Exhibit 10.14

 

LEASE AGREEMENT

(triple net)

Basic Lease Information

 

 

Lease Date:

December 10, 2002

 

 

Landlord:

LaGuardia Associates, a general partnership

 

 

Landlord’s Address:

c/o Quadrangle Investments

 

Attn: Sam Kobrinsky

 

295 South Main St. Fifth Floor

 

Salinas, CA 93901

 

 

Tenant:

Integrated Device Technology, Inc., a corporation

 

 

Tenant’s Address:

Integrated Device Technology, Inc.

 

Attn: Jim Laufman

 

2975 Stender Way, M/S C7-001

 

Santa Clara, CA 95054

 

 

Premises, Building

 

and Lot:

The Premises are approximately 33,600 rentable square feet of space inside The
Building, of equal square footage, located on the Lot, which is commonly known
as 710 LaGuardia Street, Salinas, California, all of which are shown on Exhibit
A and incorporated herein by reference.

 

 

Term:

Ten years.  The term of this Lease Agreement shall commence upon the
Commencement Date, and expire on the tenth anniversary of said Commencement Date
(“Expiration Date”).  The estimated Commencement Date is December 1, 2003.  The
“Commencement Date” shall be the date that is ten (10) days after all of the
following have occurred:  (i) Landlord shall have completed construction of the
Building, the Leasehold Improvements and all exterior improvements on the Lot,
including, without limitation, the parking areas, driveways, sidewalks, and
entranceways into the Building (collectively, “Exterior Improvements”), except
for punch list items that will not interfere with Tenant’s use or occupancy of
the Premises or the conduct of Tenant’s business; (ii) Landlord’s architect has
given Tenant written certification that the Building, Leasehold Improvements and
Exterior Improvements have been completed in accordance with the Final Plans and
Specifications therefore approved by Tenant pursuant to Exhibit B attached
hereto; and (iii) the City of Salinas has conducted a final inspection of the
Building, Leasehold Improvements and Exterior Improvements and approved such
work.  Landlord shall give Tenant not less than ten (10) days prior written
notice of the anticipated Commencement Date.

 

 

Base Rent (Sec 3):

The initial Base Rent for the first year of this Lease Agreement shall be
Thirty-Six Thousand Nine Hundred Sixty Dollars ($36,960.00) per month.  The
first month of Base Rent shall be paid to Landlord upon the execution of this
Lease Agreement.  The second month of Base Rent shall be paid to Landlord thirty
days after the Commencement Date, but shall be prorated to the end of the
then-existing month so that the Base Rent shall then become due on the first day
of each month thereafter. The Base Rent shall then be payable every thirty days
thereafter during the term of this Lease Agreement, due on the first of each
month.

 

 

Adjustments to

 

Base Rent:

The Base Rent for each year during the term of this Lease Agreement shall be
increased, on each anniversary date of the Commencement Date (each such date an
“Adjustment Date”), in an amount which is equal to the percentage increase in
the All Urban Consumers - Consumer Price Index, (for San Francisco-Oakland-San
Jose) (“CPI”).  The adjustment shall be made by multiplying the monthly Base
Rent in effect as of the applicable Adjustment Date by a fraction, the numerator
of which is the CPI for the month that is two months prior to the Adjustment
Date and the denominator of which is the CPI for the month that is two months
prior to the previous Adjustment Date or Commencement Date, as applicable, and
the resulting product shall be the monthly Base Rent for the next twelve-month
period.  However, in no event shall the increase in any given year be any less
than two percent, nor any more than four percent.

 

 

Security Deposit (Sec 4.1):

Upon execution of this Lease Agreement Tenant shall pay to Landlord an amount
equal to Thirty-Five Thousand Dollars ($35,000.00) as a security deposit for the
performance of the terms of this Lease Agreement.

 

 

Permitted Uses (Sec 9):

The Premises, Building and Lot may be used for any lawful purpose, to the extent
permitted by the City of Salinas, County of Monterey, and all agencies and
governmental authorities having jurisdiction thereof.

 

 

Parking Spaces:

One Hundred Forty-Five (145) exclusive spaces.

 

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Broker (Sec 38):

Colliers International on behalf of the Tenant, and Leland B. Evans on behalf of
the Landlord.

 

 

Exhibits:

Exhibit A - Premises, Building, and Lot

 

Exhibit B - Tenant Improvements

 

Exhibit C - Rules and Regulations

 

Exhibit D - Covenants, Conditions and Restrictions Intent

 

Exhibit E - Hazardous Materials Disclosure Certificate - Example

 

Exhibit F - Change of Commencement Date - Example

 

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TABLE OF CONTENTS

 

SECTION

 

 

PAGE

 

 

 

 

1

 

PREMISES

4

2.

 

ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES

4

3.

 

RENT

4

4.

 

SECURITY DEPOSIT

4

5.

 

LEASEHOLD IMPROVEMENTS

4

6.

 

ADDITIONAL RENT

4

7.

 

UTILITIES

6

8.

 

LATE CHARGES

6

9.

 

USE OF PREMISES

6

10.

 

ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES

7

11.

 

REPAIRS AND MAINTENANCE

7

12.

 

INSURANCE

7

13.

 

WAIVER OF SUBROGATION

8

14.

 

INTENTIONALLY OMITTED

8

15.

 

ASSIGNMENT AND SUBLEASING

8

16.

 

AD VALOREM TAXES

9

17

 

SUBORDINATION

9

18.

 

RIGHT OF ENTRY

9

19.

 

ESTOPPEL CERTIFICATE

9

20.

 

TENANT’S DEFAULT

9

21.

 

REMEDIES FOR TENANT’S DEFAULT

10

22.

 

HOLDING OVER

10

23.

 

LANDLORD’S DEFAULT

11

24.

 

PARKING

11

25.

 

INTENTIONALLY OMITTED

11

26.

 

WAIVER

11

27.

 

CASUALTY DAMAGE

11

28.

 

CONDEMNATION

11

29.

 

ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS

12

30.

 

INTENTIONALLY OMITTED

13

31.

 

GENERAL PROVISIONS

13

32.

 

SIGNS

14

33.

 

INTENTIONALLY OMITTED

14

34.

 

QUITCLAIM

14

35.

 

INTENTIONALLY OMITTED

14

36.

 

WARRANTIES OF TENANT

14

37.

 

COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT

14

38.

 

BROKERAGE COMMISSION

14

39.

 

QUIET ENJOYMENT

15

40.

 

LANDLORD’S ABILITY TO PERFORM TENANT’S UNPERFORMED OBLIGATIONS

15

41.

 

OPTION

15

 

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LEASE AGREEMENT

 

DATE:

This Lease is made and entered into as of the Lease Date set forth on Page 1.
The Basic Lease Information set forth on Page I and this Lease are and shall be
construed as a single instrument.

 

 

1.             Premises:  Landlord hereby leases the Premises, Building and Lot
to Tenant upon the terms and conditions contained herein. Landlord and Tenant
hereby agree that for purposes of this Lease, as of the Lease Date, the rentable
square footage area of the Premises shall be deemed to be the number of rentable
square feet as set forth in the Basic Lease Information on Page 1.

 

2.             Adjustment of Commencement Date; Condition of the Premises:

 

2.1          If Landlord cannot deliver possession of the Premises on the
estimated Commencement Date stated on Page 1, Landlord shall not be subject to
any liability nor shall the validity of the Lease be affected; provided, the
Commencement Date shall occur when all of the conditions to the Commencement
Date set forth on Page 1 have been satisfied, and the Expiration Date shall be
extended commensurately. Notwithstanding the foregoing, if the Commencement Date
has not occurred by December 1, 2003, then as compensation for Landlord’s delay
in delivery of the Premises, Tenant shall receive an abatement of Base Rent for
each day from and after December 1, 2003, until the Commencement Date, which
abatement shall apply to the Base Rent first becoming due under the Lease.  In
the event Landlord is unable to deliver possession of the Premises, Building and
Lot by a date no later than the Final Completion Date as described in more
detail in Exhibit B, Tenant shall have the right to terminate this Lease and
Landlord shall pay to Tenant the amount of the security deposit and the first
month’s rent, which Tenant has paid to Landlord.  In the event the Commencement
Date and/or the Expiration Date of this Lease is other than the estimated
Commencement Date on Page 1, Landlord and Tenant shall execute a written
amendment to this Lease, substantially in the form of Exhibit F hereto, wherein
the parties shall specify the actual Commencement Date and Expiration Date. 
Tenant hereby acknowledges and agrees that neither Landlord nor Landlord’s
agents or representatives has made any representations or warranties as to the
suitability or fitness of the Premises for the specific conduct of Tenant’s
business, Tenant’s intended use of the Premises or for any other purpose.

 

3.             Rent:  On the date that Tenant executes this Lease, Tenant shall
deliver to Landlord the original executed Lease, the Base Rent (which shall be
applied against the Base Rent payable for the first month Tenant is required to
pay Base Rent), and the Security Deposit.  Prior to taking possession of the
Premises, Building and or Lot, Tenant shall provide to Landlord all insurance
certificates evidencing the insurance required to be obtained by Tenant under
Section 12 of this Lease. Tenant agrees to pay Landlord, without prior notice or
demand, or abatement, offset, deduction or claim, except as specifically
provided herein, the Base Rent described on Page 1, payable in advance at
Landlord’s address shown on Page 1 on the first day of each month throughout the
Term of the Lease. In addition to the Base Rent set forth on Page 1, Tenant
shall pay Landlord in advance and on the first (1st) day of each month
throughout the Term of this Lease, as Additional Rent, all Operating Expenses,
Tax Expenses, and Utility Expenses.  The term “Rent” whenever used herein refers
to the aggregate of all these amounts. The Rent for any fractional part of a
calendar month at the commencement or termination of the Lease term shall be a
prorated amount of the Rent for a full calendar month based upon a thirty (30)
day month. The prorated Rent shall be paid on the Commencement Date and the
first day of the calendar month in which the date of termination occurs, as the
case may be.

