Exhibit 10.3

LEASE AGREEMENT

(Single Tenant Facility)

 

ARTICLE ONE: BASIC TERMS.

This Article One contains the Basic Terms of this Lease between the Landlord and
Tenant named below. Other Articles and Sections of the Lease referred to in this
Article One explain and define the Basic Terms and are to be read in conjunction
with the Basic Terms. This Lease is subject to Landlord’s existing Tenant and
Tenant’s lender mutually terminating the existing lease and Landlord’s Waiver
and Consent with Landlord and vacating the Property prior to the Commencement
Date of this Lease. If Tenant and Tenant’s lender do not terminate the existing
lease and Landlord’s Waiver and Consent by the Commencement Date set forth
herein, this Lease shall terminate. This Lease is also subject to approval by
Landlord’s lender.

 

Section 1.01.     Date of Lease: June 2, 2009 Section 1.02.  
  Landlord (include legal entity):  

  Sixth and Rochester, LLC,

  a California limited liability company

 

Address of Landlord:    c/o Panattoni Development Company, Inc.    34 Tesla,
Suite 200    Irvine, CA 92618    Attn: Jennie Reno    E-mail:
jreno@panattoni.com

 

Section 1.03.     Tenant (include legal entity):  

  MONOPRICE, INC.,

  a California corporation

 

Address of Tenant:    Monoprice, Inc.    11701 6th Street    Rancho Cucamonga,
CA    Attn: Sean Lee    E-mail: sean@monoprice.com

Section 1.04. Property The Property is that certain approximate One Hundred
Seventy-Two Thousand, Nine Hundred Ninety-Eight (172,998) rentable square foot
single tenant building known as 11701 6th Street (the “Property”), depicted in
Exhibit A (the “Project”), located in the City of Rancho Cucamonga, State of
California. The Project includes the building (“Building”).

Section 1.05. Lease Term: Five (5) years ten (10) months beginning on the later
of October 1, 2009, or Substantial Completion (as defined in the Work Letter) of
the Tenant Improvements subject to force majeure and Tenant Delay (as defined in
the Tenant Work Letter) (“Commencement Date”), and ending on the last day of the
seventieth (70th) month after the

 

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Commencement Date (“Expiration Date”). In the event Landlord does not obtain
possession of the Property from the existing Tenant by August, 15, 2009, Tenant
may terminate this Lease and receive a return of any Security Deposit and
prepaid Rent. In the event Landlord regains possession from the existing Tenant
prior to August 15, 2009, Tenant shall not have the right to terminate this
Lease.

Section 1.06. Permitted Uses (See Article Five): General office, bulk storage,
warehousing and distribution of products and other related permitted uses, in
accordance with all applicable laws, codes, ordinances, restrictions,
regulations and the CC&R’s, if any (as hereinafter defined in Article 15)
(“Permitted Use”).

Section 1.07. Tenant’s Guarantor (if none, so state): NONE (Subject to receipt
and approval of Tenant’s Financial Statements).

Section 1.08. Brokers (See Article fourteen)

Landlord’s Broker: None

Tenant’s Broker: Collier International

Section 1.09. Commission payable to Landlord’s Broker (See Article Fourteen):
Pursuant to separate written agreement with Landlord.

Section 1.10. Initial Security Deposit (See Section 3.02): An amount equal to
the last month’s Base Rent in the amount of $ 53,629.38.

Section 1.11. Vehicle parking Spaces Allocated to Tenant: Tenant shall be
entitled to use all vehicle parking spaces allocated to the Property.

Section 1.12. Rent and Other Charges Payable by Tenant:

(a) BASE RENT: Tenant shall pay to Landlord, without demand, offset or delay,
except as provided elsewhere in this Lease, when due, base rent (“Base Rent”) in
monthly installments in advance on or before the first day of each calendar
month throughout the Lease Term commencing ten (10) months after the
Commencement Date based on the following schedule:

 

Months of Lease Term

   Rentable Square
Feet      Base Rent Per
Square Foot Per
Month      Monthly Base
Rent      Annual Base Rent  

1-10

     172,998         Abated         -0-         -0-   

11-23

     172,998       $ 0.29       $ 50,169.42       $ 602,033.04   

24-46

     172,998       $ 0.30       $ 51,889.40       $ 622,672.80   

47-70

     172,998       $ 0.31       $ 53,629.38       $ 643,552.56   

(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02);
(ii) Utilities (See Section 4.03); (iii) Insurance Premiums (See Section 4.04);
(iv) Impounds for Insurance Premiums and Property Taxes (See Section 4.07);
(v) Maintenance, Repairs and Alterations (See Article Six); (vi) any Association
fees and dues; and (vii) Management fees (see Section 4.08).

 

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Section 1.13. Landlord’s Share of Profit on Assignment or Sublease (See
Section 9.05): Fifty percent (50%) of the profit (the “Landlord’s Share”).

Section 1.14. Exhibits: The following Exhibits are attached to and made a part
of this Lease: (If none, so state): Addendum, Exhibit A – Site Plan; Exhibit B –
Space Plan; Exhibit C – Tenant Work Letter; Exhibit D – Subordination,
Non-Disturbance and Attornment Agreement; Exhibit E – Tenant Estoppel
Certificate.

 

ARTICLE TWO. LEASE TERM.

Section 2.01. Lease of Property for Lease Term. Landlord leases the Property to
Tenant and Tenant leases the Property from Landlord for the Lease Term. The
Lease Term is for the period stated in Section 1.05 above and shall begin and,
unless earlier terminated in accordance with the terms hereof, end on the dates
specified in Section 1.05 above, unless the beginning or end of the Lease Term
is changed under any provision of this Lease. The “Commencement Date” shall be
the date specified in Section 1.05 above for the beginning of the Lease Term,
unless advanced or delayed under any provision of this Lease.

Section 2.02. Delay in Commencement. Landlord shall not be liable to Tenant if
Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord’s non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. If delivery of possession of the Property to Tenant is delayed, Landlord
and Tenant shall, upon such delivery, execute an amendment to this Lease setting
forth the actual Commencement Date and expiration date of the Lease. Failure to
execute such amendment shall not affect the actual Commencement Date and
expiration date of the Lease. If the Commencement Date is delayed past
October 1, 2009, subject to force majeure and Tenant Delay, Tenant shall receive
a dollar-for-dollar credit for Base Rent and Additional Rent at Tenant’s present
facility for each day after October 1, 2009, that the Commencement Date is
delayed, and any such credit shall be provided to Tenant as additional “Abated
Rent”. The aforementioned credit shall be in addition to the “Abated” Rent set
forth above in the matrix in Section 1.12(a).

Section 2.03 Early Occupancy. Tenant may occupy the Property on August 1, 2009.
Prior to any early occupancy of the Property, Tenant shall: (i) obtain
Landlord’s prior written consent, which consent will not be unreasonably
withheld, (ii) provide Landlord with evidence of Tenant’s compliance with all of
its insurance requirements hereunder, (iii) pay to Landlord all monetary amounts
required to be paid by Tenant upon execution of the Lease (as set forth in
Sections 3.01 and 3.02 below). If Tenant occupies the Property prior to the
Commencement Date, Tenant’s occupancy of the Property shall be subject to all of
the provisions of this Lease. Early occupancy of the Property shall not advance
the expiration date of this Lease. Tenant shall

 

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not pay Base Rent and all other charges specified in this Lease for the early
occupancy period. Tenant shall not interfere with the work of Landlord’s
contractors, if any. Any materials of Tenant stored in the Property shall be at
Tenant’s sole risk and Landlord will have no obligation to secure the Property
prior to the Commencement Date. Tenant shall access the Property during any
period of early occupancy at Tenant’s sole risk. Landlord shall not be liable
for any destruction, theft, vandalism or any other damage to any personal
property placed, kept or stored by or on behalf of Tenant or permitted to be
placed, kept or stored by Tenant during any period of early occupancy. Tenant
shall be granted occupancy after the current tenant and/or its lender have
vacated the Property.

Section 2.04. Holding Over. Tenant shall vacate the Property upon the expiration
or earlier termination of this Lease. Tenant shall reimburse Landlord for and
indemnify Landlord against all damages which Landlord incurs from Tenant’s delay
in vacating the Property. If Tenant does not vacate the Property upon the
expiration or earlier termination of the Lease and Landlord thereafter accepts
rent from Tenant, Tenant’s occupancy of the Property shall be a “month to month”
tenancy, subject to all of the terms of this Lease applicable to a
month-to-month tenancy terminable by either party upon thirty (30) days written
notice, except that the Base Rent then in effect shall be increased by
twenty-five percent (25%).

 

ARTICLE THREE: BASE RENT.

Section 3.01. Time and Manner of Payment. Upon execution of this Lease, by
Tenant, Tenant shall pay Landlord the Base Rent in the amount stated in
Section 1.12(a) above for the eleventh (11th) month of the Lease Term. On the
first day of the twelfth (12th) month of the Lease Term and each month
thereafter, Tenant shall pay Landlord the Base Rent, in advance, without offset,
deduction or prior demand. The Base Rent shall be payable at Landlord’s address
set forth in Section 1.02, or at such other place as Landlord may designate in
writing.

Section 3.02. Security Deposit; Increases.

(a) Upon the execution of this Lease, Tenant shall deposit with Landlord a cash
Security Deposit in the amount set forth in Section 1.10 above. Landlord may
apply all or part of the Security Deposit to any unpaid rent or other charges
due from Tenant or to cure any other defaults of Tenant. If Landlord uses any
part of the Security Deposit, Tenant shall restore the Security Deposit to its
full amount within ten (10) days after Landlord’s written request. Tenant’s
failure to do so shall be a material default under this Lease. No interest shall
be paid on the Security Deposit. Landlord shall not be required to keep the
Security Deposit separate from its other accounts and no trust relationship is
created with respect to the Security Deposit.

