Exhibit 10.1

 

 

 

LEASE

 

 

Arboretum Courtyard, L.L.C.,

a Delaware limited liability company,

 

Landlord

 

 

and

 

 

CATASYS, INC.,

 

a California corporation,

 

Tenant

 

 

 

for

 

 

 

Arboretum Courtyard

 

2120 Colorado Avenue, Suite 230

 

Santa Monica, California

 

 

 

 

 

 

September 28, 2018

 

 

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Arboretum Courtyard

[Catasys, Inc.]

 

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LEASE

 

THIS LEASE is made as of the 28th day of September, 2018 ("Effective Date"),
between Arboretum Courtyard, L.L.C., a Delaware limited liability company
("Landlord"), and CATASYS, INC., a California corporation ("Tenant").

 

Landlord and Tenant hereby agree as follows:

 

ARTICLE 1     

basic lease provisions

 

 

PREMISES

A portion of the second (2nd)  floor of the Building, commonly known as Suite
230, as more particularly shown on Exhibit A, attached hereto.

   

BUILDING

The building, fixtures, equipment and other improvements and appurtenances now
located or hereafter erected, located or placed upon the land known as
2120 Colorado Avenue, Santa Monica, California.

   

PROJECT

That office building complex which is comprised collectively of the Building and
that certain building located at 2150 Colorado Avenue, the land upon which such
buildings are located, a subterranean parking garage located on such land, and
all buildings and other improvements and plazas now or hereafter constructed on
such land.

   

COMMENCEMENT DATE

The earlier to occur of (i) the date upon which Tenant first commences to
conduct business in the Premises and (ii) the date that is thirty (30) days
following the date upon which the Premises are Ready for Occupancy. The Premises
are anticipated to be Ready for Occupancy on April 1, 2019.

   

EXPIRATION DATE

If the Commencement Date shall be the first day of a calendar month, then the
day immediately preceding the fifth (5th) anniversary of the Lease Commencement
Date; or, if the Commencement Date shall be other than the first day of a
calendar month, then the last day of the month in which the fifth (5th)
anniversary of the Commencement Date occurs.

   

TERM

The period commencing on the Commencement Date and ending on the Expiration
Date.

   

PERMITTED USES

Executive and general offices, consistent with the character of the Building as
a first-class office building.

   

BASE YEAR

Calendar year 2019.

   

TENANT'S PROPORTIONATE SHARE

5.3523%.

   

AGREED AREA OF PROJECT

147,022 rentable square feet

   

AGREED AREA OF BUILDING

86,656 rentable square feet, as mutually agreed by Landlord and Tenant.

 

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[Catasys, Inc.]

 

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AGREED AREA OF PREMISES

7,869 rentable square feet, as mutually agreed by Landlord and Tenant.

         

FIXED RENT

Months During
Lease Term

Per Annum

Per Month

Monthly Fixed

Rent Per

Rentable 

Square Foot*

           

1-12**

$571,289.40

$47,607.45

$6.05

           

13-24

$591,284.52

$49,273.71

$6.26

           

25-36

$611,979.47

$50,998.29

$6.48

           

37-48

$633,398.75

$52,783.23

$6.71

           

49-Expiration Date

$655,567.70

$54,630.64

$6.94

     

*The calculations of the monthly Fixed Rent Per Rentable Square Foot set forth
above are approximate calculations based on a three and one half percent (3.5%)
increase per annum and rounded to the nearest cent. Such approximations are
provided for convenience only and the Per Annum and Per Month amounts set forth
above shall control.

 

**Subject to the terms of Section 2.3(b), below.

   

ADDITIONAL RENT

All sums other than Fixed Rent payable by Tenant to Landlord under this Lease,
including Tenant's Tax Payment, Tenant's Operating Payment, late charges,
overtime or excess service charges, parking fees, damages, and interest and
other costs related to Tenant's failure to perform any of its obligations under
this Lease.

   

RENT

Fixed Rent and Additional Rent, collectively.

   

INTEREST RATE

The lesser of (i) three percent (3%) per annum above the then-current Base Rate,
and (ii) the maximum rate permitted by applicable Requirements.

   

LETTER OF CREDIT

$407,566.00.

   

PARKING

Subject to the terms of Article 28 hereof.

   

TENANT'S ADDRESS FOR NOTICES

Until Tenant commences business operations from the Premises:

 

Catasys, Inc. 
11601 Wilshire Blvd, Suite 1100

Los Angeles, CA 90025
Attn: Susan Etzel

 

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Thereafter:

 

Catasys, Inc.

2120 Colorado Avenue, Suite 230
Santa Monica, California 90404
Attn: Susan Etzel

 

With copies to:

 

Loeb & Loeb LLP

10100 Santa Monica Blvd., Suite 2200

Los Angeles, California 90067

Attn: Thomas Hanley, Esq.

   

LANDLORD'S ADDRESS FOR NOTICES

Arboretum Courtyard, L.L.C.
2120 Colorado Avenue, Suite 125
Santa Monica, California 90404
Attn: Property Manager

     

With copies to:

 

Tishman Speyer
45 Rockefeller Plaza
New York, New York 10111
Attn: General Counsel

 

and:

 

Tishman Speyer
45 Rockefeller Plaza
New York, New York 10111
Attn: Chief Financial Officer

   

TENANT'S BROKER

Jones Lang LaSalle, Inc.

   

LANDLORD'S AGENT

Tishman Speyer Properties, L.P. or any other person or entity designated at any
time and from time to time by Landlord as Landlord's Agent.

 

 

All capitalized terms used in this Lease without definition are defined in
Exhibit B, attached hereto.

 

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ARTICLE 2

PREMISES; TERM; RENT

 

Section 2.1     Lease of Premises. Subject to the terms of this Lease, Landlord
leases to Tenant and Tenant leases from Landlord the Premises for the Term.
Landlord and Tenant hereby agree that the rentable square feet and usable square
feet of the Premises, the rentable square feet of the office area of the
Building and the rentable square feet of the Project have been agreed to by
Landlord and Tenant and are as stipulated in Article 1 above. In addition,
Landlord grants to Tenant the right to use, on a non-exclusive basis and in
common with others, the Common Areas. Except in the event of an emergency or as
otherwise specifically required pursuant to applicable Requirements or the terms
of this Lease, Tenant shall be granted access to the Premises, the Building and
the “Project Parking Facility,” as that term is defined in Article 28 below,
twenty-four (24) hours per day, seven (7) days per week, every day of the year,
during the Term, subject to all applicable Requirements, Landlord’s reasonable
access control procedures, the Rules and Regulations and the terms of this
Lease.

 

Section 2.2     Commencement Date. Upon the Effective Date, the terms and
provisions hereof shall be fully binding on Landlord and Tenant. The Term of
this Lease shall commence on the Commencement Date. Unless sooner terminated or
extended as may be hereinafter provided, the Term shall end on the Expiration
Date. If Landlord does not tender possession of the Premises to Tenant on or
before any particular date, for any reason whatsoever, Landlord shall not be
liable for any damage thereby, this Lease shall not be void or voidable thereby,
and the Term shall not commence until the Commencement Date, subject to the
terms of this Section 2.2 below. Landlord shall be deemed to have tendered
possession of the Premises to Tenant upon the giving of notice by Landlord to
Tenant stating that the Premises are vacant, in the condition required by this
Lease and available for Tenant's occupancy. Except as set forth in Section 2.2,
below, no failure to tender possession of the Premises to Tenant on or before
any particular date shall affect any other obligations of Tenant hereunder.
There shall be no postponement of the Commencement Date for (i) any delay in the
tender of possession to Tenant which results from any Tenant Delay or (ii) any
delays by Landlord in the performance of any punch list items relating to the
construction of the Tenant Improvements. At any time during the Term, Landlord
may deliver to Tenant a notice in the form as set forth in Exhibit G, attached
hereto, as a confirmation only of the information set forth therein, which
Tenant shall execute and return to Landlord within ten (10) days of receipt
thereof; provided, however, Tenant's failure to execute and return such notice
to Landlord within such time shall be conclusive upon Tenant that the
information set forth in such notice is as specified therein.

 

Landlord shall use commercially reasonable efforts to cause the Premises to be
Ready for Occupancy on or before April 1, 2019, provided that this Lease is
fully executed and delivered by Landlord and Tenant on or before September 30,
2018.

 

Notwithstanding anything to the contrary set forth herein, but subject to the
terms of this provision below, in the event that the Tenant Improvements are
comprised of general office improvements, and Landlord fails to cause the
Premises to be Ready for Occupancy on or before May 1, 2019 (the "Rent Credit
Date") for any reason other than an Unavoidable Delay or a Tenant Delay, then
Tenant shall be entitled to an abatement of one (1) day of Fixed Rent
attributable to the Premises for the number of days commencing as of the day
immediately following the Rent Credit Date and continuing through the date that
the Premises are Ready for Occupancy. In the event that Tenant Improvements are
not comprised of general office improvements, then the Rent Credit Date shall be
July 1, 2019. In the event that Tenant is entitled to an abatement of Fixed Rent
pursuant to the terms of this Section 2.2, such abatement of Fixed Rent shall be
credited towards Tenant's obligation to pay Fixed Rent for the Premises
commencing as of the day immediately following the expiration of the seventh
(7th) month of the Term. Tenant's right to an abatement of Fixed Rent as set
forth in this Section 2.2 shall be Tenant's sole and exclusive remedy at law or
in equity for Landlord's failure to cause the Premises to be Ready for Occupancy
on or prior to the Rent Credit Date. The Rent Credit Date shall be extended on a
day-for-day basis to the extent of any Unavoidable Delay, any Tenant Delay or in
the event that the Lease is not fully executed and delivered by Landlord and
Tenant on or before September 30, 2018.

 

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Notwithstanding anything to the contrary set forth herein, in the event that
Landlord fails to cause the Premises to be Ready for Occupancy on or before the
date that is one (1) year following the full execution and delivery of this
Lease (the "Outside Date") for any reason other than an Unavoidable Delay or a
Tenant Delay, then, except as set forth above, the sole remedy of Tenant for
such failure shall be the right to deliver a notice to Landlord (a "Election
Notice") electing to terminate this Lease effective upon the date occurring ten
(10) Business Days following receipt by Landlord of the Election Notice (the
"Effective Termination Date"). The Election Notice must be delivered by Tenant
to Landlord, if at all, not earlier than the Outside Date (as the same may be
extended pursuant to the terms below) nor later than ten (10) Business Days
after the Outside Date. In the event that Tenant fails to deliver to Landlord
the Election Notice within ten (10) Business Days following the Outside Date,
then Tenant shall be deemed to have waived its right to terminate the Lease
pursuant to the terms of this Section 2.2. The Outside Date shall be extended to
the extent of any Unavoidable Delay or any Tenant Delay. Upon any termination as
set forth in this Section 2.2, Landlord and Tenant shall be relieved from any
and all liability to each other resulting hereunder except that Landlord shall
return to Tenant any prepaid rent or any Security Deposit (to the extent the
same has been paid by Tenant to Landlord).

 

Section 2.3     Payment of Rent.

 

(a)     In General. Tenant shall pay to Landlord, without notice or demand, and
without any set-off, counterclaim, abatement or deduction whatsoever, except as
may be expressly set forth in this Lease, in lawful money of the United States
by wire transfer of funds, (i) Fixed Rent in equal monthly installments, in
advance, on the first (1st) day of each month during the Term, commencing on the
Commencement Date, and (ii) Additional Rent, at the times and in the manner set
forth in this Lease.

 

(b)     Abated Fixed Rent. Notwithstanding any provision to the contrary
contained in the Lease, Tenant shall be entitled to an abatement of the entirety
of the Fixed Rent due for the second (2nd) through sixth (6th) full calendar
months of the initial Term (the "Fixed Rent Abatement Period"). The amount Fixed
Rent abated under the terms of this Section 2.3(b) shall be referred to herein
as the "Fixed Rent Abatement Amount". Landlord and Tenant acknowledge that
Tenant's right (the "Fixed Rent Abatement Right") to receive Fixed Rent
abatement during the Fixed Rent Abatement Period has been granted to Tenant as
additional consideration for Tenant's agreement to enter into this Lease and
comply with the terms and conditions otherwise required under this Lease. If
there is an Event of Default by Tenant which remains uncured beyond all
applicable notice and cure periods, or if this Lease is terminated for any
reason other than in connection with a Landlord default, casualty or
condemnation, then, in addition to any other remedies Landlord may have under
this Lease, Landlord, at its option, may elect any or all of the following
remedies: (i) Tenant's right to receive Fixed Rent abatement under this
paragraph shall automatically be deemed terminated and of no further force or
effect; or (ii)  the unexpired portion of the Fixed Rent Abatement Period as of
such Event of Default or termination shall be moved to the end of the initial
Term, and Tenant shall immediately be obligated to begin paying Fixed Rent at
the full amounts of the monthly installments therefor set forth above. The Fixed
Rent Abatement Right set forth in this Section 2.3(b) shall be personal to the
originally named Tenant hereunder (the "Original Tenant") and a Permitted
Transferee Assignee (defined in Section 13.8(a), below) and shall not inure to
the benefit of any other assignee, or any sublessee or other transferee of the
Original Tenant's interest in this Lease. Tenant shall have the right by
delivery of written notice to Landlord to convert any portion of the Fixed Rent
Abatement Amount to the Tenant Improvement Allowance.

 

Section 2.4     First Month's Rent. Tenant shall pay one (1) month's Fixed Rent
upon the execution of this Lease ("Advance Rent"). If the Commencement Date is
on the first (1st) day of a month, the Advance Rent shall be credited towards
the first (1st) month's Fixed Rent payment. If the Commencement Date is not the
first (1st) day of a month, then on the Commencement Date Tenant shall pay Fixed
Rent for the period from the Commencement Date through the last day of such
month, and the Advance Rent shall be credited towards Fixed Rent for the next
succeeding calendar month.

 

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Section 2.5     Renewal Term.

 

(a)     Renewal Term. The Original Tenant and a Permitted Transferee Assignee,
as the case may be, shall have the right to renew the initial Term for all of
the Premises for one renewal term of five (5) years (the “Renewal Term”)
commencing on the day after the expiration of the initial Term (the “Renewal
Term Commencement Date”) and ending on the day immediately preceding the fifth
(5th) anniversary of the Renewal Term Commencement Date, unless the Renewal Term
shall sooner terminate pursuant to any of the terms of this Lease or otherwise.
The Renewal Term shall commence only if (i) Tenant notifies Landlord in writing
(the “Exercise Notice”) of Tenant’s exercise of such renewal right not earlier
than fourteen (14) months, and not later than nine (9) months, prior to the
Expiration Date, (ii) at the time of the exercise of such right and immediately
prior to the Renewal Term Commencement Date, no default by Tenant under this
Lease shall have occurred and be continuing hereunder, (iii) Tenant occupies the
entire Premises at the time the Exercise Notice is given and immediately prior
to the Renewal Term Commencement Date, and (iv) Tenant exercises its renewal
option, if at all, with respect to all of the Premises. Time is of the essence
with respect to the giving of the Exercise Notice. The Renewal Term shall be
upon all of the agreements, terms, covenants and conditions of this Lease,
except that (a) the Rent for the Renewal Term shall be determined as provided in
Section 2.5(b) below and (b) if Tenant exercises the renewal option set forth in
this Section 2.5, then Tenant shall have no further right to renew the Term
unless otherwise agreed to in writing by Landlord and Tenant. Upon the
commencement of the Renewal Term, (1) the Renewal Term shall be added to and
become part of the Term, (2) any reference to “this Lease”, to the “Term”, the
“term of this Lease” or any similar expression shall be deemed to include the
Renewal Term and (3) the expiration date of the Renewal Term shall become the
Expiration Date. Any termination, cancellation or surrender of the entire
interest of Tenant under this Lease at any time during the Term shall
automatically terminate the renewal right set forth in this Section 2.5. The
rights contained in this Section 2.5 shall be personal to Original Tenant and a
Permitted Transferee Assignee, as the case may be, and may only be exercised by
Original Tenant or a Permitted Transferee Assignee, as the case may be (and not
any other assignee, or any sublessee or other transferee of Original Tenant’s
interest in this Lease).