 

4.             Security Deposit:  Upon Tenant’s execution of this Lease, Tenant
shall deliver to Landlord, as a Security Deposit for the performance by Tenant
of its obligations under this Lease, the amount described on Page 1. If Tenant
is in default beyond any applicable cure period under this Lease, Landlord may,
but without obligation to do so, use the Security Deposit, or any portion
thereof, to cure the default or to compensate Landlord for all damages sustained
by Landlord resulting from Tenant’s default. Tenant shall, after ten (10) days
written notice from Landlord, pay to Landlord a sum equal to the portion of the
Security Deposit so applied or used so as to replenish the amount of the
Security Deposit held to increase such deposit to the amount initially deposited
with Landlord.  Within thirty (30) days after the termination of this Lease,
Landlord shall return the Security Deposit to Tenant, subject to the limitations
of California Civil Code Section 1950.7, and the terms of the Lease herein.  
Landlord shall not be required to keep the Security Deposit separate from other
funds, and Tenant shall not be entitled to interest on the Security Deposit.
Tenant may not use the Security Deposit as a credit, or as collateral for any
debt other than the performance of this Lease Agreement, or to otherwise offset
any payments required hereunder, including, but not limited to, Rent or any
portion thereof.

 

5.             Leasehold Improvements:  Landlord shall construct the
improvements (“Leasehold Improvements”) on the Lot in accordance with the terms,
conditions, criteria and provisions set forth in Exhibit B hereto. Tenant
acknowledges that neither Landlord nor any of Landlord’s agents, representatives
or employees has made any representations as to the suitability or fitness of
the Premises for the conduct of Tenant’s business, including without limitation,
any storage incidental thereto, or for any other purpose.  Neither Landlord nor
any of Landlord’s agents, representatives or employees has agreed to undertake
any construction, alterations or leasehold improvements, except as expressly
provided in Exhibit B to this Lease.  Landlord warrants that Leasehold
Improvements, Building and Lot will comply with all applicable building codes
and Americans with Disabilities Act requirements as of the Commencement Date,
and Landlord shall bear the costs of said compliance up until that date.

 

6.             Additional Rent:  It is intended by Landlord and Tenant that this
Lease be a “triple net lease”. It is the intention of Landlord and Tenant that
the Base Rent and Additional Rent payable by Tenant to Landlord during the
entire term of this Lease Agreement shall be net of all costs and expenses
incurred in connection with or relating to the Premises, Building and Lot,
including, without limitation, in connection with or relating to the operation,
maintenance, management and repair of the Premises, Building and or Lot, except
as otherwise stated in this Lease Agreement.  Except as otherwise stated herein,
Tenant shall be liable for any obligations or liabilities in connection with or
relating to the operation, maintenance, management and repair of the Premises,
Building and Lot during the term of this Lease Agreement, and except as
otherwise provided herein,   Tenant shall pay all such costs or expenses before
such costs or expenses become delinquent. The costs and expenses specifically
described herein and all other sums, charges, costs and expenses, are to be paid
by Tenant directly to the third party service provider (collectively,
“Additional Rent”).

 

6.1          Operating Expenses: In addition to the Base Rent set forth in
Section 3, Tenant shall pay all Operating

 

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Expenses as Additional Rent. The term “Operating Expenses” as used herein shall
mean the total amounts paid or payable in connection with the maintenance,
repair and operation of the Premises, the Building and the Exterior
Improvements.  These Operating Expenses may include, but are not limited to:

 

6.1.1                     Cost of repairs to, and maintenance of, the roof on
the Building;

 

6.1.2       Cost of maintaining the outside paved area, interior lobbies,
mezzanines, parking areas, sidewalks, landscaping and similar areas and
facilities;

 

6.1.3       Annual cost of insurance insuring against fire and extended coverage
(including, if Landlord elects, “all risk” coverage) and all other insurance,
including, but not limited to, flood and/or surface water endorsements for the
Premises, Building, and Lot, rental value insurance against loss of Rent in an
amount equal to the amount of Rent for a period of at least one (1) year
commencing on the date of loss, and subject to the provisions of Section 27
below, any deductible;

 

6.1.4       Cost of modifications to the Premises, Building, and or Exterior
Improvements occasioned by any rules, laws or regulations effective subsequent
to the date on which the Tenant takes occupancy of the Premises, Building and 
Lot; provided, however, any such modifications or alterations shall be made by
Landlord and the cost of such modifications or alterations shall be amortized
over the useful life of such alteration or modification, and Tenant shall pay
the monthly amortized portion of such cost to Landlord as Additional Rent;

 

6.1.5       Cost of preventative maintenance, and repair contracts including,
but not limited to, contracts for heating, ventilation and air conditioning
systems;

 

6.1.6                     Cost of trash or refuse collection;

 

6.1.7                     Cost of security and fire protection services for the
Premises, Building and or Lot; and

 

6.1.8       Cost of supplies, equipment, rental equipment and other similar
items used in the operation and/or maintenance of the Premises, Building and or
Lot.

 

6.2          Tax Expenses:  In addition to the Base Rent, Tenant shall pay all
real property taxes applicable to the land and improvements included within the
Lot on which the Premises and Building are situated and one hundred percent
(100%) of all personal property taxes now or hereafter assessed or levied
against the Premises, Building, Lot or Tenant’s personal property. Tenant shall
also pay one hundred percent (100%) of any increase in real property taxes
attributable to any and all alterations, Leasehold Improvements or other
improvements of any kind, whatsoever placed in, on or about the Premises,
Building or Lot for the benefit of, at the request of, or by Tenant. The term
“Tax Expenses” shall mean and include, without limitation, any form of tax and
assessment (general, special, supplemental, ordinary or extraordinary),
commercial rental tax, payments under any improvement bond or bonds, license
fees, license tax, business license fee, rental tax, transaction tax, levy, or
penalty imposed by authority having the direct or indirect power of tax
(including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement district thereof) as
against any legal or equitable interest of Landlord in the Premises, the
Building, or the Lot, as against Landlord’s right to rent, or any other tax,
fee, or excise, however described, including, but not limited to, any value
added tax, or any tax imposed in substitution (partially or totally) of any tax
previously included within the definition of real property taxes, or any
additional tax the nature of which was previously included within the definition
of real property taxes. The term “Tax Expenses” shall not include any franchise,
estate, inheritance, net income, or excess profits tax imposed upon Landlord. 
The obligations of Tenant to pay Tax Expenses described hereinabove shall be
prorated to apply to Tax Expenses applicable to the time period commencing on
the Commencement Date and terminating on the Expiration Date.

 

6.2.1       Proposition 13 Protection.  Despite any other provision of this
Lease Agreement, if during the term of this Lease Agreement any sale, or change
in ownership of the Lot, Building or Premises is consummated and, as a result,
all or part of the Lot, Building or Premises is reassessed (“Reassessment”) for
real estate tax purposes by the appropriate government authority under the terms
of Proposition 13 (as adopted by the voters of the State of California in the
June 1978 election and as subsequently amended), the terms of this subsection
6.2.1 shall apply.  For purposes of subsection 6.2.1, the term Tax Increase
(“Tax Increase”) shall mean that portion of the Tax Expenses, as calculated
immediately following the Reassessment, that is attributable solely to the
Reassessment.  Except as stated hereinbelow, Tenant shall not be obligated to
pay any Tax Increase as part of the Tax Expenses.  Notwithstanding the above,
the Tax Increase exclusion shall not apply to any amounts calculated immediately
following Reassessment, that are:  (i) attributable to the anticipated initial
Reassessment of the value of the Lot, Building Premises and Leasehold
Improvements located on, or to be built upon the Lot pursuant to the terms of
this Lease Agreement; (ii) attributable to the annual inflationary increase in
real estate taxes; or (iii) part of Tax Expenses incurred or considered to be
incurred during the first year term of this Lease Agreement.

 

6.3            Payment of Additional Rent:  Tenant shall pay all Operating
Expenses directly to the party providing services to the Premises.  Tenant shall
pay Tax Expenses directly to the taxing authority prior to the delinquency
date.  If Tenant will not pay all of any installment of real property taxes due
to the protection afforded by Section 6.2.1, Tenant shall pay its portion of Tax
Expenses directly to Landlord not later than ten (10) days prior to the
delinquency date subject to Tenant’s receipt of a tax bill from Landlord. 
Tenant shall pay insurance premiums directly to the insurer within thirty (30)
days after receipt of the insurance invoices from Landlord.

 

6.4          Annual Reconciliation:  By June 30th of each calendar year, or as
soon thereafter as reasonably possible Landlord shall furnish Tenant with an
accounting of the actual costs incurred by Landlord as Additional Rent. Within
thirty (30) days of Landlord’s delivery of such accounting, Tenant shall pay to
Landlord the amount of any underpayment. Notwithstanding the foregoing, failure
by Landlord to give such accounting by such date shall not constitute a waiver
by Landlord of its right to collect any of Tenant’s underpayment at any time;
provided, however, after such accounting has been delivered, Landlord may not
charge Tenant for any additional expenses for the calendar year represented by
such accounting.  Landlord shall refund the amount of any overpayment to Tenant.
If the Term of the Lease expires prior to the annual reconciliation of expenses
Landlord shall have the right to reasonably estimate Tenant’s Share of such
expenses, and if Landlord determines that an underpayment

 

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is due, Tenant hereby agrees that Landlord shall be entitled to deduct such
underpayment from Tenant’s Security Deposit. If Landlord reasonably determines
that an overpayment has been made by Tenant, Landlord shall refund said
overpayment to Tenant as soon as practicable thereafter.

 

6.5          Audit:  After delivery to Landlord of at least fifteen (15)
business days prior written notice, Tenant, 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 costs and expenses for the previous one
(1) calendar year, during Landlord’s reasonable business hours but not more
frequently than twice during any calendar year. Any such accounting firm
designated by Tenant may not be compensated 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 Tenant and its accounting
firm and shall not be disclosed, published or otherwise disseminated to any
other party other than to Landlord and its authorized agents or to third parties
whose relationship to Tenant is such that disclosure is necessary for good faith
and reasonable business purposes. Landlord and Tenant shall use its best efforts
to cooperate in such negotiations and to promptly resolve any discrepancies
between Landlord and Tenant in the accounting of such costs and expenses.

 

7.             Utilities:  Utility Expenses, and all other sums or charges set
forth in this Section 7 are also considered part of Additional Rent. Once the
gas, electric, sewer and water utilities are connected at Landlord’s cost,
Tenant shall then pay the cost of all water, sewer use, sewer discharge fees and
sewer use fees, gas, heat, electricity, refuse pick-up, janitorial service,
telephone and other utilities billed or metered to the Premises, Building and or
Lot. Tenant shall also pay any assessments or charges for utility or similar
purposes included within any tax bill for the Lot on which the Premises and
Building are situated, including, without limitation, entitlement fees,
allocation unit fees, and/or any similar fees or charges, and any penalties
related. Tenant acknowledges that the Premises may become subject to the
rationing of utility services or restrictions on utility use as required by a
public utility company, governmental agency or other similar entity having
jurisdiction thereof. Notwithstanding any such rationing or restrictions on use
of any such utility services, Tenant acknowledges and agrees that its tenancy
and occupancy hereunder shall be subject to such rationing restrictions as may
be imposed upon Landlord, Tenant, the Premises, the Building or the Lot, and
Tenant shall in no event be excused or relieved from any covenant or obligation
to be kept or performed by Tenant by reason of any such rationing or
restrictions. Tenant further agrees to timely and faithfully pay, prior to
delinquency, any amount, tax, charge, surcharge, assessment or imposition
levied, assessed or imposed upon the Premises, or Tenant’s use and occupancy
thereof.