(b) Each time the Base Rent is increased, Tenant shall deposit additional funds
with Landlord sufficient to increase the Security Deposit to an amount which
bears the same relationship to the adjusted Base Rent as the initial Security
Deposit bore to the initial Base Rent, within ten (10 days after Landlord’s
written request for the deposit of such additional funds.

 

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Section 3.03. Termination; Advance Payments. Upon termination of this Lease
under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any
other termination not resulting from Tenant’s default, and after Tenant has
vacated the Property in the manner required by this Lease, Landlord shall refund
or credit to Tenant (or Tenant’s successor) the unused portion of the Security
Deposit, if any, any advance rent or other advance payments made by Tenant to
Landlord, and any amounts paid for real property taxes and other reserves which
apply to any time periods after termination of the Lease.

 

ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT.

Section 4.01. Additional Rent. All charges payable by Tenant other than Base
Rent are called “Additional Rent”. Unless this Lease provides otherwise, Tenant
shall pay all Additional Rent commencing on the first day of the sixth
(6th) month after the Commencement Date. The term “rent” shall mean Base Rent
and Additional Rent.

Section 4.02. Real Property Taxes and Other Payments.

(a) Real Property Taxes and Other Payments. Tenant shall pay all real property
taxes on the Property (including any fees, taxes or assessments against, or as a
result of, any tenant improvements installed on the Property by or for the
benefit of Tenant) accruing during the Lease Term or, at Landlord’s election,
reimburse Landlord monthly for all such Real Property Taxes. Landlord shall
provide Tenant with written notice of taxes assessed within ten (10) business
days of Landlord’s receipt of such tax assessments and/or tax billings from
applicable taxing authorities. Subject to Paragraph 4.02(c) and Section 4.07
below, any payment by Tenant directly to the taxing authority shall be made at
least twenty (20) days prior to the delinquency date of the taxes and after
paying applicable Real Property Taxes, Tenant shall furnish Landlord with
satisfactory evidence that the Real Property Taxes have been paid. Tenant will
not be obligated to assume any tax obligations existing prior to the
Commencement Date.

(b) Definition of “Real Property Tax.” “Real Property Tax” means: All Real
Property Taxes, assessments and similar charges, including, without limitation
(i) any fee, license fee, license tax, business license fee, commercial rental
tax, levy charge, assessment, penalty or tax imposed by any taxing authority
against the Property; (ii) any tax on the Landlord’s right to receive rent or
income from the Property or against Landlord’s business of leasing the Property,
but no such tax shall be due if it constitutes a portion of Landlord’s income
taxes; (iii) water and sewer charges, any tax or charge for fire protection,
streets, sidewalks, road maintenance, refuse or other services provided to the
Property by any governmental agency; (iii) any tax imposed upon this transaction
or based upon a re-assessment of the Property due to a change of ownership, as
defined by applicable law, or other transfer of all or part of Landlord’s
interest in the Property to include any payment due to, or occasioned by,
Proposition 13; and (iv) any charge or fee replacing any tax previously included
within the definition of Real Property Tax. “Real Property Tax” does not,
however, include Landlord’s federal or state income, franchise, inheritance or
estate taxes.

 

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(c) Personal Property Taxes.

(i) Tenant shall pay all taxes charged against trade fixtures, furnishings,
equipment or any other personal property belonging to Tenant. Tenant shall have
personal property taxed separately from the Property.

(ii) If any of Tenant’s personal property is taxed with the Property, Tenant
shall pay Landlord the taxes for the personal property within fifteen (15) days
after Tenant receives a written statement from Landlord for such personal
property taxes.

(d) Tenant’s Right to Contest Taxes. Tenant may attempt to have the assessed
valuation of the Property reduced or may initiate proceedings to contest the
Real Property Taxes. If required by law, Landlord shall join in the proceedings
brought by Tenant. However, Tenant shall pay all costs of the proceedings,
including any costs or fees incurred by Landlord, including without limitation
Landlord’s reasonable attorneys fees. Upon the final determination of any
proceedings or contest, Tenant shall immediately pay the Real Property Taxes
due, together with all costs, charges, interest and penalties incidental to the
proceedings. If Tenant does not pay the Real Property Taxes when due and
contests such Real Property Taxes, Tenant shall not be in default under this
Lease for nonpayment of such Real Property Taxes if Tenant deposits funds with
Landlord or opens an interest-bearing account reasonably acceptable to Landlord
in the joint names of Landlord and Tenant. The amount of such deposit shall be
sufficient to pay the Real Property Taxes plus a reasonable estimate of the
interest, costs, charges and penalties which may accrue if Tenant’s action is
unsuccessful, less any applicable tax impounds previously paid by Tenant to
Landlord. The deposit shall be applied to the Real Property Taxes due, as
determined at such proceedings. The Real Property Taxes shall be paid under
protest from such deposit if such payment under protest is necessary to prevent
the Property from being sold under a “tax sale” or similar enforcement
proceeding.

Section 4.03. Utilities. Tenant shall pay, directly to the appropriate supplier,
the cost of all natural gas, heat, light, power, sewer service, telephone,
water, refuse disposal and other utilities and services supplied to the
Property. However, if any services or utilities are jointly metered with other
property, Landlord shall make a reasonable determination of Tenant’s
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord’s
written statement.

Section 4.04. Insurance Policies.

(a) Liability Insurance. During the Lease Term, Tenant shall maintain a policy
of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the Property. Tenant
shall name Landlord and Panattoni Construction, Inc., a California corporation,
as additional insured’s under such policy, and Tenant shall maintain a policy of
at least TWO MILLION DOLLARS ($2,000,000.00) of umbrella coverage. The liability
insurance obtained by Tenant under this Section 4.04(a) shall (i) be primary and
non-contributing; (ii) contain cross-liability endorsements; and (iii) insure
Landlord against Tenant’s performance under Section 5.05, if the matters giving
rise to the indemnity under Section 5.05 result from the negligence of

 

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Tenant. Tenant shall be liable for the payment of any deductible amount. The
amount and coverage of such insurance shall not limit Tenant’s liability nor
relieve Tenant of any other obligations under this Lease. Landlord may also
obtain comprehensive public liability insurance in an amount and with coverage
determined by Landlord insuring Landlord against liability arising out of
ownership, operation, use or occupancy of the Property. The policy obtained by
Landlord shall not be contributory and shall not provide primary insurance.

(b) Property and Rental Income Insurance. During the Lease Term, Landlord shall
maintain policies of insurance covering loss of or damage to the Property in the
full amount of its replacement value. Such policy shall contain an inflation
Guard Endorsement and shall provide protection against all perils included
within the classification of fire, extended coverage, vandalism, malicious
mischief, special extended perils (all risk), sprinkler leakage and any other
perils which Landlord deems reasonably necessary. Landlord shall have the right
to obtain flood and earthquake insurance if required by any lender holding a
security interest in the Property at no cost to Tenant. Landlord shall not
obtain insurance for Tenant’s fixtures or equipment or building improvements
installed by Tenant on the Property. During the Lease Term, Landlord shall also
maintain a rental income insurance policy, at Tenant’s expense, with loss
payable to Landlord, in an amount equal to one (1) year’s Base Rent, plus
estimated real property taxes and insurance premiums. Tenant shall be liable for
the payment of any deductible amount under Tenant’s insurance policies
maintained pursuant to this Section 4.04. Additionally, Tenant shall be liable
for the payment of any deductible amount under Landlord’s insurance policies
maintained pursuant to this Section 4.04 which deductible amount shall not
exceed TWENTY-FIVE THOUSAND DOLLARS ($25,000.00). Tenant shall not do or permit
anything to be done which invalidates any such insurance policies.

(c) Payment of Premiums. Subject to Section 4.07, Tenant shall pay all premiums
for the insurance policies described in Sections 4.04(a) and (b) (whether
obtained by Landlord or Tenant) within fifteen (15) days after Tenant’s receipt
of a copy of the premium statement or other evidence of the amount due, except
Landlord shall pay all premiums for non-primary comprehensive public liability
insurance which Landlord elects to obtain as provided in Section 4.04(a). If
insurance policies maintained by Landlord cover improvements on real property
other than the Property, Landlord shall deliver to Tenant a statement of the
premium applicable to the Property showing in reasonable detail how Tenant’s
share of the premium was computed. If the Lease Term expires before the
expiration of an insurance policy maintained by Landlord, Tenant shall be liable
for Tenant’s prorated share of the insurance premiums. Before the Commencement
Date, Tenant shall deliver to Landlord proof of insurance which Tenant is
required to maintain under this Section 4.04. At least thirty (30) days prior to
the expiration of any such policy, Tenant shall deliver to Landlord a renewal of
such policy. As an alternative to providing a policy of insurance, Tenant shall
have the right to provide Landlord a certificate of insurance, executed by an
authorized officer of the insurance company, showing that the insurance which
Tenant is required to maintain under this Section 4.04 is in full force and
effect and containing such other information which Landlord reasonably requires.
Landlord shall provide Tenant a schedule of current insurance premiums
attributable to the Property.

 

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(d) General Insurance Provisions.

(i) Any insurance which Tenant is required to maintain under this Lease shall
include a provision which requires the insurance carrier to give Landlord not
less than thirty (30) days’ written notice prior to any cancellation or
modification of such coverage.