 

(b)     Renewal Term Rent; Fair Market Value. The annual Rent payable during the
Renewal Term shall be equal to the annual Fair Market Value (as hereinafter
defined) of the Premises as of commencement of the Renewal Term (the
“Calculation Date”). “Fair Market Value” shall mean the fair market annual rent
(including additional rent and considering any “base year” or “expense stop”
applicable thereto), taking into account all escalations, at which, as of the
Calculation Date, tenants are leasing non-sublease, non-encumbered, non-equity,
non-expansion space comparable in size, location and quality to the Premises for
a term equal to the Renewal Term, in an arm’s-length transaction, which
comparable space is located in the Project and/or in the Comparable Buildings,
and which comparable transactions (collectively, the “Comparable Transactions”)
are entered into within the six (6) month period immediately preceding
Landlord’s delivery of the Rent Notice (as hereinafter defined) to Tenant,
taking into consideration the following concessions (the “Concessions”): (i)
rental abatement concessions, if any, being granted such tenants in connection
with such comparable space; (ii) tenant improvements or allowances provided or
to be provided for such comparable space, taking into account, and deducting the
value of, the existing improvements in the Premises, such value to be based upon
the age, condition, design, quality of finishes and layout of the improvements
and the extent to which the same can be utilized by Tenant based upon the fact
that the precise tenant improvements existing in the Premises are specifically
suitable to Tenant; and (iii) other reasonable monetary concessions being
granted such tenants in connection with such comparable space; provided,
however, that in calculating the Fair Market Value, no consideration shall be
given to (A) the fact that Landlord is or is not required to pay a real estate
brokerage commission in connection with Tenant’s exercise of its right to lease
the Premises during the Renewal Term or in connection with the Comparable
Transactions or the fact that landlords are or are not paying real estate
brokerage commissions in connection with such comparable space, and (B) any
period of rental abatement, if any, granted to tenants in Comparable
Transactions in connection with the design, permitting and construction of
tenant improvements in such comparable spaces. The determination of Fair Market
Value shall additionally include a determination (the “Financial Security
Determination”) as to whether, and if so to what extent, Tenant must provide
Landlord with financial security, such as a letter of credit or guaranty, for
Tenant’s rent obligations in connection with Tenant’s lease of the Premises
during the Renewal Term. In connection with the foregoing, as part of
determining the Fair Market Rent, such determination shall be made by reviewing
the extent of financial security then generally being imposed in Comparable
Transactions from tenants of comparable financial condition and credit history
to the then existing financial condition and credit history of Tenant (with
appropriate adjustments to account for differences in the then-existing
financial condition of Tenant and such other tenants). Landlord shall advise
Tenant (the “Rent Notice”) of Landlord's determination of the Fair Market Value
of the Premises for the Renewal Term at least forty-five (45) days prior to the
Renewal Term Commencement Date. If Tenant timely disputes Landlord’s
determination of Fair Market Value in accordance with Section 2.5(c) below, then
the dispute shall be resolved by arbitration as provided in Section 2.5(c)
below. If the Rent payable during the Renewal Term is not determined prior to
the Renewal Term Commencement Date, then Tenant shall pay Rent in an amount
equal to the Fair Market Value for the Premises as set forth in the Rent Notice
(the "Interim Rent"). Upon final determination of the Rent for the Renewal Term,
Tenant shall commence paying such Rent as so determined, and within ten
(10) days after such determination Tenant shall pay any deficiency in prior
payments of Rent or, if the Rent as so determined shall be less than the Interim
Rent, Tenant shall be entitled to a credit against the next succeeding
installments of Rent in an amount equal to the difference between each
installment of Interim Rent and the Rent as so determined that should have been
paid for such installment until the total amount of the over payment has been
recouped.

 

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(c)     Arbitration. If Tenant wishes to dispute Landlord’s determination of
Fair Market Value of the Premises for the Renewal Term pursuant to Section
2.5(b) above, then Tenant shall give notice to Landlord of such dispute within
thirty (30) days after delivery of the Rent Notice and such dispute thereafter
shall be determined as follows:

 

(i)     In its demand for arbitration, Tenant shall specify the name and address
of the person to act as the arbitrator on Tenant’s behalf. The arbitrator shall
be a real estate broker with at least ten (10) years full-time commercial
brokerage experience who is familiar with the Fair Market Value of first-class
office space in the Project and the Comparable Buildings. Failure on the part of
Tenant to make the timely and proper demand for such arbitration where such
failure continues for three (3) Business Days after Landlord delivers a notice
to Tenant shall constitute a waiver of the right thereto and the Rent shall be
as set forth in the Rent Notice. Within ten (10) Business Days after the service
of the demand for arbitration, Landlord shall give notice to Tenant specifying
the name and address of the person designated by Landlord to act as arbitrator
on its behalf, which arbitrator shall be similarly qualified. If Landlord fails
to notify Tenant of the appointment of its arbitrator within such ten
(10) Business Day period, and such failure continues for three (3) Business Days
after Tenant delivers a second notice to Landlord, then the arbitrator appointed
by Tenant shall be the arbitrator to determine the Fair Market Value for the
Premises.

 

(ii)     If two arbitrators are chosen pursuant to Section 2.5(c)(i) above, the
arbitrators so chosen shall meet within ten (10) Business Days after the second
arbitrator is appointed and shall seek to reach agreement on Fair Market Value.
If within twenty (20) Business Days after the second arbitrator is appointed the
two arbitrators are unable to reach agreement on Fair Market Value then the two
arbitrators shall appoint a third arbitrator, who shall be a competent and
impartial person with qualifications similar to those required of the first two
arbitrators pursuant to Section 2.5(c)(i) above. If the arbitrators are unable
to agree upon such appointment within five (5) Business Days after expiration of
such twenty (20) Business Day period, the third arbitrator shall be selected by
the parties themselves. If the parties do not agree on the third arbitrator
within five (5) Business Days after expiration of the foregoing five
(5) Business Day period, then either party, on behalf of both, may request
appointment of such a qualified person under the provisions of the American
Arbitration Association, but subject to the instructions set forth in this
Section 2.5(c). The third arbitrator shall decide the dispute, if it has not
been previously resolved, by following the procedures set forth in
Section 2.5(c)(iii) below. Each party shall pay the fees and expenses of its
respective arbitrator and both shall share the fees and expenses of the third
arbitrator. Attorneys’ fees and expenses of counsel and of witnesses for the
respective parties shall be paid by the respective party engaging such counsel
or calling such witnesses.

 

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(iii)     Fair Market Value shall be fixed by the third arbitrator in accordance
with the following procedures. Concurrently with the appointment of the third
arbitrator, each of the arbitrators selected by the parties shall state, in
writing, his or her determination of the Fair Market Value supported by the
reasons therefor. The third arbitrator shall have the right to consult experts
and competent authorities for factual information or evidence pertaining to a
determination of Fair Market Value, but any such determination shall be made in
the presence of both parties with full right on their part to cross-examine. The
third arbitrator shall conduct such hearings and investigations as he or she
deems appropriate and shall, within thirty (30) days after being appointed,
select which of the two proposed determinations most closely approximates his or
her determination of Fair Market Value. The third arbitrator shall have no right
to propose a middle ground or any modification of either of the two proposed
determinations. The determination he or she chooses as that most closely
approximating his or her determination of the Fair Market Value shall constitute
the decision of the third arbitrator and shall be final and binding upon the
parties. The third arbitrator shall render the decision in writing with
counterpart copies to each party. The third arbitrator shall have no power to
add to or modify the provisions of this Lease. Promptly following receipt of the
third arbitrator’s decision, the parties shall enter into an amendment to this
Lease, evidencing the extension of the Term for the Renewal Term and confirming
the Rent for the Renewal Term, but the failure of the parties to do so shall not
affect the effectiveness of the third arbitrator’s determination.

 

(iv)     In the event of a failure, refusal or inability of any arbitrator to
act, his or her successor shall be appointed by him or her, but in the case of
the third arbitrator, his or her successor shall be appointed in the same manner
as that set forth herein with respect to the appointment of the original third
arbitrator.

 

ARTICLE 3

USE AND OCCUPANCY

 

Section 3.1     In General. Tenant shall use and occupy the Premises for the
Permitted Uses and for no other purpose. Tenant shall not use or occupy or
permit the use or occupancy of any part of the Premises in a manner constituting
a Prohibited Use. Tenant further covenants and agrees that Tenant shall not use,
or suffer or permit any person or persons to use, the Premises or any part
thereof for any use or purpose contrary to the provisions of the Rules and
Regulations set forth in Exhibit F, attached hereto, or in violation of any
applicable Requirements. Tenant shall not do or permit anything to be done in or
about the Premises, (including, without limitation, the installation or use of
any Alterations (defined in Section 5.1, below), Equipment defined in Section
5.7, below) or any other furniture, fixture and equipment, in the Premises),
which will in any way damage the reputation of the Building, be offensive or
objectionable to Landlord or other occupants of the Building, or obstruct or
interfere with the rights of other tenants or occupants of the Building, or
injure or annoy them by reason of noise, odors, or vibrations. If Tenant uses
the Premises for a purpose constituting a Prohibited Use, violating any
Requirement or the terms of this Article 3, or causing the Building or Project
to be in violation of any Requirement or the terms of this Article 3, then
Tenant shall promptly discontinue such use upon notice of such violation.
Tenant, at its expense, shall procure and at all times maintain and comply with
the terms and conditions of all licenses and permits required for the lawful
conduct of the Permitted Uses in the Premises.

 

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Section 3.2     Permitted Dogs. Notwithstanding any provision to the contrary in
this Lease, Tenant shall be permitted during the initial Term and any Renewal
Term to bring into the Premises fully-domesticated, fully-vaccinated, trained
dogs owned by Tenant's employees as pets ("Permitted Dogs"), subject to the
terms and conditions of this Section 3.2; provided, however, that Tenant shall
be permitted to bring only two (2) Permitted Dogs on the Project at any one
time. In no event shall Tenant permit any Dangerous Breeds (as defined below) or
dogs weighing in excess of approximately one hundred twenty-five (125) pounds to
enter the Premises, the Building or the Project. For the purposes herein,
"Dangerous Breeds" shall mean the following breeds: Pit Bull Terrier,
Rottweiler, Boxer, Chow, Presa Canario, German Shepherd, Alaskan Malamute, Husky
and Doberman Pinscher. Landlord shall have the right, from time to time, to
reasonably modify or add to the definition of Dangerous Breeds. All Permitted
Dogs shall be strictly controlled at all times and shall not be permitted to
foul, damage or otherwise mar any part of the Premises, the Building or the
Project, or bark excessively or otherwise create a nuisance at the Project. The
Permitted Dogs shall be on a leash at all times that they are not within the
Premises, and shall not be allowed in the Project Parking Facility or in the
Common Areas, except en route to and from the Premises. The Permitted Dogs shall
be taken off the Project for their walks and shall not be permitted to excrete
waste within the Premises, Building or Project. Upon Landlord's request at any
time, and from time to time, Tenant shall provide Landlord with evidence of all
current vaccinations and current flea treatment for Permitted Dogs. Tenant shall
be responsible for any additional cleaning costs and all other costs which may
arise from the presence of the Permitted Dogs in or on the Project in excess of
the costs that would have been incurred had the Permitted Dogs not been allowed
in or on the Project; and Tenant shall immediately remove any waste and
excrement of any Permitted Dogs from the Project and properly clean the affected
area. In no event shall any of the Permitted Dogs be kept in the Premises
overnight. Tenant shall be responsible for, and shall indemnify, defend, protect
and hold Landlord and the Indemnitees harmless from and against any and all
Losses arising from, resulting from or connected with the acts or presence of
the Permitted Dogs in the Premises or Building or on the Project (including,
without limitation, bodily injury to persons in the Premises or Building or on
the Project or property damage to the property of Landlord or any other tenant,
subtenant, occupant, licensee or invitee of the Building or Project). Tenant
shall provide Landlord with evidence reasonably satisfactory to Landlord that
Tenant's insurance provided pursuant to Section 11.1 of this Lease covers
dog-related injuries and damage. Tenant shall comply with all applicable
Requirements associated with or governing the presence of the Permitted Dogs
within the Premises or the Building or on the Project, and such presence shall
not violate the certificate of occupancy for the Building. Notwithstanding the
foregoing, Landlord shall have the right at any time to rescind Tenant's right
to have any dogs in the Premises (other than seeing eye dogs, service dogs,
assistance dogs, or emotional support dog in accordance with the Rules and
Regulations and applicable Requirements), if (1) Tenant is in violation of one
or more of the terms and conditions set forth in this Section 3.2 and fails to
cure such violation within two (2) Business Days of receiving notice thereof
from Landlord, or (2) Landlord has received three (3) or more complaints in any
twelve (12)-month period from other tenants in the Building regarding any
damage, disruption or nuisance caused by Tenant's Permitted Dogs in the Building
or on the Project, which complaints are, in the Landlord's reasonable business
judgment, are legitimate and not intended solely to harass or frustrate Tenant's
use and occupancy of the Premises. If Tenant sublets all or any portion of the
Premises (other than to a Permitted Transferee Assignee), then, as to such
portion of the Premises sublet, upon such subletting and until the expiration of
such sublease, the right to bring Tenant's Permitted Dogs into such portion of
the Premises shall terminate and be of no further force or effect.

 

ARTICLE 4

CONDITION OF THE PREMISES

 

Tenant has inspected the Premises and agrees, except as otherwise specifically
provided in the Tenant Work Letter, (a) to accept possession of the Premises in
the condition existing on the Commencement Date "as is", and (b) that, except
for the Tenant Improvement Allowance, Landlord has no obligation to perform any
work, supply any materials, incur any expense or make any alterations or
improvements to prepare the Premises for Tenant's occupancy. Tenant's occupancy
of any part of the Premises shall be conclusive evidence, as against Tenant,
that Landlord has Substantially Completed any work to be performed by Landlord
under this Lease, Tenant has accepted possession of the Premises in its then
current condition and at the time such possession was taken, the Premises, the
Building and the Project were in a good and satisfactory condition as required
by this Lease. Landlord shall deliver the Building Systems serving the Premises
in good working order and condition.

 

ARTICLE 5

ALTERATIONS

 

Section 5.1     Tenant's Alterations.

 

(a)     Tenant shall have the right, without Landlord’s prior written consent,
but upon five (5) Business Days prior written notice to Landlord (which notice
shall contain a description of the contemplated work), to make strictly
cosmetic, non-structural additions and alterations, such as painting, wall
coverings and floor coverings, to the Premises that (i) do not involve the
expenditure of more than One Hundred Thousand and No/100 Dollars ($100,000.00)
in the aggregate in any twelve (12) month period, and (ii) do not contain a
Design Problem (defined below) (the foregoing additions and alterations
described in this sentence are collectively referred to herein as “Decorative
Alterations”). Except in connection with Decorative Alterations, Tenant shall
not make any alterations, additions or other physical changes in or about the
Premises (collectively, "Alterations"), without Landlord's prior consent, which
consent shall not be unreasonably withheld, provided, that it shall be deemed
reasonable for landlord to withhold its consent to any Alterations that contain
a Design Problem. A "Design Problem" is defined as and will be deemed to exist
if any Alterations (i) are structural or adversely affect any Building Systems,
(ii) are visible from outside of the Premises, (iii) affect the certificate of
occupancy issued for the Building or the Premises, and (iv) violate any
Requirement.

