices, specifically including the procurement and
maintenance of the service contracts required by this Paragraph 7.1.  Lessee’s
obligations shall include restorations, replacements or renewals when necessary
to keep the Premises and all improvements thereon or a part thereof in good
order, condition and state of repair.  If an item cannot be repaired other than
at a cost which is in excess of 50% of the cost of replacing such item, then
such item shall be replaced by Lessee at Lessee’s sole cost and expense.  Lessee
shall, during the term of this Lease, keep the exterior appearance of the
Premises in a first-class condition (including, e.g. graffiti removal)
consistent with the exterior appearance of other similar facilities of
comparable age and size in the vicinity, including, when necessary, the exterior
repainting of the Premises.

(b)Lessee shall, at Lessee’s sole cost and expense, procure and maintain a
contract, with copies to Lessor, in customary form and substance for and with a
contractor specializing and experienced in the inspection, maintenance and
service of the heating, air conditioning and ventilation system for the
Premises.  Such HVAC contract shall provide for the maintenance of the HVAC
system not less than quarterly and replacement of the air filters not less than
monthly.  All such contractors shall be subject to Lessor’s prior approval,
which approval shall not be unreasonably withheld.  Lessee shall make all
repairs and replacements recommended by such contractors at Lessee’s sole cost
and expense.  However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain any or all of such service contracts, and if Lessor so
elects, Lessee shall reimburse Lessor, upon demand, for the cost thereof.

(c)If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1,
Lessor may enter upon the Premises after ten (10) days’ prior written notice to
Lessee (except in the case of an emergency, in which case no notice shall be

 

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required), perform such obligations on Lessee’s behalf, and put the Premises in
good order, condition and repair, in accordance with Paragraph 13.2 below.

7.2Lessor’s Obligations.  Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Operating Expenses), 7.1 (Lessee’s Obligations), 9 (Damage or Destruction)
and 14 (Condemnation), Lessor, shall keep in good order, condition and repair
the roof, foundations, floor slabs, exterior walls, the structural condition of
interior bearing walls of the Premises, and the exterior areas of the Premises
(i.e., landscaping, parking areas, sidewalks and driveways).  Lessor shall
procure and maintain a contract in customary form and substance for and with a
contractor specializing and experienced in the inspection, maintenance and
service of the following equipment and improvements, if any, if and when
installed in or at the Premises:  (i) fire extinguishing systems, including fire
alarm and/or smoke detection, (ii) landscaping and irrigation systems, and (iii)
roof covering and drains.  The cost of the aforementioned maintenance contracts
shall be added to Operating Expenses and reimbursed by Lessee pursuant to
Paragraph 4.2.  Except as provided above, it is intended by the Parties hereto
that Lessor have no obligation to repair and maintain the Premises, or the
equipment therein, all of which obligations are intended to be that of
Lessee.  It is the intention of the Parties that the terms of this Lease govern
the respective obligations of the Parties as to maintenance and repair of the
Premises, and they expressly waive the benefit of any statute now or hereafter
in effect to the extent it is inconsistent with the terms of this Lease.

7.3Utility Installations, Trade Fixtures, Alterations.

(a)Definitions; Consent Required.  The term “Utility Installations” is used in
this Lease to refer to all air lines, power panels, electrical distribution,
security, fire protection systems, communications systems, lighting fixtures,
heating, ventilating and air conditioning equipment, plumbing, and fencing in,
on or about the Premises.  The term “Trade Fixtures” shall mean Lessee’s
machinery and equipment, which can be removed, provided that Lessee repairs any
damage to the Premises caused by such removal.  The term “Alterations” shall
mean any modification of the improvements on the Premises, which are provided by
Lessee under the terms of this Lease, other than Utility Installations or Trade
Fixtures.  “Lessee-Owned Alterations and/or Utility Installations” are defined
as Alterations and/or Utility Installations made by Lessee that are not yet
owned by Lessor pursuant to Subparagraph 7.4 (a).  Lessee shall not make nor
cause to be made any Alterations or Utility Installations in, on, under or about
the Premises without Lessor’s prior written consent.

(b)Consent.  Any Alterations or Utility Installations that Lessee shall desire
to make and which require the consent of the Lessor shall be presented to Lessor
in written form with detailed plans.  All consents given by Lessor, whether by
virtue of Subparagraph 7.3 (a) or by subsequent specific consent, shall be
deemed conditioned upon:  (i) Lessee’s acquiring all applicable permits required
by governmental authorities; (ii) the furnishing of copies of such permits
together with a copy of the plans and specifications for the Alteration or
Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner.  In connection with approving any Alterations or Utility
Installations, Lessor shall have the right to approve Lessee’s
contractor(s).  Any Alterations or Utility Installations by Lessee during the
Term of this Lease shall be done in a good and workmanlike manner, with good and
sufficient materials, and be in compliance with all Applicable
Requirements.  Lessor’s approval of the plans, specifications and working
drawings for Lessee’s Alterations or Utility Installations shall create no
responsibility or liability on the part of Lessor for their completeness, design
sufficiency, or compliance with all laws, rules and regulations of governmental
agencies or authorities.  All work with respect to any Alterations or Utility
Installations must be done in a good and workmanlike manner and diligently
prosecuted to completion to the end that the Premises shall at all times be a
complete unit except during the period of work.  In the event that Lessee makes
any Alterations or Utility Installations, Lessee agrees to carry “Builder’s All
Risk” insurance in an amount approved by Lessor covering the construction of
such Alterations or Utility Installations, and such other insurance as Lessor
may require, it being understood and agreed that all of such Alterations or
Utility Installations shall be insured by Lessee pursuant to Article 8 of this
Lease immediately upon completion thereof.  Upon completion of any Alterations
or Utility Installations, Lessee agrees to cause a Notice of Completion to be
recorded in the office of the Recorder of the county in which the Premises are
located in accordance with Applicable Laws, and Lessee shall deliver to Lessor a
reproducible copy of the “as built” drawings, and specifications therefor of the
Alterations or Utility Installations.  Lessor may (but without obligation to do
so) condition its consent to any requested Alteration or Utility Installation
that costs Fifty Thousand and No/100 Dollars ($50,000.00) or more upon Lessee’s
providing Lessor with such assurances, including without limitation,
establishing an escrow account, as Lessor shall require to assure payment of the
costs thereof to protect Lessor and the Premises from and against any
mechanic’s, materialmen’s or other liens.  Lessee shall keep the Premises lien
free.  Lessee shall pay to Lessor all of Lessor’s actual costs incurred in
conjunction with the review of Lessee’s proposed Alterations or Utility
Installations within fifteen (15) days of Lessee’s receipt of an invoice
therefor.

(c)Lien Protection.  Lessee shall pay when due all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use on
the Premises, which claims are or may be secured by any mechanic’s or
materialmen’s lien against the Premises or any interest therein.  Lessee shall
give Lessor not less than ten (10) days’ notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises and to record the same, as
provided by law.  If Lessee shall, in good faith, contest the validity

 

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of any such lien, claim or demand, then Lessee shall, at its sole expense,
defend and protect itself, Lessor and the Premises against the same and shall
pay and satisfy any such adverse judgment that may be rendered thereon before
the enforcement thereof against the Lessor or the Premises.  If Lessor shall
require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in
an amount equal to one and one-half times the amount of such contested lien
claim or demand pursuant to Applicable Laws, indemnifying Lessor against
liability for the same, as required by law for the holding of the Premises free
from the effect of such lien or claim.  In addition, Lessor may require Lessee
to pay Lessor’s attorneys’ fees and costs in participating in such action if
Lessor shall decide it is to its best interest to do so.

7.4Ownership, Removal, Surrender, and Restoration.

(a)Ownership.  Subject to Lessor’s right to require their removal and to cause
Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises.  Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee‑Owned
Alterations and Utility Installation.  Unless otherwise instructed per
Subparagraph 7.4 (b) hereof, all Lessee‑Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
automatically and without further action on the part of Lessor, become the
property of Lessor and remain upon the Premises and be surrendered with the
Premises by Lessee.

(b)Removal.  Unless otherwise agreed in writing at the time of giving its
consent, Lessor may require that any or all Lessee‑Owned Alterations or Utility
Installations be removed by the expiration or earlier termination of this Lease,
notwithstanding that Lessor may have consented to their installation.  Lessor
may require the removal at any time of all or any part of any Alterations or
Utility Installations made without the required consent of Lessor.

(c)Surrender/Restoration.  Lessee shall surrender the Premises by the end of the
last day of the Term or any earlier termination date, clean and free of debris,
with all Hazardous Materials removed from the Premises, and in good operating
order, condition and state of repair (including, but not limited to: all
plumbing in working order with sinks and toilets cleaned; all lights, ballasts,
and lenses are operational; overhead doors are serviced and repaired; anything
mounted on a door, window or wall removed (including names on office doors,
white boards and any cohesive residue from such items), ordinary wear and tear
and damage by casualty excepted; all electronic, fiber, phone and data cabling
and related equipment that has been installed by or for the exclusive benefit of
Lessee in or around the Premises removed (unless Lessor notifies Lessee in
writing that it may remain in place); missing or damaged dock bumpers, levelers,
seals, locks, and lights are repaired or replaced; any damaged sheetrock is
repaired; floors are clean and free of paint, glue and chips; all racking bolts
and other protrusions are removed from the floor and patched with epoxy; and all
floor cracks ¼ inch wide or larger are filled with epoxy; and exterior signage
is removed and the fascia is repaired and repainted) as more particularly
described in the Move Out Standards attached as Exhibit G to this Lease and
shall provide Lessor with keys for all interior doors.  Except as otherwise
agreed or specified herein, the Premises, as surrendered, shall include the
Alterations and Utility Installations.  The obligations of Lessee shall include
the repair of any damage occasioned by the installation, maintenance or removal
of Lessee’s Trade Fixtures, furnishings, equipment, and Lessee‑Owned Alterations
and Utility Installations, as well as the removal of any storage tank installed
by or for Lessee, and the removal, replacement, or remediation of any air
quality, soil, material or ground water contaminated by Lessee, all as may then
be required by Applicable Requirements and/or good practice.  Lessee’s Trade
Fixtures shall remain the property of Lessee and shall be removed by Lessee
subject to its obligation to repair and restore the Premises pursuant to this
Lease.  Notwithstanding anything to the contrary contained herein, on or before
the Expiration Date or any earlier termination of this Lease, Lessee shall, at
Lessee’s sole cost and expense and in compliance with the National Electric Code
and other applicable laws, remove all electronic, fiber, phone and data cabling
and related equipment that has been installed by or for the exclusive benefit of
Lessee in or around the Premises (collectively, the “Cabling”); provided,
however, Lessee shall not remove the Cabling if Lessee receives a written notice
from Lessor at least fifteen (15) days prior to the expiration or earlier
termination of this Lease authorizing all or any portion of the Cabling to
remain in place, in which event the Cabling or portion thereof authorized by
Lessor remain at the Premises shall be surrendered with the Premises upon
expiration or earlier termination of this Lease.

8.

Insurance; Indemnity.