 

8.             Late Charges:  Any and all sums or charges set forth in this
Section 8 are considered part of Additional Rent. Tenant acknowledges that late
payment (the tenth day after written notice of default which remains uncured by
Tenant) by Tenant to Landlord of Base Rent, Additional Rent or any other sums
due hereunder, will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and
accounting charges, and late charges that may be imposed on Landlord by the
terms of any note secured by any encumbrance against the Premises, and late
charges and penalties due to the late payment of real  property taxes on the
Premises. Therefore, if any installment of Rent or any other sum due from Tenant
is not received by Landlord when due, Tenant shall promptly pay to Landlord an
additional sum equal to ten percent (10%) of such delinquent amount. The parties
agree that this late charge and the other charges referenced above represent a
fair and reasonable estimate of the costs that Landlord will incur by reason of
late payment by Tenant. Acceptance of any late charge or other charges shall not
constitute a waiver by Landlord of Tenant’s default with respect to the
delinquent amount, nor prevent Landlord from exercising any of the other rights
and remedies available to Landlord for any other breach of Tenant under this
Lease.

 

9.             Use of Premises:

 

9.1          Compliance with Laws, Recorded Matters, and Rules and Regulations:
The Premises are to be used solely for the uses stated on Page 1 and for no
other uses or purposes.  The use of the Premises by Tenant and its employees,
representatives, agents, invitees, licensees, subtenants, customers or
contractors (collectively, “Tenant’s Representatives”) shall be subject to, and
at all times in compliance with, (a) any and all applicable laws, ordinances,
statutes, orders and regulations as same exist from time to time (collectively,
the “Laws”), (b) any and all documents, matters or instruments, including
without limitation, any declarations of covenants, conditions and restrictions,
and any supplements thereto, each of which has been recorded in any official or
public records with respect to the Premises, the Building, the Lot, or any
portion thereof prior to the date of the Lease (collectively, the “Recorded
Matters”), and (c) any and all rules and regulations set forth in Exhibit C,
attached to and made a part of this Lease.  Tenant agrees to, and does hereby,
assume full and complete responsibility to ensure that the Premises are adequate
to fully meet the needs and requirements of Tenant’s intended operations of its
business within the Premises, Building and on the Lot, and Tenant’s use of the
Premises and that same are in compliance with all applicable Laws throughout the
Term of this Lease.

 

9.2          Prohibition on Use:  Tenant shall not use the Premises, Building or
Lot, or permit anything to be done in or about the Premises, Building or Lot,
nor keep or bring anything therein which will in any way conflict with any of
the requirements of the Board of Fire Underwriters or similar body now or
hereafter constituted or in any way increase the rate of or affect any policy of
fire or other insurance upon the Building or any of its contents, or cause a
cancellation of any insurance policy. No auctions may be held or otherwise
conducted in, on or about the Premises, the Building, or the Lot without
Landlord’s written consent thereto, which consent may be given or withheld in
Landlord’s sole discretion. Tenant shall not do or permit anything to be done in
or about the Premises, Building or Lot  which will in any way obstruct or
interfere with the rights of Landlord, or other persons or businesses in the
area, or injure or annoy other persons or businesses in the area, nor do or
permit anything to be done in or about the Premises, Building or Lot to be used
for any unlawful purpose; nor shall Tenant cause, maintain or permit any private
or public nuisance in, on or about the Premises, Building, or Lot, including,
but not limited to, any offensive odors, noises, fumes or vibrations. Tenant
shall not damage or deface or otherwise commit or suffer to be committed any
waste in, upon or about the Premises, Building or Lot. Tenant shall not place or
store, nor permit any other person or entity to place or store, any property,
equipment, materials, supplies, personal property or any other items or goods
outside of the Premises for any period of time. Tenant shall not permit any
animals, including, but not limited to, any household pets, to be brought or
kept in or about the Premises, Building or Lot. Tenant shall place no loads upon
the floors, walls, or ceilings in excess of the maximum designed load permitted
by the applicable Uniform Building Code or which may damage the Building or
outside areas; nor place any harmful liquids in the drainage systems; nor dump
or store waste materials, refuse or other such materials, or allow such to
remain outside the Building area, except in refuse dumpsters or in any enclosed
trash areas provided.  Tenant shall honor the terms of all Recorded Matters
relating to the Premises, the Building and the Lot.

 

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10.          Alterations and Additions; and Surrender of Premises:

 

10.1        Alterations and Additions:  After Landlord has completed the
construction of the Leasehold Improvements described in Exhibit B, Tenant shall
not install any signs, fixtures, improvements, nor make or permit any other
alterations or additions to the Premises, Building or Lot without the prior
written consent of Landlord, which consent shall not be unreasonably withheld. 
Notwithstanding the above, Tenant shall be allowed to make nonstructural
alterations, the cost of which do not exceed fifty thousand dollars ($50,000)
per year, without Landlord’s consent.  If any such alteration or addition is
expressly permitted by Landlord, including any alterations that do not require
Landlord’s consent, Tenant shall deliver at least ten (10) days prior notice to
Landlord, from the date Tenant intends to commence construction, sufficient to
enable Landlord to post a Notice of Non-Responsibility. In all events, Tenant
shall obtain all permits or other governmental approvals prior to commencing any
of such work and deliver a copy of same to Landlord. All alterations and
additions shall be installed by a licensed contractor reasonably approved by
Landlord, at Tenant’s sole expense in compliance with all applicable Laws
(including, but not limited to, the ADA as defined herein), Recorded Matters,
and Rules and Regulations. Tenant shall keep the Premises, Building and Lot free
from any liens arising out of any work performed, materials furnished or
obligations incurred by or on behalf of Tenant.

 

10.2        Surrender of Premises:   Upon the termination of this Lease, whether
by forfeiture, lapse of time or otherwise, or upon the termination of Tenant’s
right to possession of the Premises, Tenant will at once surrender and deliver
up the Premises, Building and Lot to Landlord in good condition and repair
including, but not limited to, all light bulbs and ballasts, HVAC equipment,
plumbing and electrical in good working condition, excepting for reasonable wear
and tear. Upon such termination of this Lease, Tenant shall remove all tenant
signage, trade fixtures, furniture, furnishings, and personal property.  Tenant
shall repair any damage caused by the installation or removal of such signs,
trade fixtures, furniture, furnishings fixtures which are to be removed from the
Premises, Building or Lot by Tenant hereunder.

 

11.          Repairs and Maintenance:

 

11.1        Tenant’s Repairs and Maintenance Obligations:  Except as otherwise
provided in this Lease, Tenant shall, at Tenant’s sole cost and expense, keep
and maintain the Premises, Building and Lot in good, clean, operable and safe
condition and repair. Without limiting the generality of the foregoing, Tenant
shall be responsible for maintaining and repairing:  (a) all mechanical systems,
heating, ventilation and air conditioning systems, (b) all plumbing, electrical
wiring and equipment serving the Premises, Building and Lot (c) all interior
lighting (including, without limitation, light bulbs and/or ballasts) and
exterior lighting serving the Premises, Building and Lot (d) all glass, windows,
window frames, window casements, skylights, interior and exterior doors, door
frames and door closers, (e) all roll-up doors, dock equipment, including
without limitation, dock bumpers, dock plates, dock seals, dock levelers and
dock lights, if any (f) all signage, (g) lifts for disabled persons, if any (h)
sprinkler systems, fire protection systems and security systems, (i) all
partitions, fixtures, equipment, interior painting, and interior walls, floors
and floor coverings of the Premises and Building and every part thereof, (j) the
roof,  (k) exterior electrical wiring and equipment, exterior lighting, exterior
glass, and (l) exterior doors/entrances and door closers, exterior window
casements, exterior painting of the Building, paving, curbs, striping, trash
receptacle areas, and underground utility and sewer pipes.

 

                                In the event any of the HVAC units, mechanical,
plumbing and electrical systems, or the roof needs replacement, or any capital
repairs or replacements are required to the Premises, Leasehold Improvements and
Exterior Improvements during the term of this Lease Agreement, then Landlord
shall perform and pay for the cost of said replacement or repair, and thereafter
Landlord shall amortize the cost of said capital expenditure, repair or
replacement over the useful life of the item replaced, and Tenant shall
reimburse Landlord an amount equal to the monthly amortized cost for the period
of time remaining on the term of the Lease Agreement.

 

                                Tenant shall procure and maintain (a) a heating,
ventilation and air conditioning systems preventative maintenance and repair
contract(s); such contract(s) to be on no more than a quarterly basis, and (b) a
fire and sprinkler protection services and preventative maintenance and repair
contract(s) (including, without limitation, monitoring services); such
contract(s) to be on no more than a monthly basis. In the event Tenant fails to
obtain the service contracts described hereinabove, Landlord reserves the right,
but without the obligation to do so, to procure and maintain (i) the heating,
ventilation and air conditioning systems preventative maintenance and repair
contract(s), and/or (ii) the fire and sprinkler protection services and
preventative maintenance and repair contract(s) (including, without limitation,
monitoring services), and Tenant shall be obligated to reimburse Landlord for
the cost thereof.  If Tenant procures and maintains any of such contract(s),
Tenant will promptly deliver to Landlord a true and complete copy of each such
contract and any and all renewals or extensions thereof, and each service report
or other summary received by Tenant pursuant to or in connection with such
contract(s).

 

11.2        Tenant’s Failure to Perform Repairs and Maintenance Obligations: 
Except for normal maintenance and repair of the items described above, and
Tenant’s reasonable ability to place a satellite and/or antennae on the roof,
Tenant shall have no right of access to or right to install any device on the
roof of the Building nor make any penetrations of the roof of the Building
without the express prior written consent of Landlord, which consent shall not
be unreasonably withheld.  If, after twenty (20) days written notice from
Landlord, Tenant refuses or neglects to repair and maintain the Premises,
Building or Lot properly as required herein, Landlord may, but without
obligation to do so, at any time make such repairs and/or maintenance.