 

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(b)     Plans and Specifications. Prior to making any Alterations, Tenant, at
its expense, shall (i) submit to Landlord for its approval, detailed plans and
specifications ("Plans") of each proposed Alteration (other than Decorative
Alterations), and with respect to any Alteration affecting any Building System,
evidence that the Alteration has been designed by, or reviewed and approved by,
Landlord's designated engineer for the affected Building System, (ii) obtain all
permits, approvals and certificates required by any Governmental Authorities,
(iii) furnish to Landlord duplicate original policies or certificates of
worker's compensation (covering all persons to be employed by Tenant, and
Tenant's contractors and subcontractors in connection with such Alteration) and
commercial general liability (including property damage coverage) and business
auto insurance and Builder's Risk coverage (as described in Article 11) all in
such form, with such companies, for such periods and in such amounts as Landlord
may reasonably require, naming Landlord, Landlord's Agent, any Lessor and any
Mortgagee as additional insureds, and (iv) furnish to Landlord reasonably
satisfactory evidence of Tenant's ability to complete and to fully pay for such
Alterations (other than Decorative Alterations). Tenant shall give Landlord not
less than five (5) Business Days' notice prior to performing any Decorative
Alteration, which notice shall contain a description of such Decorative
Alteration.

 

(c)     Governmental Approvals. Tenant, at its expense, shall, as and when
required, promptly obtain certificates of partial and final approval of such
Alterations required by any Governmental Authority and shall furnish Landlord
with copies thereof, together with "as-built" Plans for such Alterations
prepared on an AutoCAD Computer Assisted Drafting and Design System (or such
other system or medium as Landlord may reasonably accept), using naming
conventions issued by the American Institute of Architects in June, 1990 (or
such other naming conventions as Landlord may accept) and magnetic computer
media of such record drawings and specifications translated in DFX format or
another format acceptable to Landlord.

 

Section 5.2     Manner and Quality of Alterations. All Alterations shall be
performed (a) in a good and workmanlike manner and free from defects,
(b) substantially in accordance with the Plans, and by contractors reasonably by
Landlord, provided that Tenant shall retain the contractors designated by
Landlord to perform any structural, mechanical, electrical, plumbing, HVAC, life
safety and sprinkler work, provided that their rates are competitive in the
marketplace, (c) in compliance with all Requirements, the terms of this Lease
and all construction procedures and regulations then prescribed by Landlord, and
(d) at Tenant's expense. All materials and equipment shall be of first quality
and at least equal to the applicable standards for the Building then established
by Landlord, and no such materials or equipment (other than Tenant's Property)
shall be subject to any lien or other encumbrance. Upon completion of any
Alterations hereunder, Tenant shall provide Landlord with copies of all
construction contracts, proof of payment for all labor and materials, and final
unconditional waivers of lien from all contractors, subcontractors, materialmen,
suppliers and others having lien rights with respect to such Alterations, in the
form prescribed by California law. In addition, Tenant shall cause a Notice of
Completion to be recorded in the Office of the Recorder of the county in which
the Project is located in accordance with Section 8182 of the Civil Code of the
State of California or any successor statute.

 

Section 5.3     Removal of Tenant's Property. Tenant's Property shall remain the
property of Tenant and Tenant may remove the same at any time on or before the
Expiration Date. On or before the Expiration Date, Tenant shall, unless
otherwise directed by Landlord, at Tenant's expense, remove any Specialty
Alterations and close up any slab penetrations in the Premises. Tenant shall
repair and restore, in a good and workmanlike manner, any damage to the
Premises, the Building or the Project caused by Tenant's removal of any
Alterations or Tenant's Property or by the closing of any slab penetrations, and
upon default thereof, Tenant shall reimburse Landlord for Landlord's cost of
repairing and restoring such damage. Any Specialty Alterations or Tenant's
Property not so removed shall be deemed abandoned and Landlord may retain or
remove and dispose of same, and repair and restore any damage caused thereby, at
Tenant's cost and without accountability to Tenant. All other Alterations shall
become Landlord's property upon termination of this Lease.

 

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Section 5.4     Mechanic's Liens. Tenant, at its expense, shall discharge any
lien or charge recorded or filed against the Project in connection with any work
done or claimed to have been done by or on behalf of, or materials furnished or
claimed to have been furnished to, Tenant, within fifteen (15) days after
Tenant's receipt of notice thereof by payment, filing the bond required by law
or otherwise in accordance with applicable Requirements.

 

Section 5.5     Labor Relations. Tenant shall not employ, or permit the
employment of, any contractor, mechanic or laborer, or permit any materials to
be delivered to or used in the Building, if, in Landlord's sole judgment, such
employment, delivery or use will interfere or cause any conflict with other
contractors, mechanics or laborers engaged in the construction, maintenance or
operation of the Building by Landlord, Tenant or others. If such interference or
conflict occurs based upon a good faith determination by Landlord, then upon
Landlord's request, Tenant shall cause all contractors, mechanics or laborers
causing such interference or conflict to leave the Building immediately.

 

Section 5.6     Tenant's Costs. Tenant shall pay to Landlord, upon demand, all
reasonable out-of-pocket costs actually incurred by Landlord in connection with
Tenant's Alterations, including costs incurred in connection with (a) Landlord's
review of the Alterations (including review of requests for approval thereof)
and (b) the provision of Building personnel during the performance of any
Alteration, to operate elevators or otherwise to facilitate Tenant's
Alterations. In addition, Tenant shall pay to Landlord, upon demand, an
administrative fee in an amount equal to three percent (3%) of the total cost of
any Alterations. At Landlord's request, Tenant shall deliver to Landlord
reasonable supporting documentation evidencing the hard and soft costs incurred
by Tenant in designing and constructing any Alterations.

 

Section 5.7     Tenant's Equipment. Tenant shall provide notice to Landlord
prior to moving any heavy machinery, heavy equipment, freight, bulky matter or
fixtures (collectively, "Equipment") into or out of the Building and shall pay
to Landlord any costs actually incurred by Landlord in connection therewith. If
such Equipment requires special handling, Tenant agrees (a) to employ only
persons holding all necessary licenses to perform such work, (b) all work
performed in connection therewith shall comply with all applicable Requirements
and (c) such work shall be done only during hours designated by Landlord.

 

Section 5.8     Compliance. The approval of Plans, or consent by Landlord to the
making of any Alterations, does not constitute Landlord's representation that
such Plans or Alterations comply with any Requirements or the terms of Article 3
of this Lease (i.e., that the same shall not obstruct or interfere with the
rights of other tenants or occupants of the Building, or injure or annoy them by
reason of noise, odors, or vibrations). Landlord shall not be liable to Tenant
or any other party in connection with Landlord's approval of any Plans, or
Landlord's consent to Tenant's performing any Alterations, and Tenant's waiver
and indemnity set forth in this Lease shall specifically apply to the Plans or
Alterations. If any Alterations made by or on behalf of Tenant require Landlord
to make any alterations or improvements to any part of the Building or Project
in order to comply with any Requirements, Tenant shall pay all costs and
expenses incurred by Landlord in connection with such alterations or
improvements.

 

Section 5.9     Floor Load. Tenant shall not place a load upon any floor of the
Premises that exceeds 100 pounds per square foot "live load". Landlord reserves
the right to reasonably designate the position of all Equipment which Tenant
wishes to place within the Premises, and to place limitations on the weight
thereof.

 

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ARTICLE 6

REPAIRS

 

Section 6.1     Landlord's Repair and Maintenance. Landlord shall operate,
maintain and, except as provided in Section 6.2 hereof, make all necessary
repairs (both structural and nonstructural) to (i) the Base Building and
(ii) the Common Areas, in conformance with standards applicable to Comparable
Buildings. For purposes of this Lease, the “Base Building” shall include, but
not be limited, to the following: (a) roof structure and membrane; (b) exterior
walls and glass; (c) floor/ceiling slabs and other structural portions of the
Building, including, without limitation, the foundation, curtain wall, exterior
glass, and mullions, columns, beams, shafts (including elevator shafts); and (d)
Building Systems.

 

Section 6.2     Tenant's Repair and Maintenance. Tenant shall promptly, at its
expense and in compliance with Article 5 including, without limitation, the
requirement that any repairs affecting any Building System be reviewed and
approved by Landlord's designated engineer for the affected Building System,
make all nonstructural repairs to the Premises and the fixtures, equipment and
appurtenances therein (including all electrical, plumbing, heating, ventilation
and air conditioning, sprinklers and life safety systems in and serving the
Premises from the point of connection to the Building Systems) (collectively,
"Tenant Fixtures") as and when needed to preserve the Premises in good working
order and condition, except for reasonable wear and tear and damage which is
Landlord's obligation to repair pursuant to the express provisions of this
Lease. All damage to the Building or to any portion thereof, or to any Tenant
Fixtures, requiring structural or nonstructural repair caused by or resulting
from any act, omission, neglect or improper conduct of a Tenant Party or the
moving of Tenant's Property or Equipment into, within or out of the Premises by
a Tenant Party, shall be repaired at Tenant's expense by (i) Tenant, if the
required repairs are nonstructural in nature and do not affect any Building
System, or (ii) Landlord, if the required repairs are structural in nature,
involve replacement of exterior window glass or affect any Building System. All
Tenant repairs shall be of good quality utilizing new construction materials.

 

Section 6.3     Reserved Rights. Landlord reserves the right to make all
changes, alterations, additions, improvements, repairs or replacements to the
Building and/or the Project, including the Building Systems, including changing
the arrangement or location of entrances or passageways, doors and doorways,
corridors, elevators, stairs, toilets or other Common Areas (collectively, "Work
of Improvement"), as Landlord deems necessary or desirable, and to take all
materials into the Premises required for the performance of such Work of
Improvement, provided that (a) the level of any Building service shall not
decrease in any material respect from the level required of Landlord in this
Lease as a result thereof (other than temporary changes in the level of such
services during the performance of any such Work of Improvement), (b) Tenant is
not deprived of access to the Premises, and (c) any Work of Improvement does not
otherwise materially and adversely impact Tenant’s rights under this Lease.
Landlord shall use reasonable efforts to minimize interference with Tenant's use
and occupancy of the Premises during the performance of such Work of
Improvement. There shall be no Rent abatement or allowance to Tenant for a
diminution of rental value, no actual or constructive eviction of Tenant, in
whole or in part, no relief from any of Tenant's other obligations under this
Lease, and no liability on the part of Landlord by reason of inconvenience,
annoyance or injury to business arising from Landlord, Tenant or others
performing, or failing to perform, any Work of Improvement.

 

ARTICLE 7

INCREASES IN TAXES AND OPERATING EXPENSES

 

Section 7.1     Definitions. For the purposes of this Article 7, the following
terms shall have the meanings set forth below:

 

(a)     "Assessed Valuation" shall mean the amount for which the Project is
assessed by the County Assessor of Los Angeles, California, for the purpose of
imposition of Taxes.

 

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(b)     "Base Operating Expenses" shall mean the Operating Expenses for the Base
Year.

 

(c)     "Base Taxes" shall mean the Taxes payable for the Base Year.

 

(d)     "Comparison Year" shall mean each calendar year commencing subsequent to
the Base Year in which all or any portion of the Term falls, through and
including the calendar year in which the Term expires.

 

(e)     "Operating Expenses" shall mean the aggregate of all costs and expenses
paid or incurred by or on behalf of Landlord in connection with the ownership,
operation, repair and maintenance of the Project, including the rental value (at
customary market rates) of Landlord's Building office and capital improvements
incurred after the Base Year only if such capital improvement either (i) is
reasonably intended to result in a reduction in Operating Expenses (as for
example, a labor-saving improvement), provided the amount included in Operating
Expenses in any Comparison Year shall not exceed an amount equal to the savings
reasonably anticipated to result from the installation and operation of such
improvement, and/or (ii) is made during any Comparison Year in compliance with
Requirements, except for such capital improvements to remedy a condition
existing prior to the date hereof, which a federal, state, or municipal
Governmental Authority, if it had knowledge of such condition prior to the date
hereof, would have then required to be remedied pursuant to the then-current
Requirements in their form existing as of the date hereof. Such capital
improvements shall be amortized (with interest at the Base Rate) on a
straight-line basis over such period as Landlord shall reasonably determine in
accordance with sound real estate management and accounting principles
consistently applied, and the amount included in Operating Expenses in any
Comparison Year shall be equal to the annual amortized amount. Operating
Expenses shall not include any Excluded Expenses. If during all or part of the
Base Year or any Comparison Year, Landlord shall not furnish any particular
item(s) of work or service (which would otherwise constitute an Operating
Expense) to any occupable portions of the Project for any reason, then, for
purposes of computing Operating Expenses for such period, the amount included in
Operating Expenses for such period shall be increased by an amount equal to the
costs and expenses that would have been reasonably incurred by Landlord during
such period if Landlord had furnished such item(s) of work or service to such
portion of the Project. Landlord shall exclude from Operating Expenses for the
Base Year any non-recurring items. If Landlord eliminates from Operating
Expenses for any Comparison Year a recurring category of expenses previously
included in Operating Expenses for the Base Year, Landlord may subtract such
category from Operating Expenses for the Base Year commencing with such
Comparison Year. Without limiting the generality of the foregoing, if Landlord
eliminates from Operating Expenses for any Comparison Year any particular type
of insurance included in Operating Expenses for the Base Year, or if Landlord
reduces the level of insurance coverage during any Comparison Year from that
carried during the Base Year, then Landlord may adjust the amount of any
insurance premium included in Operating Expenses for the Base Year to equal that
amount which Landlord reasonably estimates it would have incurred had Landlord
maintained similar types and levels of insurance during the Base Year as
maintained by Landlord during such Comparison Year. In determining the amount of
Operating Expenses for the Base Year or any Comparison Year, if less than
ninety-five percent (95%) of the Project rentable area is occupied by tenants at
any time during any such Base Year or Comparison Year, Operating Expenses that
vary based on occupancy shall be determined for such Base Year or Comparison
Year to be an amount equal to the like expenses which would normally be expected
to be incurred had such occupancy been ninety-five percent (95%) throughout the
Base Year or such Comparison Year.

 

Notwithstanding any provision to the contrary set forth herein, Landlord shall
(a) not collect or be entitled to collect Operating Expenses from all of the
tenants in the Building in an amount in excess of one hundred percent (100%) of
the Operating Expenses actually paid by Landlord in connection with the
operation of the Building; and (b) make no profit from Landlord's collections of
Operating Expenses.

 

(f)     "Statement" shall mean a statement containing a comparison of (i) Base
Taxes and the Taxes for any Comparison Year, or (ii) Base Operating Expenses and
the Operating Expenses for any Comparison Year.

 

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(g)     "Taxes" shall mean (i) all real estate taxes, assessments, sewer and
water rents, rates and charges and other governmental levies, impositions or
charges, whether general, special, ordinary, extraordinary, foreseen or
unforeseen (including transit taxes, leasehold taxes or taxes based upon the
receipt of rent, including gross receipts or sales taxes applicable to the
receipt of rent), which may be assessed, levied or imposed upon all or any part
of the Project, and (ii) all expenses (including reasonable attorneys' fees and
disbursements and experts' and other witnesses' fees) incurred in contesting any
of the foregoing or the Assessed Valuation of the Project. Taxes shall not
include (x) interest or penalties incurred by Landlord as a result of Landlord's
late payment of Taxes, or (y) franchise, transfer, gift, inheritance, estate or
net income taxes imposed upon Landlord. If Landlord elects to pay any assessment
in annual installments, then (i) such assessment shall be deemed to have been so
divided and to be payable in the maximum number of installments permitted by
law, and (ii) there shall be deemed included in Taxes for each Comparison Year
the installments of such assessment becoming payable during such Comparison
Year, together with interest payable during such Comparison Year on such
installments and on all installments thereafter becoming due as provided by law,
all as if such assessment had been so divided. If at any time the methods of
taxation prevailing on the Effective Date shall be altered so that in lieu of or
as an addition to the whole or any part of Taxes, there shall be assessed,
levied or imposed (1) a tax, assessment, levy, imposition or charge based on the
income or rents received from the Project whether or not wholly or partially as
a capital levy or otherwise, (2) a tax, assessment, levy, imposition or charge
measured by or based in whole or in part upon all or any part of the Project and
imposed upon Landlord, (3) a license fee measured by the rents, or (4) any other
tax, assessment, levy, imposition, charge or license fee however described or
imposed, including business improvement district impositions, then all such
taxes, assessments, levies, impositions, charges or license fees or the part
thereof so measured or based shall be deemed to be Taxes.