8.1Lessor’s Insurance.  Lessor shall maintain "causes of loss - special form"
property insurance covering the Premises against loss or damage resulting from
fire and other insurable loss.  Such insurance shall be on a 100% replacement
cost basis.  As reasonably determined by Lessor and subject to Lessee’s
reimbursement of such costs in accordance with the terms of this Paragraph 8.1,
Lessor shall also carry earthquake, terrorism, windstorm and/or other insurance
covering the Premises at commercially reasonable rates.  Lessor shall have the
right to obtain flood insurance if the Premises is located within a 100-Year
Flood Plain or in an identified “flood prone area” as classified by the U.S.
Department of Housing and Urban Development or if required by any lender holding
a security interest in the Premises.  Lessor shall not obtain insurance for
Lessee’s fixtures or equipment or other building improvements installed by
Lessee on the Premises, including Trade Fixtures and Lessee-Owned Alterations
and/or Utility Installations.  During the Term, Lessor shall also maintain a
rental income insurance policy, with loss payable to Lessor, in an amount not to
exceed eighteen (18) months of Base Rent, plus estimated real property taxes and

 

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insurance premiums.  Lessee shall be liable for the payment of any commercially
reasonable deductible amount under Lessor’s insurance policies maintained
pursuant to this Paragraph 8.1 and any commercially reasonable self-insured
retention amount.  Lessee shall not do or permit anything to be done which
invalidates any such insurance policies.  Lessee shall pay all premiums for the
insurance policies described in this Paragraph 8.1 within fifteen (15) days
after Lessee’s receipt of a copy of the premium statement or other evidence of
the amount due except Lessor shall pay all premiums for non-primary
comprehensive public liability insurance which Lessor elects to
obtain.  Alternatively, at Lessor’s election, Lessor shall estimate the
insurance premiums required to be paid by Lessee under this Paragraph 8.1 and
require that such premiums be paid to Lessor by Lessee monthly in advance as
part of Operating Expenses in accordance with Paragraph 4.1 above.  Such monthly
payments shall be an amount equal to the amount of the estimated annual
insurance premiums divided by the number of months remaining before the month in
which said premiums become delinquent.  When the actual amount of the insurance
premiums are known, the amount of such equal monthly advance payments shall be
adjusted as required to provide the funds needed to pay the insurance
premiums.  If the amount collected by Lessor is insufficient to pay such
insurance premiums when due, Lessee shall pay Lessor, upon 10 business days
written notice thereof, such additional sum as is necessary.  If the Term
expires before the expiration of an insurance policy maintained by Lessor,
Lessee shall be liable for Lessee’s prorated share of the insurance premiums.

8.2Lessee’s Insurance.  At all times during the Term of this Lease, Lessee will
purchase and maintain, at Lessee’s sole expense, the following insurance, in
amounts not less than those specified below or such other amounts as Lessor may
from time to time reasonably request, with insurance companies and on forms
satisfactory to Lessor.

(a)Commercial General Liability Insurance written on an I.S.O. “occurrence” form
or its equivalent covering the use, occupancy and maintenance of the Premises
and all operations of Lessee.  Such coverage shall include a limit of $2,000,000
per occurrence for Bodily Injury and Property Damage, $5,000,000 General
Aggregate, $2,000,000 Products/Completed Operations aggregate, $1,000,000 limit
for Personal & Advertising Injury and $1,000,000 Fire Damage Legal Liability
limit.  The policy shall also contain an endorsement amending the “Other
Insurance” clause as follows: “The insurance afforded to Additional Insureds
under this policy is primary insurance and the insurer will not seek
contribution from other insurance available to the Additional Insureds.”  The
policy shall provide defense expense in addition to the limit of liability
stated in the policy.

(b)Umbrella or Excess Liability Insurance to be excess over the Commercial
General Liability, Automobile Liability and Employers’ Liability Insurance.  The
Umbrella Liability policy shall be written on an “occurrence” form with a limit
of liability of Five Million Dollars ($5,000,000.00) and a Self-Insured
Retention no greater than Twenty Five Thousand Dollars ($25,000.00).

(c)Commercial Property Insurance covering all Lessee’s furniture, fixtures,
machinery, equipment, stock and any other personal property owned and/or used in
Lessee’s business and all leasehold improvements, whether made or acquired at
the Lessee’s expense or Lessor’s expense, plate glass that is part of the
Premises and any other property in the Premises that Lessee is responsible for
repairing or replacing under this Lease, in an amount equal to their full
replacement cost without deduction for depreciation.  At a minimum, such policy
shall insure against destruction or damage by fire and other perils covered on
an ISO Causes of Loss - Special Form including wind and hurricane.  Such policy
shall further provide Replacement Cost Coverage.  Such policy shall not contain
a per occurrence deductible greater than Twenty Five Thousand Dollars
($25,000.00).  Further, the policy shall contain a provision specifically naming
Lessor as loss payee for property which Lessor has an insurable interest (i.e.,
leasehold improvements).

(d)Business Income and/or Extra Expense Insurance in an amount sufficient to
insure payment of Rent and all other expenses to be borne by Lessee under this
Lease, for a period of not less than Twelve (12) months, during any interruption
of Lessee’s business by reason of the Premises or personal property being
damaged by fire or other perils covered on an ISO Causes of Loss - Special Form
or its equivalent.  Lessee acknowledges that it assumes all risks of loss due to
interruption of Lessee’s business by any cause.

(e)Automobile Liability Insurance to include coverage for any owned, non-owned
or hired automobiles entering and exiting from the Premises and automobile
contractual liability with limits of:  $1,000,000 per occurrence and Basic
No-Fault coverage as required by law or regulation if any, in the State in which
the Premises is located.

(f)Workers’ Compensation coverage shall be carried as required by law in the
State in which the employees are hired and to further include:  Voluntary
Compensation Coverage and Other States’ Coverage, if applicable, with statutory
limits for Workers’ Compensation and limits for Employers’ Liability
of:  $1,000,000 Each Accident; $1,000,000 Disease - Policy Limit; and $1,000,000
Disease - Each Employee.  The policy shall further contain an endorsement
providing a waiver of subrogation in favor of the Additional Insured Parties.

(g)If required by Lessor because of special environmental concerns regarding the
Lessee’s operations, Pollution Legal Liability Insurance and/or Environmental
Impairment Insurance covering claims for damage or injury caused by

 

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hazardous materials, including, without limitation, bodily injury, wrongful
death, property damage, including loss of use, removal, cleanup and restoration
of work and materials necessary to return the premises and any other property of
whatever nature located on the Premises to their condition existing prior to the
appearance of Lessee’s hazardous materials on the Premises.  The policy shall
contain a provision specifically naming Lessor and Lessor’s officers and
employees as additional insureds.

8.3General Requirements.

(a)Certificates of Insurance evidencing all such insurance and acceptable to
Lessor shall be filed with Lessor prior to occupancy of the Premises and at
least five (5) days prior to the expiration of the term of each policy
thereafter.  Such Certificates of Insurance must specifically show all of the
special policy conditions required in this Article including “additional
insured”, “waiver of subrogation”, “notice of cancellation”, and “primary
insurance” wording applicable to each policy.  Alternatively, a certified, true
and complete copy of each properly endorsed policy may be submitted.  All
coverage shall be written by an admitted insurer in the State in which the
Premises is located with a current Best Rating of A-VIII or better.

(b)All coverage shall be written by an admitted insurer in the State in which
the Premises is located with a current Best Rating of A-X or better.

(c)Intentionally deleted.

(d)Intentionally deleted.

(e)Lessee shall not settle any claim or accept any proceeds in satisfaction of
any claim involving damage to the Premises or liability of Lessor without
Lessor’s express prior written consent.

(f)Lessee may maintain the insurance required under this Paragraph under blanket
or umbrella policies, as applicable, issued to Lessee covering other properties
owned or leased by Lessee; provided that the policies otherwise comply with this
Paragraph and allocate to the Premises the coverage specified by this Paragraph,
without possibility of reduction or coinsurance penalty by reason of, or damage
to, any other properties named therein, and if the insurance required by this
Paragraph shall be effected by any such blanket or umbrella policies, Lessee
shall furnish to Lessor certificates of insurance or certified copies of
policies with schedules thereto attached showing the amount of insurance
afforded by such policies to the Premises.

(g)Lessor at its option may obtain any of the required insurance directly or
through blanket or umbrella policies covering the Premises and other assets
owned by Lessor; provided that the policies otherwise comply with this Paragraph
and allocate to the Premises the coverage specified by this Paragraph, without
possibility of reduction or coinsurance penalty by reason of, or damage to, any
other properties named therein.

8.4Adequacy of Coverage.  Lessor, its agents and employees, make no
representation that the limits of liability specified to be carried by Lessee
pursuant to this Paragraph are adequate to protect Lessee.  If Lessee believes
that any of such insurance coverage is inadequate, Lessee will obtain such
additional insurance coverage as Lessee deems adequate, at Lessee’s sole
expense.

8.5Additional Insureds.  Lessee shall add as additional insureds to the
insurance policies required by this Paragraph such other persons as Lessor may
from time to time reasonably require.

8.6Waiver of Subrogation.  Lessor and Lessee each hereby waives, on their behalf
and on behalf of their respective insurance carriers, any claim which either
Party might otherwise have against the other Party, arising out of loss or
damage, including consequential loss or damage, to any property of such Party
from any risk required to be insured against hereunder.  Lessor and Lessee shall
each indemnify the other against any loss or expense, including reasonable
attorneys’ fees, resulting from the failure of either Party, respectively, to
obtain the waivers required by this Paragraph 8.6.

8.7Indemnity.  Except to the extent caused by Lessor’s gross negligence, willful
misconduct and/or breach of express warranties, Lessee shall indemnify, protect,
defend and hold harmless the Premises, Lessor and its agents, employees,
officers, independent contractors, Lessor’s master or ground lessor, partners
and Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys’ and consultants’
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee’s business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee’s part to be performed under this
Lease.  The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein,

 

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and whether or not (in the case of claims made against Lessor) litigated and/or
reduced to judgment.  In case any action or proceeding is brought against Lessor
by reason of any of the foregoing matters, Lessee, upon notice from Lessor,
shall defend the same at Lessee’s expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense.  Lessor need not
have first paid any such claim in order to be so indemnified.  In no event shall
the foregoing indemnity apply to any injury or damage to persons or property
that is proximately caused the sole negligence of Lessor.  Lessor agrees to
indemnify, defend, and hold Lessee harmless from all claims and all costs,
including reasonable attorneys’ fees, expenses and liabilities, except to the
extent caused by Lessee’s negligence or intentional misconduct or Lessee’s
default of its obligations under this Lease, arising or resulting from the gross
negligence or intentional misconduct of the Lessor or Lessor’s breach of its
obligations under this Lease; provided however that Lessor's agreement to
indemnify Lessee shall be ineffective to the extent the matters for which Lessor
agreed to indemnify Lessee are covered by insurance carried by Lessee or, if not
carried, would have been covered by insurance required to be carried by Lessee
pursuant to this Lease.  The indemnification obligations of Lessee and Lessor
under this Lease shall survive the expiration or earlier termination of this
Lease.

8.8Exemption of Lessor from Liability.  Lessor shall not be liable for injury or
damage to the person or goods, wares, merchandise or other property of Lessee’s
employees, contractors, invitees, customers, or any other person in or about the
Premises, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether said injury or damage results from conditions arising upon the Premises,
from other sources or places, and regardless of whether the cause of such damage
or injury or the means of repairing the same is accessible or
not.  Notwithstanding anything to the contrary contained in this Lease, in no
event shall Lessor be liable under any circumstances for any consequential
damages, including, without limitation, injury to the Lessee’s business or for
any loss of income or profit therefrom.

8.9Failure to Provide Insurance.  Following Lessor’s delivery of prior written
notice to Lessee, Lessor shall have the right and option, but not the
obligation, to maintain any or all of the insurance which is required in this
Paragraph 8 to be provided by Lessee if Lessee fails to maintain the insurance
required of Lessee in this Paragraph 8.  All costs of Lessee’s insurance
provided by the Lessor shall be obtained at Lessee’s expense.

9.

Damage or Destruction.

9.1Definitions.

(a)“Premises Partial Damage” shall mean damage or destruction to the Premises,
other than Lessee‑Owned Alterations and Utility Installations, which can
reasonably be repaired in 365 days or less from the damage or
destruction.  Lessor shall notify Lessee in writing within sixty (60) days after
the date of the damage or destruction as to whether or not the damage is Partial
or Total.