 

11.3        Landlord’s Repairs and Maintenance Obligations: Landlord warrants
that the roof and HVAC, mechanical , electrical and plumbing systems shall be
free from defects and repairs for the first two years of the Lease Term.  Except
for repairs rendered necessary by the intentional or negligent acts or omissions
of Tenant, or Tenant’s agents, contractors or invitees, Landlord agrees, at
Landlord’s sole cost and expense (a) to keep in good repair the structural
portions of the foundations, exterior walls (exclusive of glass windows or
doors), concrete slab flooring, (b) to replace the structural portions of the
roof of the Building when reasonably necessary, and (c) during the first two
years of the Lease Term, to make any repairs required for the roof and/or the
HVAC, mechanical, plumbing and electric systems of the Building.

 

12.          Insurance:

 

12.1       Types of Insurance:  Tenant shall maintain in full force and effect
at all times during the Term of this Lease, at Tenant’s sole cost and expense,
for the protection of Tenant and Landlord, as their interests may appear,
policies of insurance which afford the following coverages: (i) worker’s
compensation: statutory limits; (ii) employer’s liability, as required by law,
with

 

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a minimum limit of $100,000 per employee and $500,000 per occurrence; (iii)
primary commercial general liability insurance (occurrence form) providing
coverage against any and all claims for bodily injury and property damage
occurring in, on or about the Premises, Building and Lot arising out of the use
and/or occupancy of the Premises, Building and Lot . Such insurance shall
include coverage for blanket contractual liability, fire damage, premises,
personal injury, completed operations, products liability, personal and
advertising, and a plate-glass rider to provide coverage for all glass in, on or
about the Premises, Building and Lot including, without limitation, skylights,
with deletion of the exclusion for operations within fifty (50) feet of a
railroad track (railroad protective liability), if applicable. Such insurance
shall have a combined single limit of not less than One Million Dollars
($1,000,000) per occurrence with a Two Million Dollar ($2,000,000) aggregate
limit and excess umbrella insurance in the amount of Two Million Dollars
($2,000,000). If Tenant has other locations which it owns or leases, the policy
shall include an aggregate limit per location endorsement. If necessary, as
reasonably determined by Landlord, Tenant shall provide for restoration of the
aggregate limit; (iv) comprehensive automobile liability insurance: a combined
single limit of not less than $2,000,000 per occurrence and insuring Tenant
against liability for claims arising out of the ownership, maintenance, or use
of any owned, hired or non-owned automobiles; (v) “all risk” property insurance,
including without limitation, sprinkler leakage, boiler and machinery
comprehensive form, if applicable, covering damage to or loss of any personal
property, trade fixtures, inventory, fixtures and equipment located in, on or
about the Premises, Building and Lot, together with, if the property of Tenant’s
invitees is to be kept in or about the Premises, Building and Lot, warehouser’s
legal liability or bailee customers insurance for the full replacement cost of
the property belonging to invitees and located in or about  the Premises,
Building and Lot. Such insurance shall be written on a replacement cost basis
(without deduction for depreciation) in an amount equal to one hundred percent
(100%) of the full replacement value of the aggregate of the items referred to
in this subparagraph, such other insurance as Landlord deems necessary and
prudent or as may otherwise be reasonably required by any of Landlord’s lenders.

 

12.2       Insurance Policies:  Insurance required to be maintained by Tenant
shall be written by companies (i) licensed to do business in the State of
California, (ii) domiciled in the United States of America, and (iii) having a
“General Policyholders Rating” of at least A:X (or such higher rating as may be
required by a lender having a lien on the Premises) as set forth in the most
current issue of “Best’s Insurance Reports. “ Any deductible amounts under any
of the insurance policies required hereunder shall not exceed Five Thousand
Dollars ($5,000). Tenant shall deliver to Landlord certificates of insurance and
true and complete copies of any and all endorsements required herein for all
insurance required to be maintained by Tenant hereunder at the time Landlord
delivers possession of the Premises, Building and Lot to Tenant. Tenant shall,
at least ten (10) days after expiration of each policy, furnish Landlord with
certificates of renewal or “binders” thereof. Each certificate shall expressly
provide that such policies shall not be cancelable or otherwise subject to
modification except after thirty (30) days prior written notice to the parties
named as additional insureds as required in this Lease (except for cancellation
for nonpayment of premium, in which event cancellation shall not take effect
until at least ten (10) days’ notice has been given to Landlord). Tenant shall
have the right to provide insurance coverage which it is obligated to carry
pursuant to the terms of this Lease under a blanket insurance policy, provided
such blanket policy expressly affords coverage for the Premises, Building and
Lot and for Landlord as required by this Lease.

 

12.3        Additional Insureds and Coverage:  Landlord, any property management
company and/or agent of Landlord for the Premises, the Building, and the Lot,
any lender(s) of Landlord having a lien against the Premises, the Building, and 
the Lot, and any joint venture partners of Landlord shall be named as additional
insureds under all of the policies required in Section 12.1 above. Additionally,
such policies shall provide for severability of interest. All insurance to be
maintained by Tenant shall, except for workers’ compensation and employer’s
liability insurance, be primary, without right of contribution from insurance
maintained by Landlord. Any umbrella liability policy or excess liability policy
(which shall be in “following form”) shall provide that if the underlying
aggregate is exhausted, the excess coverage will drop down as primary insurance.
The limits of insurance maintained by Tenant shall not limit Tenant’s liability
under this Lease. It is the parties’ intention that the insurance to be procured
and maintained by Tenant as required herein shall provide coverage for any and
all damage or injury arising from or related to Tenant’s operations of its
business and/or Tenant’s or Tenant’s Representatives’ use of the Premises,
Building or Lot. It is not contemplated or anticipated by the parties that the
aforementioned risks of loss be borne by Landlord’s insurance carriers, rather
it is contemplated and anticipated by Landlord and Tenant that such risks of
loss be borne by Tenant’s insurance carriers pursuant to the insurance policies
procured and maintained by Tenant as required herein.

 

12.4        Failure of Tenant to Purchase and Maintain Insurance: If, after ten
(10) days written notice of default by Landlord to Tenant, Tenant does, not
purchase the insurance required in this Lease or keep the same in full force and
effect throughout the Term of this Lease (including any renewals or extensions),
Landlord may, but without obligation to do so, purchase the necessary insurance
and pay the premiums therefor. If Landlord so elects to purchase such insurance,
Tenant shall promptly pay to Landlord as Additional Rent, the amount so paid by
Landlord, upon Landlord’s demand therefor. In addition, Landlord may recover
from Tenant and Tenant agrees to pay, as Additional Rent, damages which Landlord
may sustain by reason of Tenant’s failure to obtain and maintain such insurance.
If Tenant fails to maintain any insurance required in this Lease, Tenant shall
be liable for all losses, damages and costs resulting from such failure.

 

13.          Waiver of Subrogation:  Landlord and Tenant hereby mutually waive
their respective rights of recovery against each other for any loss of, or
damage to, either parties’ property to the extent that such loss or damage is
insured by an insurance policy required to be in effect at the time of such loss
or damage. Each party shall obtain any special endorsements, if required by its
insurer whereby the insurer waives its rights of subrogation against the other
party. This provision is intended to waive fully, and for the benefit of the
parties hereto, any rights and/or claims which might give rise to a right of
subrogation in favor of any insurance carrier. The coverage obtained by Tenant
pursuant to Section 12 of this Lease shall include, without limitation, a waiver
of subrogation endorsement attached to the certificate of insurance. The
provisions of this Section 13 shall not apply in those instances in which such
waiver of subrogation would invalidate such insurance coverage or would cause
either party’s insurance coverage to be voided or otherwise uncollectible.

 

14.                               Intentionally Omitted.

 

15.          Assignment and Subleasing:

 

15.1        Prohibition:  Tenant shall not assign, mortgage, hypothecate,
encumber, grant any license or concession, pledge or otherwise transfer this
Lease (collectively, “assignment”), in whole or in part, whether voluntarily or
involuntarily or by operation of law, nor sublet or permit occupancy by any
person other than Tenant of all or any portion of the Premises without

 

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first obtaining the prior written consent of Landlord, which consent shall not
be unreasonably withheld. If Tenant seeks to sublet or assign all or any portion
of the Premises, Tenant shall deliver to Landlord at least thirty (30) days
prior to the proposed commencement of the sublease or assignment (the “Proposed
Effective Date”) the following: (i) the name of the proposed assignee or
sublessee; (ii) such information as to such assignee’s or sublessee’s financial
responsibility and standing as Landlord may reasonably require; and (iii) a copy
of the assignment, sublease or other transfer document.  Tenant shall reimburse
Landlord for reasonable legal and other expenses incurred by Landlord in
connection with any actual or proposed assignment or subletting not to exceed
One Thousand Dollars ($1,000). Each permitted assignee or sublessee shall assume
and be deemed to assume this Lease and shall be and remain liable jointly and
severally with Tenant for payment of Rent and for the due performance of, and
compliance with all the terms, covenants, conditions and agreements herein
contained on Tenant’s part to be performed or complied with, for the term of
this Lease. No assignment or subletting shall affect the continuing primary
liability of Tenant (which, following assignment, shall be joint and several
with the assignee), and Tenant shall not be released from performing any of the
terms, covenants and conditions of this Lease. Tenant hereby acknowledges and
agrees that it understands that Landlord’s accounting department may process and
accept Rent payments without verifying that such payments are being made by
Tenant, a permitted sublessee or a permitted assignee in accordance with the
provisions of this Lease. Although such payments may be processed and accepted
by such accounting department personnel, any and all actions or omissions by the
personnel of Landlord’s accounting department shall not be considered as
acceptance by Landlord of any proposed assignee or sublessee nor shall such
actions or omissions be deemed to be a substitute for the requirement that
Tenant obtain Landlord’s prior written consent to any such subletting or
assignment, and any such actions or omissions by the personnel of Landlord’s
accounting department shall not be considered as a voluntary relinquishment by
Landlord of any of its rights hereunder nor shall any voluntary relinquishment
of such rights be inferred therefrom.

 

15.2        Excess Sublease Rental or Assignment Consideration:  In the event of
any sublease or assignment of all or any portion of the Premises where the rent
or other consideration provided for in the sublease or assignment either
initially or over the term of the sublease or assignment exceeds the Rent or pro
rata portion of the Rent, as the case may be, for such space reserved in the
Lease, Tenant shall pay the Landlord monthly, as Additional Rent, at the same
time as the monthly installments of Rent are payable hereunder, fifty percent
(50%) of the excess of each such payment of rent or other consideration in
excess of the Rent called for hereunder, after Tenant has recovered the costs of
a leasing commission incurred to an independent broker, any tenant improvement
costs and reasonable attorneys’ fees incurred by Tenant in connection with the
assignment or subletting.