 

Section 7.2     Tenant's Tax Payment.

 

(a)     If the Taxes payable for any Comparison Year exceed the Base Taxes,
Tenant shall pay to Landlord Tenant's Proportionate Share of such excess
("Tenant's Tax Payment"). For each Comparison Year, Landlord shall furnish to
Tenant a statement setting forth Landlord's reasonable estimate of Tenant's Tax
Payment for such Comparison Year (the "Tax Estimate"). Tenant shall pay to
Landlord on the first (1st) day of each month during such Comparison Year an
amount equal to 1/12 of the Tax Estimate for such Comparison Year. If Landlord
furnishes a Tax Estimate for a Comparison Year subsequent to the commencement
thereof, then (i) until the first (1st) day of the month following the month in
which the Tax Estimate is furnished to Tenant, Tenant shall pay to Landlord on
the first (1st) day of each month an amount equal to the monthly sum payable by
Tenant to Landlord under this Section 7.2 during the last month of the preceding
Comparison Year, (ii) promptly after the Tax Estimate is furnished to Tenant or
together therewith, Landlord shall give notice to Tenant stating whether the
installments of Tenant's Tax Estimate previously made for such Comparison Year
were greater or less than the installments of Tenant's Tax Estimate to be made
for such Comparison Year in accordance with the Tax Estimate, and (x) if there
shall be a deficiency, Tenant shall pay the amount thereof within ten (10)
Business Days after demand therefor, or (y) if there shall have been an
overpayment, Landlord shall credit the amount thereof against subsequent
payments of Rent due hereunder, and (iii) on the first (1st) day of the month
following the month in which the Tax Estimate is furnished to Tenant, and on the
first (1st) day of each month thereafter throughout the remainder of such
Comparison Year, Tenant shall pay to Landlord an amount equal to 1/12 of the Tax
Estimate. Landlord shall have the right, upon not less than thirty (30) days
prior written notice to Tenant, to reasonably adjust the Tax Estimate from time
to time during any Comparison Year.

 

(b)     As soon as reasonably practicable after Landlord has determined the
Taxes for a Comparison Year, Landlord shall furnish to Tenant a Statement for
such Comparison Year. If the Statement shall show that the sums paid by Tenant
under Section 7.2(a) exceeded the actual amount of Tenant's Tax Payment for such
Comparison Year, Landlord shall credit the amount of such excess against
subsequent payments of Rent due hereunder or if no further payments of Rent are
due hereunder, Landlord shall refund such amounts directly to Tenant. If the
Statement for such Comparison Year shall show that the sums so paid by Tenant
were less than Tenant's Tax Payment for such Comparison Year, Tenant shall pay
the amount of such deficiency within ten (10) Business Days after delivery of
the Statement to Tenant. The provisions of this Section 7.2 shall survive the
expiration or earlier termination of the Term.

 

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(c)     Only Landlord may institute proceedings to reduce the Assessed Valuation
of the Project and the filings of any such proceeding by Tenant without
Landlord's consent shall constitute an Event of Default. If the Taxes payable
for the Base Year are reduced, the Base Taxes shall be correspondingly revised,
the Additional Rent previously paid or payable on account of Tenant's Tax
Payment hereunder for all Comparison Years shall be recomputed on the basis of
such reduction, and Tenant shall pay to Landlord within ten (10) Business Days
after being billed therefor, any deficiency between the amount of such
Additional Rent previously computed and paid by Tenant to Landlord, and the
amount due as a result of such recomputations. If Landlord receives a refund of
Taxes for any Comparison Year, Landlord shall credit against subsequent payments
of Rent due hereunder, an amount equal to Tenant's Proportionate Share of the
refund, net of any expenses incurred by Landlord in achieving such refund, which
amount shall not exceed Tenant's Tax Payment paid for such Comparison Year.
Landlord shall not be obligated to file any application or institute any
proceeding seeking a reduction in Taxes or the Assessed Valuation. The benefit
of any exemption or abatement relating to all or any part of the Project shall
accrue solely to the benefit of Landlord and Taxes shall be computed without
taking into account any such exemption or abatement.

 

(d)     Tenant shall be responsible for any applicable occupancy or rent tax now
in effect or hereafter enacted and, if such tax is payable by Landlord, Tenant
shall promptly pay such amounts to Landlord, upon Landlord's demand.

 

(e)     Tenant shall be obligated to make Tenant's Tax Payment regardless of
whether Tenant may be exempt from the payment of any Taxes as the result of any
reduction, abatement or exemption from Taxes granted or agreed to by any
Governmental Authority, or by reason of Tenant's diplomatic or other tax-exempt
status.

 

Section 7.3     Tenant's Operating Payment.

 

(a)      If the Operating Expenses payable for any Comparison Year exceed the
Base Operating Expenses, Tenant shall pay to Landlord Tenant's Proportionate
Share of such excess ("Tenant's Operating Payment"). For each Comparison Year,
Landlord shall furnish to Tenant a statement setting forth Landlord's reasonable
estimate of Tenant's Operating Payment for such Comparison Year (the "Expense
Estimate"). Tenant shall pay to Landlord on the first (1st) day of each month
during such Comparison Year an amount equal to 1/12 of the Expense Estimate. If
Landlord furnishes an Expense Estimate for a Comparison Year subsequent to the
commencement thereof, then (i) until the first (1st) day of the month following
the month in which the Expense Estimate is furnished to Tenant, Tenant shall pay
to Landlord on the first (1st) day of each month an amount equal to the monthly
sum payable by Tenant to Landlord under this Section 7.3 during the last month
of the preceding Comparison Year, (ii) promptly after the Expense Estimate is
furnished to Tenant or together therewith, Landlord shall give notice to Tenant
stating whether the installments of Tenant's Operating Payment previously made
for such Comparison Year were greater or less than the installments of Tenant's
Operating Payment to be made for such Comparison Year in accordance with the
Expense Estimate, and (x) if there shall be a deficiency, Tenant shall pay the
amount thereof within ten (10) Business Days after demand therefor, or (y) if
there shall have been an overpayment, Landlord shall credit the amount thereof
against subsequent payments of Rent due hereunder, and (iii) on the first (1st)
day of the month following the month in which the Expense Estimate is furnished
to Tenant, and on the first (1st) day of each month thereafter throughout the
remainder of such Comparison Year, Tenant shall pay to Landlord an amount equal
to 1/12 of the Expense Estimate. Landlord shall have the right, upon not less
than thirty (30) days prior written notice to Tenant, to reasonably adjust the
Expense Estimate from time to time during any Comparison Year.

 

(b)     On or before May 1st of each Comparison Year, Landlord shall furnish to
Tenant a Statement for the immediately preceding Comparison Year. If the
Statement shows that the sums paid by Tenant under Section 7.3(a) exceeded the
actual amount of Tenant's Operating Payment for such Comparison Year, Landlord
shall credit the amount of such excess against subsequent payments of Rent due
hereunder or if no further payments of Rent are due hereunder, Landlord shall
refund such amounts directly to Tenant. If the Statement shows that the sums so
paid by Tenant were less than Tenant's Operating Payment for such Comparison
Year, Tenant shall pay the amount of such deficiency within ten (10) Business
Days after delivery of the Statement to Tenant. The failure of Landlord to
timely furnish the Statement for any Comparison Year shall not prejudice
Landlord or Tenant from enforcing its rights under this Article 7. The
provisions of this Section 7.3 shall survive the expiration or earlier
termination of the Term.

 

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Section 7.4     Non-Waiver; Disputes. (a) Landlord's failure to render any
Statement on a timely basis with respect to any Comparison Year shall not
prejudice Landlord's right to thereafter render a Statement with respect to such
Comparison Year or any subsequent Comparison Year, nor shall the rendering of a
Statement prejudice Landlord's right to thereafter render a corrected Statement
for that Comparison Year. Notwithstanding the foregoing, Tenant shall not be
responsible for Taxes or Operating Expenses attributable to any Comparison Year
which are first billed to Tenant more than eighteen (18) months after the
expiration of the Term, provided that in any event Tenant shall be responsible
for Taxes and Operating Expenses levied by any governmental authority or by any
public utility companies at any time following the expiration of the Term which
are attributable to any Comparison Year (provided that Landlord delivers to
Tenant any such bill for such amounts within one (1) calendar year following
Landlord’s receipt of the bill therefor).

 

(b)     Within one hundred eighty (180) days after receipt of a Statement by
Tenant, Tenant or an agent of Tenant may, after reasonable notice to Landlord,
inspect Landlord’s records at Landlord’s offices in Los Angeles. Each Statement
sent to Tenant shall be conclusively binding upon Tenant unless Tenant (i) pays
to Landlord when due the amount set forth in such Statement, without prejudice
to Tenant's right to dispute such Statement, and (ii) within one hundred eighty
(180) days after such Statement is sent, sends a notice to Landlord objecting to
such Statement and specifying the reasons therefor. Tenant agrees that Tenant
will not employ, in connection with any dispute under this Lease, any person or
entity who is to be compensated, in whole or in part, on a contingency fee
basis. If the parties are unable to resolve any dispute as to the correctness of
such Statement within thirty (30) days following such notice of objection,
either party may refer the issues raised to a nationally recognized public
accounting firm selected by Landlord and reasonably acceptable to Tenant, and
the decision of such accountants shall be conclusively binding upon Landlord and
Tenant. In connection therewith, Tenant and such accountants shall execute and
deliver to Landlord a confidentiality agreement, in form and substance
reasonably satisfactory to Landlord, whereby such parties agree not to disclose
to any third party any of the information obtained in connection with such
review. Tenant shall pay the fees and expenses relating to such procedure,
unless such accountants determine that Landlord overstated Operating Expenses by
more than five percent (5%) for such Comparison Year, in which case Landlord
shall pay such fees and expenses. Except as provided in this Section 7.4, Tenant
shall have no right whatsoever to dispute, by judicial proceeding or otherwise,
the accuracy of any Statement.

 

Section 7.5     Proration. If the Commencement Date is not January 1, and
provided that the Commencement Date does not occur in the Base Year, Tenant's
Tax Payment and Tenant's Operating Payment for the Comparison Year in which the
Commencement Date occurs shall be apportioned on the basis of the number of days
in the year from the Commencement Date to the following December 31. If the
Expiration Date occurs on a date other than December 31st, Tenant's Tax Payment
and Tenant's Operating Payment for the Comparison Year in which such Expiration
Date occurs shall be apportioned on the basis of the number of days in the
period from January 1st to the Expiration Date. Upon the expiration or earlier
termination of this Lease, any Additional Rent under this Article 7 shall be
adjusted or paid within thirty (30) days after submission of the Statement for
the last Comparison Year.

 

Section 7.6     No Reduction in Rent. In no event shall any decrease in
Operating Expenses or Taxes in any Comparison Year below the Base Operating
Expenses or Base Taxes, as the case may be, result in a reduction in the Fixed
Rent or any component of Additional Rent payable hereunder.

 

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Section 7.7     Allocation of Operating Expenses and Taxes. Landlord shall have
the right, from time to time, to equitably allocate some or all of the Operating
Expenses and/or Taxes for the Project among different portions or occupants of
the Project and/or the Building (the “Cost Pools”), in Landlord’s discretion.
Such Cost Pools may include, but shall not be limited to, the office space
tenants of the Project and/or the Building, and the retail space tenants of the
Project and/or the Building. The Operating Expenses and/or Taxes allocable to
each such Cost Pool shall be allocated to such Cost Pool and charged to the
tenants within such Cost Pool in an equitable manner. The parties acknowledge
that the Building is a part of a multi-building project and that the costs and
expenses incurred in connection with the Project should be shared between the
tenants of the Building and the tenants of the other buildings in the Project.
Accordingly, Operating Expenses and Taxes are determined annually for the
Project as a whole, and a portion of the Operating Expenses and Taxes, which
portion shall be determined by Landlord on an equitable basis, shall be
allocated to the tenants of the Building (as opposed to the tenants of any other
buildings in the Project) and such portion shall be the Operating Expenses and
Taxes for purposes of this Lease. Such portion of Operating Expenses and Taxes
allocated to the tenants of the Building shall include all Operating Expenses
and Taxes attributable solely to the Building and an equitable portion of the
Operating Expenses and Taxes attributable to the Project as a whole.

 

ARTICLE 8

REQUIREMENTS OF LAW

 

Section 8.1     Compliance with Requirements.

 

(a)     Tenant's Compliance. Tenant, at its expense, shall comply with all
Requirements applicable to the Premises and/or Tenant's use or occupancy
thereof; provided, however, that Tenant shall not be obligated to comply with
any Requirements requiring any structural alterations to the Building unless the
application of such Requirements arises from (i) the specific manner and/or
nature of Tenant's use or occupancy of the Premises, as distinct from general
office use, (ii) the Tenant Improvements or Alterations made by Tenant, or
(iii) a breach by Tenant of any provisions of this Lease. Any repairs or
alterations required for compliance with applicable Requirements shall be made
at Tenant's expense (1) by Tenant in compliance with Article 5 if such repairs
or alterations are nonstructural and do not affect any Building System, and to
the extent such repairs or alterations do not affect areas outside the Premises,
or (2) by Landlord if such repairs or alterations are structural or affect any
Building System, or to the extent such repairs or alterations affect areas
outside the Premises. If Tenant obtains knowledge of any failure to comply with
any Requirements applicable to the Premises, Tenant shall give Landlord prompt
notice thereof.

 

(b)     Hazardous Materials. Tenant shall not cause or permit (i) any Hazardous
Materials to be brought onto the Project, (ii) the storage or use of Hazardous
Materials in or about the Building or Premises (subject to the second sentence
of this Section 8.1(b)), or (iii) the escape, disposal or release of any
Hazardous Materials within or in the vicinity of the Project. Nothing herein
shall be deemed to prevent Tenant's use of any Hazardous Materials customarily
used in the ordinary course of office work, provided such use is in accordance
with all Requirements. Tenant shall be responsible, at its expense, for all
matters directly or indirectly based on, or arising or resulting from the
presence of Hazardous Materials at the Project which is caused or permitted by a
Tenant Party. Tenant shall provide to Landlord copies of all communications
received by Tenant with respect to any Requirements relating to Hazardous
Materials, and/or any claims made in connection therewith. Landlord or its
agents may perform environmental inspections of the Premises at any time,
subject to the provisions of Section 14.1 below. Subject to and as set forth in
items (r) and (s) of the definition of “Excluded Expenses” set forth in Exhibit
B attached hereto, any costs incurred by Landlord in connection with any
Pre-Existing Hazardous Materials (as defined in item (r) of Exhibit B) and any
other Hazardous Materials brought into the Building or onto the Project after
the date of this Lease by Landlord, the Indemnitees, any tenant (other than
Tenant), or any other third party shall be specifically excluded from Operating
Expenses. Landlord covenants that during the Term, Landlord shall comply with
all Requirements relating to Hazardous Materials in accordance with, and as
required by, the terms of Article 8 of this Lease.

 

(c)     Landlord's Compliance. Landlord shall comply with (or cause to be
complied with) all Requirements applicable to the Base Building and the Common
Areas which are not the obligation of Tenant, to the extent that non-compliance
would (i) prohibit Tenant from obtaining or maintaining a certificate of
occupancy for the Premises, (ii) unreasonably and materially affect the safety
of Tenant's employees or create a significant health hazard for Tenant's
employees, or (iii) materially impair Tenant's use and occupancy of the Premises
for the Permitted Uses. All costs incurred by Landlord in connection with this
Section 8.1(c) shall be included in Operating Expenses to the extent permitted
under Section 7.1 of this Lease.