(b)“Premises Total Destruction” shall mean damage or destruction to the
Premises, other than Lessee‑Owned Alterations and Utility Installations, which
cannot be reasonably repaired in 365 days or less from the date of the damage or
destruction.  Lessor shall notify Lessee in writing within sixty (60) days after
the date of the damage or destruction as to whether or not the damage is Partial
or Total.

(c)“Insured Loss” shall mean damage or destruction to the Premises, other than
Lessee‑Owned Alterations and Utility Installations and Trade Fixtures, which was
caused by an event actually covered by insurance carried by the Parties or
required to be covered by the insurance described in Paragraph 8 irrespective of
any deductible amounts or coverage limits involved, and where adequate insurance
proceeds are available to Lessor for the reconstruction of the Premises.

(d)“Replacement Cost” shall mean the cost to repair or rebuild the improvements
owned by Lessor at the time of the occurrence to their condition existing
immediately prior thereto, including demolition, debris removal and upgrading
required by the operation of applicable building codes, ordinances or laws, and
without deduction for depreciation.

9.2Premises Partial Damage - Insured Loss.  If Premises Partial Damage occurs,
and such damage or destruction is an Insured Loss, then Lessor shall, at
Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or
Lessee‑Owned Alterations and Utility Installations) as soon as reasonably
possible and this Lease shall continue in full force and effect.  Premises
Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3
rather than this Paragraph 9.2, notwithstanding that there may be some insurance
coverage, but the net proceeds of any such insurance shall be made available for
the repairs if made by either Party.

9.3Partial Damage - Uninsured Loss.  If Premises Partial Damage occurs and such
damage or destruction is not an Insured Loss, then unless such damage or
destruction was caused by a negligent or willful act of Lessee, its agents,
contractors or employees (in which event Lessee shall make the repairs at
Lessee’s expense and this Lease shall continue in full

 

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force and effect), Lessor may at Lessor’s option, either (i) repair such damage
as soon as reasonably possible at Lessor’s expense, in which event this Lease
shall continue in full force and effect, or (ii) give written notice to Lessee
within sixty (60) days after receipt by Lessor of knowledge of the occurrence of
such damage of Lessor’s desire to terminate this Lease as of the date sixty (60)
days following the date of such notice.

9.4Total Destruction.  Notwithstanding any other provision hereof, if Premises
Total Destruction occurs (including any destruction required by any authorized
public authority), then either Party may elect to terminate this Lease by giving
thirty (30) days written notice to the other within sixty (60) days following
the date of such Premises Total Destruction, whether or not the damage or
destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee.

9.5Damage Near End of Term.  If at any time during the last six (6) months of
the Term of this Lease there is a casualty damage or destruction for which the
cost to repair exceeds two (2) months’ Base Rent, whether or not an Insured
Loss, Lessor may, at Lessor’s option, terminate this Lease effective sixty (60)
days following the date of occurrence of such damage by giving written notice to
Lessee of Lessor’s election to do so within thirty (30) days after the date of
occurrence of such damage.  Provided, however, if Lessee at that time has an
exercisable option to extend this Lease or to purchase the Premises, then Lessee
may preserve this Lease by exercising such option on or before the earlier of
(i) the date which is ten (10) days after Lessee’s receipt of Lessor’s written
notice purporting to terminate this Lease, or (ii) the day prior to the date
upon which such option expires.  If Lessee duly exercises such option during
such period, Lessor shall, at Lessor’s expense repair such damage as soon as
reasonably possible and this Lease shall continue in full force and effect.  If
Lessee fails to exercise such option, then this Lease shall terminate as of the
date set forth in the first sentence of this Paragraph 9.5.

9.6Abatement of Rent; Lessee’s Remedies.

(a)In the event of Premises Partial Damage, the Base Rent and other charges, if
any, payable by Lessee hereunder for the period during which such damage or
condition, its repair, remediation or restoration continues, shall be abated in
proportion to the degree to which, in Lessor’s good faith reasonable business
judgment, Lessee’s use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Subparagraph 8.2
(e).  Except for abatement of Base Rent and other charges, if any, as aforesaid,
all other obligations of Lessee hereunder shall be performed by Lessee, and
Lessee shall have no claim against Lessor for any damage suffered by reason of
any such damage, destruction, repair, remediation or restoration.

(b)If Lessor is obligated to repair or restore the Premises under the provisions
of this Paragraph 9 and does not commence the repair or restoration of the
Premises within one hundred eighty (180) days after either (i) such obligation
shall accrue, or (ii) receipt of all applicable insurance proceeds, whichever
time period is greater, then Lessee may, at any time prior to the commencement
of such repair or restoration, give written notice to Lessor and to any Lenders
of which Lessee has actual notice of Lessee’s election to terminate this Lease
on a date not less than sixty (60) days following the giving of such notice.  If
Lessee gives such notice to Lessor and such Lenders and such repair or
restoration is not commenced within sixty (60) days after receipt of such
notice, this Lease shall terminate as of the date specified in said notice.  If
Lessor or a Lender commences the repair or restoration of the Premises within
sixty (60) days after the receipt of such notice, this Lease shall continue in
full force and effect.  “Commence” as used in this Paragraph 9.6 shall mean
either the authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever occurs first.

9.7Intentionally Omitted.

9.8Termination - Advance Payments.  Upon termination of this Lease pursuant to
this Paragraph 9, Lessor shall return to Lessee any advance payment made by
Lessee to Lessor as has not been or is not then required to be, used by Lessor
under the terms of this Lease.

9.9Waiver of Statutes.  Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent it is inconsistent herewith.

10.

Real Property Taxes.

10.1Payment of Taxes.  In addition to Base Rent, Lessee shall pay to Lessor all
Real Property Taxes relating to the term of this Lease.  Lessor shall estimate
the current Real Property Taxes and require that such taxes be paid to Lessor by
Lessee monthly in advance as part of Operating Expenses in accordance with
Paragraph 4.2 above.

10.2Real Property Tax Definition.  As used herein, the term “Real Property
Taxes” shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement

 

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bond or bonds, levy or tax (other than inheritance, personal income or estate
taxes) imposed upon the Premises by any authority having the direct or indirect
power to tax, including any city, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage, or other improvement district
thereof, including any taxes or assessments levied by a Community Facilities
District, levied against any legal or equitable interest of Lessor in the
Premises or any portion thereof, Lessor’s right to rent or other income
therefrom, and/or Lessor’s business of leasing the Premises, in addition to any
such tax imposed on the Base Rent, a sum equal to the aggregate of any city,
county or state sales, use or transaction privilege taxes levied or imposed
against or on account of any other Rent or otherwise any amounts paid, or costs
incurred by Lessee or on behalf of Lessee hereunder, or the receipt or benefit
thereof by Lessor.  The term “Real Property Taxes” shall also include any tax,
fee, levy, assessment or charge, or any increase therein, imposed by reason of
events occurring, or changes in Applicable Law taking effect, during the Term of
this Lease, including but not limited to a change in the ownership of the
Premises or in the improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties.  In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days,
which such calendar year and tax year have in common.  Each year, at Lessor’s
election, Lessor may protest real property assessments.  In the event Lessor
elects to protest a real property tax assessment, Lessor may utilize the
services of a tax consultant to protest the real property tax assessment.  If as
a result of the protest, the Real Property Taxes are lowered, and a tax
consultant has been utilized in connection with the protest, Lessee agrees to
pay, as additional rent during the Term, all fees payable to tax consultants in
the manner set forth in this Lease, as long as there is a net benefit to Lessee
from such lowering of Real Property Taxes. Lessee may request in writing that
Lessor contest any Real Property Taxes payable (or reimbursable) by Lessee
hereunder levied against all or any portion of the Premises.  Upon receipt of
such request from Lessee, Lessor shall either (i) promptly engage in such
contest, in good faith and diligently, employing a consultant for such contest,
in which event Lessee hereby agrees to cooperate with Lessor in such contest, or
(ii) promptly notify Lessee that Lessor does not elect to engage in such
contest.  If Lessor fails to commence such contest and diligently pursue such
contest to completion or notify Lessee that it elects not to engage in any such
contest within thirty (30) days following Lessee’s request to Lessor to do so,
then Lessee shall have the right to contest in good faith the amount or validity
of any such Real Property Taxes, by appropriate administrative and legal
proceedings, either in its own name, Lessor’s name or jointly with Lessor, and
Lessor shall promptly execute and deliver to Lessee whatever document may be
reasonably necessary to permit the Lessee to so contest any such Real Property
Taxes.  

10.3Additional Improvements.  Notwithstanding Paragraph 10.1 hereof, Lessee
shall, however, pay to Lessor at the time Real Property Taxes are paid under
this Lease, the entirety of any increase in Real Property Taxes by reason of
Alterations, Trade Fixtures or Utility Installations placed upon the Premises by
Lessee or at Lessee’s request.

10.4Joint Assessment.  If the Premises is not separately assessed, Real Property
Taxes allocated to the Premises shall be an equitable proportion of the Real
Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor’s work sheets or such other information as
may be reasonably available.  Lessor’s reasonable determination thereof, in good
faith, shall be conclusive.

10.5Lessee’s Property Taxes.  Lessee shall pay, prior to delinquency, all taxes
assessed against and levied upon Lessee‑Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Premises.  When
possible, Lessee shall cause its Lessee‑Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of
Lessor.  If any of Lessee’s said property shall be assessed with Lessor’s real
property, Lessee shall pay Lessor the taxes attributable to Lessee’s property
within fifteen (15) days after receipt of a written statement setting forth the
taxes applicable to Lessee’s property.

11.Utilities.  Lessee shall pay directly for all utilities and services supplied
to the Premises, including but not limited to electricity, telephone, security,
gas, water, trash removal and cleaning of the Premises, together with any taxes
thereon.  There shall be no abatement of rent and Lessor shall not be liable in
any respect whatsoever for the inadequacy, stoppage, interruption or
discontinuance of any utility or service.  Upon Lessor’s request, Lessee shall
deliver to Lessor copies of all bills for separately metered utilities supplied
to the Premises for the past twelve (12) month period within thirty (30) days of
Lessor’s request.  Lessee shall provide all necessary authorizations for Lessor
to obtain any bills relating to utility usage at the Premises directly from the
utility provider.  At Lessor’s option, Lessor may maintain a telephone line or
lines in Lessor’s name for a security alarm system and/or fire-life/safety
system for the Premises, the cost of which shall be reimbursed by Lessee within
ten (10) days of demand or estimated monthly and paid as part of Operating
Expenses under Paragraph 8.1.

 

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12.

Assignment and Subletting.

12.1Lessor’s Consent Required.

(a)Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage or otherwise transfer or encumber (collectively, “assign” or
“assignment”) or sublet all or any part of Lessee’s interest or obligations in
this Lease or in the Premises without Lessor’s prior written consent given under
and subject to the terms of Paragraph 36, which Lessor shall not withhold, delay
or condition unreasonably.  The Parties agree, however, that the manner of
operation of the Premises and conduct of business thereon by Lessee will have an
impact on the quality and reputation of the Premises.  Accordingly, the Parties
agree that in approving or disapproving of any proposed assignment or subletting
of the Premises or the Lease, Lessor shall be entitled to take into
consideration, by way of example and not limitation, any or all of the criteria
set forth below and that it shall not be unreasonable for Lessor to withhold its
consent if any of the following circumstances exist or may exist:  (i) the
transferee’s contemplated use of the Premises following the proposed assignment
or subletting is different from the permitted use specified herein;  (ii) in
Lessor’s reasonable business judgment, the transferee lacks sufficient business
reputation or experience to operate a successful business of the type and
quality permitted under the Lease; (iii) in Lessor’s reasonable business
judgment, the present net worth of the transferee is less than the greater of
Lessee’s net worth at the Effective Date or Lessee’s “Net Worth” (as defined in
Subparagraph C below) at the date of Lessee’s request for consent to the
assignment or subletting; (iv)  the proposed assignment or subletting would
breach any covenant of Lessor in any other lease, financing agreement or other
agreement relating to the Premises or otherwise; or (v) the transferee requests
an amendment to the Lease other than the identity of Lessee.  No assignment or
subletting shall release Lessee from its obligations and liabilities
hereunder.  Notwithstanding the foregoing and subject to the provisions of
subsection (c) below, Lessee may assign this Lease or sublease the Premises
(“Permitted Transfers”), without Lessor’s consent but upon ten (10) days prior
written notice to Lessor, to any corporation which controls, is controlled by or
is under common control with Lessee, or to any corporation resulting from the
merger of or consolidation with Lessee (“Lessee’s Affiliate”).  In such case,
any Lessee’s Affiliate shall assume in writing all of Lessee’s obligations under
this Lease.