(ii) If Tenant fails to deliver a policy, certificate or renewal to Landlord
required under this Lease within the prescribed time period or if any such
policy is canceled or modified during the Lease Term without Landlord’s consent,
Landlord may obtain such insurance, in which case Tenant shall reimburse
Landlord for the cost of such insurance within fifteen (15) days after receipt
of a statement that indicates the cost of such insurance.

(iii) Tenant shall maintain all insurance required under this Lease with
companies holding a “General Policy Rating” of A-12 or better, as set forth in
the most current issue of “Best Key Rating Guide”. Landlord makes no
representation as to the adequacy of such insurance to protect Landlord’s or
Tenant’s interests.

(iv) Unless prohibited under any applicable insurance policies maintained,
Landlord and Tenant each hereby waive any and all rights of recovery against the
other, or against the officers, employees, agents or representatives of the
other, for loss of or damage to its property or the property of others under its
control, to the extent that such loss or damage is covered by any insurance
policy in force (whether or not described in this Lease) at the time of such
loss or damage. Upon obtaining the required policies of insurance, Landlord and
Tenant shall give notice to the insurance carriers of this mutual waiver of
subrogation.

Section 4.05. Late Charges. Tenant’s failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay to Landlord a late charge equal
to five percent (5%) of the overdue amount. The parties agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of such late payment.

Section 4.06. Interest on Past Due Obligations. Any amount owed by Tenant to
Landlord which is not paid when due shall bear interest at the rate of ten
percent (10%) per annum from the due date of such amount. However, interest
shall not be payable on late charges to be paid by Tenant under this Lease. The
payment of interest on such amounts shall not excuse or cure any default by
Tenant under this Lease. If the interest rate specified in this Lease is higher
than the rate permitted by law, the interest rate is hereby decreased to the
maximum legal interest rate permitted by law.

Section 4.07. Impounds for Insurance Premiums and Real Property Taxes. If
requested by any ground lessor or lender to whom Landlord has granted a security
interest in the Property, or if Tenant is more than ten (10) days late in the
payment of rent more than once in any consecutive twelve (12) month period,
Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real
property taxes and insurance premiums payable by Tenant under this Lease,
together with each payment of Base Rent. Landlord shall hold such payments in a
non-interest

 

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bearing impound account. If unknown, Landlord shall reasonably estimate the
amount of real property taxes and insurance premiums when due. Tenant shall pay
any deficiency of funds in the impound account to Landlord upon written request.
If Tenant defaults under this Lease, Landlord may apply any funds in the impound
account to any obligation then due under this Lease.

Section 4.08. Management Fees. Tenant shall reimburse Landlord monthly for
management fees and expenses incurred by Landlord in connection with the
Property in an amount of two percent (2%) of annual Base Rent, prorated and
payable monthly.

 

ARTICLE FIVE: USE OF PROPERTY.

Section 5.01. Permitted Uses. Tenant may use the Property only for the Permitted
Uses set forth in Section 1.06 above.

Section 5.02. Manner of Use. Tenant shall not cause or permit the Property to be
used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
other tenants of Landlord, or which constitutes a nuisance or waste. Tenant
shall obtain and pay for all permits, including a Certificate of Occupancy or
the equivalent, required for Tenant’s occupancy or specific use of the Property
and operation of Tenant’s business and shall promptly take all actions necessary
to comply with all applicable statutes, ordinances, rules, regulations, orders
and requirements regulating the use by Tenant of the Property, including the
Occupational Safety and Health Act.

Section 5.03. Hazardous Materials. As used in this Lease, the term “Hazardous
Material” or “Hazardous Substance” means any flammable items, explosives,
radioactive materials, hazardous or toxic substances, material or waste or
related materials, including any substances defined as or included in the
definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”
or “toxic substances”, but excluding commonly used cleaning products (i.e.
window and floor cleaners, bathroom cleaners, etc.) in ordinary quantities, now
or subsequently regulated under any applicable federal, state or local laws or
regulations, including, without limitation petroleum-based products, asbestos,
PCBs and similar compounds, and including any different products and materials
which are subsequently found to have adverse effects on the environment or the
health and safety of persons. Tenant shall not cause or permit any Hazardous
Material to be generated, produced, brought upon, used, stored, treated,
released or disposed of in or about the Property by Tenant, its agents,
employees, contractors, sublessees without the prior written consent of
Landlord. Landlord shall be entitled to take into account such other factors or
facts as Landlord may reasonably determine to be relevant in determining whether
to grant or withhold consent to Tenant’s proposed activity with respect to
Hazardous Material. In no event, however, shall Landlord be required to consent
to the installation or use of any storage tanks on the Property. Landlord
represents and warrants as to Landlord’s actual knowledge that as of the date of
this Lease, Landlord is unaware of any Hazardous Materials and/or Hazardous
Substances existing on, in or under the Property.

(a) Routine Reporting Requirements. Tenant shall promptly notify Landlord of,
and shall promptly provide Landlord with true, correct, complete and legible
copies of, all of the following environmental items relating to the Property
which may be filed or prepared by or on

 

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behalf of, or delivered to or served upon, Tenant: reports filed pursuant to any
self-reporting requirements, reports filed pursuant to any Environmental Laws or
this Lease, all permit applications, permits, monitoring reports, workplace
exposure and community exposure warnings or notices and all other reports,
disclosures, plans or documents (even those which may be characterized as
confidential) relating to water discharges, air, soil, sediment, and ground
water pollution, waste generation or disposal, underground storage tanks or the
use, storage or existence of Hazardous Substances. Landlord agrees that any
materials that Tenant provides Landlord pursuant to this Section 4 shall be
subject to the confidentiality requirements of Section 9 below.

(b) Incident Reporting Requirements. Tenant shall promptly notify Landlord of,
and shall promptly provide Landlord with true, correct, complete and legible
copies of, all the following environmental items relating to the Property which
may be filed or prepared by or on behalf of, or delivered to or served upon,
Tenant: all orders, reports, notices, listings and correspondence (even those
which maybe considered confidential) of or concerning the release, investigation
of, compliance, clean up, remedial and corrective actions, and abatement of
Hazardous Substances on the Property whether or not required by Environmental
Laws, including, but not limited to, reports and notices required by or given
pursuant to any Environmental Laws, and all complaints, pleadings and other
legal documents filed against Tenant related to Tenant’s use, handling, storage
or disposal of Hazardous Substances on the Property. In the event of a release
of any Hazardous Substances on the Property, Tenant shall promptly provide
Landlord with copies of all reports and correspondence with or from all
governmental agencies, authorities or any other persons relating to such
release.

(c) Inspection: Compliance. Landlord and Landlord’s agents shall have the right,
but not the obligation, to inspect, investigate, sample and/or monitor the
Property, including any soil, water, groundwater or other sampling, and any
other testing, digging, drilling or analyses, at any time to determine whether
Tenant is complying with the terms of this Lease involving Hazardous Substances
and in connection therewith, Tenant shall provide Landlord with full access to
all relevant facilities, records and personnel upon at least one (1) day written
notice to Tenant and without interfering with Tenant’s use of the Property. If
Landlord reasonably determines that Tenant is not in compliance with the
provisions of this Lease involving Hazardous Substances, after three (3) days
prior written notice (i) Landlord and Landlord’s agents shall have the right,
but not the obligation, without limitation upon any of Landlord’s other rights
and remedies under this Lease, to immediately enter upon the Property and to
discharge Tenant’s obligations in that regard at Tenant’s expense,
notwithstanding any other provision of this Lease, and (ii) all sums reasonably
and actually disbursed, deposited or incurred by Landlord in connection
therewith, including, but not limited to, all actual out-of-pocket costs,
expenses and actual and reasonable attorney fees, shall be due and payable by
Tenant to Landlord, as an item of additional Rent, on demand by Landlord,
together with interest thereon at the rate of ten percent (10%) per annum (the
“Default Rate”) from the date which is twenty (20) days after such demand until
paid by Tenant. In the event of any such entry and performance of such work,
Landlord and Landlord’s agents shall endeavor to minimize interference with
Tenant’s business but shall not be liable for any such interference.

(d) Actions and Proceedings. Landlord, at Landlord’s sole cost and expense,
shall have the right, but not the obligation, to be present at any legal or
administrative proceedings or

 

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actions initiated in connection with any claims or causes of action arising out
of the storage, generation, use or disposal of Hazardous Substances on, under,
from or about the Property caused by Tenant or any of Tenant’s agents,
employees, contractors, licensees or invitees, after the Commencement Date, (any
of such storage, generation, use or disposal described items (i) and
(ii) hereinabove shall be sometimes referred to herein collectively as the
“Tenant Environmental Activities”). Tenant has no responsibility for any
Hazardous Substances existing on, in or under the Property as of Commencement
Date, for which Landlord indemnifies Tenant. Landlord’s representative shall
conduct an environmental inspection of the Property upon termination of the
existing tenancy and prior to the Commencement Date and provide the results of
such inspection promptly to Tenant. Such environmental inspection shall
thereafter be the base line for the environmental condition of the Property upon
Tenant’s vacation of the Property. In the event the environmental inspection of
the Property performed prior to the Commencement Date discloses that the
contamination will impair Tenant’s use of the Property, then Article 7 shall
apply, and if the contamination is such that it would constitute a substantial
or total destruction, Tenant shall have the right to terminate this Lease, and
Tenant shall be entitled to a return of the Security Deposit and any prepaid
Rent. In the event this Lease is a renewal or extension of a Lease which did not
contain an environmental indemnity to Landlord by Tenant, upon execution of this
Lease, Tenant agrees to indemnify Landlord for Tenant Environmental Activities
from the date Tenant first occupied the Property. If the presence of any
Hazardous Substances on, in or under the Property resulting from any Tenant
Environmental Activities, results in (A) injury to any person or entity,
(B) injury to or contamination of the Property or (C) injury to or contamination
of any real or personal property wherever situated, Tenant, at its sole cost and
expense, shall promptly take all actions necessary to return the Property to the
condition existing prior to the introduction of such Hazardous Substances to the
Property and to remedy or repair any such injury or contamination.
Notwithstanding the foregoing, Tenant shall not, without Landlord’s prior
written consent, which shall not be unreasonably withheld or delayed, take any
remedial action in response to the presence of any Hazardous Substances on,
under or about the Property, or enter into any settlement agreement, consent
decree or other compromise with any governmental agency with respect to any
Hazardous Substances claims; provided, however, Landlord’s prior written consent
shall not be necessary in the event that the presence of Hazardous Substances
on, under or about the Property (Y) poses an immediate threat to the health,
safety or welfare of any individual or (Z) is of such a nature that an immediate
remedial response is necessary and it is not reasonably possible to obtain
Landlord’s consent before taking such action. However, Tenant shall immediately
thereafter notify Landlord orally and in writing in the event of (Y) and
(Z) above.