 

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(d)     Landlord's Insurance. Tenant shall not cause or permit any action or
condition that would (i) invalidate or conflict with Landlord's insurance
policies or be inconsistent with the recommendations of any of the issuers of
such policies, (ii) violate applicable rules, regulations and guidelines of the
Fire Department, Fire Insurance Rating Organization or any other authority
having jurisdiction over the Building or Project, (iii) cause an increase in the
premiums of insurance for the Building or Project over that payable with respect
to Comparable Buildings, or (iv) result in Landlord's insurance companies'
refusing to insure the Building or Project or any property therein in amounts
and against risks as reasonably determined by Landlord. If insurance premiums
increase as a result of Tenant's failure to comply with the provisions of this
Section 8.1, Tenant shall promptly cure such failure and shall reimburse
Landlord for the increased insurance premiums paid by Landlord as a result of
such failure by Tenant.

 

Section 8.2     Fire and Life Safety. Tenant shall maintain in good order and
repair the sprinkler, fire-alarm and life-safety system in the Premises in
accordance with this Lease including, without limitation, the provisions of
Section 6.2 respecting any repairs affecting any Building System, the Rules and
Regulations and all Requirements, if and to the extent such system has not been
installed in the Premises prior to the Commencement Date. If the Fire Insurance
Rating Organization or any Governmental Authority or any of Landlord's insurers
requires or recommends any modifications and/or alterations be made or any
additional equipment be supplied in connection with the sprinkler system or fire
alarm and life-safety system serving the Building by reason of Tenant's
business, any Alterations performed by Tenant or the location of the partitions,
Tenant's Property, or other contents of the Premises, Landlord (to the extent
outside of the Premises) or Tenant (to the extent within the Premises) shall
make such modifications and/or Alterations, and supply such additional
equipment, in either case at Tenant's expense.

 

Section 8.3     Required Disclosures Related to Accessibility Standards. For
purposes of Section 1938(a) of the California Civil Code, Landlord hereby
discloses to Tenant, and Tenant hereby acknowledges, that the Premises have not
undergone inspection by a person certified as a Certified Access Specialist
(CASp). In addition, the following notice is hereby provided pursuant to Section
1938(e) of the California Civil Code: "A Certified Access Specialist (CASp) can
inspect the subject premises and determine whether the subject premises comply
with all of the applicable construction-related accessibility standards under
state law. Although state law does not require a CASp inspection of the subject
premises, the commercial property owner or lessor may not prohibit the lessee or
tenant from obtaining a CASp inspection of the subject premises for the
occupancy or potential occupancy of the lessee or tenant, if requested by the
lessee or tenant. The parties shall mutually agree on the arrangements for the
time and manner of the CASp inspection, the payment of the fee for the CASp
inspection, and the cost of making any repairs necessary to correct violations
of construction-related accessibility standards within the premises." In the
event that Tenant requests a CASp inspection, then, (i) Tenant, at its sole cost
and expense, shall be responsible for making any improvements, alterations,
modifications and/or repairs to or within the Premises to correct violations of
construction-related accessibility standards, including, without limitation, any
violations disclosed by such CASp inspection, and (ii) if such CASp inspection
identifies any improvements, alterations, modifications and/or repairs necessary
to correct violations of construction-related accessibility standards relating
to those items of the Building and/or the Project located outside the Premises,
then Tenant shall be responsible for performing any such improvements,
alterations, modifications and/or repairs as and to the extent required by
applicable Requirements to the extent provided Section 8.1(a) of this Lease and
Landlord shall be responsible for performing any such improvements, alterations,
modifications and/or repairs as and to the extent required by applicable
Requirements to the extent provided in Section 8.1(c) of this Lease.

 

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ARTICLE 9

SUBORDINATION

 

Section 9.1     In General. This Lease shall be subject and subordinate to all
Mortgages and Superior Leases, unless any Mortgagee or Lessor of any such
Mortgages and/or Superior Leases, as applicable, require in writing that this
Lease be superior thereto. Tenant covenants and agrees in the event any
proceedings are brought for the foreclosure of any Mortgage or deed in lieu
thereof (or if any Superior Lease is terminated), to attorn to the lienholder or
purchaser or any successors thereto upon any such foreclosure sale or deed in
lieu thereof (or to the Lessor), if so requested to do so by such purchaser or
lienholder or Lessor, and to recognize such purchaser or lienholder or Lessor as
the landlord under this Lease. This Section 9.1 shall be self-operative, but
within ten (10) days of request from a Mortgagee (or Lessor), Tenant shall
execute a commercially reasonable subordination agreement in favor of the
Mortgagee (or Lessor) (i) evidencing such attornment, (ii) setting forth the
terms and conditions of Tenant's tenancy, (iii) providing Tenant's tenancy will
not be disturbed in the absence of a default hereunder by Tenant which is not
cured within applicable periods of notice and cure hereunder, and
(iv) containing such other commercially reasonable terms and conditions as may
be required by such Mortgagee (or Lessor), provided such terms and conditions do
not increase the Rent, materially increase Tenant's other obligations or
materially and adversely affect Tenant's rights under this Lease. Tenant hereby
irrevocably authorizes Landlord to execute and deliver in the name of Tenant any
such agreement if Tenant fails to do so, provided that such authorization shall
in no way relieve Tenant from the obligation of executing such agreement of
subordination or superiority. Landlord's interest herein may be assigned as
security at any time to any lienholder. Tenant waives the provisions of any
current or future statute, rule or law which may give or purport to give Tenant
any right or election to terminate or otherwise adversely affect this Lease and
the obligations of the Tenant hereunder in the event of any foreclosure
proceeding or sale.

 

Section 9.2     Future Condominium Declaration. This Lease and Tenant's rights
hereunder are and will be subject and subordinate to any condominium
declaration, by-laws and other instruments (collectively, the "Declaration")
which may be recorded regardless of the reason therefor, in order to permit a
condominium form of ownership of the Building pursuant to the California
Subdivision Map Act or any successor Requirement, provided that the Declaration
does not by its terms increase the Rent, materially increase Tenant's non-Rent
obligations or materially and adversely affect Tenant's rights under this Lease.
At Landlord's request, and subject to the foregoing proviso, Tenant will execute
and deliver to Landlord an amendment of this Lease confirming such subordination
and modifying this Lease to conform to such condominium regime.

 

ARTICLE 10

SERVICES

 

Section 10.1     Electricity. Subject to any Requirements or any public utility
rules or regulations governing energy consumption, Landlord shall make or cause
to be made, customary arrangements with utility companies and/or other suppliers
of electricity to furnish electric current to the Premises for Tenant's use in
accordance with the Design Standards. If Landlord reasonably determines by the
use of an electrical consumption survey or by other reasonable means that Tenant
is using electric current (including overhead fluorescent fixtures) in excess of
4 watts per square foot of rentable area in the Premises per month, as
determined on a monthly basis ("Excess Electrical Usage"), then Landlord shall
have the right to charge Tenant an amount equal to Landlord's reasonable
estimate of Tenant's Excess Electrical Usage, and shall have the further right
to install an electric current meter, sub-meter or check meter in the Premises
(a "Meter") to measure the amount of electric current consumed in the Premises.
The cost of such Meter, special conduits, wiring and panels needed in connection
therewith and the installation, maintenance and repair thereof shall be paid by
Tenant. In the event that the Premises has an existing Meter, then Tenant shall,
at its sole cost and expense, connect its equipment to such Meter. Tenant shall
pay to Landlord, from time to time, but no more frequently than monthly, for its
Excess Electrical Usage at the Premises, plus Landlord's charge equal to five
percent (5%) of Tenant's Excess Electrical Usage for Landlord's costs of
maintaining, repairing and reading such Meter. The rate to be paid by Tenant for
submetered electricity shall include any taxes or other charges in connection
therewith.

 

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Section 10.2     Excess Electricity. Tenant shall at all times comply with the
rules and regulations of the utility company supplying electricity to the
Building. Tenant shall not use any electrical equipment which, in Landlord's
reasonable judgment, would exceed the capacity of the electrical equipment
serving the Premises. If Landlord determines that Tenant's electrical
requirements necessitate installation of any additional risers, feeders or other
electrical distribution equipment (collectively, "Electrical Equipment"), or if
Tenant provides Landlord with evidence reasonably satisfactory to Landlord of
Tenant's need for excess electricity and requests that additional Electrical
Equipment be installed, Landlord shall, at Tenant's expense, install such
additional Electrical Equipment, provided that Landlord, in its reasonable
judgment, determines that (a) such installation is practicable and necessary,
(b) such additional Electrical Equipment is permissible under applicable
Requirements, and (c) the installation of such Electrical Equipment will not
cause permanent damage to the Building or the Premises, cause or create a
hazardous condition, entail excessive or unreasonable alterations, interfere
with or limit electrical usage by other tenants or occupants of the Building or
exceed the limits of the switchgear or other facilities serving the Building, or
require power in excess of that available from the utility company serving the
Building. Any costs incurred by Landlord in connection therewith shall be paid
by Tenant within ten (10) days after the rendition of a bill therefor.

 

Section 10.3     Elevators. Landlord shall provide passenger elevator service to
the Premises twenty-four (24) hours per day, seven (7) days per week; provided,
however, Landlord may limit passenger elevator service during times other than
Ordinary Business Hours. Landlord shall provide at least one freight elevator
serving the Premises, available upon Tenant's prior request, on a non-exclusive
"first come, first serve" basis with other Building tenants, on all Business
Days from 7:00 a.m. to 5:30 p.m., which hours of operation are subject to
change.

 

Section 10.4     Heating, Ventilation and Air Conditioning. Landlord shall
furnish to the Premises heating, ventilation and air-conditioning ("HVAC") in
accordance with the Design Standards set forth in Exhibit D, attached hereto,
during Ordinary Business Hours. Landlord shall have access to all air-cooling,
fan, ventilating and machine rooms and electrical closets and all other
mechanical installations of Landlord (collectively, "Mechanical Installations"),
and Tenant shall not construct partitions or other obstructions which may
interfere with Landlord's access thereto or the moving of Landlord's equipment
to and from the Mechanical Installations. No Tenant Party shall at any time
enter the Mechanical Installations or tamper with, adjust, or otherwise affect
such Mechanical Installations. Landlord shall not be responsible if the HVAC
System fails to provide cooled or heated air, as the case may be, to the
Premises in accordance with the Design Standards by reason of (i) any equipment
installed by, for or on behalf of Tenant, which has an electrical load in excess
of the average electrical load and human occupancy factors for the HVAC System
as designed, or (ii) any rearrangement of partitioning or other Alterations made
or performed by, for or on behalf of Tenant. Tenant agrees that, notwithstanding
the proper operation of the HVAC System, Tenant's failure to keep operable
windows in the Premises closed, and depending on the position of the sun during
daylight hours, to lower the blinds, may affect the HVAC System's ability to
meet the Design Standards. Tenant shall cooperate with Landlord and shall abide
by the rules and regulations which Landlord may reasonably prescribe for the
proper functioning and protection of the HVAC System.

 

Section 10.5     Overtime Freight Elevators and HVAC. The Fixed Rent does not
include any charge to Tenant for the furnishing of any freight elevator service
or HVAC to the Premises during any periods other than as set forth in
Section 10.3 and Section 10.4 ("Overtime Periods"). If Tenant desires freight
elevator service during Overtime Periods, Tenant shall deliver notice to the
Building office requesting such service at least 24 hours prior to the time
Tenant requests such service to be provided; provided, however, that Landlord
shall use reasonable efforts to arrange such service on such shorter notice as
Tenant shall provide. If Landlord furnishes freight elevator or HVAC service
during Overtime Periods, Tenant shall pay to Landlord the cost thereof at the
then established rates for such services in the Building. The current rate as of
the date of this Lease for HVAC service during Overtime Periods is $42.02 per
hour.

 

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Section 10.6     Cleaning. Landlord shall cause the Premises (excluding any
portions thereof used for the storage, preparation, service or consumption of
food or beverages, as an exhibition area or classroom, for storage, as a
shipping room, mail room or similar purposes, for private bathrooms, showers or
exercise facilities, as a trading floor, or primarily for operation of computer,
data processing, reproduction, duplicating or similar equipment) to be cleaned,
substantially in accordance with the standards set forth in Exhibit E, attached
hereto. Notwithstanding the foregoing, Landlord shall, as part of its services,
cause the floors of the kitchen located in the Premises to be cleaned and shall
also take out the trash located in the kitchen of the Premises. Any areas of the
Premises which Landlord is not required to clean hereunder or which require
additional cleaning shall be cleaned, at Tenant's expense, by Landlord's
cleaning contractor, at rates which shall be competitive with rates of other
cleaning contractors providing comparable services to Comparable Buildings.
Landlord's cleaning contractor and its employees shall have access to the
Premises at all times except between 8:00 a.m. and 5:30 p.m. on weekdays which
are not Observed Holidays.

 

Section 10.7     Water. Landlord shall provide water in the core lavatories and
kitchen on each floor of the Building. If Tenant requires water for any
additional purposes, Tenant shall pay for the cost of bringing water to the
Premises and Landlord may install a meter to measure the water. Tenant shall pay
the cost of such installation, and for all maintenance, repairs and replacements
thereto, and for the reasonable charges of Landlord for the water consumed.

 

Section 10.8     Refuse Removal. Landlord shall provide refuse removal services
at the Building for ordinary office refuse and rubbish. Tenant shall pay to
Landlord, Landlord's reasonable charge for such removal to the extent that the
refuse generated by Tenant exceeds the refuse customarily generated by general
office tenants. Tenant shall not dispose of any refuse in the Common Areas, and
if Tenant does so, Tenant shall be liable for Landlord's reasonable charge for
such removal.

 

Section 10.9     Signage.

 

(a)     Entry Identification. Landlord shall, at Landlord's sole cost and
expense, install (and Tenant shall be entitled to maintain) entry identification
signage for the designation of Tenant's entity name at the entrance to the
Premises, the location, quality, design, style, lighting and size of which
signage shall be consistent with the Landlord's then current Building standard
signage program and shall be subject to Landlord's prior written approval, in
its reasonable discretion, and all applicable Requirements. Following the Tenant
Improvements of the Tenant's entry identification signage in accordance with
this Section 10.9(a), Tenant shall be entitled, at its sole cost and expense, to
change the name on the Tenant's entry identification signage to a new name
adopted by Tenant, so long as such change does not involve an Objectionable Name
(as that term is defined hereinbelow). The term "Objectionable Name" shall mean
any name which relates to an entity which is of a character or reputation, or is
associated with a political orientation or faction, which is inconsistent with
the quality of the Building as a first-class office building, or which would
otherwise reasonably offend a landlord of the Comparable Buildings.

 

(b)     Directory. The lobby shall contain a directory wherein the Building's
tenants shall be listed. Tenant shall be entitled to a proportionate share of
such listings, based on the rentable square footage of the Premises. From time
to time, but not more frequently than monthly, Landlord shall update the
directory to reflect such changes in the listings therein as Tenant shall
request.