(b)A “Change of Control” of Lessee shall constitute an assignment requiring
Lessor’s consent.  Change of Control shall mean the transfer by sale,
assignment, death, incompetency, mortgage, deed of trust, trust, operation of
law, or otherwise, of any shares, voting rights or ownership interest which will
result in a change in the identity of the entity, entities, person or persons
exercising, or who may exercise, effective control of Lessee, unless such change
results from the trading of shares listed on a recognized public stock exchange
and such trading is not for the purpose of acquiring effective control of
Lessee.  If Lessee is a private corporation whose stock becomes publicly held,
the transfers of such stock from private to public ownership shall not be deemed
a Change of Control. The transfer, on a cumulative basis, of fifty percent (50%)
or more of the voting control of Lessee shall constitute a change in control for
this purpose.

(c)The involvement of Lessee or its assets in any transaction, or series of
transactions (by way of merger, sale, acquisition, financing, refinancing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee’s assets occurs, which may, in Lessor’s
good faith reasonable business judgment, results in a reduction of the Net Worth
of Lessee, as hereinafter defined, by an amount equal to or greater than ten
(10%) of such Net Worth of Lessee as it was represented to Lessor at the time of
full execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent.  “Net
Worth” of Lessee for purposes of this Lease shall be the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles consistently applied.

(d)An assignment or subletting of Lessee’s interest in this Lease without
Lessor’s specific prior written consent shall be a Default under this Lease.

(e)Lessee’s remedy for any breach of this Paragraph 12.1 by Lessor shall be
limited to compensatory damages and/or injunctive relief.

12.2Terms and Conditions Applicable to Assignment and Subletting.

(a)Regardless of Lessor’s consent, any assignment or subletting shall not (i) be
effective without the express written assumption by such assignee or sublessee
of the obligations of Lessee under this Lease, (ii) release Lessee of any
obligations hereunder, nor (iii) alter the primary liability of Lessee for the
payment of Base Rent and other sums due Lessor hereunder or for the performance
of any other obligations to be performed by Lessee under this Lease.

(b)Lessor may accept any Rent or performance of Lessee’s obligations from any
person other than Lessee pending approval or disapproval of an
assignment.  Neither a delay in the approval or disapproval of such assignment
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the acceptance of any Rent for performance shall constitute a waiver or estoppel
of Lessor’s right to exercise its remedies for the Default or Breach by Lessee
of any of the terms, covenants or conditions of this Lease.

(c)The consent of Lessor to any assignment or subletting shall not constitute
consent to any subsequent assignment or subletting by Lessee or to any
subsequent or successive assignment or subletting by the assignee or
sublessee.  However, Lessor may consent to subsequent sublettings and
assignments of the sublease or any amendments or modifications thereto without
notifying Lessee or anyone else liable under this Lease or the sublease and
without obtaining their consent, and such action shall not relieve such persons
from liability under this Lease or the sublease.

(d)In the event of any Default or Breach of Lessee’s obligation under this
Lease, Lessor may proceed directly against Lessee or anyone else responsible for
the performance of the Lessee’s obligations under this Lease, including any
sublessee, without first exhausting Lessor’s remedies against any other person
or entity responsible therefor to Lessor, or any security held by Lessor.

(e)Should Lessee desire to enter into an assignment or subletting transaction,
Lessee shall give notice thereof to Lessor by requesting in writing Lessor’s
consent to such assignment or subletting at least thirty (30) days before the
proposed effective date of any such assignment or subletting and shall provide
Lessor with the following:  (i) the full particulars of the proposed assignment
or subletting transaction, including its nature, effective date, terms and
conditions, and copies of any documents pertaining to such proposed transaction;
(ii) a description of the identity, net worth and previous business experience
of the transferee, including, without limitation, copies of transferee’s latest
income, balance sheet and change-of-financial-position statements (with
accompanying notes and disclosures of all material changes thereto to the extent
such information is available) in audited form, if available, and certified as
accurate by the transferee; and (iii) any further information relevant to the
transaction which Lessor shall have reasonably requested within ten (10) days
after receipt of Lessee’s request for consent and all information specified
above in Subparagraphs (i), (ii) and (iii).

Each assignment or subletting to which Lessor has consented shall be evidenced
by an instrument made in such written form as is satisfactory to Lessor and
executed by Lessee and transferee.  By such instrument, transferee shall assume
all the terms, covenants and conditions of this Lease, which are obligations of
Lessee.  Lessee shall remain fully liable to perform its duties under the Lease
following the assignment or subletting.  Lessee shall, on demand of Lessor,
reimburse Lessor for Lessor’s reasonable and actual costs, including legal fees,
incurred in obtaining advice and preparing documentation for each assignment or
subletting to which Lessor has consented.

(f)Any assignee of, or sublessee under, this Lease shall, by reason of accepting
such assignment or entering into such sublease, be deemed, for the benefit of
Lessor, to have assumed and agreed to conform and comply with each and every
term, covenant, condition and obligation herein to be observed or performed by
Lessee during the term of said assignment or sublease, other than such
obligations as are contrary to or inconsistent with provisions of an assignment
or sublease to which Lessor has specifically consented in writing.

(g)Intentionally deleted.

(h)Intentionally deleted.

(i)If Lessor consents to an assignment or subletting, as a condition thereto
which the Parties hereby agree is reasonable, Lessee shall pay to Lessor fifty
percent of any “Transfer Premium,” as that term is defined in this subparagraph,
received by Lessee from such assignee or sublessee.  “Transfer Premium” shall
mean all rent, additional rent or other consideration payable by the assignee or
sublessee in connection with the assignment or sublease in excess of the Base
Rent under this Lease during the term of the assignment or sublease on a per
rentable square foot basis if less than all of the Premises is transferred,
deducting any expenses incurred by Lessee in connection with the assignment or
subletting, including without limitation, expenses of marketing brokerage
commissions and reasonable attorneys’ fees, but excluding expenses incurred in
improving the space or loss of rent.  “Transfer Premium” shall also include, but
not be limited to, key money, bonus money or other cash consideration paid by
such assignee or sublessee to Lessee in connection with such assignment or
sublease, directly or indirectly (including any consideration received Lessee or
any person or any entity or person related to or affiliated with, Lessee
[including, but not limited to, any subsidiary or sister corporation] from any
assignee or subtenant or any other entity or person related to, or affiliated
with, such assignee or subtenant) and any payment for services rendered by
Lessee to such transferee or for assets, fixtures, inventory, equipment, or
furniture transferred by Lessee to such transferee in connection with such
assignment or sublease.  The determination of the amount of Lessor’s applicable
share of the Transfer Premium shall be made on a monthly basis as rent or other
consideration is received by Lessee under the assignment or sublease.

(j)In the event of a proposed assignment or subletting, Lessor shall also have
the right, by notice to Lessee, to terminate this Lease in the event of an
assignment as to all of the Premises and, in the event of a sublease, as to the

 

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subleased portion of the Premises and to require that all or part, as the case
may be, of the Premises be surrendered to Lessor for the balance of the Term
(collectively “Recapture the Lease”).

12.3Additional Terms and Conditions Applicable to Subletting.  The following
terms and conditions shall apply to any subletting by Lessee 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:

(a)Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in all
rentals and income arising from any sublease of all or a portion of the Premises
heretofore or hereafter made by Lessee, and Lessor may collect such rent and
income and apply same toward Lessee’s obligations under this Lease; provided,
however, that until a Breach shall occur in the performance of Lessee’s
obligations under this Lease, Lessee may, except as otherwise provided in this
Lease, receive, collect and enjoy the rents accruing under such
sublease.  Lessor shall not, by reason of the foregoing provision or any other
assignment of such sublease to Lessor, nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee’s obligations to such sublessee
under such Sublease.  Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee’s obligations under this Lease, to pay to
Lessor the rents and other charges due and to become due under the
sublease.  Sublessee shall rely upon any such statement and request from Lessor
and shall pay such rents and other charges to Lessor without any obligation or
right to inquire as to whether such Breach exists and notwithstanding any notice
from or claim from Lessee to the contrary.  Lessee shall have no right or claim
against such sublessee, or, until the Breach has been cured, against Lessor, for
any such rents and other charges so paid by said sublessee to Lessor.

(b)In the event of a Breach by Lessee in the performance of its obligations
under this Lease, Lessor, at its option and without any obligation to do so, may
require any sublessee to attorn to Lessor, in which event Lessor shall undertake
the obligations of the sublessor under such sublease from the time of the
exercise of said option to the expiration of such sublease; provided, however,
Lessor shall not be liable for any prepaid rents or security deposit paid by
such sublessee to such sublessor or for any other prior defaults or breaches of
such sublessor under such sublease.

(c)Any matter or thing requiring the consent of the sublessor under a sublease
shall also require the consent of Lessor herein.

(d)No sublessee under a sublease approved by Lessor shall further assign or
sublet all or any part of the Premises without Lessor’s prior written consent,
which consent may be granted or denied in Lessor’s sole discretion.

13.

Default; Breach; Remedies.

13.1Default; Breach.  Lessee’s obligations to Lessor hereunder shall include any
and all costs or expenses incurred by Lessor in conjunction with enforcing
Lessor’s rights and remedies hereunder, which shall include, but shall not be
limited to, any attorneys’ fees or other legal expenses or costs associated
therewith, and that Lessor may include the cost of such services and costs in
any notice of Default as rent due and payable to cure said default.  A “Default”
by Lessee is defined as a failure by Lessee to observe, comply with or perform
any of the terms, covenants, conditions or rules applicable to Lessee under this
Lease.  A “Breach” by Lessee is defined as the occurrence of any Default,
including but not limited those listed below, and, where a grace period for cure
after notice is specified herein, the failure by Lessee to cure such Default
prior to the expiration of the applicable grace period, and shall entitle Lessor
to pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:

(a)The vacating of the Premises without the intention to reoccupy same, or the
abandonment of the Premises; provided, however, that Lessee shall not be deemed
to have vacated or abandoned the Premises if it continues to timely pay all
amounts due under this Lease, keeps the Premises secure, and otherwise maintains
the Premises in accordance with this Lease.

(b)The failure by Lessee to make any payment of Rent or any other monetary
payment required to be made by Lessee hereunder as and when due.

(c)Except as expressly otherwise provided in this Lease, the failure by Lessee
to provide Lessor with reasonable written evidence (in duly executed original
form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Subparagraph 7.1 (b), (iii) the rescission of an unauthorized assignment
or subletting per Paragraph 12.1, (iv) an estoppel certificate per Paragraphs 16
or 37, (v) the subordination or non-subordination of this Lease per
Paragraph 30, (vi) the Guaranty of the performance of Lessee’s obligations under
this Lease if required under Paragraphs 1.11 and 37, (vii) the execution of any
document requested under Paragraph 41 (Reservations), or (viii) any other
documentation or information which Lessor may reasonably require of Lessee under
the terms of this Lease, where any such failure continues for a period of ten
(10) days following written notice by or on behalf of Lessor to Lessee.

 

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(d)A Default by Lessee as to the terms, covenants, conditions or provisions of
this Lease, or of the Rules and Regulations adopted under Paragraph 39 hereof
that are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1 (a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee’s
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.