 

16.          Ad Valorem Taxes:  Prior to delinquency, Tenant shall pay all taxes
and assessments levied upon trade fixtures, alterations, additions,
improvements, inventories and personal property located and/or installed on or
in the Premises, Building or Lot by, or on behalf of, Tenant; and if requested
by Landlord, Tenant shall promptly deliver to Landlord copies of receipts for
payment of all such taxes and assessments. To the extent any such taxes are not
separately assessed or billed to Tenant, Tenant shall pay the amount thereof as
invoiced by Landlord, and Landlord shall provide Tenant with verifying
documentation establishing the nature and amount of such taxes invoiced by
Landlord to Tenant.

 

17.          Subordination:   Landlord shall have the right to cause this Lease
to be and become and remain subject and subordinate to any and all ground or
underlying leases, mortgages or deeds of trust which may hereafter be executed
covering the Premises, Building or Lot or any renewals, modifications,
consolidations, replacements or extensions thereof, for the full amount of all
advances made or to be made thereunder and without regard to the time or
character of such advances, together with interest thereon and subject to all
the terms and provisions thereof; provided, however, that any such ground
lessor, beneficiary or mortgagee agrees in a commercially reasonable
subordination, non-disturbance and attornment agreement (“SNDA”) in form
reasonably satisfactory to Tenant not to disturb Tenant as long as Tenant is not
in default under this Lease beyond any applicable cure period.  Notwithstanding
the foregoing, Landlord, mortgagee, or any beneficiary shall have the right to
subordinate or cause to be subordinated any underlying leases or any such liens
to this Lease. If any underlying lease terminates for any reason or any mortgage
or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made
for any reason, Tenant shall, notwithstanding any subordination and upon the
request of such successor to Landlord, attorn to and become the Tenant of the
successor in interest to Landlord, provided such successor in interest will not
disturb Tenant’s use, occupancy or quiet enjoyment of the Premises, Building and
or Lot, so long as Tenant is not in default of the terms and provisions of this
Lease beyond any applicable cure period, and so long as said successor in
interest agrees to a commercially reasonable nondisturbance agreement with
Tenant.  Landlord shall be liable to Tenant for all or any portion of the
Security Deposit not forfeited by, or refunded to Tenant, until and unless
Landlord transfers such Security Deposit to the successor in interest.

 

18.          Right of Entry:  Tenant grants Landlord or its agents the right to
enter the Premises upon at least twenty-four (24) hours notice, except in
emergency, for purposes of inspection, exhibition, posting of notices, repair or
alteration. Landlord shall comply with Tenant’s reasonable security requirements
in exercising its entry rights.  At Landlord’s option, Landlord shall at all
times have and retain a key with which to unlock all the doors in, upon and
about the Premises, excluding Tenant’s vaults and safes. It is further agreed
that Landlord shall have the right to use any and all means Landlord deems
necessary to enter the Premises in an emergency. Landlord shall also have the
right to place “for rent” and/or “for sale” signs on the outside of the Premises
during the last six (6) months of the term of this Lease, or at any time during
which Tenant is in default under this Lease.

 

19.          Estoppel Certificate:  Tenant shall execute, acknowledge and
deliver to Landlord, within not less than twenty (20) days after Landlord
provides such to Tenant, a statement in writing certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification), the date to which the Rent and other charges are paid in
advance, if any, acknowledging that there are not, to Tenant’s knowledge, any
uncured defaults on the part of Landlord hereunder or specifying such defaults
as are claimed, and such other matters as Landlord may reasonably require. Any
such statement may be conclusively relied upon by Landlord and any prospective
purchaser or encumbrancer of the Premises, Building and or Lot. Tenant’s failure
to deliver such statement within such time shall be conclusive upon the Tenant
that (a) this Lease is in full force and effect, without modification except as
may be represented by Landlord; (b) there are no uncured defaults in Landlord’s
performance; and (c) not more than one month’s Rent has been paid in advance,
except in those instances when Tenant pays Rent quarterly in advance, then not
more than three month’s Rent has been paid in advance. Failure by Tenant to so
deliver such certified estoppel certificate shall be a default of the provisions
of this Lease.

 

20.          Tenant’s Default:  The occurrence of any one or more of the
following events shall, at Landlord’s option, constitute a

 

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default and breach of this Lease by Tenant:

 

20.1        Any act by Tenant which would cause any insurance policy to be
invalidated or otherwise lapse. Tenant agrees to notice and service of notice as
provided for in this Lease and waives any right to any other or further notice
or service of notice which Tenant may have under any statute or law now or
hereafter in effect.

 

20.2        The failure by Tenant to make any payment of Rent, Additional Rent
or any other payment required hereunder on the date said payment is due, and
failure to cure said monetary delinquency within five (5) days written notice
from Landlord to Tenant.

 

20.3        The failure by Tenant to observe, perform or comply with any of the
conditions, covenants or provisions of this Lease (except failure to make any
payment of Rent and/or Additional Rent) and such failure is not cured within the
time period required under the provisions of this Lease. If such failure is
susceptible of cure but cannot reasonably be cured within the aforementioned
time period (if any), Tenant shall promptly commence the cure of such failure
and thereafter diligently prosecute such cure to completion within a reasonable
time thereafter.  In no event or circumstance shall Tenant have less than thirty
(30) days to complete any such cure, unless otherwise expressly agreed to in
writing by Landlord (in Landlord’s sole discretion); and

 

20.4        The making of a general assignment by Tenant for the benefit of
creditors, the filing of a voluntary petition by Tenant or the filing of an
involuntary petition by any of Tenant’s creditors seeking the rehabilitation,
liquidation, or reorganization of Tenant under any law relating to bankruptcy,
insolvency or other relief of debtors and, in the case of an involuntary action,
the failure to remove or discharge the same within sixty (60) days of such
filing, the appointment of a receiver or other custodian to take possession of
substantially all of Tenant’s assets or this leasehold, Tenant’s insolvency or
inability to pay Tenant’s debts or failure generally to pay Tenant’s debts when
due, any court entering a decree or order directing the winding up or
liquidation of Tenant or of substantially all of Tenant’s assets, Tenant taking
any action toward the dissolution or winding up of Tenant’s affairs, the
cessation or suspension of Tenant’s use of the Premises, or the attachment,
execution or other judicial seizure of substantially all of Tenant’s assets or
this leasehold.

 

21.          Remedies for Tenant’s Default:

 

21.1        Landlord’s Rights:  In the event of a breach or default under this
Lease as provided in Section 20 hereof, Landlord may exercise all of its
remedies as may be permitted by law, including but not limited to the remedy
provided by Section 1951.4 of the California Civil Code, and including
terminating this Lease, reentering the Premises and removing all persons and
property therefrom, which property may be stored by Landlord at a warehouse or
elsewhere at the risk, expense and for the account of Tenant.  If Landlord
elects to terminate this Lease, Landlord shall be entitled to recover from
Tenant the aggregate of all amounts permitted by law, including but not limited
to, the cost of recovering the Premises and including (i) the worth at the time
of 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 Tenant proves could have been reasonably
avoided; (iii) the worth at the time of the award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform its obligations under this
Lease or which in the ordinary course of events would be likely to result
therefrom.  The “worth at the time of award” of the amounts referred to in (i)
and (ii) above is computed by allowing interest at the rate of ten percent (10%)
per annum.  The “worth at the time of award” of the amount referred to in (iii)
above shall be computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of award plus one percent
(1%).

 

                Notwithstanding anything to the contrary set forth herein,
Landlord’s re-entry to perform acts of maintenance or preservation of or in
connection with efforts to relet the Premises or any portion thereof, or the
appointment of a receiver upon Landlord’s initiative to protect Landlord’s
interest under this Lease shall not terminate Tenant’s right to possession of
the Premises or any portion thereof and, until Landlord does elect to terminate
this Lease, this Lease shall continue in full force and effect and Landlord
shall enforce all of Landlord’s rights and remedies hereunder including, without
limitation, the right to recover from Tenant as it becomes due hereunder all
Base Rent, Additional Rent and other charges required to be paid by Tenant under
the terms hereof.

 

21.2        Rights and Remedies Cumulative:  The foregoing rights and remedies
of Landlord are not exclusive; they are cumulative in addition to any rights and
remedies now or hereafter existing at law, in equity by statute or otherwise, or
to any equitable remedies Landlord may have, and to any remedies Landlord may
have under bankruptcy laws or laws affecting creditor’s rights generally.

 

21.4        Waiver of a Default:  The waiver by Landlord of any default or
breach of any provision of this Lease shall not be deemed or construed a waiver
of any other breach or default by Tenant hereunder or of any subsequent breach
or default of this Lease, except for the default specified in the waiver.

 

22.          Holding Over:  If Tenant holds possession of the Premises, Building
or Lot after the expiration of the Term of this Lease with Landlord’s consent,
Tenant shall become a tenant from month-to-month upon the terms and provisions
of this Lease, provided the monthly Base Rent shall be 125% of the then existing
Base Rent for the three month period following the expiration of the Term, and
then for each month thereafter, the Base Rent shall be 150% of the Base Rent due
on the last month of the Lease Term, payable in advance on or before the first
day of each month. Acceptance by Landlord of the monthly Base Rent without the
additional increase of Base Rent shall not be deemed or construed as a waiver by
Landlord of any of its rights to collect the increased amount of the Base Rent
as provided herein at any time. Such month-to- tenancy shall not constitute a
renewal or extension for any further term. All options, if any, granted under
the terms of this Lease shall be deemed automatically terminated and be of no
force or effect during said month-to-month tenancy. Tenant shall continue in
possession until such tenancy shall be terminated by either Landlord or Tenant
giving written notice of termination to the other party at least thirty (30)
days prior to the effective date of termination. This paragraph shall not be
construed as Landlord’s permission for Tenant to hold over. Acceptance of Base
Rent by Landlord following expiration or termination of this Lease shall not
constitute a renewal of this Lease.

 

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23.          Landlord’s Default:   Landlord shall not be deemed in breach or
default of this Lease unless Landlord fails within a reasonable time to perform
an obligation required to be performed by Landlord hereunder. For purposes of
this provision, a reasonable time shall not be less than thirty (30) days after
receipt by Landlord of written notice specifying the nature of the obligation
Landlord has not performed; provided, however, that if the nature of Landlord’s
obligation is such that more than thirty (30) days, after receipt of written
notice, is reasonably necessary for its performance, then Landlord shall not be
in breach or default of this Lease if performance of such obligation is
commenced within such thirty (30) day period and thereafter diligently pursued
to completion.  In the event of an emergency circumstance resulting from the
default of Landlord, Tenant shall have the right to cure said default and
invoice the Landlord for the cost associated with curing said emergency.