 

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(c)     Monument Signage. Tenant hereby acknowledges that, as of the date
hereof, the existing monument (the "Monument") serving the Project does not have
any panels available for the placement of Tenant's name. In the event that
following the date hereof, a panel becomes available on the Monument, then,
subject to the terms of this Section 10.9(c) below, the Original Tenant shall
have the non-exclusive right to elect to have installed the Original Tenant's
name ("Tenant's Identity Sign") on the Monument. Tenant's Identity Sign shall be
located on the Monument in a location designated by Landlord. The graphics,
materials, color, design, lettering, size, quality and specifications of
Tenant's Identity Sign shall be subject to the prior written approval of
Landlord, in Landlord's reasonable discretion, shall be consistent with the
exterior building signage of the other tenants of the Building, and shall also
comply with and be subject to all applicable laws, statutes, ordinances, rules,
regulations, permits, approvals, and all covenants, conditions or restrictions
of record, including, but not limited to, all requirements of the City of Los
Angeles ("City") (or other applicable Governmental Authorities); provided,
however, that in no event shall the approval by the City (or other applicable
Governmental Authority) of Tenant's Identity Sign be deemed a condition
precedent to the effectiveness of this Lease. Tenant's Identity Sign shall be
installed by Landlord, provided that Tenant shall pay for all costs incurred by
Landlord in the design, construction and installation of the Tenant's Identity
Sign. Landlord shall maintain the Monument and Tenant's Identity Sign in
accordance with Landlord’s signage maintenance program, provided that Tenant
shall pay for all costs incurred by Landlord in connection with such maintenance
(prorated based on the number of tenants identified on the Monument). At the
expiration or earlier termination of this Lease (or within five (5) days
following Tenant’s receipt of written notice from Landlord that Tenant’s rights
to such Tenant's Identity Sign have terminated as a result of an uncured event
of default, or Tenant's failure to satisfy the occupancy requirement set forth
below), Tenant shall, at Tenant’s sole cost and expense, cause (a) Tenant's
Identity Sign to be removed from the Monument and (b) the Monument to be
restored to its condition existing prior to the installation of Tenant's
Identity Sign. If Tenant fails to timely remove Tenant's Identity Sign and
restore the Monument as provided in this Section 10.9(c), then Landlord may (but
shall not be obligated to) perform such work at Tenant's sole cost and expense.
All costs and expenses incurred by Landlord in connection with this Section
10.9(c) shall constitute Additional Rent under this Lease, and shall be paid by
Tenant to Landlord within ten (10) days following Tenant's receipt of an invoice
therefor. The signage rights granted to Tenant under this Section 8 are personal
to the Original Tenant, and may only be exercised by the Original Tenant (and
not any assignee, sublessee or other transferee of the Original Tenant’s
interest in the Lease, as amended) if the Original Tenant continually occupies
the entire Premises, and an Event of Default does not exist. Tenant hereby
acknowledges and agrees that Tenant's rights to the Monument as set forth in
this Section 10.9(c) shall be subordinate to the rights of all existing tenants
of the Project to the Monument.

 

Section 10.10     Telecommunications. If Tenant requests that Landlord grant
access to the Building to a telecommunications service provider designated by
Tenant for purposes of providing telecommunications services to Tenant, Landlord
shall use its good faith efforts to respond to such request within thirty (30)
days. Tenant acknowledges that nothing set forth in this Section 10.10 shall
impose any affirmative obligation on Landlord to grant such request and that
Landlord, in its reasonable discretion, shall have the right to determine which
telecommunications service providers shall have access to Building facilities.

 

Section 10.11     Service Interruptions. Landlord reserves the right to suspend
any service when necessary, by reason of Unavoidable Delays, accidents or
emergencies, or for any Work of Improvement which, in Landlord's reasonable
judgment, is necessary or appropriate, until such Unavoidable Delay, accident or
emergency shall cease or such Work of Improvement is completed and Landlord
shall not be liable for any interruption, curtailment or failure to supply
services, except as otherwise provided in Section 26.25 below. Landlord shall
use reasonable efforts to minimize interference with Tenant's use and occupancy
of the Premises as a result of any such interruption, curtailment or failure of
or defect in such service, or change in the supply, character and/or quantity
of, electrical service, and to restore any such services, remedy such situation
and minimize any interference with Tenant's business. The exercise of any such
right or the occurrence of any such failure by Landlord shall not constitute an
actual or constructive eviction, in whole or in part, entitle Tenant to any
compensation, abatement or diminution of Rent (except as otherwise provided in
Section 26.25 below), relieve Tenant from any of its obligations under this
Lease, or impose any liability upon Landlord or any Indemnified Party by reason
of inconvenience to Tenant, or interruption of Tenant's business, or otherwise.
Subject to Section 26.25 below, Landlord shall not be liable in any way to
Tenant for any failure, defect or interruption of, or change in the supply,
character and/or quantity of, electric service furnished to the Premises for any
reason except if attributable to the gross negligence or willful misconduct of
Landlord.

 

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ARTICLE 11

INSURANCE; PROPERTY LOSS OR DAMAGE

 

Section 11.1     Tenant's Insurance.

 

(a)     Prior to the date Landlord delivers possession of the Premises to Tenant
for the construction of the initial improvements pursuant to the Tenant Work
Letter attached hereto as Exhibit C, attached hereto, and continuing thereafter
throughout the Term, Tenant, at its expense, shall obtain and maintain in full
force and effect the following insurance policies throughout the Term:

 

(i)     Commercial General Liability (CGL) Insurance on an occurrence basis
covering liability arising from premises operations, independent contractors,
product-completed operations, personal injury, advertising injury, bodily
injury, death and/or property damage occurring in or about the Building, under
which Tenant is insured and Landlord, Landlord's Agent and any Lessors and any
Mortgagees whose names have been furnished to Tenant are named as additional
insureds (the "Insured Parties"). Such insurance shall provide primary coverage
without contribution from any other insurance or self-insurance carried by or
for the benefit of the Insured Parties, and such insurance shall include blanket
broad-form contractual liability coverage. The minimum limits of liability
applying exclusively to the Premises shall be a combined single limit with
respect to each occurrence in an amount of not less than Five Million and No/100
Dollars ($5,000,000.00). If CGL contains a general aggregate limit, it shall
apply separately to this location. Landlord shall retain the right to require
Tenant to increase such coverage from time to time to that amount of insurance
which in Landlord's reasonable judgment is then being customarily required by
landlords for similar office space in Comparable Buildings. There shall be no
deductible or self-insurance without the prior written consent of Landlord;

 

(ii)     All-Risk Commercial Property Insurance insuring Tenant's Property (as
defined in Exhibit B) and the Tenant-Insured Improvements (as defined in Exhibit
B), for the full replacement cost thereof, having a deductible amount, if any,
not in excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00) without
the prior written consent of Landlord. The Insured Parties shall be included as
loss payee(s) with respect to the Tenant-Insured Improvements;

 

(iii)     Builder's Risk during the performance of any Alteration, until
completion thereof, on an "All Risk" basis, including a permission to complete
and occupy, and flood, including resulting water damage, endorsements, for full
replacement cost covering the interest of Landlord and Tenant (and their
respective contractors and subcontractors) in all work incorporated in the
Building and all materials and equipment in or about the Premises, or evidence
of such coverage under the property insurance policies set forth in (ii) above.
The Insured Parties shall be named as additional insureds;

 

(iv)     Workers' Compensation Benefits Insurance and Employer's Liability
Insurance, with Worker's Compensation Benefits Insurance as required by law and
Employer's Liability Insurance with a limit not less than One Million and No/100
Dollars ($1,000,000.00) each accident for bodily injury by accident and One
Million and No/100 Dollars ($1,000,000.00) each employee for bodily injury by
disease. A deductible or self-insured retention for such policy shall not exceed
Twenty-Five Thousand and No/100 Dollars ($25,000.00) without the prior written
consent of Landlord;

 

(v)     Business Interruption Insurance covering a minimum of one (1) year of
anticipated gross Rent; and

 

(vi)     such other insurance in such amounts as the Insured Parties may
reasonably require from time to time.

 

(b)     All insurance required to be carried by Tenant shall contain a provision
that the Insured Parties receive thirty (30) days' prior written notice in
advance of any termination or material change to the policies that would affect
the interest of any of the Insured Parties and shall be effected under valid and
enforceable policies issued by reputable insurers authorized to do business in
the State of California and rated in AM Best's Insurance Guide, or any successor
thereto as having an AM Best's Rating of "A" or better and a Financial Size
Category of at least "X" or better, or, if such ratings are not then in effect,
the equivalent thereof or such other financial rating as Landlord may at any
time consider appropriate.

 

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(c)     On or prior to the Commencement Date, Tenant shall deliver to Landlord
appropriate certificates of insurance that evidence insurance required to be
covered by this Article 11, the waivers of subrogation required by Section 11.2
below, the Insured Parties are named as additional insureds/loss payees as
required pursuant to this Article 11, and the commercial general liability is
primary, non-contributory, and not excess of any other valid and collectible
insurance. Evidence of each renewal or replacement policies shall be delivered
by Tenant to Landlord at least ten (10) days after the expiration of the
policies.

 

(d)     By requiring insurance herein, Landlord does not represent that coverage
and limits will necessarily be adequate to protect Tenant, and such coverage and
limits shall not be deemed a limitation on or transfer of Tenant's liability
under the indemnities granted to Landlord in this contract.

 

(e)     All rights that inure to the benefit of the Landlord shall not be
prejudiced by the expiration of the Lease.

 

(f)     Tenant may satisfy the limits of liability required herein with a
combination of umbrella and/or excess policies of insurance where applicable,
provided that such policies comply with all of the provisions hereof (including,
without limitation, with respect to scope of coverage and naming of the Insured
Parties as additional insureds).

 

Section 11.2     Waiver of Subrogation. Landlord and Tenant shall have no
liability to one another, or to any insurer, by way of subrogation or otherwise,
on account of any loss or damage to their respective property, the Premises or
its contents or the Building, regardless of whether such loss or damage is
caused by the negligence of Landlord or Tenant, arising out of any of the perils
or casualties insured against by the property insurance policies carried, or
required to be carried, by the parties pursuant to this Lease, but only to the
extent covered by such insurance policies carried, or required to be carried, by
the parties pursuant to this Lease. In addition, Landlord and Tenant shall have
no liability to one another for any deductible amount carried under any policy,
except with respect to Tenant's reimbursement of deductible amounts to Landlord
as a part of Operating Expenses in accordance with Article 7 above. The
insurance policies obtained by Landlord and Tenant pursuant to this Lease, shall
permit waivers of subrogation which the insurer may otherwise have against the
non-insuring party. In the event the policy or policies do not include blanket
waiver of subrogation prior to loss, either Landlord or Tenant shall, at the
request of the other party, arrange and deliver to the requesting party a waiver
of subrogation endorsement in such form and content as may reasonably be
required by the requesting party or its insurer. Tenant acknowledges that
Landlord shall not carry insurance on, and shall not be responsible for,
(i) damage to any Tenant-Insured Improvements, (ii) Tenant's Property, and
(iii) any loss suffered by Tenant due to interruption of Tenant's business.

 

Section 11.3     Restoration.

 

(a)      If the Premises are damaged by fire or other casualty, or if the
Building is damaged such that Tenant is deprived of reasonable access to the
Premises, Landlord shall promptly commence and diligently pursue to completion
the repairs to substantially the condition of the Premises prior to the damage,
subject to the provisions of any Mortgage or Superior Lease and only to the
extent that such repairs can be reasonably made from the net proceeds of any
insurance actually received by Landlord, but Landlord shall have no obligation
to repair or restore (i) Tenant's Property or (ii) except as provided in
Section 11.3(b), any Tenant-Insured Improvements. So long as Tenant is not in
default beyond applicable grace or notice provisions in the payment or
performance of its obligations under this Section 11.3, and provided Tenant
timely delivers to Landlord either Tenant's Restoration Payment (as hereinafter
defined) or the Restoration Security (as hereinafter defined) or Tenant
expressly waives any obligation of Landlord to repair or restore any of Tenant's
Tenant-Insured Improvements, then until the restoration of the Premises is
Substantially Completed or would have been Substantially Completed but for
Tenant Delay, Fixed Rent, Tenant's Tax Payment and Tenant's Operating Payment
shall be reduced in the proportion by which the area of the part of the Premises
which is not usable (or accessible ) and is not used by Tenant bears to the
total area of the Premises. If this Lease is terminated in connection with any
fire or casualty and Tenant has obtained and maintained the insurance policies
required under Section 11.1 of this Lease, then Tenant shall assign to Landlord
all insurance proceeds payable to Tenant in connection with the Tenant-Insured
Improvements. In addition, if this Lease is terminated in connection with any
fire or casualty and Tenant has not obtained or maintained the insurance
policies required under Section 11.1 of this Lease, then Tenant shall pay to
Landlord an amount equal to the amount of the insurance proceeds that otherwise
would have been payable to Tenant had Tenant complied with the insurance
requirements set forth herein.

 

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(b)     As a condition precedent to Landlord's obligation to repair or restore
any Tenant-Insured Improvements, Tenant shall (i) pay to Landlord upon demand a
sum ("Tenant's Restoration Payment") equal to the amount, if any, by which
(A) the cost, as estimated by a reputable independent contractor reasonably
approved by Landlord (provided that Tenant shall retain the contractors
designated by Landlord to perform any structural, mechanical, electrical,
plumbing, HVAC, life safety and sprinkler work, provided that their rates are
competitive in the marketplace), of repairing and restoring all Alterations and
improvements in the Premises (including the Tenant Improvements) to their
condition prior to the damage, exceeds (B) the cost of restoring the Premises
with Building Standard Installations, or (ii) furnish to Landlord security (the
"Restoration Security") in form and amount reasonably acceptable to Landlord to
secure Tenant's obligation to pay all costs in excess of restoring the Premises
with Building Standard Installations. If Tenant shall fail to deliver to
Landlord either (1) Tenant's Restoration Payment or the Restoration Security, as
applicable, or (2) a waiver by Tenant, in form satisfactory to Landlord, of all
of Landlord's obligations to repair or restore any of the Tenant-Insured
Improvements, in either case within fifteen (15) days after Landlord's demand
therefor, Landlord shall have no obligation to restore any Tenant-Insured
Improvements and Tenant's abatement of Fixed Rent, Tenant's Tax Payment and
Tenant's Operating Payment shall cease when the restoration of the Premises
(other than any Tenant-Insured Improvements) is Substantially Complete.

 

Section 11.4     Landlord's Termination Right. Notwithstanding anything to the
contrary contained in Section 11.3, (a) if the Premises are totally damaged or
are rendered wholly untenantable, (b) if the Building shall be so damaged that,
in Landlord's reasonable opinion, substantial alteration, demolition, or
reconstruction of the Building shall be required (whether or not the Premises
are so damaged or rendered untenantable), (c) if any Mortgagee shall require
that the insurance proceeds or any portion thereof be used to retire the
Mortgage debt or any Lessor shall terminate the Superior Lease, as the case may
be, or (d) if the damage is not fully covered, except for deductible amounts, by
Landlord's insurance policies, then in any of such events, Landlord may, not
later than sixty (60) days following the date of the damage, terminate this
Lease by notice to Tenant. If this Lease is so terminated, (a) the Term shall
expire upon the sixtieth (60th) day after such notice is given, (b) Tenant shall
vacate the Premises and surrender the same to Landlord, (c) Tenant's liability
for Rent shall cease as of the date of the damage, and (d) any prepaid Rent for
any period after the date of the damage shall be refunded by Landlord to Tenant.

 

Section 11.5     Tenant's Termination Right. If the Premises are totally damaged
and are thereby rendered wholly untenantable, or if the Building shall be so
damaged that Tenant is deprived of reasonable access to the Premises, and if
Landlord elects to restore the Premises pursuant to this Article 11, Landlord
shall, within sixty (60) days following the date of the damage, cause a
contractor or architect selected by Landlord to give notice (the "Restoration
Notice") to Tenant of the date by which such contractor or architect estimates
the restoration of the Premises (excluding any Tenant-Insured Improvements)
shall be Substantially Completed. If such date, as set forth in the Restoration
Notice, is more than twelve (12) months from the date of such damage, then
Tenant shall have the right to terminate this Lease by giving notice (the
"Termination Notice") to Landlord not later than thirty (30) days following
delivery of the Restoration Notice to Tenant. If Tenant delivers a Termination
Notice, this Lease shall be deemed to have terminated as of the date of the
giving of the Termination Notice, in the manner set forth in the second sentence
of Section 11.4.

 

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Section 11.6     Final 18 Months. Notwithstanding anything to the contrary in
this Article 11, if any damage during the final eighteen (18) months of the Term
renders the Premises wholly untenantable, either Landlord or Tenant may
terminate this Lease by notice to the other party within thirty (30) days after
the occurrence of such damage and this Lease shall expire on the thirtieth
(30th) day after the date of such notice. For purposes of this Section 11.6, the
Premises shall be deemed wholly untenantable if Tenant shall be precluded from
using more than fifty percent (50%) of the Premises for the conduct of its
business and Tenant's inability to so use the Premises is reasonably expected to
continue for more than ninety (90) days.