(e)The occurrence of any of the following events: (i) the making by Lessee of
any general arrangement or assignment for the benefit of creditors;
(ii) Lessee’s becoming a “debtor” as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee’s assets
located at the Premises or of Lessee’s interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee’s assets
located at the Premises or of Lessee’s interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this Subparagraph 13.1 (e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.

(f)The discovery by Lessor that any financial statement of Lessee or of any
Guarantor, given to Lessor by Lessee or any Guarantor, was materially false.

(g)If the performance of Lessee’s obligations under this Lease is guaranteed:
(i) the death of a Guarantor, (ii) the termination of a Guarantor’s liability
with respect to this Lease other than in accordance with the terms of such
Guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy
filing, (iv) a Guarantor’s refusal to honor the Guaranty, or (v) a Guarantor’s
breach of its guaranty obligation on an anticipatory breach basis, and Lessee’s
failure, within sixty (60) days following written notice by or on behalf of
Lessor to Lessee of any such event, to provide Lessor with written alternative
assurances of security, which, when coupled with the then existing resources of
Lessee, equals or exceeds the combined financial resources of Lessee and the
Guarantors that existed at the time of execution of this Lease.

13.2Remedies.  If Lessee fails to perform any affirmative duty or obligation of
Lessee under this Lease, within ten (10) business days after written notice to
Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee’s
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals.  The actual
and reasonable costs and expenses of any such performance by Lessor shall be due
and payable by Lessee to Lessor within thirty (30) days of Lessor’s delivery of
an invoice to Lessee.  If any check given to Lessor by Lessee shall not be
honored by the bank upon which it is drawn,  Lessor at its own option, may
require all future payments to be made under this Lease by Lessee to be made
only by cashier’s check.  In the event of a Breach of this Lease by Lessee, with
or without further notice or demand, and without limiting Lessor in the exercise
of any right or remedy, which Lessor may have by reason of such Breach, Lessor
may:

(a)Terminate Lessee’s right to possession of the Premises by any lawful means,
in which case this Lease and the Term hereof shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor.  In such event
Lessor shall be entitled to recover from Lessee: (i) the worth at the time of
the award of the unpaid rent which had been earned at the time of termination;
(ii) the worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that the Lessee proves could have been reasonably
avoided; (iii) 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 the Lessee proves could be reasonably avoided; and
(iv) any other amount necessary to compensate Lessor for all the detriment
proximately caused by the Lessee’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 the cost of recovering possession of the
Premises, expenses of reletting, including necessary renovation and alteration
of the Premises, reasonable attorneys’ fees, and that portion of any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired Term of this Lease.  The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco or the Federal Reserve Bank District in which the Premises
are located at the time of award plus one percent (1%).  Efforts by Lessor to
mitigate damages caused by Lessee’s Default or Breach of this Lease shall not
waive Lessor’s right to recover damages under this Paragraph 13.2.  If
termination of this Lease is obtained through the provisional remedy of unlawful
detainer, Lessor shall have the right to recover in such proceeding the unpaid
rent and damages as are recoverable therein, or Lessor may reserve the right to
recover all or any part thereof in a separate suit for such rent and/or
damages.  If a notice and grace period required under Subparagraph 13.1 (b), (c)
or (d) was not previously given, a notice to pay rent or quit, or to perform or
quit, as the case may be, given to Lessee under any statute authorizing the
forfeiture of leases for unlawful detainer shall also constitute the applicable
notice for grace period purposes required by Subparagraph 13.1 (b), (c) or
(d).  In such case, the applicable grace period under the unlawful detainer
statute shall run concurrently after the one such statutory notice, and the

 

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failure of Lessee to cure the Default within the greater of the two (2) such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.

(b)Lessor shall have the remedy described in California Civil Code Section
1951.4 (lessor may continue lease in effect after lessee’s breach and
abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations).  Lessor and Lessee
agree that the limitations on assignment and subletting this Lease are
reasonable.  Acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver to protect the Lessor’s interest under this
Lease, shall not constitute a termination of the Lessee’s right to possession.

(c)Pursue any other remedy now or hereafter available to Lessor under the laws
or judicial decisions of the state wherein the Premises are located.

(d)The expiration or termination of this Lease and/or the termination of
Lessee’s right to possession shall not relieve Lessee from liability under any
indemnity provisions of this Lease as to matters occurring or accruing during
the Term hereof or by reason of Lessee’s occupancy of the Premises.

13.3Inducement Recapture in Event of Breach.  Any agreement by Lessor for free
or abated rent or other charges applicable to the Premises, or for the giving or
paying by Lessor to or for Lessee of any cash or other bonus, inducement or
consideration for Lessee’s entering into this Lease, all of which concessions
are hereinafter referred to as “Inducement Provisions” shall be deemed
conditioned upon Lessee’s full and faithful performance of all of the terms,
covenants and conditions of this Lease to be performed or observed by Lessee
during the Term hereof as the same may be extended.  Upon the occurrence of a
Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement Provision
shall be immediately due and payable by Lessee to Lessor, and recoverable by
Lessor, as additional rent due under this Lease, notwithstanding any subsequent
cure of said Breach by Lessee.  The acceptance by Lessor of rent or the cure of
the Breach which initiated the operation of this Paragraph 13.3 shall not be
deemed a waiver by Lessor of the provisions of this Paragraph 13.3 unless
specifically so stated in writing by Lessor at the time of such acceptance.

13.4Late Charges.  Lessee hereby acknowledges that late payment by Lessee to
Lessor of rent and other sums due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain.  Such costs include, but are not limited to, processing
and accounting charges, and late charges, which may be imposed upon Lessor by
the terms of any ground lease, mortgage or deed of trust covering the
Premises.  Accordingly, if any installment of rent or other sum due from Lessee
shall not be received by Lessor or Lessor’s designee at the address stated in,
and in accordance with, the Rent Payment Instructions attached as Exhibit H to
this Lease, within five (5) days after such amount shall be due, then, without
any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge
equal to five percent (5%) of such overdue amount.  Any post dated checks, two
party checks, third party checks or any check from a party other than the Lessee
named in this Lease will not be accepted and will be deemed late unless a check
from the Lessee is received within such five day period.  The Parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee.  Acceptance of such
late charge by Lessor shall in no event constitute a waiver of Lessee’s Default
or Breach with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.  In addition
to the late charge, in the event (i) any check is returned for insufficient
funds, (ii) Lessor receives a check for an installment of rent at an address
other than the address set forth in the Rent Payment Instructions attached as
Exhibit H to this Lease, or (iii) Lessor receives a post dated check, a two
party check, a third party check or any check for Rent from a party other than
the Lessee named in this Lease, Lessee shall pay to Lessor, as additional rent,
the sum of $50.00.  In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of Base Rent in any twelve
(12) month period, then notwithstanding Paragraph 4.1 or any other provision of
this Lease to the contrary, Base Rent shall, at Lessor’s option, become due and
payable quarterly in advance.

13.5Breach by Lessor.  Lessor shall not be deemed in breach of this Lease unless
Lessor fails within a reasonable time to perform an obligation required to be
performed by Lessor.  For purposes of this Paragraph 13.5, a reasonable time
(except in the event of an emergency threatening life or property) shall in no
event be less than thirty (30) days after receipt by Lessor, and by any
Lender(s) whose name and address shall have been furnished to Lessee in writing
for such purpose, of written notice specifying wherein such obligation of Lessor
has not been performed; provided, however, that if the nature of Lessor’s
obligation is such that more than thirty (30) days after such notice are
reasonably required for its performance, then Lessor shall not be in breach of
this Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.

14.Condemnation.  If the Premises or any portion thereof are permanently 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.  If more than ten

 

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percent (10%) of the floor area of the Premises, or more than twenty five
percent (25%) of the portion of the Premises designated for Lessee’s parking, is
taken by condemnation, Lessee may, at Lessee’s option, to be exercised in
writing within twenty (20) days after Lessor shall have given Lessee written
notice of such taking (or in the absence of such notice, within twenty (20) days
after the condemning authority shall have taken possession) terminate this Lease
as of the date the condemning authority takes such possession.  If Lessee 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 Base Rent shall be reduced in the same proportion as the
rentable floor area of the Premises taken bears to the total rentable floor area
of the Premises.  No reduction of Base Rent shall occur if the condemnation does
not apply to any portion of the Premises.  Any award for the taking of all or
any part of the Premises under the power of eminent domain or any payment made
under threat of the exercise of such power shall be the property of Lessor,
whether such award shall be made as compensation for diminution of value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any compensation, awarded to Lessee
for Lessee’s relocation expenses and/or loss of Lessee’s Trade Fixtures.  In the
event that this Lease is not terminated by reason of such condemnation, Lessor
shall to the extent of its net severance damages received, over and above the
legal and other expenses incurred by Lessor in the condemnation matter, repair
any damage to the Premises caused by such condemnation authority.  Lessee shall
be responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.

15.

Brokers.

15.1Procuring Cause.  The Broker(s) named in Paragraph 1.10 is/are the procuring
cause of this Lease.

15.2Representations and Warranties.  Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.10 in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder’s fee in
connection with said transaction.  Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys’ fees
reasonably incurred with respect thereto.

16.

Estoppel Certificates and Financial Statements.

16.1Estoppel Certificates.  Within ten (10) business days after notice from
Lessor, Lessee shall execute and deliver to Lessor a certificate stating such
matters reflecting the status of this Lease or the Premises as Lessor or
Lessor’s lender, purchaser or ground lessor may reasonably request.  If Lessee
shall fail to deliver such certificate within said ten (10) business day period,
such failure shall constitute a material default under this Lease and, at
Lessor’s option, any representation of Lessor respecting the matters covered by
such certificate shall be conclusively presumed to be accurate.  Any such
election by Lessor shall not cure Lessee’s default, and Lessee shall continue to
be obligated to deliver such certificate.

16.2Financial Statement.  Within ten (10) days of Lessor’s request, Lessee shall
deliver to any potential lender or purchaser designated by Lessor such financial
statements of Lessee as may be reasonably required by such lender or purchaser,
including but not limited to Lessee’s financial statements for the past three
(3) years.  All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the purposes herein
set forth.

17.Lessor’s Liability.  The term “Lessor” as used herein shall mean the owner or
owners at the time in question of the fee title to the Premises.  In the event
of a transfer of Lessor’s title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment.  Upon such transfer or assignment and delivery of the Security
Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with
respect to the obligations and/or covenants under this Lease thereafter to be
performed by the Lessor.  Subject to the foregoing, the obligations and/or
covenants in this Lease to be performed by the Lessor shall be binding only upon
the Lessor as hereinabove defined.  Notwithstanding anything to the contrary
contained in the Lease, Lessee agrees that its sole and exclusive remedy shall
be against Lessor’s interest in the Premises and that the obligations of Lessor
under the Lease do not constitute personal obligations of the individual
partners, whether general or limited, directors, officers, members, shareholders
or trustees of Lessor, and Lessee shall not seek recourse against the individual
partners, directors, officers, members, shareholders or trustees of Lessor or
any of their personal assets for satisfaction of any liability with respect to
the Lease.  

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.  Any monetary payment due Lessor hereunder,
other than late charges, not received by Lessor within ten (10) days following
the date on which it was due, shall bear interest from the date due at the rate
of eight

 

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percent (8%) per annum, but not exceeding the maximum rate allowed by law, in
addition to the potential late charge provided for in Paragraph 13.4.

20.Time of Essence; Recording.  Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease.  Lessee shall not record this Lease or any memorandum of this Lease.

21.Rent Defined.  All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.