 

24.          Parking:   Tenant shall have exclusive use of all parking spaces
set forth on Page 1. Landlord shall not be required to enforce Tenant’s right to
use the same.

 

25.          Intentionally Omitted.

 

26.          Waiver:  No delay or omission in the exercise of any right or
remedy of Landlord on any default by Tenant shall impair such a right or remedy
or be construed as a waiver. The subsequent acceptance of Rent by Landlord after
breach by Tenant of any covenant or term of this Lease shall not be deemed a
waiver of such breach, other than a waiver of timely payment for the particular
Rent payment involved, and shall not prevent Landlord from maintaining an
unlawful detainer or other action based on such breach. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly Rent and other sums due
hereunder shall be deemed to be other than on account of the earliest Rent or
other sums due, nor shall any endorsement or statement on any check or
accompanying any check or payment be deemed an accord and satisfaction; and
Landlord may accept such check or payment without prejudice to Landlord’s right
to recover the balance of such Rent or other sum or pursue any other remedy
provided in this Lease. No failure, partial exercise or delay on the part of the
Landlord in exercising any right, power or privilege hereunder shall operate as
a waiver thereof.

 

27.          Casualty Damage:  If the Premises or any part thereof shall be
damaged by fire or other casualty, Tenant shall give prompt written notice
thereof to Landlord. Landlord shall, at Landlord’s expense, repair such damage
to the condition existing prior to such damage (but not Tenant’s trade fixtures,
equipment or personal property) as soon as reasonably possible thereafter, and
this Lease shall continue in full force and effect.  Notwithstanding the
foregoing, if the insurance proceeds are not sufficient to effect such repair,
Landlord shall promptly contribute the shortage in proceeds (except the
deductible shall be Tenant’s responsibility).  If such shortage is due to the
fact that, by reason of the unique nature of the Leasehold Improvements, full
replacement cost insurance coverage was not commercially reasonable and
available, Landlord shall have no obligation to contribute the shortfall in
insurance proceeds or to restore the unique aspects of the Premises unless
Tenant provides Landlord with the funds to cover the shortfall or written
assurance that Tenant will provide such funds within thirty (30) days after
receiving written notice of the shortfall from Landlord.  If Landlord receives
such funds or written assurance from Tenant within said thirty (30) day period,
Landlord shall make such repairs to the Premises, including the unique aspects
of the Leasehold Improvements and this Lease shall remain in full force and
effect.

 

                If the Premises are damaged by an uninsured casualty, and the
cost to repair the Premises exceeds five hundred thousand dollars ($500,000),
Landlord may either (i) repair such damage and restore the Premises to the
condition existing prior to such casualty as soon as reasonably possible at
Landlord’s expense, in which event the Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Tenant within
thirty (30) days after receipt by Landlord of knowledge of the occurrence of
such damage.  Such termination shall be effective sixty (60) days following the
date of such notice.  If Landlord elects to terminate this Lease, Tenant shall
have the right, within thirty (30) days after receipt of the termination notice,
to give written notice to Landlord of Tenant’s commitment to pay for the repair
of such damage without reimbursement from Landlord.  Tenant shall provide
Landlord with such funds or written assurance thereof within thirty (30) days
after making such commitment.  In such event, the Lease shall continue in full
force and effect, and Landlord shall proceed to make such repairs as soon as
reasonably possible after the required funds are available.  If Tenant does not
make the required commitment, this Lease shall terminate as of the date
specified in the termination notice.

 

                Upon any damage or destruction of the Premises, Landlord shall
cause its architect to estimate the time period required to restore the Premises
to the condition existing prior to such damage or destruction and deliver such
estimate to the parties within thirty (30) days after such damage.  If
Landlord’s architect estimates that the restoration period applicable to the
Premises will be no longer than one hundred twenty (120) days after the date of
such damage Tenant shall have the right to terminate this Lease by giving
Landlord written notice of such termination within ten (10) days after the date
Tenant receives the estimate of the restoration period from Landlord’s
architect.  Tenant’s failure to give written notice of termination of this Lease
within said ten (10) day period shall be deemed Tenant’s waiver of its
termination right and election to permit Landlord to restore the Premises in
accordance with this Section 27.  Notwithstanding the foregoing, if all or a
portion of the Premises is damaged or destroyed during the last six (6) months
of the Lease such that the remainder of the Premises cannot be effectively and
efficiently used, and Landlord’s architect reasonably estimates, by written
notice given to the parties within thirty (30) days after the date of such
damage, that the time required to repair and restore the Premises exceeds the
period of time remaining under the Lease Term, then either party may terminate
this Lease by giving written notice of such termination to the other party
within fifteen (15) days after the date of such notice from Landlord’s
architect.

 

                From the date of such damage and destruction until the date of
completion of restoration thereof, Base Rent and Additional Rent shall be abated
in proportion to the part of the Premises which is unusable by Tenant in the
conduct of its business (but there shall be no abatement of rent by reason of
any portion of the Premises being unusable for a period equal to one (1) day or
less).

 

28.          Condemnation:   If all of the Premises, Building and Lot are
condemned by eminent domain, inversely condemned or sold in lieu of condemnation
for any public or quasi-public use or purpose (“Condemned”), then Tenant or
Landlord may terminate this Lease as of the date when physical possession of the
Premises, Building and Lot are taken and title vests in such condemning
authority, and Rent shall be adjusted to the date of termination. If a
substantial portion of the Premises, Building or the Lot is so condemned such
that Tenant cannot, in Tenant’s reasonable opinion, use the remainder for the
conduct of its business, Tenant, at its option may terminate this Lease. If
Tenant does not elect to terminate this Lease, Landlord shall, if necessary,
promptly proceed to restore the Premises, Building or Lot to substantially its
same condition prior

 

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to such partial condemnation, and shall use the condemnation proceeds received
by Landlord for such purpose.  Base Rent shall be reduced on a proportionate
basis corresponding to the time during which, and to the part of the Premises,
Building or Lot of which Tenant is deprived on account of such partial
condemnation and restoration.

 

29.          Environmental Matters /Hazardous Materials:

 

29.1        Hazardous Materials Disclosure Certificate:  Prior to executing this
Lease, Tenant has completed, executed and delivered to Landlord Tenant’s
Hazardous Materials Disclosure Certificate (the “HazMat Certificate”), a copy of
which is attached hereto as Exhibit E and incorporated herein by this reference.
Tenant covenants, represents and warrants to Landlord that the information on
the HazMat Certificate is true and correct and accurately describes the use(s)
of Hazardous Materials which will be made and/or used on the Premises by Tenant.
Tenant shall, commencing with the date which is one year from the Commencement
Date and continuing every year thereafter, complete, execute, and deliver to
Landlord, a new or updated HazMat Certificate in the form attached hereto as
Exhibit E describing Tenant’s present use of Hazardous Materials on the
Premises, and any other reasonably necessary documents as requested by Landlord.

 

29.2        Definition of Hazardous Materials:  As used in this Lease, the term
Hazardous Materials shall mean and include (a) any hazardous or toxic wastes,
materials or substances, and other pollutants or contaminants, which are or
become regulated by any Environmental Laws; (b) petroleum, petroleum by
products, gasoline, diesel fuel, crude oil or any fraction thereof; (c) asbestos
and asbestos containing material, in any form, whether friable or non-friable;
(d) polychlorinated biphenyls; (e) radioactive materials; (f) lead and
lead-containing materials; (g) any other material, waste or substance displaying
toxic, reactive, ignitable or corrosive characteristics, as all such terms are
used in their broadest sense, and are defined or become defined by any
Environmental Law (defined below); or (h) any materials which cause or threatens
to cause a nuisance upon or waste to any portion of the Premises, the Building,
or the Lot, or any surrounding property; or poses or threatens to pose a hazard
to the health and safety of persons on the Premises or any surrounding property.

 

29.3          Prohibition; Environmental Laws:   Tenant shall not be entitled to
use nor store any Hazardous Materials on, in, or about the Premises, the
Building, or the Lot, or any portion of the foregoing, without, in each
instance, said usage being in compliance with any and all applicable laws and
regulations, and only upon giving written notice to Landlord of said usages. 
Tenant shall be permitted to use and/or store only those Hazardous Materials
that are necessary for Tenant’s business and to the extent disclosed in the
HazMat Certificate, provided that such usage and storage is only to the extent
of the quantities of Hazardous Materials as specified in the then applicable
HazMat Certificate unless Tenant notifies Landlord in writing of a change in the
quantities used prior to the delivery of the next annual HazMat Certificate, and
provided further that such usage and storage is in full compliance with any and
all local, state and federal environmental, health and/or safety-related laws,
statutes, orders, standards, courts’ decisions, ordinances, rules and
regulations (as interpreted by judicial and administrative decisions), decrees,
directives, guidelines, permits or permit conditions, currently existing and as
amended, enacted, issued or adopted in the future which are or become applicable
to Tenant or all or any portion of the Premises, Building or Lot (collectively,
the “Environmental Laws”).  Landlord shall have the right at all times during
the Term of this Lease to (i) inspect the Premises, Building or Lot, (ii)
conduct tests and investigations to determine whether Tenant is in compliance
with the provisions of this Section 29, and (iii) request lists of all Hazardous
Materials used, stored or otherwise located on, under or about the Premises,
Building and the Lot. The cost of all such inspections, tests and investigations
shall be borne solely by Landlord, unless there has been a release of Hazardous
Materials at which time said costs shall be paid by Tenant. The aforementioned
rights granted herein to Landlord and its representatives shall not create (a) a
duty on Landlord’s part to inspect, test, investigate, monitor or otherwise
observe the Premises, Building or Lot, or the activities of Tenant and Tenant’s
Representatives with respect to Hazardous Materials, including without
limitation, Tenant’s operation, use and any remediation related thereto, or (b)
liability on the part of Landlord and its representatives for Tenant’s use,
storage, disposal or remediation of Hazardous Materials, it being understood
that Tenant shall be solely responsible for all liability in connection
therewith.