 

Section 11.7     Landlord's Liability. Any Building employee to whom any
property shall be entrusted by or on behalf of Tenant shall be deemed to be
acting as Tenant's agent with respect to such property and neither Landlord nor
its agents shall be liable for any damage to such property, or for the loss of
or damage to any property of Tenant by theft or otherwise. None of the Insured
Parties shall be liable for any injury or damage to persons or property or
interruption of Tenant's business resulting from fire or other casualty, any
damage caused by other tenants or persons in the Building or by construction of
any private, public or quasi-public work, or any latent defect in the Premises,
in the Building or in the Project (except that Landlord shall be required to
repair the same to the extent provided in Article 6). No penalty shall accrue
for delays which may arise by reason of adjustment of casualty insurance on the
part of Landlord or Tenant, or for any Unavoidable Delays arising from any
repair or restoration of any portion of the Building, provided that Landlord
shall use reasonable efforts to minimize interference with Tenant's use and
occupancy of the Premises during the performance of any such repair or
restoration.

 

ARTICLE 12

EMINENT DOMAIN

 

Section 12.1     Taking.

 

(a)     Total Taking. If all or substantially all of the Project, the Building
or the Premises shall be acquired or condemned for any public or quasi-public
purpose (a "Taking"), this Lease shall terminate and the Term shall end as of
the earlier of (i) the date possession is taken or (ii) the date of the vesting
of title and Rent shall be prorated and adjusted as of such date.

 

(b)     Partial Taking. Upon a Taking of only a part of the Project, the
Building or the Premises then, except as hereinafter provided in this
Article 12, this Lease shall continue in full force and effect, provided that
from the earlier of (i) the date possession is taken or (ii) the date of the
vesting of title, Fixed Rent and Tenant's Proportionate Share shall be modified
proportionately to reflect the reduction of the Premises and/or the Building as
a result of such Taking.

 

(c)     Landlord's Termination Right. Whether or not the Premises are affected,
Landlord may, be notice to Tenant, terminate this Lease upon a Taking of all or
a portion of the Project, the Building or the Premises.

 

(d)     Tenant's Termination Right. If the part of the Project so Taken contains
more than twenty percent (20%) of the total area of the Premises occupied by
Tenant immediately prior to such Taking, or if, by reason of such Taking, Tenant
no longer has reasonable means of access to the Premises, Tenant may terminate
this Lease by notice to Landlord given within thirty (30) days following the
date upon which Tenant is given notice of such Taking. If Tenant so notifies
Landlord, this Lease shall end and expire upon the thirtieth (30th) day
following the giving of such notice. If a part of the Premises shall be so Taken
and this Lease is not terminated in accordance with this Section 12.1 Landlord,
without being required to spend more than it collects as an award, shall,
subject to the provisions of any Mortgage or Superior Lease, restore that part
of the Premises not so Taken to a self-contained rental unit substantially
equivalent (with respect to character, quality, appearance and services) to that
which existed immediately prior to such Taking, excluding Tenant's Property and
any Tenant-Insured Improvements.

 

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(e)     Apportionment of Rent. Upon any termination of this Lease pursuant to
the provisions of this Article 12, Rent shall be apportioned as of, and shall be
paid or refunded up to and including, the date of such termination.

 

Section 12.2     Awards. Upon any Taking, Landlord shall receive the entire
award for any such Taking, and Tenant shall have no claim against Landlord or
the condemning authority for the value of any unexpired portion of the Term or
Tenant's Alterations; and Tenant hereby assigns to Landlord all of its right in
and to such award. Nothing contained in this Article 12 shall be deemed to
prevent Tenant from making a separate claim in any condemnation proceedings for
the then value of any Tenant's Property or Tenant-Insured Improvements included
in such Taking and for any moving expenses, provided any such award is in
addition to, and does not result in a reduction of, the award made to Landlord.

 

Section 12.3     Temporary Taking. If all or any part of the Premises is Taken
temporarily during the Term for any public or quasi-public use or purpose,
Tenant shall give prompt notice to Landlord and the Term shall not be reduced or
affected in any way and Tenant shall continue to pay all Rent payable by Tenant
without reduction or abatement and to perform all of its other obligations under
this Lease, except to the extent prevented from doing so by the condemning
authority, and Tenant shall be entitled to receive any award or payment from the
condemning authority for such use, which shall be received, held and applied by
Tenant as a trust fund for payment of the Rent falling due.

 

ARTICLE 13     

ASSIGNMENT AND SUBLETTING

 

Section 13.1     Consent Requirements.

 

(a)     No Transfers. Except as expressly set forth herein, Tenant shall not
assign, mortgage, pledge, encumber, or otherwise transfer this Lease, whether by
operation of law or otherwise, and shall not sublet, or permit, or suffer the
Premises or any part thereof to be used or occupied by others (whether for desk
space, mailing privileges or otherwise), without Landlord's prior consent in
each instance, which consent shall not be unreasonably withheld, conditioned or
delayed. Any assignment, sublease, mortgage, pledge, encumbrance or transfer in
contravention of the provisions of this Article 13 shall be void and shall
constitute an Event of Default.

 

(b)     Collection of Rent. If, without Landlord's consent (which such consent
is required pursuant to the terms of this Lease), this Lease is assigned, or any
part of the Premises is sublet or occupied by anyone other than Tenant or this
Lease is encumbered (by operation of law or otherwise), Landlord may collect
rent from the assignee, subtenant or occupant, and apply the net amount
collected to the Rent herein reserved. No such collection shall be deemed a
waiver of the provisions of this Article 13, an acceptance of the assignee,
subtenant or occupant as tenant, or a release of Tenant from the performance of
Tenant's covenants hereunder, and in all cases Tenant shall remain fully liable
for its obligations under this Lease.

 

(c)     Further Assignment/Subletting. Landlord's consent to any assignment or
subletting shall not relieve Tenant from the obligation to obtain Landlord's
consent to any further assignment or subletting. In no event shall any permitted
subtenant assign or encumber its sublease or further sublet any portion of its
sublet space, or otherwise suffer or permit any portion of the sublet space to
be used or occupied by others.

 

Section 13.2     Tenant's Notice. If Tenant desires to assign this Lease or
sublet all or any portion of the Premises (sometimes referred to herein as a
"Transfer"), Tenant shall give notice thereof to Landlord, which shall be
accompanied by (a) with respect to an assignment of this Lease, the date Tenant
desires the assignment to be effective, and (b) with respect to a sublet of all
or a part of the Premises, a description of the portion of the Premises to be
sublet, the commencement date of such sublease and the rent per rentable square
foot Tenant will ask for such portion of the Premises ("Tenant's Asking Rate").
Such notice shall be deemed an irrevocable offer from Tenant to Landlord of the
right, at Landlord's option, (1) to terminate this Lease with respect to such
space as Tenant proposes to sublease (the "Partial Space"), upon the terms and
conditions hereinafter set forth, or (2) if the proposed transaction is an
assignment of this Lease or a subletting of fifty percent (50%) or more of the
rentable square footage of the Premises, to terminate this Lease with respect to
the entire Premises. Such option may be exercised by notice from Landlord to
Tenant within thirty (30) days after delivery of Tenant's notice. If Landlord
exercises its option to terminate this Lease with respect to all or a portion of
the Premises, (a) this Lease shall end and expire with respect to all or a
portion of the Premises, as the case may be, on the date that such assignment or
sublease was to commence, provided that such date is in no event earlier than
sixty (60) days after the date of the above notice unless Landlord agrees to
such earlier date, (b) Rent shall be apportioned, paid or refunded as of such
date, (c) Tenant, upon Landlord's request, shall enter into an amendment of this
Lease ratifying and confirming such total or partial termination, and setting
forth any appropriate modifications to the terms and provisions hereof, and
(d) Landlord shall be free to lease the Premises (or any part thereof) to
Tenant's prospective assignee or subtenant or to any other party. Tenant shall
pay all costs to make the Partial Space a self-contained rental unit and to
install any required Building corridors.

 

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Section 13.3     Intentionally Deleted.

 

Section 13.4     Conditions to Assignment/Subletting.

 

(a)     If Landlord does not exercise either of Landlord's options provided
under Section 13.2, Landlord's consent to the proposed assignment or subletting
shall not be unreasonably withheld or delayed. Such consent shall be granted or
denied within twenty (20) days after delivery to Landlord of (i) a true and
complete statement reasonably detailing the identity of the proposed assignee or
subtenant ("Transferee"), the nature of its business and its proposed use of the
Premises, (ii) current financial information with respect to the Transferee,
including its most recent financial statements, (iii) all of the terms of the
proposed Transfer and the consideration therefor, together with a copy of all
existing executed and/or proposed documentation pertaining to the proposed
Transfer, including the final operative documents executed to evidence such
Transfer and such other agreements incidental or related to such Transfer,
provided that Landlord shall have the right to require Tenant to utilize
Landlord's standard Transfer documents in connection with the documentation of
such Transfer, and (iv) any other information Landlord may reasonably request,
provided that:

 

(i)     in Landlord's reasonable judgment, the Transferee is engaged in a
business or activity, and the Premises will be used in a manner, which (1) is in
keeping with the then standards of the Project, (2) is for the Permitted Uses,
and (3) does not violate any restrictions set forth in this Lease, any Mortgage
or Superior Lease or any negative covenant as to use of the Premises required by
any other lease in the Project;

 

(ii)     the Transferee is reputable with sufficient financial means to perform
all of its obligations under this Lease or the sublease, as the case may be;

 

(iii)     if Landlord has, or reasonably expects to have three (3) months
thereafter, comparable space available in the Project, neither the Transferee
nor any person or entity which, directly or indirectly, controls, is controlled
by, or is under common control with, the Transferee is then an occupant of the
Project;

 

(iv)     the Transferee is not a person or entity (or affiliate of a person or
entity) with whom Landlord is then or has been within the prior six (6) months
negotiating in connection with the rental of space in the Project;

 

(v)     there shall be not more than two (2) subtenants in the Premises;

 

(vi)     intentionally deleted;

 

(vii)     Tenant shall, upon demand, reimburse Landlord for all reasonable
expenses incurred by Landlord in connection with such assignment or sublease,
including any investigations as to the acceptability of the Transferee and all
legal costs reasonably incurred in connection with the granting of any requested
consent, but in no event in an amount exceeding $2,500.00 for a Transfer in the
ordinary course of business;

 

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(viii)     the proposed Transfer is either a sublease or a non-collateral
complete assignment;

 

(ix)     the proposed Transfer would not cause Landlord to be in violation of
any Requirements or any other lease, Mortgage, Superior Lease or agreement to
which Landlord is a party and would not give a tenant of the Project a right to
cancel its lease;

 

(x)     the Transferee shall not be either a governmental agency or an
instrumentality thereof, nor shall the Transferee be entitled, directly or
indirectly, to diplomatic or sovereign immunity, regardless of whether the
Transferee agrees to waive such diplomatic or sovereign immunity, and shall be
subject to the service of process in, and the jurisdiction of the courts of, the
County of Los Angeles, and State of California; and

 

(xi)     intentionally deleted;

 

(xii)     Landlord has received assurances acceptable to Landlord in its sole
discretion that all past due amounts owing from Tenant to Landlord, if any, will
be paid and all defaults on the part of Tenant, if any, will be cured prior to
the effective date of the proposed Transfer.

 

In the event that Landlord fails to grant or deny its consent to a proposed
assignment or subletting within such twenty (20) day period, and such failure
continues for a period of five (5) Business Days after Tenant's delivery of a
second written notice to Landlord that contains a statement in bold and capital
letters substantially similar to the following: "THIS IS A SECOND REQUEST FOR
LANDLORD'S CONSENT PURSUANT TO THE TERMS OF SECTION 13.4: IF LANDLORD FAILS TO
GRANT OR DENY ITS CONSENT WITHIN 5 BUSINESS DAYS AFTER RECEIPT OF THIS NOTICE,
THEN LANDLORD SHALL BE DEEMED TO HAVE CONSENTED TO THE PROPOSED TRANSFER", then
Landlord shall be deemed to have consented to the proposed Transfer.

 

The parties hereby agree, without limitation as to other reasonable grounds for
withholding consent, that it shall be reasonable under this Lease and under
applicable Requirements for Landlord to withhold consent to any proposed
Transfer based upon any of the foregoing criteria.

 

(b)     With respect to each and every subletting and/or assignment approved by
Landlord under the provisions of this Lease:

 

(i)     the form of the proposed assignment or sublease shall be reasonably
satisfactory to Landlord;

 

(ii)     no sublease shall be for a term ending later than one (1) day prior to
the Expiration Date;

 

(iii)     no Transferee shall take possession of any part of the Premises until
an executed counterpart of such sublease or assignment has been delivered to
Landlord and approved by Landlord as provided in Section 13.4(a); and

 

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(iv)     each sublease shall be subject and subordinate to this Lease and to the
matters to which this Lease is or shall be subordinate; and Tenant and each
Transferee shall be deemed to have agreed that upon the occurrence and during
the continuation of an Event of Default hereunder, Tenant has hereby assigned to
Landlord, and Landlord may, at its option, accept such assignment of, all right,
title and interest of Tenant as sublandlord under such sublease, together with
all modifications, extensions and renewals thereof then in effect and such
Transferee shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of such sublease, except that Landlord shall not be
(A) liable for any previous act or omission of Tenant under such sublease,
(B) subject to any counterclaim, offset or defense not expressly provided in
such sublease or which theretofore accrued to such Transferee against Tenant,
(C) bound by any previous modification of such sublease not consented to by
Landlord or by any prepayment of more than one (1) month's rent, (D) bound to
return such Transferee's security deposit, if any, except to the extent Landlord
shall receive actual possession of such deposit and such Transferee shall be
entitled to the return of all or any portion of such deposit under the terms of
its sublease, or (E) obligated to make any payment to or on behalf of such
Transferee, or to perform any work in the sublet space or the Building or
Project, or in any way to prepare the subleased space for occupancy, beyond
Landlord's obligations under this Lease. The provisions of this
Section 13.4(b)(iv) shall be self-operative, and no further instrument shall be
required to give effect to this provision, provided that the Transferee shall
execute and deliver to Landlord any instruments Landlord may reasonably request
to evidence and confirm such subordination and attornment.

 

Section 13.5     Binding on Tenant; Indemnification of Landlord. Notwithstanding
any assignment or subletting or any acceptance of rent by Landlord from any
Transferee, Tenant and any guarantor shall remain fully liable for the payment
of all Rent due and for the performance of all the covenants, terms and
conditions contained in this Lease on Tenant's part to be observed and
performed, and any default under any term, covenant or condition of this Lease
by any Transferee or anyone claiming under or through any Transferee shall be
deemed to be a default under this Lease by Tenant. Tenant shall indemnify,
defend, protect and hold harmless Landlord from and against any and all Losses
resulting from any claims that may be made against Landlord by the Transferee or
anyone claiming under or through any Transferee or by any brokers or other
persons or entities claiming a commission or similar compensation in connection
with the proposed assignment or sublease, irrespective of whether Landlord shall
give or decline to give its consent to any proposed assignment or sublease, or
if Landlord shall exercise any of its options under this Article 13.

 

Section 13.6     Tenant's Failure to Complete. If Landlord consents to a
proposed assignment or sublease and Tenant fails to execute and deliver to
Landlord such assignment or sublease within ninety (90) days after the giving of
such consent, or the amount of space subject to any such sublease varies by more
than ten (10%) from that specified in the notice given by Tenant to Landlord
pursuant to Section 13.2, or the net effective rent payable under such sublease
is less than ninety-five percent (95%) of Tenant's Asking Rate, or if there are
any changes in the terms and conditions of the proposed assignment or sublease
such that Landlord would initially have been entitled to refuse its consent to
such Transfer under this Article 13, then Tenant shall again comply with all of
the provisions and conditions of Sections 13.2 and 13.4 before assigning this
Lease or subletting all or part of the Premises.