22.No Prior or Other Agreements.  This Lease (including all exhibits and
addenda) contains all agreements, representations and warranties between the
Parties with respect to any matter mentioned herein and supersedes and cancels
any and all previous negotiations, arrangements, brochures, marketing materials,
agreements and understandings, if any, and no other prior or contemporaneous
agreement or understanding (whether verbal or written) shall be effective.  This
Lease may not be modified, deleted or added to except by a writing signed by the
Parties hereto.  The Parties acknowledge that (i) each Party and/or its counsel
have reviewed and revised this Lease, and (ii) no rule of construction to the
effect that any ambiguities are to be resolved against the drafting Party shall
be employed in the interpretation or enforcement of this Lease.

23.Notices.  All notices required or permitted by this Lease shall be in writing
and shall be and deemed duly served or given when actually delivered, if
personally delivered or delivered by overnight courier (including delivery by
FedEx, which confirms delivery in writing), or within three (3) business days
after deposit in the U.S. Mail, if sent by certified mail, postage prepaid,
return receipt requested, and shall be deemed sufficiently given if served in a
manner specified in this Paragraph 23.  If notice is received on a Saturday or a
Sunday or a legal holiday, it shall be deemed received on the next business day.
The addresses noted adjacent to a Party’s signature on this Lease shall be that
Party’s address for delivery or mailing of notice purposes.  Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee’s taking possession of the Premises, the Premises shall
constitute Lessee’s address for the purpose of mailing or delivering notices to
Lessee.  A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such Party or Parties at such
addresses as Lessor may from time to time hereafter designate by written notice
to Lessee.

24.Waivers.  No waiver by either Party of the Default or Breach of any term,
covenant or condition hereof by the other Party, shall be deemed a waiver of any
other term, covenant or condition hereof, or of any subsequent Default or Breach
by the other Party of the same or any other term, covenant or condition
hereof.  Lessor’s consent to, or approval of, any such act shall not be deemed
to render unnecessary the obtaining of Lessor’s consent to, or approval of, any
subsequent or similar act by Lessee, or be construed as the basis of an estoppel
to enforce the provision or provisions of this Lease requiring such
consent.  Regardless of Lessor’s knowledge of a Default or Breach at the time of
accepting rent, the acceptance of rent by Lessor shall not be a waiver of any
Default or Breach by Lessee of any provision hereof.  Any payment given Lessor
by Lessee may be accepted by Lessor on account of moneys or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.

25.Access to the Premises. Subject to the terms of this Lease, including but not
limited to, the Rules and Regulations attached hereto as Exhibit D, Lessee and
its employees shall have access to the Premises twenty-four (24) hours per day,
365 days per year.

26.No Right To Holdover.  Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.  In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to (a) for the first month
of such holdover, one hundred five percent (105%) of the Base Rent applicable
during the month immediately preceding such expiration or earlier termination,
and (b) thereafter, one hundred twenty-five percent (125%) of the Base Rent
applicable during the month immediately preceding such expiration or earlier
termination.  Additionally, in the event that upon the expiration or earlier
termination of the Lease, Lessee has not fulfilled its obligation with respect
to restoration, repairs and cleanup of the Premises or any other Lessee
obligations as set forth in this Lease, then Lessor shall have the right to
perform any such obligations as it deems necessary at Lessee's sole cost and
expense, and any time required by Lessor to complete such obligations shall be
considered a period of holding over and the terms of this Paragraph 26 shall
apply.  Lessee shall protect, defend, indemnify and hold Lessor harmless from
all loss, costs (including reasonable attorneys’ fees), direct and indirect
damages, and liability resulting from Lessee’s holding over, including, without
limiting the generality of the foregoing, the cost of unlawful detainer
proceedings instituted by Lessor against Lessee, increased construction costs to
Lessor as a result of Lessor’s inability to timely commence construction of
improvements for a new tenant for the Premises, lost profits that results from
Lessor’s inability to timely deliver the Premises to such new tenant, and any
claims made by any succeeding tenant founded upon such failure to surrender and
any lost profits to Lessor resulting therefrom.  Nothing contained herein shall
be construed as consent by Lessor to any holding over by Lessee.

 

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27.Cumulative Remedies.  No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28.Covenants and Conditions.  All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.

29.Binding Effect; Choice of Law.  This Lease shall be binding upon the Parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located.  Lessee expressly agrees
that any and all disputes arising out of or in connection with this Lease shall
be litigated only in the Superior Court of the State of California for the
county in which the Premises are located (and in no other), and Lessee hereby
consents to the jurisdiction of said court.

30.

Subordination; Attornment; Non-Disturbance.

30.1Subordination.  This Lease and any Option granted hereby shall automatically
be subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device or amendment or modification thereto
(collectively, “Security Device”), now or hereafter placed by Lessor upon the
real property of which the Premises are a part, to any and all advances made on
the security thereof, and to all renewals, modifications, consolidations,
replacements and extensions thereof.  Lessee agrees that the Lenders holding any
such Security Device shall have no duty, liability or obligation to perform any
of the obligations of Lessor under this Lease, but that in the event of Lessor’s
default with respect to any such obligation, Lessee will give any Lender whose
name and address have been furnished Lessee in writing for such purpose notice
of Lessor’s default pursuant to Paragraph 13.5.  If any Lender shall elect to
have this Lease and/or any Option granted hereby superior to the lien of its
Security Device and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.

30.2Attornment.  Subject to the non-disturbance provisions of Paragraph 30.3,
Lessee agrees to attorn to a Lender or any other party who acquires ownership of
the Premises by reason of a foreclosure of a Security Device, and that in the
event of such foreclosure, such new owner shall not:  (i) be liable for any act
or omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership, (ii) be subject to any offsets or defenses which
Lessee might have against any prior lessor, or (iii) be bound by prepayment of
more than one month’s rent.

30.3Non-Disturbance.  With respect to Security Devices entered into for the
first time (as opposed to amendments or modifications to existing Security
Devices) by Lessor after the execution of this Lease, Lessee’s subordination of
this Lease shall be subject to receipt of an assurance (a “Nondisturbance
Agreement”) from the Lender that Lessee’s possession and this Lease, including
any options to extend the Term hereof, will not be disturbed so long as Lessee
is not in Breach hereof and attorns to the record owner of the Premises.

30.4Self-Executing.  The agreements contained in this Paragraph 30 shall be
effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall, within ten (10)
days following the date of such request, execute such further writings as may be
reasonably required to separately document any such subordination or
non-subordination, attornment and/or non-disturbance agreement as is provided
for herein.

31.Attorneys’ Fees.  If any Party brings an action or proceeding to enforce the
terms hereof or declare rights hereunder, the Prevailing Party (as hereafter
defined) in any such proceeding, action, or appeal thereon, shall be entitled to
reasonable attorneys’ fees.  Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment.  The term “Prevailing Party” shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other Party of its claim or defense.  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.  Lessor
shall be entitled to attorneys’ fees, costs and expenses incurred in 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 or resulting Breach.

32.Lessor’s Access; Showing Premises; Repairs.  Lessor and Lessor’s agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times and upon prior reasonable notice to Lessee,
for the purpose of showing the same to prospective purchasers, lenders, or
lessees, and making such alterations, repairs, improvements or additions to the
Premises, as Lessor may reasonably deem necessary, including the right to take
photographs of the Premises in connection with such entry.  Lessor may at any
time place on or about the Premises any ordinary “For Sale” signs and Lessor may
at any time during the last three hundred sixty five (365) days of the Term
hereof place on or about the Premises any ordinary “For Lease” signs.  All such
activities of Lessor shall be without abatement of rent or liability to Lessee.

 

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33.Auctions.  Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor’s prior written consent.  Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.

34.Signs.  Lessee shall not place any sign upon the exterior of the Premises,
except that Lessee may, with Lessor’s prior written consent and at Lessee’s sole
cost and expense, install (but not on the roof) such signs as are reasonably
required to advertise Lessee’s own business so long as such signs are in a
location designated by Lessor and comply with Applicable Requirements and the
signage criteria established for the Premises by Lessor.  Notwithstanding the
foregoing, at Lessee’s sole cost and expense, Lessee shall have the right to
install (a) a sign on the exterior of the Building, and (b) a monument sign in
front of the Building, subject to Lessor’s prior approval of such signage and
Lessee’s compliance with the other provisions of this Paragraph 34.  The
location, quality, design, style, lighting and size of such signage shall be
subject to Lessor’s prior written approval.  The right granted under this
paragraph shall be personal to the originally named Lessee under this
Lease.  Such signage shall comply with all applicable laws, statutes,
regulations, ordinances and restrictions, including but not limited to, any
permit requirements.  Lessee shall install and maintain said signage in good
condition and repair at its sole cost and expense during the entire Term.  The
installation of any sign on the Premises by or for Lessee shall be subject to
the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,
Trade Fixtures and Alterations).  Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof of the Premises, and the right
to install advertising signs on the Premises, including the roof, which do not
unreasonably interfere with the conduct of Lessee’s business; Lessor shall be
entitled to all revenues from such advertising signs.

35.Termination; Merger.  Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies.  Lessor’s failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor’s election to have such
event constitute the termination of such interest.

36.Consents. Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld,
conditioned or delayed.  Lessor’s actual costs and expenses (including but not
limited to architects’, attorneys’, engineers’ and other consultants’ fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice therefor.  Lessor’s consent to any act, assignment of this Lease or
subletting of the Premises by Lessee shall not constitute an acknowledgment that
no Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such
consent.  Lessee acknowledges all conditions to Lessor’s consent authorized by
this Lease as being reasonable.  The failure to specify herein any particular
condition to Lessor’s consent shall not preclude the impositions by Lessor at
the time of consent of such further or other conditions as are then reasonable
with reference to the particular matter for which consent is being given.

37.

Guarantor.  Intentionally deleted.

38.Quiet Possession.  Upon payment by Lessee of the Rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee’s
part to be observed and performed under this Lease, and unless specifically
provided herein, Lessee shall have quiet possession of the Premises for the
entire Term hereof subject to all of the provisions of this Lease.

39.Rules and Regulations.  Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations (“Rules and Regulations”) which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order.  The current Rules and Regulations are attached
hereto as Exhibit D.

40.Security Measures.  Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide
same.  Lessee assumes all responsibility for the protection of the Premises,
Lessee, its agents and invitees and their property from the acts of third
parties and shall install, at Lessee’s sole cost and expense, any and all
necessary security devices.

41.Reservations.  Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee.  Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.

 

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42.OFAC Compliance.  Lessee represents, warrants and covenants to Lessor that
neither they are not, and, after making due inquiry, that no person or entity
that owns a 10% or greater equity interest in or otherwise controls Lessee, nor
any of their respective officers, directors or managing members, (i) is a person
or entity with whom U.S. persons or entities are restricted from doing business
under regulations of the Office of Foreign Asset Control (“OFAC”) of the
Department of the Treasury (including those named on OFAC’s Specially Designated
and Blocked Persons List or any similar list) or under any statute, executive
order (including Executive Order 13224 (the “Executive Order”) signed on
September 24, 2001 and entitled “Blocking Property and Prohibiting Transactions
with Persons Who Commit, Threaten to Commit, or Support Terrorism”), or other
governmental action, (ii) is currently subject to any U.S. sanctions
administered by OFAC, (iii) is in violation of the International Money
Laundering Abatement and Financial Anti-Terrorism Act of 2001 or the regulations
or orders promulgated thereunder (as amended from time to time, the “Money
Laundering Act”) and none of the activities of such person violate the Money
Laundering Act, and (iv) that throughout the term of this Lease the Lessee shall
comply with the Executive Order and with the Money Laundering Act.

43.Authority.  If either Party hereto is a corporation, limited liability
company, trust, or general or limited partnership, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf.  If Lessee is a
corporation, limited liability company, trust or partnership, Lessee shall,
within five (5) days after request by Lessor, deliver to Lessor evidence
satisfactory to Lessor of such authority.

44.Conflict; Counterparts.  The typewritten or handwritten provisions shall
control any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions.  This Lease may be executed in
counterparts, each of which shall be deemed an original, but such counterparts,
when taken together, shall constitute one agreement.