(e) Tenant’s Responsibility at Conclusion of Lease. Promptly upon the expiration
or earlier termination of this Lease, Tenant shall represent to Landlord in
writing that to the best of Tenant’s knowledge no Hazardous Substances exist on,
in or under the Property as a result of Tenant Environmental Activities other
than as specifically identified to Landlord by Tenant in writing. Landlord may,
at any time prior to the expiration of the Lease Term, or upon the occurrence of
a Tenant default as set forth in Section 10.02, by notice to Tenant, conduct or
cause an outside consultant selected by Landlord to conduct an environmental
evaluation of the Property, an executed copy of which evaluation shall be
delivered to Tenant within thirty (30) days. If such environmental evaluation
discloses the existence of Hazardous Substances on, under or about the Property
as a result of any Tenant Environmental Activities, Tenant shall (i) pay for the
reasonable cost of such evaluation, and (ii) at Landlord’s written request,

 

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immediately prepare and submit to Landlord within thirty (30) days after such
request a comprehensive plan, subject to Landlord’s approval of the cleanup
required, specifying within thirty (30) days after Landlord’s request therefore
the actions to be taken by Tenant to return the Property to the condition
existing prior to the introduction of such Hazardous Substances. Upon Landlord’s
approval of such clean-up plan, Tenant shall, at Tenant’s sole cost and expense,
without limitation on any rights and remedies of Landlord under this Lease,
immediately implement such plan and proceed to clean up such Hazardous
Substances, as required pursuant to the comprehensive plan, in accordance with
all Environmental Laws and as required by such plan and this Lease.

Section 5.04. Signs and Auctions. Tenant shall not place any signs on the
Property without Landlord’s prior written consent, which consent shall not be
unreasonably withheld. Any such signage shall also be in accordance with the
CC&R’s, and applicable City or County ordinances. All costs in connection with
Tenant’s signage shall be at Tenant’s sole costs and expense, including without
limitation, costs of installation, maintenance, repair, replacement and removal.
Tenant shall not conduct or permit any auctions or sheriffs sales at the
Property.

Section 5.05. Indemnity. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from:
(a) the negligence or willful misconduct of Tenant or its agents, employees,
contractors, licensees or invitees; (b) the conduct of Tenant’s business or
anything else done or permitted by Tenant to be done in or about the Property,
including any contamination of the Property or any other property resulting from
the presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant’s obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease.
Tenant shall defend Landlord against any such cost, claim or liability at
Tenant’s expense with counsel reasonably acceptable to Landlord. As a material
part of the consideration to Landlord, Tenant assumes all risk of damage to
property or injury to persons in or about the Property arising from any cause,
and Tenant hereby waives all claims in respect thereof against Landlord, except
for any claim arising out of Landlord’s gross negligence or willful misconduct.
As used in this Section, the term “Tenant” shall include Tenant’s employees,
agents, contractors, licensees and invitees.

Section 5.06. Landlord’s Access. Landlord or its agents may enter the Property
at all reasonable times to show the Property to potential buyers, investors or
tenants or other parties; to do any other act or to inspect and conduct tests in
order to monitor Tenant’s compliance with all applicable environmental laws and
all laws governing the presence and use of Hazardous Material; or for any other
purpose Landlord deems necessary. Landlord shall give Tenant at least one
(1) days prior notice of such entry, except in the case of an emergency.
Landlord may place customary “For Sale” or “For Lease” signs on the Property.

Section 5.07. Quiet Possession. If Tenant pays the rent and complies with all
other terms of this Lease, Tenant may occupy and enjoy the Property for the full
Lease Term, subject to the provisions of this Lease.

 

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ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS

Section 6.01. Existing Conditions. Tenant accepts the Property in its current
condition as of the execution of the Lease, subject to the obligations of
Landlord set forth in Section 6.03 and subject to all recorded matters, laws,
ordinances, and governmental regulations and orders. Except as provided herein,
Tenant acknowledges that neither Landlord nor any agent of Landlord has made any
representation as to the condition of the Property or the suitability of the
Property for Tenant’s intended use. Tenant represents and warrants that Tenant
has made its own inspection of and inquiry regarding the condition of the
Property and is not relying on any representations of Landlord or any Broker
with respect thereto.

Section 6.02. Exemption of Landlord from Liability. Landlord shall not be liable
for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant’s
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Property or upon other portions of the Project, or from other sources or places;
or (d) any act or omission of any other tenant of the Project. Landlord shall
not be liable for any such damage or injury even though the cause of or the
means of repairing such damage or injury are not accessible to Tenant. The
provisions of this Section 6.02 shall not, however, exempt Landlord from
liability for Landlord’s gross negligence or willful misconduct.

Section 6.03. Landlord’s Obligations. Subject to the provisions of this Section
and Article Seven (Damage or Destruction) and Article Eight (Condemnation),
Landlord shall have absolutely no responsibility to repair, maintain or replace
any portion of the Property at any time, except that Landlord shall be
responsible for repair of any structural elements in the Building, not caused by
Tenant or its employees, agents or contractors, and for latent defects in the
Building, at Landlord’s sole cost and expense. Landlord shall be responsible for
replacement of the floor, roof and HVAC of the Building at Landlord’s sole cost
and expense, unless such replacement is due to other than normal usage by
Tenant, or its employees, agents or contractors. Landlord shall refurbish the
landscaped areas and slurry coat portions of the parking lot, in Landlord’s
reasonable discretion, at Landlord’s sole cost and expense. It is the intention
of Landlord and Tenant that at all times Landlord shall maintain the portions of
the Property which Landlord is obligated to maintain in an attractive,
first-class and fully operative condition. Tenant waives the benefit of any
present or future law which might give Tenant the right to repair the Property
at Landlord’s expense or to terminate the Lease due to the condition of the
Property.

Section 6.04. Tenant’s Obligations.

(a) Except as provided in Article Seven (Damage Destruction) and Article Eight
(Condemnation), Tenant shall keep all portions of the Property (including
nonstructural, interior, exterior, parking lot and landscaped areas or portions
thereof, roof membrane and roof system, Building systems, HVAC and equipment) in
good order, condition and repair (including interior repainting and refinishing,
as needed, and including janitorial service to the Property), at Tenant’s
expense. Tenant shall maintain a preventive maintenance contract approved by

 

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Landlord, providing for the regular inspection and maintenance of the HVAC
system by a licensed heating and air conditioning contractor and the roof
membrane by a licensed roof contractor. Tenant shall provide a copy of the
preventive maintenance contract(s) to Landlord promptly upon request. Landlord
may enter the Property pursuant to this Lease to verify that the HVAC system and
roof membrane are being properly maintained. In no event shall any such
preventive maintenance contract violate or void any applicable warranties. If
any part of the Property is damaged by any act or omission of Tenant, Tenant
shall pay Landlord the cost of repairing or replacing such damaged property,
whether or not Landlord would otherwise be obligated to pay the cost of
maintaining or repairing such property. It is the intention of Landlord and
Tenant that at all times Tenant shall maintain the portions of the Property
which Tenant is obligated to maintain in an attractive, first-class and fully
operative condition.

(b) Tenant shall fulfill all of Tenant’s obligations under this Section 6.04, at
Tenant’s sole expense. If Tenant fails to maintain, repair or replace the
Property as required by this Section 6.04, Landlord may, upon ten (10) days’
prior notice to Tenant (except that no notice shall be required in the case of
an emergency), enter the Property and perform such maintenance or repair
(including replacement, as needed) on behalf of Tenant. In such case, Tenant
shall reimburse Landlord for all costs incurred in performing such maintenance
or repair immediately upon demand, together with interest at the rate of ten
percent (10%) per annum.

Section 6.05. Alterations, Additions, and Improvements.

(a) Tenant shall not make any alterations, additions, or improvements to the
Property without Landlord’s prior written consent, which consent will not be
unreasonably withheld, except for non-structural alterations which do not exceed
Ten Thousand Dollars ($10,000.00) in cost cumulatively over the Lease Term,
which are not visible from the outside of any building of which the Property is
part and which do not affect the structural portions of the Property. Landlord
reserves the right at the expiration or earlier termination of the Lease Term to
request those alterations, additions or improvements constructed without
Landlord’s consent to be removed. Landlord may require Tenant to provide
demolition and/or lien and completion bonds in form and amount satisfactory to
Landlord. Tenant shall promptly remove any alterations, additions, or
improvements constructed in violation of this Section 6.05(a) upon Landlord’s
written request and repair any damage caused by such removal. All alterations,
additions, and improvements shall be done in a good and workmanlike manner, in
conformity with all applicable laws and regulations, and by a licensed
contractor approved by Landlord, which approval shall not be unreasonably
withheld and such contractor shall maintain liability, workmen’s compensation
and other insurance in amounts as may be reasonably required and approved by
Landlord. Tenant shall be responsible, at Tenant’s sole cost and expense, for
obtaining any and all permits and approvals required for any such alterations,
additions or improvements and shall deliver a copy of same to Landlord upon
receipt by Tenant. Upon completion of any such work, Tenant shall provide
Landlord with “as built” plans, copies of all construction contracts, and proof
of payment for all labor and materials.