 

29.4        Tenant’s Environmental Obligations:  Tenant shall give to Landlord
immediate verbal and follow-up written notice of any spills, releases,
discharges, disposals, emissions, migrations, removals or transportation of
Hazardous Materials on, under or about the Premises, Building or Lot which are
not in compliance with any and all applicable laws and regulations. Tenant, at
its sole cost and expense, covenants and warrants to promptly investigate, clean
up, remove, restore and otherwise remediate (including, without limitation,
preparation of any feasibility studies or reports and the performance of any and
all closures) any spill, release, discharge, disposal, emission, migration or
transportation of Hazardous Materials by Tenant on the Premises, Building or Lot
to such levels as are required by law.  Tenant, at its sole cost and expense,
shall conduct and perform, or cause to be conducted and performed, all closures
as required by any Environmental Laws or any agencies or other governmental
authorities having jurisdiction thereof to the extent required by Tenant’s
activities on the Property. If Tenant fails to so promptly investigate, clean
up, remove, restore, provide closure or otherwise so remediate any spill,
release, discharge, disposal, emission, migration, removal or transportation of
Hazardous Materials caused by Tenant, Landlord may, but without obligation to do
so, take any and all steps necessary to rectify the same and Tenant shall
promptly reimburse Landlord, upon demand, for all costs and expenses to Landlord
of performing investigation, clean up, removal, restoration, closure and
remediation work. All such work undertaken by Tenant, as required herein, shall
be performed in such a manner so as to enable Landlord to make full economic use
of the Premises, the Building, and the Lot after the satisfactory completion of
such work.

 

29.5        Environmental Indemnity - Tenant:  In addition to Tenant’s
obligations as set forth hereinabove, Tenant agrees to, and shall, protect,
indemnify, defend (with counsel acceptable to Landlord) and hold Landlord and
Landlord’s lenders, partners, property management company (if other than
Landlord), agents, directors, officers, representatives, shareholders,
successors and assigns and each of their respective partners, directors,
representatives, agents, shareholders, successors and assigns harmless from and
against any and all claims, judgments, damages, penalties, fines, liabilities,
losses , suits, administrative proceedings and costs (including, but not limited
to, attorneys’ and consultant fees and court costs, but excluding any
consequential damages) arising at any time during or after the Term of this
Lease in connection with or related to, directly or indirectly, the use,
presence, transportation, storage, disposal, migration, removal, spill, release
or discharge of Hazardous Materials by Tenant on, in or about the Premises,
Building or Lot. Neither the written consent of Landlord to the presence, use or
storage of Hazardous Materials by Tenant in, on, under or about any portion of
the Premises, the Building, or the Lot, nor the strict compliance by Tenant with
all Environmental Laws shall excuse Tenant from its obligations of
indemnification pursuant hereto. To the extent Landlord is strictly liable under
any Environmental Laws, Tenant’s obligations to Landlord under this Section 29
and the indemnity contained herein shall likewise be without regard to fault on
Tenant’s part with

 

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respect to the violation of any Environmental Law which results in liability to
any of the aforementioned indemnitees.

 

29.6        Environmental Indemnity - Landlord:  Landlord represents and
warrants to Tenant that no Hazardous Materials have been used or incorporated
into the building materials for the Building, Premises, Leasehold Improvements
and Lot, and there are no Hazardous Materials present in the soil or groundwater
on the Lot as of execution of this Lease Agreement.  In addition to Landlord’s
obligations as set forth hereinabove, Landlord agrees to, and shall, protect,
indemnify, defend and hold Tenant and Tenant’s agents, directors, officers,
representatives, shareholders, successors and assigns and each of their
respective directors, representatives, agents, shareholders, successors and
assigns harmless from and against any and all claims, judgments, damages,
penalties, fines, liabilities, losses, suits, administrative proceedings and
costs (including, but not limited to, attorneys’ and consultant fees and court
costs, but excluding any consequential damages) arising at any time during or
after the Term of this Lease in connection with or related to, directly or
indirectly, the use, presence, transportation, storage, disposal, migration,
removal, spill, release or discharge of Hazardous Materials on, in or about the
Premises, Building or Lot which took place prior to the Commencement Date. 
Neither the written consent of Tenant to the presence, use or storage of
Hazardous Materials on, in or about the Premises, the Building, or the Lot, nor
the strict compliance by Landlord with all Environmental Laws shall excuse
Landlord from its obligations of indemnification pursuant hereto.  To the extent
Tenant is strictly liable under any Environmental Laws, Landlord’s obligations
to Tenant under this Section 29 and the indemnity contained herein shall
likewise be without regard to fault on Landlord’s part with respect to the
violation of any environmental Law which results in liability to any of the
aforementioned indemnitees.

 

29.7        Survival: Tenant’s and Landlord’s obligations and liabilities
pursuant to the provisions of this Section 29 shall survive the expiration or
earlier termination of this Lease.

 

30.                               Intentionally Omitted.

 

31.          General Provisions:

 

31.1        Time:  Time is of the essence in this Lease and with respect to each
and all of its provisions in which performance is a factor.

 

31.2        Successors and Assigns:  The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.

 

31.3        Recordation: If Tenant so elects, Tenant may record a commercially
reasonable short form memorandum of this Lease without the prior written consent
of the Landlord.

 

31.4        Landlord’s Personal Liability:  The liability of Landlord to Tenant
for any default by Landlord under the terms of this Lease shall be limited to
the actual interest of Landlord and its present or future partners in the
Premises, Building or Lot, and Tenant agrees to look solely to the Premises or
any applicable insurance proceeds, or sales proceeds from a sale of the
Premises, Building or Lot for satisfaction of any liability and shall not look
to other assets of Landlord nor seek any recourse against the assets of the
individual partners, directors, officers, shareholders, agents or employees of
Landlord; it being intended that Landlord and the individual partners,
directors, officers, shareholders, agents or employees of Landlord shall not be
personally liable in any manner whatsoever for any judgment or deficiency. The
liability of Landlord under this Lease is limited to its actual period of
ownership of title to the Building and Lot, and Landlord shall be automatically
released from further performance under this Lease and from all further
liabilities and expenses hereunder accruing from and after the date of the
transfer of Landlord’s interest in the Premises, Building and or Lot.

 

31.5        Severability:  Any provisions of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provisions hereof and such other provision shall remain in full force and
effect.

 

31.6        Choice of Law:  This Lease shall be governed by the laws of the
State of California, and the venue for any legal actions regarding or relating
to this Lease Agreement shall be in the County of Monterey, State of California.

 

31.7        Attorneys’ Fees:  In the event any dispute between the parties
results in litigation or other proceeding, the prevailing party shall be
reimbursed by the party not prevailing for all reasonable costs and expenses,
including, without limitation, reasonable attorneys’ and experts’ fees and costs
incurred by the prevailing party in connection with such litigation or other
proceeding, and any appeal thereof. Such costs, expenses and fees shall be
included in and made a part of the judgment recovered by the prevailing party,
if any.

 

31.8        Entire Agreement:  This Lease supersedes any prior agreements,
representations, negotiations or correspondence between the parties, and
contains the entire agreement of the parties on matters covered. No other
agreement, statement or promise made by any party, that is not in writing and
signed by all parties to this Lease, shall be binding.

 

31.9        Warranty of Authority:  Each person executing this Lease on behalf
of a party represents and warrants that (1) such person is duly and validly
authorized to do so on behalf of the entity it purports to so bind, and (2) if
such party is a partnership, corporation or trustee, that such partnership,
corporation or trustee has full right and authority to enter into this Lease and
perform all of its obligations hereunder. In addition to any other remedies
available to Landlord under this Lease, if there is any breach of the foregoing
warranty, the person(s) executing this Lease on behalf of Tenant shall be
personally liable for all of Tenant’s obligations under this Lease, including,
but not limited to, the payment by such person(s) to Landlord of any and all
losses, liabilities, costs, expenses and damages incurred by Landlord hereunder.

 

31.10    Notices:  Any and all notices and demands required or permitted to be
given hereunder to Landlord shall be in writing and shall be sent: (a) by United
States mail, certified and postage prepaid; or (b) by personal delivery; or (c)
by overnight courier, addressed to Landlord c/o Quadrangle Investments, 295 Main
Street, Fifth Floor, Salinas, California 93901. Any and all notices and demands
required or permitted to be given hereunder to Tenant shall be in writing and
shall be sent: (i) by United States mail, certified and postage prepaid; or (ii)
by personal delivery to any employee or agent of Tenant over the age of

 

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eighteen (18) years of age; or (iii) by overnight courier, all of which shall be
addressed to Tenant at the address stated on Page 1 of this Lease Agreement; or
(iv) by facsimile at the facsimile number at the Premises, if any, as provided
by Tenant on Page 1 of this Lease or otherwise provided to Landlord. Notice
and/or demand shall be deemed given upon the earlier of actual receipt or the
third day following deposit in the United States mail. Notice and/or demand by
facsimile shall be complete upon transmission over the telephone line, Any
notice or requirement of service required by any statute or law now or hereafter
in effect, including, but not limited to, California Code of Civil Procedure
Sections 1161, 1161 - 1, and 1162, is hereby waived by Tenant.

 

31.11   Joint and Several:  If Tenant consists of more than one person or
entity, the obligations of all such persons or entities shall be joint and
several.

 

31.12   Covenants and Conditions:  Each provision to be performed by Tenant
hereunder shall be deemed to be both a covenant and a condition.

 

31.13   Waiver of Jury Trial:  The parties hereto shall and they hereby do waive
trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on any matters whatsoever arising out of or in
any way related to this Lease, the relationship of Landlord and Tenant, Tenant’s
use or occupancy of the Premises, Building and or Lot, and/or any claim of
injury, loss or damage.

 

31.14   Intentionally Omitted.

 

31.15   Underlining:  The use of underlining within the Lease is for Landlord’s
reference purposes only and no other meaning or emphasis is intended by this
use, nor should any be inferred.

 

32.         Signs:    All signs and graphics of every kind visible in or from
public view or corridors or the exterior of the Premises shall be subject to any
applicable governmental laws and ordinances.  Tenant shall have the right to
place a sign either on the exterior of the Building or a monument sign on the
Lot identifying Tenant’s business without Landlord’s consent, but subject to
compliance with all applicable governmental laws and ordinances.  Tenant shall
remove all such signs and graphics prior to the termination of this Lease. Such
installations and removals shall be made in a manner as to avoid damage or
defacement of the Premises; and Tenant shall repair any damage or defacement,
including without limitation, discoloration caused by such installation or
removal. Landlord shall have the right, at its option, to deduct from the
Security Deposit such sums as are reasonably necessary to remove such signs,
including, but not limited to, the costs and expenses associated with any
repairs necessitated by such removal. Notwithstanding the foregoing, in no event
shall any neon, flashing or moving sign(s) be permitted hereunder. Tenant
further agrees to maintain any such sign, awning, canopy, advertising matter,
lettering, decoration or other thing as may be approved in good condition and
repair at all times.