45.Offer.  Preparation of this Lease by either Lessor or Lessee or Lessor’s
agent or Lessee’s agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease.  This Lease is not intended to be binding until
executed and delivered by all Parties hereto.

46.Amendments.  This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification.  The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease.  As long as they do not
materially change Lessee’s obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.

47.Multiple Parties.  Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.

48.Construction.  Headings at the beginning of each paragraph and subparagraph
are solely for the convenience of the Parties and are not a part of the
Lease.  Whenever required by the context of this Lease, the singular shall
include the plural and the masculine shall include the feminine and vice
versa.  This Lease shall not be construed as if it had been prepared by one of
the Parties, but rather as if both Parties had prepared the same and,
consequently, any inconsistencies or ambiguities herein shall not be interpreted
against either Party as the drafter of the Lease.  Unless otherwise indicated,
all references to paragraphs and subparagraphs are to this Lease.  All exhibits
referred to in this Lease are attached and incorporated by this reference.
Except as specifically provided herein, Lessee hereby agrees that Lessee shall
not disclose any of the economic terms of this Lease to any person or entity not
a party to this Lease, nor shall Lessee issue any press releases or make any
public statements relating to the terms or provisions of this Lease; provided,
however, Lessee may make necessary disclosures to potential lenders, attorneys,
accountants and space planning consultants, and/or as may be required by
applicable Laws or court order, so long as such Parties agree to keep all of the
economic terms of this Lease strictly confidential.  The obligation of Lessee
set forth in this paragraph shall survive the expiration or any earlier
termination of this Lease.

THE PARTIES HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE 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 LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY’S
REVIEW AND APPROVAL.  FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PREMISES AS TO THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND
STORAGE TANKS OR HAZARDOUS SUBSTANCES. THE PARTIES SHALL RELY SOLELY UPON THE
ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE.  AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE
CONSULTED.

 

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The Parties hereto have executed this Lease as of the Effective Date.

 

LESSOR

LESSEE

 

 

 

 

 

 

 

 

 

WESTCORE II NEWHOPE, LLC,

 

SKECHERS U.S.A., INC.,

 

a Delaware limited liability company

 

a Delaware corporation

 

 

 

 

 

 

 

 

 

 

By:

Westcore II Investco, LLC,

 

 

 

 

 

 

a Delaware limited liability company,

 

By:

/s/ David Weinberg

 

 

its Sole Member

 

Name:

David Weinberg

 

 

 

 

 

 

Title:

COO

 

 

By:

Westcore Properties II, LLC,

 

 

 

 

 

 

 

a Delaware limited liability company,

 

Address:

 

 

 

 

its Sole Member

 

 

 

 

 

 

 

 

 

 

 

225 S. Sepulveda Blvd

 

 

 

By:

/s/Donald Ankeny

 

 

Manhattan Beach, CA 90266

 

 

 

Name:

Donald Ankeny

 

 

 

 

 

 

Title:

Authorized Officer

 

Telephone:

(310)    318-3100

 

 

 

 

 

 

Facsimile:

(      )

 

Address:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

c/o Westcore Properties, LLC

 

 

 

 

 

4350 La Jolla Village Drive, Suite 900

 

 

 

 

 

San Diego, CA 92122

 

 

 

 

 

Telephone: (858) 625-4100

 

 

 

 

 

Facsimile: (858) 678-0060

 

 

 

 

 

 

 

 

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EXHIBIT A

PREMISES

THE SITE PLAN SET FORTH HEREIN IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT
CONSTITUTE A WARRANTY OR REPRESENTATION CONCERNING THE SIZE OR LAYOUT OF THE
PREMISES.

 

[g20180504014950126627.jpg]

 

 

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EXHIBIT B

LESSOR’S WORK

 

Dock High Doors to be equipped with 6x8 35,000 lb capacity mechanical levelers
are marked with a red arrow:

 

 

[g20180504014950142628.jpg]

 

 

 

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EXHIBIT C

INTENTIONALLY OMITTED

 

 

 

 

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EXHIBIT D

RULES AND REGULATIONS

 

1.No sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed or affixed on or to any part of the outside or inside of the Premises
or the surrounding area without the written consent of the Lessor being first
obtained.  If Lessor gives such consent, Lessor may regulate the manner of
display of the sign, placard, picture, advertisement, name or notice.  Lessor
shall have the right to remove any sign, placard, picture, advertisement, name
or notice which has not been approved by Lessor or is being displayed in a
non-approved manner without notice to and at the expense of the Lessee.  All
approved signs or lettering on doors shall be printed, painted, affixed of
inscribed at the expense of Lessee by a person approved by Lessor.  Lessor shall
not place anything or allow anything to be placed near window, door, partition
or wall, which may appear unsightly from outside of the Premises.

2.The sidewalks, halls, passages, exits and entrances shall not be obstructed by
any of the lessees or used by them for any purpose other than for ingress to and
egress from their respective Premises.  The halls, passages, exits, entrances
and roof are not for the use of the general public and the Lessor shall in all
cases retain the right to control thereof and prevent access thereto by all
persons whose presence in the judgment of the Lessor shall be prejudicial to the
safety, character, reputation and interests of the Premises or its lessees;
provided, however, that nothing herein contained shall be construed to prevent
access by persons with whom the Lessee normally deals in the ordinary course of
Lessee’s business unless such persons are engaged in illegal activities.  No
lessee and no employees or invitees of any lessee shall go upon the roof of the
Premises.

3.Lessee shall not alter any lock or install any new additional locks or bolts
on any exterior door of the Premises without the written consent of Lessor.
Lessee may install an electronic alarm system.

4.The toilet rooms, urinals, wash bowls and other apparatus shall not be used
for any purpose other than that for which they were constructed and no foreign
substance of any kind whatsoever shall be thrown therein.  The expense of any
breakage, stoppage or damage resulting from a violation of this rule shall be
borne by the Lessee who, or whose employees or invitees, shall have caused it.

5.Lessee shall not overload the floor of the Premises and shall not deface the
Premises.

6.Lessee shall not use, keep or permit to be used or kept any noxious gas or
substance in the Premise, or permit or suffer the Premises to be occupied or
used in a manner offensive or objectionable to the Lessor by reason of noise,
odors and/or vibrations.  Neither animals nor birds shall be brought in or kept
in or about the Premises.  No lessee shall make or permit to be made any
disturbing noises or disturb or interfere with occupants of this or neighboring
projects or premises, or with those having business with such occupants, by the
use of any musical instruments, radio, phonograph, unusual noise, or in any
other way.  No lessee shall throw anything out of doors.  No cooking shall be
done or permitted by Lessee in the Premises beyond the use of a microwave oven
or other small appliances.

7.No Lessee shall occupy or permit any portion of its Premises to be occupied
for the manufacture, sale, or use of liquor or narcotics in any form, or as a
medical office, or as a barbershop or manicure shop, except without prior
written consent of Lessor.  The Premises shall not be used for lodging or
sleeping or for illegal purposes.

8.Lessor will direct electricians as to where and how telephone wires are to be
introduced.  No boring or cutting for or stringing of wires will be allowed
without the consent of Lessor.  The location of telephones, call boxes and other
office equipment affixed to the Premises shall be subject to the approval of
Lessor.

9. Lessee upon termination of the tenancy, shall deliver to the Lessor the keys
to the Premises, offices, rooms, and toilet rooms which shall have been
furnished and shall pay the Lessor the cost of replacing any lost key or of
changing the lock or locks opened by such lost key if Lessor deems it necessary
to make such change.

10.No lessee shall lay linoleum, tile, carpet or other similar floor coverings
so that the same shall be affixed to the floor of the Premises in any manner
except as approved by the Lessor.  The expense of repairing any damage resulting
from a violation of this rule or removal of any floor covering shall be borne by
the lessee by whom, or by whose contractors, employees or invitees, the floor
covering shall have been laid.

11.In case of invasion, mob riot, public excitement, or other commotion, the
Lessor reserves the right to prevent access to the Premises during the
continuance of the same, by closing the doors or otherwise, for the safety of
the lessees and

 

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protection of the Premises and property located therein.  Anything to the
foregoing notwithstanding, Lessor shall have no duty to provide security
protection for the Premises at any time or to monitor access thereto.

12.Lessee shall see that the doors of the Premises are closed and securely
locked before leaving the Premises and that all water faucets, water apparatus
and electricity are entirely shut off before Lessee or Lessee’s employee’s leave
the Premises.  Lessee shall be responsible for any damage to the Premises or
other lessees’ premises caused by a failure to comply with this rule.

13.Lessor reserves the right to exclude or expel from the Premises any person
who, in the judgment of Lessor, is intoxicated or under the influence of liquor
or drugs, or who shall in any manner do any act in violation of any of the rules
and regulations of the Premises.

14.Any requests of Lessee will be considered only upon application at the Office
of Lessor.  Employees of Lessor shall not be requested to perform any work or do
anything outside of their regular duties unless under special instructions from
the Lessor.

15.Lessor shall have the right, exercisable with reasonable notice and without
liability to Lessee, to change the name and the street address of the Premises
are a part, where such change is required by any government agency.

16.Lessee agrees that it shall comply with all fire regulations that may be
issued from time to time by any governmental authority having jurisdiction over
the Premises, and Lessee also shall provide Lessor with the name of a designated
responsible employee to represent Lessee in all matters pertaining to fire
regulations.

17.Lessor reserves the right by written notice to Lessee, to rescind, alter or
waive any rule or regulation at any time prescribed for the Premises when, in
Lessor’s reasonable judgment, it is necessary, desirable or proper for the best
interest of the Premises.

 

 

 

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EXHIBIT E

NOTICE OF LEASE TERM DATES

 

To:

 

 

 

 

 

 

Re:

Single Tenant Industrial/Commercial Lease (Net) dated December 27, 2017 (the
“Lease”) between Westcore II Newhope, LLC, a Delaware limited liability company
(“Lessor”), and Skechers U.S.A., Inc., a Delaware corporation (“Lessee”)
concerning 22705 Newhope Drive, Moreno Valley, California.

Gentlemen:

In accordance with the Lease, we wish to advise you and/or confirm as follows:

1.The Commencement Date occurred on _________________, 20___ and the Expiration
Date shall occur on __________________, 20___.

2.Rent commenced to accrue on ____________________, in the amount of
___________________.  Monthly Base Rent shall be payable in accordance with the
following schedule:

 

 

 

Period

Monthly
Installment
of Base Rent

_____________, 201__ – _____________, 201__

$

_____________, 201__ – _____________, 202__

$

_____________, 202__ – _____________, 202__

$

3.If the Commencement Date is other than the first day of the month, the first
billing will contain a pro rata adjustment.  Each billing thereafter, with the
exception of the final billing, shall be for the full amount of the monthly
installment as provided for in the Lease.

“Lessor”:

 

WESTCORE II NEWHOPE, LLC,

a Delaware limited liability company

 

By:

Westcore II Investco, LLC,

 

a Delaware limited liability company,

 

its Sole Member

 

 

 

 

By:

Westcore Properties II, LLC,

 

 

a Delaware limited liability company,

 

 

its Sole Member

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

 

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Agreed to and Accepted as of _______________, 20___.

 

“Lessee”:

SKECHERS U.S.A., INC.,

a Delaware corporation

 

By:

 

Name:

 

Title:

 

 

 

 

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EXHIBIT F

HAZARDOUS SUBSTANCES SURVEY FORM

The purpose of this form is to obtain information regarding the use of Hazardous
Substances on the Premises.  Prospective lessees should answer the questions in
light of their proposed operations on the Premises.  Existing lessees should
answer the questions as they relate to ongoing operations on the Premises and
should update any information previously submitted.  If additional space is
needed to answer the questions, you may attach separate sheets of paper to this
form.

Your cooperation in this matter is appreciated.  Any questions should be
directed to, and when completed, the form should be mailed to:

________________________________

________________________________

________________________________

________________________________

1.