(b) Tenant shall pay when due all claims for labor and material furnished to the
Property. Tenant shall give Landlord at least twenty (20) days’ prior written
notice of the commencement of any work on the Property, regardless of whether
Landlord’s consent to such work is required. Landlord may elect to record and
post notices of non-responsibility on the Property.

 

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Section 6.06. Condition upon Termination. Upon the termination of the Lease,
Tenant shall surrender the Property to Landlord, broom clean and in the same
condition as received except for ordinary wear and tear which Tenant was not
otherwise obligated to remedy under any provision of this Lease. However, Tenant
shall not be obligated to repair any damage which Landlord is required to repair
under Article Seven (Damage or Destruction). In addition, Landlord may require
Tenant to remove any alterations, additions or improvements (whether or not made
with Landlord’s consent) prior to the expiration of the Lease and to restore the
Property to its prior condition, all at Tenant’s expense. All alterations,
additions and improvements which Landlord has not required Tenant to remove
shall become Landlord’s property and shall be surrendered to Landlord upon the
expiration or earlier termination of the Lease, except that Tenant may remove
any of Tenant’s machinery or equipment which can be removed without material
damage to the Property. Tenant shall repair, at Tenant’s expense, any damage to
the Property caused by the removal of any such machinery or equipment within ten
(10) business days of the expiration or earlier termination of the Lease. In no
event, however, shall Tenant remove any of the following materials or equipment
(which shall be deemed Landlord’s property) without Landlord’s prior written
consent or unless otherwise instructed by Landlord in writing: any power wiring
or power panels; lighting or lighting fixtures; wall coverings; drapes, blinds
or other window coverings; carpets or other floor coverings; heaters, air
conditioners or any other heating or air conditioning equipment; fencing or
security gates; or other similar building operating equipment and decorations.

 

ARTICLE SEVEN: DAMAGE OR DESTRUCTION

Section 7.01. Partial Damage to Property.

(a) Tenant shall notify Landlord in writing immediately upon the occurrence of
any damage to the Property. If the Property is only partially damaged (i.e.,
less than fifty percent (50%) of the Property is untenantable as a result of
such damage or less than fifty percent (50%) of Tenant’s operations are
materially impaired) and if the proceeds received by Landlord from the insurance
policies described in Section 4.04(b) are sufficient to pay for the necessary
repairs, this Lease shall remain in effect and Landlord shall repair the damage
as soon as reasonably possible. Landlord may elect (but is not required) to
repair any damage to Tenant’s fixtures, equipment, or improvements.

(b) If the insurance proceeds received by Landlord are not sufficient to pay the
entire cost of repair, or if the cause of the damage is not covered by the
insurance policies which Landlord maintains under Section 4.04(b), Landlord may
elect either to (i) repair the damage as soon as reasonably possible, in which
case this Lease shall remain in full force and effect, or (ii) terminate this
Lease as of the date the damage occurred. Landlord shall notify Tenant within
thirty (30) days after receipt of notice of the occurrence of the damage whether
Landlord elects to repair the damage or terminate the Lease. If Landlord elects
to repair the damage, Tenant shall pay Landlord the “deductible amount” (if any)
under Landlord’s insurance policies and, if the damage was due to an act or
omission of Tenant, or Tenant’s employees, agents, contractors

 

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or invitees, the difference between the actual cost of repair and any insurance
proceeds received by Landlord. If Landlord elects to terminate the Lease, Tenant
may elect to continue this Lease in full force and effect, in which case Tenant
shall repair any damage to the Property and any building in which the Property
is located. Tenant shall pay the cost of such repairs, except that upon
satisfactory completion of such repairs, Landlord shall deliver to Tenant any
insurance proceeds received by Landlord for the damage repaired by Tenant.
Tenant shall give Landlord written notice of such election within ten (10) days
after receiving Landlord’s termination notice.

(c) If the damage to the Property occurs during the last six (6) months of the
Lease Term and such damage will require more than thirty (30) days to repair,
either Landlord or Tenant may elect to terminate this Lease as of the date the
damage occurred, regardless of the sufficiency of any insurance proceeds. The
party electing to terminate this Lease shall give written notification to the
other party of such election within thirty (30) days after Tenant’s notice to
Landlord of the occurrence of the damage.

Section 7.02. Substantial or Total Destruction. If the Property is substantially
or totally destroyed by any cause whatsoever (i.e., the damage to the Property
is greater than partial damage as described in Section 7.01), and regardless of
whether Landlord receives any insurance proceeds, this Lease shall terminate as
of the date the destruction occurred. Notwithstanding the preceding sentence, if
the Property can be rebuilt within nine (9) months after the date of
destruction, Landlord may elect to rebuild the Property at Landlord’s own
expense, in which case this Lease shall remain in full force and effect.
Landlord shall notify Tenant of such election within thirty (30) days after
Tenant’s notice to Landlord of the occurrence of total or substantial
destruction. If Landlord so elects, Landlord shall rebuild the Property at
Landlord’s sole expense, except that if the destruction was caused by an act or
omission of Tenant, Tenant shall pay Landlord the difference between the actual
cost of rebuilding and any insurance proceeds received by Landlord.

Section 7.03. Temporary Reduction of Rent. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant’s use of the Property is impaired. However, the reduction
shall not exceed the sum of one year’s payment of Base Rent and Additional Rent.
Except for such possible reduction in Base Rent and Additional Rent, Tenant
shall not be entitled to any compensation, reduction, or reimbursement from
Landlord as a result of any damage, destruction, repair, or restoration of or to
the Property.

Section 7.04. Waiver. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.

 

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ARTICLE EIGHT: CONDEMNATION

If all or any portion of the Property is taken under the power of eminent domain
or sold under the threat of that power (all of which are called “Condemnation”),
this Lease shall terminate as to the part taken or sold on the date the
condemning authority takes title or possession, whichever occurs first. If more
than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to Tenant,
only the amount of any award specifically designated for loss of or damage to
Tenant’s trade fixtures or removable personal property, Tenant’s loss of
business goodwill, and relocation expenses, if specifically awarded by the
condemning authority; (c) third, to Landlord, the remainder of such award,
whether as compensation for reduction in the value of the leasehold, the taking
of the fee, or otherwise. If this Lease is not terminated, Landlord shall repair
any damage to the Property caused by the Condemnation, except that Landlord
shall not be obligated to repair any damage for which Tenant has been reimbursed
by the condemning authority. If the severance damages received by Landlord are
not sufficient to pay for such repair, Landlord shall have the right to either
terminate this Lease or make such repair at Landlord’s expense.

 

ARTICLE NINE: ASSIGNMENT AND SUBLETTING

Section 9.01. Landlord’s Consent Required. No portion of the Property or of
Tenant’s interest in this Lease may be acquired by any other person or entity,
whether by sale, assignment, mortgage, sublease, transfer, operation of law, or
act of Tenant, without Landlord’s prior written consent, except as provided in
Section 9.02 below. Landlord has the right to grant or withhold its consent as
provided in Section 9.05 below. Any attempted transfer without consent shall be
void and shall constitute a non-curable breach of this Lease. If Tenant is a
partnership, any cumulative transfer of more than twenty percent (20%) of the
partnership interests shall require Landlord’s consent. If Tenant is a
corporation, any change in the ownership of a controlling interest of the voting
stock of the corporation shall require Landlord’s consent.

Section 9.02. Tenant Affiliate. Tenant may assign this Lease or sublease the
Property, without Landlord’s consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant (“Tenant’s Affiliate”)
so long as the net worth of Tenant’s Affiliate is equal to or greater than the
net worth of Tenant as of the Commencement Date of this Lease. In such case, any
Tenant’s Affiliate shall assume in writing all of Tenant’s obligations under
this Lease.

 

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Section 9.03. No Release of Tenant. No transfer permitted by this Article Nine,
whether with or without Landlord’s consent, shall release Tenant or change
Tenant’s primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord’s acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant’s transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant’s transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant’s liability under
this Lease.

Section 9.04. Offer to Terminate. If Tenant desires to assign the Lease or
sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. If Landlord does
not so elect, the Lease shall continue in effect until otherwise terminated and
the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.

Section 9.05. Landlord’s Consent.

(a) Tenant’s request for consent to any transfer described in Section 9.01 shall
set forth in writing the details of the proposed transfer, including the name,
business and financial condition of the prospective transferee, financial
details of the proposed transfer (e.g., the term of and the rent and security
deposit payable under any proposed assignment or sublease), and any other
information Landlord deems relevant. Landlord shall have the right to withhold
consent, if reasonable, or to grant consent, based on the following factors:
(i) the business of the proposed assignee or subtenant and the proposed use of
the Property: (ii) the net worth and financial reputation of the proposed
assignee or subtenant: (iii) Tenant’s compliance with all of its obligations
under the Lease: and (iv) such other factors as Landlord may reasonably deem
relevant. If Landlord objects to a proposed assignment solely because of the net
worth and/or financial reputation of the proposed assignee, Tenant may
nonetheless sublease (but not assign), all or a portion of the Property to the
proposed transferee, but only on the other terms of the proposed transfer.