 

33.          Intentionally Omitted.

 

34.          Quitclaim:    Upon any termination of this Lease, Tenant shall, at
Landlord’s request, execute, have acknowledged and deliver to Landlord a
quitclaim deed of Tenant’s interest in and to the Premises, Building and Lot. If
Tenant fails to so deliver to Landlord such a quitclaim deed, Tenant hereby
agrees that Landlord shall have the full authority and right to record such a
quitclaim deed signed only by Landlord and such quitclaim deed shall be deemed
conclusive and binding upon Tenant.

 

35.          Intentionally Omitted.

 

36.          Warranties of Tenant:  Tenant hereby warrants and represents to
Landlord, for the express benefit of Landlord, that in entering into this Lease,
Tenant has not relied upon any statement, fact, promise or representation
(whether express or implied, written or oral) not specifically set forth herein
in writing and that any statement, fact, promise or representation (whether
express or implied, written or oral) made at any time to Tenant, which is not
expressly incorporated herein in writing, is hereby waived by Tenant.

 

37.         Compliance with Americans with Disabilities Act:  Landlord and
Tenant hereby agree and acknowledge that the Premises, the Building and/or Lot
may be subject to the requirements of the Americans with Disabilities Act, a
federal law codified at 42 U.S.C. 12101 et seq., including, but not limited to
Title III thereof, all regulations and guidelines related thereto, together with
any and all laws, rules, regulations, ordinances, codes and statutes now or
hereafter enacted by local or state agencies having jurisdiction thereof,
including all requirements of Title 24 of the State of California, as the same
may be in effect on the date of this Lease and may be hereafter modified,
amended or supplemented (collectively, the “ADA”).  Landlord represents and
warrants to Tenant that the Building, Premises, Leasehold Improvements and
Exterior Improvements shall comply with ADA as of the Commencement Date.  If at
any time after the Commencement Date, any portion of the Building, Premises,
Leasehold Improvements or Exterior Improvements are determined not to comply
with ADA as in effect as of the Commencement Date, then Landlord shall, at
Landlord’s cost and expense, make such alterations as may be necessary to cause
the same to comply with ADA.  Any Tenant Improvements constructed after the
Commencement Date, whether by Landlord or Tenant, shall be in compliance with
the requirements of the ADA.  If such work is required under the ADA as a result
of Tenant’s change in use of the Premises or any work or alteration made to the
Premises by or on behalf of Tenant after the Commencement Date, then such work
shall be performed by Landlord at the sole cost and expense of Tenant.  Within
ten (10) days after receipt, Landlord and Tenant shall advise the other party in
writing, and provide the other with copies of (as applicable), any notices
alleging violation of the ADA relating to any portion of the Premises or the
Building; any claims made or threatened in writing regarding noncompliance with
the ADA and relating to any portion of the Premises or the Building; or any
governmental or regulatory actions or investigations instituted or threatened
regarding noncompliance with the ADA and relating to any portion of the Premises
or the Building.

 

38.          Brokerage Commission:   Landlord and Tenant each represents and
warrants for the benefit of the other that it has had no dealings with any real
estate broker, agent or finder in connection with the Premises and/or the
negotiation of this Lease, except for the Brokers (as set forth on Page 1), and
that it knows of no other real estate broker, agent or finder who is or might be
entitled to a real estate brokerage commission or finder’s fee in connection
with this Lease or otherwise based upon contacts between the Landlord and
Tenant. Each party shall indemnify and hold harmless the other from and against
any and

 

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all liabilities or expenses arising out of claims made for a fee or commission
by any real estate broker, agent or finder in connection with the Premises,
Building and Lot, and this Lease other than Brokers resulting from the actions
of the indemnifying party. Any real estate brokerage commission or finder’s fee
payable to the Brokers in connection with this Lease shall be paid by Landlord
and shall only be payable pursuant to that separate written commission agreement
with Brokers, and is only applicable to the extent of the initial Term of the
Lease and to the extent of the Premises as same exist as of the date on which
Tenant executes this Lease.

 

39.          Quiet Enjoyment:  Landlord covenants with Tenant:  (i) that Tenant
shall and may peaceably and quietly hold, occupy and enjoy the Premises,
Building and Lot during the Term of this Lease, and (ii) neither Landlord, nor
any successor or assign of Landlord, shall disturb Tenant’s occupancy or
enjoyment of the Premises, Building or Lot.

 

40.          Landlord’s Ability to Perform Tenant’s Unperformed Obligations:  
Notwithstanding anything to the contrary contained in this Lease, if Tenant
shall fail to perform any of the terms, provisions, covenants or conditions to
be performed or complied with by Tenant pursuant to this Lease after having been
given thirty (30) days written notice to cure, and/or if the failure of Tenant
relates to a matter which in Landlord’s judgment reasonably exercised is of an
emergency nature and such failure shall remain uncured for a period of time
commensurate with such emergency, then Landlord may, at Landlord’s option
without any obligation to do so, and in its sole discretion as to the necessity
therefor, perform any such term, provision, covenant, or condition, or make any
such payment and Landlord by reason of so doing shall not be liable or
responsible for any loss or damage thereby sustained by Tenant or anyone holding
under or through Tenant. If Landlord so performs any of Tenant’s obligations
hereunder, the full amount of the cost and expense entailed or the payment so
made or the amount of the loss so sustained shall immediately be owing by Tenant
to Landlord, and Tenant shall promptly pay to Landlord upon demand, as
Additional Rent, the full amount thereof with interest thereon from the date of
payment at the greater of (i) ten percent (10%) per annum, or (ii) the highest
rate permitted by applicable law.

 

41.          Option.

 

                41.1        Grant of Option.  Landlord hereby grants to Tenant
two options(the “Options) to extend the initial term of the Lease (“Initial
Term”) for an additional five (5) years (each, an “Option Term”) upon and
subject to the terms and conditions set forth in this Lease.  The first Option
Term shall commence upon the expiration of the Initial Term and the second
Option Term shall commence upon the expiration of the first Option Term.  Tenant
may not exercise the second Option if Tenant has not exercised the first
Option.  Tenant shall have no right to extend the Initial Term except as
provided herein.  Each Option shall be exercised, if at all, by Tenant’s
delivery of written notice of exercise to Landlord no later than six (6) months
nor earlier than twelve (12) months prior to the expiration date of the Initial
Term with respect to the first Option, or the first Option Term with respect to
the second Option.  The Basic Rental to be paid during each Option Term shall be
the Prevailing Market Rental, as hereinafter defined.  As used herein, the term
“Prevailing Market Rental” shall mean the rental and all other monetary payments
and escalations that Landlord could obtain from a third party tenant comparable
to Tenant desiring to lease the Premises for the applicable Option Term, taking
into account the age of the Premises, the size of the Premises, the type and
quality of tenant improvements, the quality of construction of the Premises and
Leasehold Improvements, the services provided under the terms of the Lease, the
Additional Rent paid by Tenant under the Lease, the rental and brokers’
commissions then being paid for the renewal of leases of space comparable to the
Premises in the City of Salinas and all other factors that would be relevant to
a third party in determining the rental such party would be willing to pay to
lease the Premises for the applicable Option Term.

 

                41.2        Determination of Prevailing Market Rental.  On or
before five (5) days after Tenant provides Landlord with notice of exercise of
an Option, Landlord and Tenant shall commence negotiations to agree upon the
Prevailing Market Rental applicable thereto.  If Landlord and Tenant are unable
to reach agreement on the Prevailing Market Rental within ten (10) days after
the date negotiations commence, then the Prevailing Market Rental shall be
determined as follows:

 

                                (a)           If Landlord and Tenant are unable
to agree on the Prevailing Market Rental within said ten (10) day period, then
within five (5) days thereafter, Landlord and Tenant shall each simultaneously
submit to the other in a sealed envelope its good faith estimate of the
Prevailing Market Rental.  If the higher of such estimates is not more than one
hundred five percent (105%) of the lower of such estimates, then the Prevailing
Market Rental shall be the average of the two estimates.

 

                                (b)           If the matter is not resolved by
the exchange of estimates as provided in subparagraph (a) above, then either
Landlord or Tenant may, by written notice to the other on or before five (5)
days after the exchange of such estimates, require that the disagreement be
resolved by arbitration.  Within seven (7) days after such notice, the parties
shall select as an arbitrator a mutually acceptable MAI appraiser with
experience in real estate activities, including at least ten (10) years’
experience in appraising research and development space in Monterey County,
California and/or Northern California.  If the parties cannot agree on an
appraiser, then, within a second period of seven (7) days, each party shall
select an independent MAI appraiser meeting the aforementioned criteria and,
within a third period of seven (7) days, the two appointed appraisers shall
select a third appraiser meeting the aforementioned criteria and the third
appraiser shall determine the Prevailing Market Rental pursuant to subparagraph
(c) below.  If one party shall fail to make such appointment within said second
seven (7) day period, then the appraiser chosen by the other party shall be the
sole arbitrator.

 

                                (c)           Once the arbitrator has been
selected as provided for in subparagraph (b) above, then, as soon as practicable
but in any case within fourteen (14) days thereafter, the arbitrator shall
select one of the two estimates of the Prevailing Market Rental submitted by
Landlord and Tenant, which estimate shall be the one that is closer to the
Prevailing Market Rental as determined by the arbitrator.  The arbitrator’s
selection shall be rendered in writing to both Landlord and Tenant and shall be
final and binding upon them and shall not be subject to appeal.  If the
arbitrator believes that expert advice would materially assist such arbitrator,
then the arbitrator may retain one or more qualified persons, including, but not
limited to, legal counsel, brokers, architects or engineers, to provide such
expert advice.  The party whose estimate is not chosen by the arbitrator shall
pay the costs of the arbitrator and of any experts retained by the arbitrator;
provided, however, that any fees of any counsel or expert engaged directly by
Landlord or Tenant shall be borne by the party retaining such counsel or expert.

 

[SIGNATURES ONLY ON FOLLOWING PAGE]

 

 

 

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IN WITNESS WHEREOF, this Lease is executed by the parties as of the Lease Date
referenced on page 1 of this Lease.

 

 

TENANT:

 

LANDLORD:

 

 

 

Integrated Device Technology, Inc.,

 

LaGuardia Associates,

a corporation

 

a general partnership

 

 

 

 

 

 

 

 

 

By:

 

 

By:

 

 

Jerry G. Fielder

 

 

Samuel Kobrinsky

Its:

Corporate Secretary

 

Its:

Managing General Partner

 

 

 

16

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