GENERAL INFORMATION

Company Name:

 

Check Applicable Status: Prospective Lessee:

 

 

Current Lessee:

 

Mailing Address:

 

 

Contact Person & Title:

 

Phone #: (       )

 

Address of Premises:

 

Describe the proposed operations to take place on the Premises, including
principal products manufactured or services to be conducted.  Existing lessees
should describe any proposed changes to ongoing operations.

 

 

 

2.

STORAGE OF HAZARDOUS SUBSTANCES

2.1

Will any Hazardous Substances be used or stored on the Premises?

WastesYes ______________No ______________

Chemical ProductsYes ______________No ______________

Attach the list of any Hazardous Substances to be used or stored, the quantities
that will be on site

at any given time, and the location and method of storage.

 

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3.

STORAGE TANKS & SUMPS

3.1

Is any above or belowground storage of gasoline, diesel, or other Hazardous
Substances in tanks or sumps proposed or currently conducted on the Premises?

Yes ______________No ______________

If yes, describe the materials to be stored, and the type, size and construction
of the sump or tank.  Attach copies of any permits obtained for the storage of
such substances.

 

 

3.2

Have any of the tanks or sumps been inspected or tested for leakage?

Yes ______________No ______________

If so, attach results.

3.3

Have any spills or leaks occurred from such tanks or sumps?

Yes ______________No ______________

If so, describe.

 

 

3.4

Were any regulatory agencies notified of the spill or leak?

Yes ______________No ______________

If so, attach copies of any spill reports filed, any clearance letters or other
correspondence from regulatory agencies relating to the spill or leak.

3.5

Have any underground storage tanks or sumps been taken out of service or been
removed?

Yes ______________No ______________

If yes, attach copies of any closure permits and clearance obtained from
regulatory agencies relating to closure and removal of such tanks.

4.

SPILLS

4.1

During the past year, have any spills occurred on the Premises?

Yes ______________No ______________

If so, please describe the spill and attach the results of any testing conducted
to determine the extent of such spills.

4.2

Were any agencies notified in connection with such spills?

Yes ______________No ______________

If so, attach copies of any spill reports or other correspondence with
regulatory agencies.

 

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4.3

Were any cleanup actions undertaken in connection with the spill?

Yes ______________No ______________

If so, briefly describe the actions taken.  Attach copies of any clearance
letters obtained from any regulatory agencies involved and the results of any
final soil or ground water sampling done upon completion of the cleanup work.

 

 

 

 

5.

WASTE MANAGEMENT

5.1

Has your company been issued an EPA Hazardous Waste Generator I.D. Number?

Yes ______________No ______________

5.2

Has your company filed a biennial report as a hazardous waste generator?

Yes ______________No ______________

If so, attach a copy of the most recent report files.

5.3

Attach a list of the Hazardous Substances, if any, generated or to be generated
at the Premises, its hazard class and the quality generated on a monthly basis.

5.4

Describe the method(s) of disposal for each substance.  Indicate where and how
often disposal will take place.

 

 

 

 

5.5

Indicate the name of the person(s) responsible for maintaining copies of
hazardous manifests completed for off-site shipments of Hazardous Substances.

 

5.6

Is any treatment or processing of Hazardous Substances currently conducted or
proposed to be conducted at the Premises:

Yes ______________No ______________

If yes, please describe any existing or proposed treatment methods.

 

 

 

 

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5.7

Attach copies of any hazardous waste permits or licenses issued to your company
with respect to its operations on the Premises.

6.

WATER TREATMENT / DISCHARGE

6.1

Do you discharge waste water to:

________ storm drain?________ sewer?

________ surface water:________ no industrial discharge.

6.2

Is your wastewater treated before discharge?

Yes ______________No ______________

If yes, describe the type of treatment conducted.

 

Attach copies of any wastewater discharge permits issued to your company with
respect to its operations on the Premises.

7.

AIR DISCHARGES

7.1

Do you have any filtration systems or stacks that discharge into the air?

Yes ______________No ______________

7.2

Do you operate any of the following types of equipment, or any other equipment
requiring an air emissions permit?

________Spray booth

________Dip tank

________Drying oven

________Incinerator

________Other ______________

________No Equipment Requiring Air Permits

7.3

Are air emissions from your operation monitored?

Yes ______________No ______________

If so, indicate the frequency of monitoring and a description of the monitoring
results.

 

7.4

Attach copies of any air emissions permits pertaining to your operations on the
Premises.

8.

HAZARDOUS SUBSTANCES DISCLOSURES

8.1

Does your company handle Hazardous Substances in a quantity equal to or
exceeding an aggregate of 500 pound, 5 gallons, or 200 cubic feet?

Yes ______________No ______________

 

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8.2

Has your company prepared a Hazardous Substances management plan (“Business
Plan”) pursuant to the Fire Department requirements for the County in which the
Premises is located?

Yes ______________No ______________

8.3

Are any of the chemicals used in your operation regulated under Proposition 65?

Yes ______________No ______________

If so, describe the actions taken, or proposed actions to be taken, to comply
with the proposition.

8.4

Describe the procedure followed to comply with OSHA Hazard Communication
Standard requirements.

9.

ENFORCEMENT ACTIONS, COMPLAINTS

9.1

Has your company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees?

Yes ______________No ______________

If so, describe the actions and any continuing compliance obligations imposed as
a result of these actions.

9.2

Has your company ever received requests for information, notice or demand
letters, or any other inquiries regarding its operation?

Yes ______________No ______________

9.3

Have there ever been, or are there now pending, any lawsuits against the company
regarding any environmental or health and safety concerns?

Yes ______________No ______________

9.4

Has an environmental audit ever been conducted at your company’s current
facility?

Yes ______________No ______________

9.5

Have there been any problems or complaints from neighbors at the company’s
current facility?

Yes ______________No ______________

 

________________________________

Company

 

 

By:

 

Title:

 

Date:

 

 

 

 

 

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EXHIBIT G

 

MOVE OUT STANDARDS

 

Before surrendering the Premises, Lessee shall remove all of its personal
property, trade fixtures and such improvements, alterations or additions to the
Premises made by Lessee as may be specified for removal by Lessor and repair any
damage caused by such removal such that the damaged area is returned to the
condition that existed prior to the installation of such personal property,
trade fixtures, improvements, alterations or additions. Lessee shall, at its
sole cost and expense, engage consultant(s) acceptable to Lessor to oversee the
removal if it is deemed necessary by Lessor, in its sole discretion. Ordinary
wear and tear shall not include any damage or deterioration that would have been
prevented by good maintenance practices, Lessee’s proper and orderly occupation
and use of the Premises or by Lessee timely performing its obligations in this
Lease.

 

If Lessee fails to remove its personal property, trade fixtures, improvements,
alterations or additions upon the Expiration Date or earlier termination of this
Lease, the same shall be deemed abandoned and shall become the property of the
Lessor. Notwithstanding the foregoing, Lessee shall be liable to Lessor for all
costs and damages incurred by Lessor in removing, storing or selling such
personal property, trade fixtures, improvements, alterations or additions and in
restoring the Premises the condition required as provided in this Lease.

 

Notwithstanding anything to the contrary in this Lease and in addition to the
requirement of Paragraph 7.4 of the Lease, Lessee shall surrender the Premises,
at the time of the Expiration Date or earlier termination of this Lease, in a
condition that shall include, without limitation, the following:

 

1. Lights:

Office, warehouse and exterior lights and ballasts must be fully operational
with all bulbs functioning. Broken light lenses must be replaced with matching
lenses.  Ballast color should all be uniform (either all “cool” or all “warm”).

 

2. Dock Levelers & Roll-Up Doors:

Must be fully operational. Damaged panels must be replaced and painted to match.
All missing or damaged dock bumpers, dock levelers, Dok-loks and Dok-lok lights
must be replaced.

 

3. Truck Doors, Dock Seals, and Awnings:

Metal and fabric awnings must be free of damage and tears. Frames and fasteners
must be secure and undamaged. Dock seals must be free of damage, operational and
securely fastened in place.

 

4. Warehouse Floors and Columns:

Must be free of stains and swept with no racking bolts and other protrusions
left in floor. Bolts must be ground down or removed and patched with an
appropriate epoxy filing; bolts must not be removed with a gas torch. Cracks in
the floor which are ¼” or greater must be repaired with an epoxy sealer. Heavily
scarred floor seal requires re-sealing. Damaged or bent columns, bollards,
railing, etc. must be repaired.

 

5. Lessee Installed Equipment & Wiring:

Must be removed and space returned to original condition when originally leased
(remove air lines, junction boxes, conduit, etc.). Security systems must be
disarmed and removed with damage, if any, repaired. Phone systems must be
removed and damage, if any, repaired.

 

6. Walls:

All nails, shelves, and toggle bolts must be removed from walls. Holes must be
professionally filed and sanded. Large damaged areas may require tape, bed and
sanding. Holes must not remain in either office or warehouse walls. Any sticky
residue from placards or signs must be completely removed.

 

7. Roof:

Any lessee-installed equipment must be removed and roof penetrations properly
repaired by a licensed roofing contractor. If maintenance of the roof is a
Lessee responsibility, then active leaks must be fixed and the most recent
Lessor maintenance and repairs recommendations must have been completed.

 

 

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8. Signs:

All exterior Lessee signage must be removed, holes patched, fixings remediated
and paint touched up to match, as necessary. All door and window signs must be
removed and damage, if any, repaired.

 

9. Heating & Air Conditioning System:

If maintenance of the HVAC equipment is a Lessee responsibility, then a written
report from a licensed contractor must be submitted to Lessor within the last
two (2) months of the Term. The report must (i) state that all evaporative
coolers and/or heaters within the warehouse are operational and safe and that
office HVAC system is also in good and safe operating condition, and (ii) set
out detailed specifications of work necessary to put any equipment and
installations into such condition. All repairs/maintenance specified in the HVAC
report must be completed by Lessee.

 

10. Painting:

All touch up painting must match existing paint. Scarred and damaged walls and
rooms may need to be entirely repainted.

 

11. Doors:

All interior and exterior personnel doors (for office and warehouse) must be in
good appearance and fully operational including fixtures, door closures, etc.
Holes/scars in doors must be repaired and painted to match. Irreparable holes
will require door replacement of matching and like quality doors. Any signs or
name placards on doors must be removed as well as any residue leftover from
adhesion.

 

12. Ceiling Tiles

Any damaged or stained ceiling tiles in the office area should be replaced.

 

13. Overall Cleanliness:

Clean windows, kitchens, and restrooms to full janitorial standard (i.e.,
strip/wax floors, sanitize toilets, sinks, clean under cabinets, exhaust fans
must be operational, fixtures must be operational, etc.), professionally clean
carpet, VCT floors require stripping and waxing, and remove any and all debris
from office and warehouse areas. Remove all pallets and debris from exterior of
Premises. Debris and trash may not be stored temporarily outside of the
Building. Parking lot must be swept and dumpster removed. If appropriate,
interior pest control treatment must be completed.

 

Systems:

14. BuildingAll building systems must be in good and safe working order (e.g.,
plumbing, electrical, fire alarms, intruder alarms, etc.). Provide certification
of recent fire sprinkler inspection by a licensed company, if a Lessee
responsibility.

 

15. External

All landscaping, parking and other external areas must be repaired as necessary
if a lessee responsibility, including but not limited to the removal of all
debris and trash, remarking/repainting parking lots, repair/replacement of
generic and emergency signage, resetting/replacing damaged curb stones, and
replacing/repairing damaged gulley grids and manhole covers.

 

16. Upon Completion:

Contact Lessor’s property manager to coordinate date of turning off power and
utilities, turning in keys, and obtaining final Lessor Inspection of the
Premises.

 

 

 

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EXHIBIT H

RENT PAYMENT INSTRUCTIONS

 

[ATTACHED]

 

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