(b) If Tenant assigns or subleases, the following shall apply:

(i) Tenant shall pay to Landlord as Additional Rent under the Lease the
Landlord’s Share (stated in Section 1.13) of the Profit (defined below) on such
transaction as and when received by Tenant, unless Landlord gives written notice
to Tenant and the assignee or subtenant that Landlord’s Share shall be paid by
the assignee or subtenant to Landlord directly. The “Profit” means (A) all
amounts paid to Tenant for such assignment or sublease, including “key” money,
monthly rent in excess of the monthly rent payable under the Lease, and all fees
and other consideration paid for the assignment or sublease, including fees
under any collateral agreements, less (B) costs and expenses directly incurred
by Tenant in connection with the execution and performance of such assignment or
sublease for real estate broker’s commissions and costs of renovation or
construction of tenant improvements required under such assignment

 

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of sublease. Tenant is entitled to recover such cost and expenses before Tenant
is obligated to pay the Landlord’s Share to Landlord. The Profit in the case of
a sublease of less than all the Property is the rent allocable to the subleased
space as a percentage on a square footage basis.

(ii) Tenant shall provide Landlord a written statement certifying all amounts to
be paid from any assignment or sublease of the Property within thirty (30) days
after the transaction documentation is signed, and Landlord may inspect Tenant’s
books and records to verify the accuracy of such statement. On written request,
Tenant shall promptly furnish to Landlord copies of all the transaction
documentation, all of which shall be certified by Tenant to be complete, true
and correct. Landlord’s receipt of Landlord’s Share shall not be consent to any
further assignment or subletting. The breach of Tenant’s obligation under this
Section 9.05(b) shall be a material default of the Lease.

Section 9.06. No Merger. No merger shall result from Tenant’s sublease of the
Property under this Article Nine, Tenant’s surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.

 

ARTICLE TEN: DEFAULTS; REMEDIES

Section 10.01. Covenants and Conditions. Tenant’s performance of each of
Tenant’s obligations under this Lease is a condition as well as a covenant.
Tenant’s right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.

Section 10.02. Defaults. Tenant shall be in material default under this Lease:

(a) If Tenant abandons the Property or if Tenant’s vacation of the Property
results in the cancellation of any insurance described in Section 4.04;

(b) If Tenant fails to pay rent or any other charge when due, provided however
that Landlord must first provide Tenant with five (5) days written notice of
such non-payment and an opportunity to cure one time in any twelve (12) month
period in the event of such non-payment;

(c) If Tenant fails to perform any of Tenant’s non-monetary obligations under
this Lease for a period of thirty (30) days after written notice from Landlord;
provided that if more than thirty (30) days are required to complete such
performance, Tenant shall not be in default if Tenant commences such performance
within the thirty (30)-day period and thereafter diligently pursues its
completion, except that any failure by Tenant to provide Landlord with the
documents required in Section 11.03 or Section 11.04 shall not be subject to
this 30-day cure period. However, Landlord shall not be required to give such
notice if Tenant’s failure to perform constitutes a non-curable breach of this
Lease. The notice required by this Section is intended to satisfy any and all
notice requirements imposed by law on Landlord and is not in addition to any
such requirement.

 

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(d) (i) If Tenant makes a general assignment or general arrangement for the
benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant’s assets located at the
Property or of Tenant’s interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant’s assets
located at the Property or of Tenant’s interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subsection (d) is not a default under this Lease, and
a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant’s interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.

(e) If any guarantor of the Lease revokes or otherwise terminates, or purports
to revoke or otherwise terminate, any guaranty of all or any portion of Tenant’s
obligations under the Lease. Unless otherwise expressly provided, no guaranty of
the Lease is revocable.

Section 10.03. Remedies. On the occurrence of any material default by Tenant,
Landlord may, at any time thereafter, with or without notice or demand and
without limiting Landlord in the exercise of any right or remedy which Landlord
may have:

(a) Terminate Tenant’s right to possession of the Property by any lawful means,
and terminate this Lease in which event Tenant shall immediately surrender
possession of the Property to Landlord. In such event, Landlord shall be
entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant’s default, including (i) the worth at the time of the award of the unpaid
Base Rent, Additional Rent and other charges which Landlord had earned at the
time of the termination; (ii) the worth at the time of the award of the amount
by which the unpaid Base Rent, Additional Rent and other charges which Landlord
would have earned after termination until the time of the award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; (iii) the worth at the time of the award of the amount by which the
unpaid Base Rent, and other charges which Tenant would have paid for the balance
of the Lease Term after the time of award exceeds the amount of such rental loss
that Tenant proves Landlord could have 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 the Lease or which in the
ordinary course of things would be likely to result therefrom, including, but
not limited to, any costs or expenses Landlord incurs in maintaining or
preserving the Property after such default, the cost of recovering possession of
the Property, expenses of reletting, including necessary renovation or
alteration of the Property, Landlord’s reasonable attorneys’ fee incurred in
connection therewith, and any real estate commission paid or payable. As used in
subparts (i) and (ii) above, the “worth at the time of the award” is computed by
allowing interest on unpaid amounts at the rate of ten percent (10%) per annum,
or such lesser amount as may then be the maximum lawful rate. As used in subpart
(iii) above, the “worth at the time of the award” is computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San Francisco at
the time of the award, plus one percent (1%). If Tenant has abandoned the
Property, Landlord shall have the option of (i) retaking possession of the
Property and recovering from Tenant the amount specified in this
Section 10.03(a), or (ii) proceeding under Section 10.03(b);

 

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(b) Terminate Tenant’s right to possession of the property by any lawful means
or maintain Tenant’s right to possession and not terminate this lease, in which
case this Lease shall continue in effect whether or not Tenant is in possession
of the Property. In such event, Landlord shall be entitled to enforce all of
Landlord’s rights and remedies under this Lease, including the right to recover
the rent as it becomes due;

(c) Pursue any other remedy now or hereafter available to Landlord in equity or
under the laws or judicial decisions of the state in which the Property is
located.

This lease shall not terminate in the event of a material default by Tenant
unless Landlord expressly terminates it.

Section 10.04. Repayment of “Free” Rent. If this Lease provides for a
postponement of any monthly rental payments, a period of “free” rent or other
rent concession, such postponed rent or “free” rent is called the “Abated Rent”.
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant’s obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant’s full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession. In such case, Abated Rent shall
be calculated based on the full initial rent payable under this Lease.
Notwithstanding for foregoing, for each year that the Tenant remains lawfully in
possession of the Property and has not been in default under this Lease, the
obligation of Tenant to repay “free” rent to Landlord shall reduce by twenty
percent (20%) per Lease year.

Section 10.05. Damages. In the event of the termination of the lease, Landlord’s
damages for default shall include all costs and fees, including reasonable
attorneys’ fees that Landlord incurs in connection with the filing,
commencement, pursuing and/or defending of any action in any bankruptcy court or
other court with respect to the Lease; or the pursuing of any action with
respect to Landlord’s right to possession of the Property. All such damages
suffered (apart from Base Rent and other rent payable hereunder) shall
constitute pecuniary damages which must be reimbursed to Landlord prior to
assumption of the Lease by Tenant or any successor to Tenant in any bankruptcy
or other proceeding.

Section 10.06. Cumulative Remedies. Landlord’s exercise of any right or remedy
shall not prevent it from exercising any other right or remedy.

 

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ARTICLE ELEVEN. PROTECTION OF LENDERS.

Section 11.01. Subordination. Landlord shall have the right to subordinate this
Lease to any ground lease, deed of trust or mortgage encumbering the Property,
any advances made on the security thereof and any renewals, modifications,
consolidations, replacements or extensions thereof, whenever made or recorded.
Tenant shall cooperate with Landlord and any existing lender, or a lender who is
acquiring a security interest in the Property or the Lease. Tenant shall execute
the Subordination, Non-Disturbance and Attornment Agreement with Landlord’s
existing lender upon Lease execution, and which is attached hereto as Exhibit
“D”, and made a part hereof by reference. Tenant shall execute such further
documents and assurances as such future lender may require, provided that
Tenant’s obligations under this Lease shall not be increased in any material way
(the performance of ministerial acts shall not be deemed material), and Tenant
shall not be deprived of its rights under this Lease. Tenant’s right to quiet
possession of the Property during the Lease Term shall not be disturbed if
Tenant pays the rent and performs all of Tenant’s obligations under this Lease
and is not otherwise in default. If any ground lessor, beneficiary or mortgagee
elects to have this Lease prior to the lien of its ground lease, deed of trust
or mortgage and gives written notice thereof to Tenant, this Lease shall be
deemed prior to such ground lease, deed of trust or mortgage whether this Lease
is dated prior or subsequent to the date of said ground lease, deed of trust or
mortgage or the date of recording thereof.

Section 11.02. Attornment. If Landlord’s interest in the Property is acquired by
any ground lessor, beneficiary under a deed of trust, mortgagee, or purchaser at
a foreclosure sale, Tenant shall attorn to the transferee or successor to
Landlord’s interest in the Property and recognize such transferee or successor
as Landlord under this Lease. Tenant waives the protection of any statute or
rule of law which gives or purports to give Tenant any right to terminate this
Lease or surrender possession of the Property upon the transfer of Landlord’s
interest.

Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten
(10) days after written request, Tenant hereby makes, constitutes and
irrevocably appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.

Section 11.04. Estoppel Certificates.

(a) Upon either party’s written request, the other party shall execute,
acknowledge and deliver to Landlord a written statement in the form attached
hereto as Exhibit E, certifying: (i) that none of the terms or provisions of
this Lease have been changed (or if they have been changed, stating how they
have been changed); (ii) that this Lease has not been cancelled or terminated;
(iii) the last date of payment of the Base Rent and other charges and the time
period covered by such payment; (iv) that the party so executing is not in
default under this Lease (or, if the party is claimed to be in default, stating
why); and (v) such other representations or information with respect to parties
or the Lease as the requesting party may reasonably request or which any
prospective purchaser or encumbrancer of the Property may require. The
responding party shall deliver such statement to the requesting party within
twenty (20) days after the request. The parties may give any such statement to
any prospective purchaser or encumbrancer of the Property, or any third party
requesting such as statement, and such purchaser or encumbrancer or third party
may rely conclusively upon such statement as true and correct.

 

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(b) If the responding party does not deliver such statement to the requesting
party within such twenty (20) day period, the requesting party and any
prospective purchaser or encumbrancer, or third party, may conclusively presume
and rely upon the following facts: (i) that the terms and provisions of this
Lease have not been changed except as otherwise represented by the requesting
party; (ii) that this Lease has not been cancelled or terminated except as
otherwise represented by the requesting party; (iii) that not more than one
month’s Base Rent or other charges have been paid in advance; and (iv) that the
requesting party is not in default under the Lease. In such event, the
responding party shall be estopped from denying the truth of such facts.

Section 11.05. Tenant’s Financial Condition. Within ten (10) days after written
request from Landlord, Tenant shall deliver to Landlord such financial
statements as Landlord reasonably requires to verify the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender or prospective purchaser designated by Landlord any
financial statements required by such lender or prospective purchaser to
facilitate the financing, refinancing or purchase of the Property. Tenant
represents and warrants to Landlord that each such financial statement is a true
and accurate statement as of the date of such statement. All financial
statements shall be confidential and shall be used only for the purposes set
forth in this Lease.

 

ARTICLE TWELVE: LEGAL COSTS

Section 12.01. Legal Proceedings. Tenant shall also indemnify Landlord against
and hold Landlord harmless from all costs, expenses, demands and liability
Landlord may incur if Landlord becomes or is made a party to any claim or action
(a) instituted by Tenant against any third party, or by any third party against
Tenant, or by or against any person holding any interest under or using the
Property by license of or agreement with Tenant; (b) for foreclosure of any lien
for labor or material furnished to or for Tenant or such other person;
(c) otherwise arising out of or resulting from any act or transaction of Tenant
or such other person; or (d) necessary to protect Landlord’s interest under this
Lease in a bankruptcy proceeding, or other proceeding under Title 11 of the
United States Code, as amended. Tenant’s defense of the aforementioned actions
may be by counsel selected by Tenant and reasonably approved by Landlord. In the
event of any litigation to enforce or interpret this Lease, the prevailing party
shall be entitled to reasonable attorney’s fees and costs. This provision shall
survive the termination of this Lease.

Section 12.02. Landlord’s Consent. Tenant shall pay Landlord’s reasonable
attorneys’ fees incurred in connection with Tenant’s request for Landlord’s
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord’s consent,
which attorneys’ fees shall not exceed one thousand dollars ($1,000).

 

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ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS

Section 13.01. Non-Discrimination. Tenant promises, and it is a condition to the
continuance of this Lease, that there will be no discrimination against, or
segregation of, any person or group of persons on the basis of race, color, sex,
creed, national origin or ancestry in the leasing, subleasing, transferring,
occupancy, tenure or use of the Property or any portion thereof.

Section 13.02. Landlord’s Liability; Certain Duties.

(a) As used in this Lease, the term “Landlord” means only the current owner or
owners of the fee title to the Property or the leasehold estate under a ground
lease of the Property at the time in question. Each Landlord is obligated to
perform the obligations of Landlord under this Lease only during the time such
Landlord owns such interest or title. Any Landlord who transfers its title or
interest is relieved of all liability with respect to the obligations of
Landlord under this Lease to be performed on or after the date of transfer.
However, each Landlord shall deliver to its transferee all funds that Tenant
previously paid if such funds have not yet been applied under the terms of this
Lease.

(b) Tenant shall give written notice of any failure by Landlord to perform any
of its obligations under this Lease to Landlord and to any ground lessor,
mortgagee or beneficiary under any deed of trust encumbering the Property whose
name and address have been furnished to Tenant in writing. Landlord shall not be
in default under this Lease unless Landlord (or such ground lessor, mortgagee or
beneficiary) fails to cure such non-performance within thirty (30) days after
receipt of Tenant’s notice. However, if such non-performance reasonably requires
more than thirty (30) days to cure, Landlord shall not be in default if such
cure is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.

(c) Notwithstanding any term or provision herein to the contrary, the liability
of Landlord for the performance of its duties and obligations under this Lease
is limited to Landlord’s interest in the Property, and neither the Landlord nor
its partners, shareholders, officers or other principals shall have any personal
liability under this Lease.

Section 13.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.

Section 13.04. Interpretation. The captions of the Articles or Sections of this
Lease are to assist the parties in reading this Lease and are not a part of the
terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term “Tenant” shall include Tenant’s agents, employees, contractors,
invitees, successors or others using the Property with Tenant’s expressed or
implied permission.

Section 13.05. Incorporation of Prior Agreements; Modifications. This Lease is
the only agreement between the parties pertaining to the lease of the Property
and no other agreements are effective. All amendments to this Lease shall be in
writing and signed by all parties. Any other attempted amendment shall be void.

 

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Section 13.06. Notices. All notices required or permitted under this Lease shall
be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid or by electronic mail transmission
providing sending party retains evidence of such transmissions. Notices to
Tenant shall be delivered to the address specified in Section 1.03 above, except
that upon Tenant’s taking possession of the Property, the Property shall be
Tenant’s address for notice purposes. Notices to Landlord shall be delivered to
the address specified in Section 1.02 above. All notices shall be effective upon
delivery. Either party may change its notice address upon written notice to the
other party.

Section 13.07. Waivers. All waivers must be in writing and signed by the waiving
party. Landlord’s failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.

Section 13.08. No Recordation. Tenant shall not record this Lease without prior
written consent from Landlord. However, either Landlord or Tenant may require
that a “Short Form” memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.

Section 13.09. Binding Effect; Choice of Law. This Lease binds any party who
legally acquires any rights or interest in this Lease from Landlord or Tenant.
However, Landlord shall have no obligation to Tenant’s successor unless the
rights or interests of Tenant’s successor are acquired in accordance with the
terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease, and any dispute shall be resolved in the Superior Court
of the County in which the Property is located.

Section 13.10. Corporate Authority; Partnership Authority; Limited Liability
Company Authority. If Tenant is a corporation, each person signing this Lease on
behalf of Tenant represents and warrants that he has full authority to do so and
that this Lease binds the corporation. If Tenant is a partnership, each person
or entity signing this Lease for Tenant represents and warrants that he or it is
a general partner of the partnership, that he or it has full authority to sign
for the partnership and that this Lease binds the partnership and all general
partners of the partnership. Tenant shall give written notice to Landlord of any
general partner’s withdrawal or addition. Within thirty (30) days after this
Lease is signed, Tenant shall deliver to Landlord a copy of Tenant’s recorded
statement of partnership or certificate of limited partnership. If Tenant is a
limited liability company, each person or entity signing this Lease for Tenant
represents and warrants that he or it is the manager or managing member of the
limited liability company, that he or it has full authority to sign for the
limited liability company, and that this Lease binds the limited liability
company. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord evidence satisfactory to Landlord of the authority of the
individual(s) signing this Lease.

 

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Section 13.11. Joint and Several Liability. All parties signing this Lease as
Tenant shall be jointly and severally liable for all obligations of Tenant.

Section 13.12. Force Majeure. If Landlord cannot perform any of its obligations
due to events beyond Landlord’s control, the time provided for performing such
obligations shall be extended by a period of time equal to the duration of such
events. Events beyond Landlord’s control include, but are not limited to, delays
caused by Tenant or its agents, employees or contractors, acts of God, war,
terrorism, civil commotion, labor disputes, strikes, fire, flood or other
casualty, shortages of labor or material, government regulation or restriction,
delays in issuance of applicable permits or other required governmental
approvals, and weather conditions.

Section 13.13. Execution of Lease. This Lease may be executed in counterparts
and, when all counterpart documents are executed, the counterparts shall
constitute a single binding instrument. Landlord’s delivery of this Lease to
Tenant shall not be deemed to be an offer to lease and shall not be binding upon
either party until executed and delivered by both parties.

Section 13.14. Survival. All representations and warranties of Landlord and
Tenant shall survive the termination of this Lease.

 

ARTICLE FOURTEEN: BROKERS

Section 14.01. Broker’s Fee. When this Lease is signed by and delivered to both
Landlord and Tenant, Landlord shall pay a real estate commission to Landlord’s
Broker named in Section 1.08 above, if any, as provided in the written agreement
between Landlord and Landlord’s Broker, or the sum stated in Section 1.09 above
for services rendered to Landlord by Landlord’s Broker. If a Tenant’s Broker is
named in Section 1.08 above, Landlord’s Broker shall pay an appropriate portion
of its commission to Tenant’s Broker if so provided in any agreement between
Landlord’s Broker and Tenant’s Broker. Nothing contained in this Lease shall
impose any obligation on Landlord to pay a commission or fee to any party other
than Landlord’s Broker.

Section 14.02. Agency Disclosure; No Other Brokers. Landlord and Tenant each
warrant that they have dealt with no other real estate broker(s) in connection
with this transaction except the brokers set forth in Section 1.08 above.
Landlord and Tenant hereby agree to indemnify and defend the other for any
commission or fee claimed by any other party. The terms of this Section 14.02
shall survive the expiration or termination of this Lease.

 

ARTICLE FIFTEEN: COMPLIANCE

The parties hereto agree to comply with all applicable federal, state and local
laws, regulations, codes, ordinances and administrative orders having
jurisdiction over the parties, property or the subject matter of this Agreement,
including, but not limited to, the 1964 Civil Rights Act and all amendments
thereto, the Foreign Investment in Real Property Tax Act, the Comprehensive
Environmental Response Compensation and Liability Act, and The Americans With
Disabilities Act. Tenant shall comply with, and Tenant’s occupancy of the
Property shall be subject to any Covenants, Conditions or Restrictions
(“CC&R’s”), if any, recorded in the real property records against the Property.

 

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Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialed all Exhibits
which are attached to or incorporated by reference in this Lease.

 

“LANDLORD”

SIXTH AND ROCHESTER, LLC,

a California limited liability company,

By:   PG 6th & R, LLC,   a California limited liability company,   Managing
Member   By:   Panattoni Investments, LLC,     a California limited liability
company,     Managing Member,     By:   LOGO [g586084ex10_3pg027.jpg]      

 

      Carl D. Panattoni, Trustee of the       Panattoni Living Trust, Dated
April 8, 1998,       Managing Member Signed on June 10, 2009

 

TENANT”

MONOPRICE, INC.,

a California corporation

By:   LOGO [g586084ex10_3pg028.jpg]  

 

Name:  

JONG S LEE

Its:  

CEO

Signed on June 5th, 2009

 

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ADDENDUM

This addendum (“Addendum”) is attached to and made a part of that certain Lease
Agreement (Single-Tenant Facility) (“Lease”) dated June 2, 2009, by and between
Sixth and Rochester, LLC, a California limited liability company (the
“Landlord”), and Monoprice, Inc., a California corporation (the “Tenant”), and
is made concurrently with the Lease. The terms and conditions of this Addendum
supplement and, to the extent of any conflict, supersede the provisions of the
Lease. Each initially capitalized term used and not defined in this Addendum
shall have the meaning given it in the Lease.

1. Tenant Obligation for Permits:

(a) Tenant shall be solely responsible, at its expense, for obtaining all
conditional use permits (if any) or any replacement permit required for Tenant’s
specific use of the Property or improvements constructed by Tenant, to include
without limitation, racking permits and high pile permits.

(b) Tenant’s city-approved commodity and/or use of the Property may require
specific costs and/or work to be performed related to egress lighting, hose
racks, in-rack sprinklers or any other fire and/or life safety requirements. Any
and all such costs and work to be performed related thereto shall be the sole
responsibility of Tenant and at Tenant’s sole cost and expense.

(c) There shall be no delay of the Commencement Date as a result of any failure
or delay in obtaining any such permits or approvals or to perform such work.

2. ADA Compliance:

Notwithstanding any other provision of this Lease, the parties hereby agree that
the Property may be subject to the terms and conditions of the Americans with
Disabilities Act of 1990 as may be amended and any applicable state laws
relating to the disabled (hereinafter collectively the “ADA”). The parties
further agree and acknowledge that it shall be the sole responsibility of
Landlord to comply with any and all provisions of the ADA with respect to the
shell improvements and any improvements constructed by Landlord as of the
Commencement Date. Tenant shall comply with any and all provisions of the ADA as
such compliance may be required to construct future improvements to the Property
and to operate the Property after Tenant’s occupancy or in connection with
Tenant’s specific use. Each party further agrees to indemnify and hold each
other harmless against any claims, which may arise out of the indemnifying
party’s failure to comply with the ADA as required by this Section. Such
indemnification shall include, but not necessarily be limited to reasonable
attorney’s fees, court costs, and judgments as a result of said claims.

3. Improvements to be Constructed by Landlord:

Landlord, or Landlord’s contractor, shall construct Tenant’s improvements
(“Tenant Work”) based on the work letter agreement (“Tenant Work Letter”) for
the Tenant Work, attached hereto as Exhibit “C” and incorporated herein.

 

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4. Option to Extend:

(a) Extension Periods. The Lease Term may be extended, at the option of Tenant,
for one (1) period of five (5) years, potentially for a total of five (5) years,
each such period herein sometimes referred to as the “Extension Period”,
provided that (i), prior to expiration of the Lease Term, Tenant provides the
Landlord with no less than nine (9) months and no more than twelve (12) months
prior written notice for said Extension Period, and (ii) Tenant is not then in
material default of the Lease at the time Tenant submits notice to extend the
Lease Term, beyond any applicable notice and grace periods. The Extension Period
shall be on the same terms, covenants and conditions of this Lease, except for
the payment of Base Rent that shall be as set forth in subsection (c) below.
Tenant shall not be permitted to extend this Lease beyond the Extension Period.
If Tenant fails to exercise an extension, then the Lease shall expire at the end
of the then current term and Tenant shall have no further right to extend the
Lease Term.

(b) In the event Tenant exercises a renewal option, upon Landlord’s request,
Tenant shall execute and deliver to Landlord a Lease amendment within thirty
(30) days after Tenant’s receipt of such request setting forth the Base Rent for
the option period and the commencement and expiration of the upcoming Extension
Period.

(c) The Rent during the Extension Period shall be at ninety-five percent
(95%) of the then prevailing market rental rate for the Property. The parties
will attempt in good faith to arrive at the fair market rental rate. In the
event the parties cannot agree on the fair market rental rate within thirty
(30) days of Tenant’s exercise of the option to extend, the parties shall each
designate an MAI appraiser with a minimum of ten (10) years experience in the
Ontario Airport Market place within ten (10) days of the date the parties
determine they cannot agree on a fair market rental rate. The appraisers so
selected shall mutually agree on a third MAI appraiser with the above
qualifications. That appraiser shall appraise the Property and determine the
fair market rent rate for the five-year (5-year) Extension Period taking into
consideration the value of the Property, the rental market in the Ontario
Airport Market place, rental for buildings of comparable quality and other
relevant factors. If the appraisers cannot agree on the third MAI appraiser,
then upon application, the Presiding Judge for the Superior Court for San
Bernardino County covering the City of Rancho Cucamonga, California shall make
such selection upon application of either party.

5. Preparation of Lease:

This Lease shall not be construed more strictly against one party than against
the other merely by virtue of the fact that it may have been prepared by counsel
for one of the parties, it being recognized that both Landlord and Tenant have
contributed substantially and materially to the preparation of this Lease. The
headings of various sections in this Lease are for convenience only and are not
to be utilized in construing the content or meaning of the substantive
provisions hereof. The terms “herein,” “hereof,” “hereunder” and any other
similar terms used herein shall be deemed to refer to this Lease in its
entirety. All references herein to a party’s best knowledge shall be deemed to
mean the best knowledge of such party based on all appropriate

 

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and thorough inquiry. Unless specified to the contrary herein, all references
herein to an exercise of discretion or judgment by Landlord, to the making of a
determination or designation by Landlord, to the application of Landlord’s
discretion or opinion, to the granting or withholding of Landlord’s consent or
approval, to the consideration of whether a matter or thing is satisfactory or
acceptable to Landlord, or otherwise involving the decision making of Landlord,
shall be deemed to mean that Landlord shall decide unilaterally using its
reasonable discretion or judgment and such approval shall not be unreasonably
withheld or delayed. Each of the term “Landlord” and the term “Tenant” or any
pronoun used in place thereof, shall indicate and include the masculine or
feminine, the singular or plural number, individuals, firms or corporations, and
their and each of their respective successors, executors, administrators and
permitted assigns, who are a party to this Lease according to the context
hereof. This Lease, together with its Addendum, exhibits, contains all the
agreements of the parties hereto and supersedes any previous negotiations. There
have been no representations made by the Landlord or understandings made between
the parties other than those set forth in this Lease and its Addendum, and
exhibits. This Lease may not be modified except by a written instrument executed
by the parties hereto. If, for any reason whatsoever, any of the provisions
hereof shall be unenforceable or ineffective, all of the other provisions shall
be and remain in full force and effect.

6. Confidentiality:

Except as specifically provided herein, the parties hereby agree not to disclose
any of the terms of this Lease to any person or entity not a party to this
Lease, nor shall either party issue any press releases or make any public
statements relating to the terms or provisions of this Lease; provided, however,
either party may make necessary disclosures to potential lenders, attorneys,
accountants and space planning consultants, economic development authorities
and/or as may be required by applicable Laws or court order, so long as such
parties agree to keep all of the terms of this Lease strictly confidential to
the extent practicable. The obligations set forth in this Section shall survive
the expiration or any earlier termination of this Lease.

Notwithstanding anything contained herein to the contrary, each party to this
Lease (and each of its employees, representatives and other agents) may disclose
to any and all persons, without limitation of any kind, the tax treatment and
tax structure of the transaction contemplated hereby (the “Transaction”) and all
materials of any kind (including opinions and other tax analyses) that are
provided to such party or parties relating to the tax treatment or tax structure
of the Transaction, except that such disclosure is not permitted to the extent
necessary for each party to comply with the federal or state securities laws.
This authorization is not intended to permit disclosure of any other information
and materials relating to the Transaction including, without limitation: (i) any
portion of any materials to the extent not related to the tax treatment or tax
structure of the Transaction, (ii) the existence or status of any negotiations,
(iv) any pricing or financial information (except to the extent such pricing or
financial information is related to the tax treatment or tax structure of the
Transaction).

7. Lender Approval. This Lease remains subject to the review and approval of
Landlord’s lender, which Landlord shall use good faith efforts to obtain.
Landlord shall have no obligation to execute this Lease unless and until such
lender approval is obtained.

 

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