 

Section 13.7     Profits. If Tenant enters into any assignment or sublease
permitted hereunder or consented to by Landlord, Tenant shall, within sixty (60)
days of Landlord's consent to such assignment or sublease (but not as to any
assignment or sublease that does not require landlord's consent hereunder),
deliver to Landlord a list of Tenant's reasonable third-party brokerage fees,
legal fees and architectural fees and improvement costs paid or to be paid in
connection with such transaction, reasonable marketing costs, and, in the case
of any sublease, any actual costs incurred by Tenant in separately demising the
sublet space (collectively, "Transaction Costs"), together with a list of all of
Tenant's Property to be transferred to such Transferee; provided, however, that
Transaction Costs shall not include any rent paid by Tenant to Landlord,
including with respect to the period Tenant is marketing the Premises or any
portion thereof for sublease. The Transaction Costs shall be amortized, on a
straight-line basis, over the term of any sublease. Tenant shall deliver to
Landlord evidence of the payment of such Transaction Costs promptly after the
same are paid. In consideration of such assignment or subletting, Tenant shall
pay to Landlord:

 

(a)     In the case of an assignment, on the effective date of the assignment,
fifty percent (50%) of all sums and other consideration paid to Tenant by the
Transferee for or by reason of such assignment (including key money, bonus money
and any sums paid for services rendered by Tenant to the Transferee in excess of
fair market value for such services and sums paid for the sale or rental of
Tenant's Property, less the then fair market or rental value thereof, as
reasonably determined by Landlord) after first deducting the Transaction Costs;
or

 

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(b)     In the case of a sublease, fifty percent (50%) of any consideration
payable under the sublease to Tenant by the Transferee which exceeds on a per
square foot basis the Fixed Rent, Tenant's Tax Payment and Tenant's Operating
Payment accruing during the term of the sublease in respect of the sublet space
(together with any sums paid for services rendered by Tenant to the Transferee
in excess of fair market value for such services and sums paid for the sale or
rental of Tenant's Property, less the then fair market or rental value thereof,
as reasonably determined by Landlord) after first deducting the monthly
amortized amount of Transaction Costs. The sums payable under this clause shall
be paid by Tenant to Landlord monthly as and when paid by the subtenant to
Tenant.

 

The amount payable under this Section 13.7 with respect to any particular
Transfer is sometimes referred to herein as the "Transfer Premium." Landlord or
its authorized representatives shall have the right at all reasonable times to
audit the books, records and papers of Tenant relating to any Transfer, and
shall have the right to make copies thereof. If the Transfer Premium respecting
any Transfer shall be found understated, such event shall, at Landlord's option,
be deemed to be an uncurable Event of Default (as such term is defined in
Section 15.1 below) and Tenant shall, within thirty (30) days after demand, pay
the deficiency, and if understated by more than two percent (2%), Tenant shall
pay Landlord's costs of such audit.

 

Section 13.8     Transfers.

 

(a)     Permitted Transfers. If Tenant is a legal entity, except as otherwise
provided in this Section 13.8(a) below, the transfer (by one or more transfers),
directly or indirectly, by operation of law or otherwise, of a majority of the
stock or other beneficial ownership interest in Tenant or of all or
substantially all of the assets of Tenant (collectively, "Ownership Interests")
shall be deemed a voluntary assignment of this Lease; provided, however, that
the provisions of this Article 13 shall not apply to the transfer of Ownership
Interests in Tenant if and so long as Tenant is publicly traded on a nationally
recognized stock exchange. For purposes of this Article the term "transfers"
shall be deemed to include (x) the issuance of new Ownership Interests which
results in a majority of the Ownership Interests in Tenant being held by a
person or entity which does not hold a majority of the Ownership Interests in
Tenant on the Effective Date (y) the sale, mortgage, hypothecation or pledge of
more than an aggregate of fifty percent (50%) of Tenant's net assets, and
(z) except as provided below, the sale or transfer of all or substantially all
of the assets of Tenant in one or more transactions or the merger, consolidation
or conversion of Tenant into or with another business entity. The provisions of
Section 13.1(a), 13.1(b), 13.2, 13.4, 13.6, 13.7 and 13.9 hereof shall not apply
to the following transactions, which shall be deemed permitted transfers: (1) an
assignment of this Lease or the subletting or space sharing of all or a portion
of the Premises to or with an entity which is controlled by, controls or is
under common control with Tenant, (2) an assignment of this Lease or a
subletting of all or a portion of the Premises to a purchaser of all or
substantially all of Tenant's ownership interest in its assets, or (3) a
transfer, by operation of law or otherwise, in connection with the merger,
consolidation or other reorganization of Tenant (in each of the foregoing
instances, a "Permitted Transferee"), so long as (i) such transfer was made for
a legitimate independent business purpose and not for the purpose of
transferring this Lease, (ii) the successor to Tenant has a tangible net worth
computed in accordance with generally accepted accounting principles
consistently applied (and excluding goodwill, organization costs and other
intangible assets) that is sufficient to meet the obligations of Tenant under
this Lease and is at least equal to the net worth of Tenant (1) immediately
prior to such merger, consolidation, conversion or transfer, or (2) on the
Effective Date, whichever is greater, (iii) proof satisfactory to Landlord of
such net worth is delivered to Landlord at least ten (10) days prior to the
effective date of any such transaction, (iv) any such transfer shall be subject
and subordinate to all of the terms and provisions of this Lease, and the
transferee shall assume, in a written document reasonably satisfactory to
Landlord and delivered to Landlord upon or prior to the effective date of such
transfer, all the obligations of Tenant under this Lease, (v) Tenant and any
guarantor shall remain fully liable for all obligations to be performed by
Tenant under this Lease, (vi) such transfer does not cause Landlord to be in
default under any existing lease at the Project and (vii) the Permitted
Transferee is in Landlord's reasonable judgment of a character and engaged in a
business which is in keeping with the standards for the Building. An assignee of
Tenant's entire interest in this Lease who qualifies as a Permitted Transferee
may also be referred to herein as a "Permitted Transferee Assignee"). Any
assignment or sublease to a Permitted Transferee shall not relieve, release,
impair or discharge any of Tenant's obligations hereunder. For the purposes
hereof, "control" shall be deemed to mean ownership of not less than fifty
percent (50%) of all of the Ownership Interests of such corporation or other
business entity or the power and authority to otherwise control or direct the
business of such entity. Notwithstanding the foregoing, Tenant shall have no
right to assign this Lease or sublease all or any portion of the Premises
without Landlord's consent pursuant to this Section 13.8 if an Event of Default
by Tenant exists under this Lease.

 

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(b)     Applicability. The limitations set forth in this Section 13.8 shall
apply to Transferee(s) and guarantor(s) of this Lease, if any, and any transfer
by any such entity in violation of this Section 13.8 shall be a transfer in
violation of Section 13.1.

 

(c)     Modifications, Takeover Agreements. Any modification, amendment or
extension of a sublease and/or any other agreement by which a landlord of a
building other than the Building, or its affiliate, agrees to assume the
obligations of Tenant under this Lease shall be deemed a sublease for the
purposes of Section 13.1 hereof.

 

Section 13.9     Assumption of Obligations. No assignment or transfer shall be
effective unless and until the Transferee executes, acknowledges and delivers to
Landlord an agreement in form and substance reasonably satisfactory to Landlord
whereby the Transferee (a) assumes Tenant's obligations under this Lease and
(b) agrees that, notwithstanding such assignment or transfer, the provisions of
Section 13.1 hereof shall be binding upon it in respect of all future
assignments and transfers.

 

Section 13.10     Tenant's Liability. The joint and several liability of Tenant
and any successors-in-interest of Tenant and the due performance of Tenant's
obligations under this Lease shall not be discharged, released or impaired by
any agreement or stipulation made by Landlord, or any grantee or assignee of
Landlord, extending the time, or modifying any of the terms and provisions of
this Lease, or by any waiver or failure of Landlord, or any grantee or assignee
of Landlord, to enforce any of the terms and provisions of this Lease.

 

Section 13.11     Listings in Building Directory. The listing of any name other
than that of Tenant on the doors of the Premises, the Building directory or
elsewhere shall not vest any right or interest in this Lease or in the Premises,
nor be deemed to constitute Landlord's consent to any assignment or transfer of
this Lease or to any sublease of the Premises or to the use or occupancy thereof
by others. Any such listing shall constitute a privilege revocable in Landlord's
discretion by notice to Tenant.

 

Section 13.12     Lease Disaffirmance or Rejection. If at any time after an
assignment by Tenant named herein, this Lease is not affirmed or is rejected in
any bankruptcy proceeding or any similar proceeding, or upon a termination of
this Lease due to any such proceeding, Tenant named herein, upon request of
Landlord given after such disaffirmance, rejection or termination (and actual
notice thereof to Landlord in the event of a disaffirmance or rejection or in
the event of termination other than by act of Landlord), shall (a) pay to
Landlord all Rent and other charges due and owing by the assignee to Landlord
under this Lease to and including the date of such disaffirmance, rejection or
termination, and (b) as "tenant," enter into a new lease of the Premises with
Landlord for a term commencing on the effective date of such disaffirmance,
rejection or termination and ending on the Expiration Date, at the same Rent and
upon the then executory terms, covenants and conditions contained in this Lease,
except that (i) the rights of Tenant named herein under the new lease shall be
subject to the possessory rights of the assignee under this Lease and the
possessory rights of any persons or entities claiming through or under such
assignee or by virtue of any statute or of any order of any court, (ii) such new
lease shall require all defaults existing under this Lease to be cured by Tenant
named herein with due diligence, and (iii) such new lease shall require Tenant
named herein to pay all Rent which, had this Lease not been so disaffirmed,
rejected or terminated, would have become due under the provisions of this Lease
after the date of such disaffirmance, rejection or termination with respect to
any period prior thereto. If Tenant named herein defaults in its obligations to
enter into such new lease for a period of ten (10) days after Landlord's
request, then, in addition to all other rights and remedies by reason of
default, either at law or in equity, Landlord shall have the same rights and
remedies against Tenant named herein as if it had entered into such new lease
and such new lease had thereafter been terminated as of the commencement date
thereof by reason of Tenant's default thereunder.

 

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ARTICLE 14

ACCESS TO PREMISES

 

Section 14.1     Landlord's Access.

 

(a)     Landlord, Landlord's agents and utility service providers servicing the
Project may erect, use and maintain concealed ducts, pipes and conduits in and
through the Premises provided such use does not cause the usable area of the
Premises to be reduced beyond a de minimis amount. Landlord shall promptly
repair any damage to the Premises caused by any work performed pursuant to this
Article 14.

 

(b)     Landlord, any Lessor or Mortgagee and any other party designated by
Landlord and their respective agents shall have the right to enter the Premises
at all reasonable times, upon at least twenty-four (24) hours prior notice
(which notice may be oral) except in the case of emergency (in which event no
notice shall be required), to examine the Premises, to show the Premises to
prospective purchasers, Mortgagees, Lessors or tenants and their respective
agents and representatives or others and to perform Work of Improvement to the
Premises or the Project. Landlord shall use commercially reasonable efforts to
minimize any interference with Tenant's use of the Premises during any such
entries.

 

(c)     All parts (except surfaces facing the interior of the Premises) of all
walls, windows and doors bounding the Premises, all balconies, terraces and
roofs adjacent to the Premises, all space in or adjacent to the Premises used
for shafts, stacks, stairways, mail chutes, conduits and other mechanical
facilities, Building Systems, Building facilities and Common Areas are not part
of the Premises, and Landlord shall have the use thereof and access thereto
through the Premises for the purposes of Building operation, maintenance,
alteration and repair.

 

Section 14.2     Building Name. Landlord has the right at any time to change the
name, number or designation by which the Building or Project is commonly known.

 

Section 14.3     Light and Air. If at any time any windows of the Premises are
temporarily darkened or covered over by reason of any Work of Improvement, any
of such windows are permanently darkened or covered over due to any Requirement
or there is otherwise a diminution of light, air or view by another structure
which may hereafter be erected (whether or not by Landlord), Landlord shall not
be liable for any damages and Tenant shall not be entitled to any compensation
or abatement of any Rent, nor shall the same release Tenant from its obligations
hereunder or constitute an actual or constructive eviction.

 

ARTICLE 15

DEFAULT

 

Section 15.1     Tenant's Defaults. Each of the following events shall be an
"Event of Default" hereunder:

 

(a)     Tenant fails to pay when due any installment of Rent (provided that
Tenant shall be entitled to a grace period before such failure to pay shall
constitute an Event of Default of five (5) Business Days after written notice by
Landlord to Tenant that such amount is past due for the first two (2) late
payment of Rent during any twelve (12) month period); or

 

(b)     Except as otherwise specifically set forth in this Section 15.1, Tenant
fails to observe or perform any other term, covenant or condition of this Lease
and such failure continues for more than thirty (30) days (or three (3) Business
Days with respect to a failure under Article 3, Article 9 or Section 26.10)
after notice by Landlord to Tenant of such default, or if such default (other
than a default under Article 3, Article 9 or Section 26.10) is of a nature that
it cannot be completely remedied within thirty (30) days, failure by Tenant to
commence to remedy such failure within said thirty (30) days, and thereafter
diligently prosecute to completion all steps necessary to remedy such default,
provided in all events the same is completed within ninety (90) days; or

 

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(c)     if Landlord applies or retains any part of the security held by it
hereunder, and Tenant fails to deposit with Landlord the amount so applied or
retained by Landlord, or if Landlord draws on any Letter of Credit (as
hereinafter defined), in part or in whole, and Tenant fails to provide Landlord
with a replacement Letter of Credit, within five (5) days after notice by
Landlord to Tenant stating the amount applied, retained or drawn, as applicable;
or

 

(d)     Tenant files a voluntary petition in bankruptcy or insolvency, or is
adjudicated a bankrupt or insolvent, or files any petition or answer seeking any
reorganization, liquidation, dissolution or similar relief under any present or
future federal bankruptcy act or any other present or future applicable federal,
state or other statute or law, or makes an assignment for the benefit of
creditors or seeks or consents to or acquiesces in the appointment of any
trustee, receiver, liquidator or other similar official for Tenant or for all or
any part of Tenant's property; or

 

(e)     A court of competent jurisdiction shall enter an order, judgment or
decree adjudicating Tenant bankrupt, or appointing a trustee, receiver or
liquidator of Tenant, or of the whole or any substantial part of its property,
without the consent of Tenant, or approving a petition filed against Tenant
seeking reorganization or arrangement of Tenant under the bankruptcy laws of the
United States, as now in effect or hereafter amended, or any state thereof, and
such order, judgment or decree shall not be vacated or set aside or stayed
within sixty (60) days from the date of entry thereof.

 

The notice periods provided herein are in lieu of, and not in addition to, any
notice periods provided by applicable Requirements.

 

Section 15.2     Landlord's Remedies. If Landlord elects to terminate this Lease
by serving a notice pursuant to Section 15.1 above, or otherwise, then pursuant,
pursuant to Section 1951.2 of the California Civil Code, Landlord shall be
entitled to recover from Tenant the aggregate of:

 

(i)     The worth at the time of award of the unpaid rent earned as of the date
of the termination hereof;

 

(ii)     The worth at the time of award of the amount by which the unpaid rent
which would have been earned after the date of termination hereof until the time
of award exceeds the amount of such rental loss that Tenant proves could have
been reasonably avoided;

 

(iii)     The worth at the time of award of the amount by which the unpaid rent
for the balance of the Term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided;

 

(iv)     Any other amount necessary to compensate Landlord for the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which, in the ordinary course of things, would be likely to result
therefrom; and

 

(v)     Any other amount which Landlord may hereafter be permitted to recover
from Tenant to compensate Landlord for the detriment caused by Tenant's default.

 

For the purposes of this Section 15.2, "rent" shall be deemed to be and to mean
all sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others, the "time of award" shall mean the
date upon which the judgment in any action brought by Landlord against Tenant by
reason of such Event of Default is entered or such earlier date as the court may
determine; the "worth at the time of award" of the amounts referred to in
Sections 15.2(i) and 15.2(ii) shall be computed by allowing interest on such
amounts at the Interest Rate; and the "worth at the time of award" of the amount
referred to in Section 15.2(iii) shall be computed by discounting such amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent (1%) per annum. Tenant agrees that such charges shall be
recoverable by Landlord under California Code of Civil Procedure Section 1174(b)
or any similar, successor or related provision of law.

 

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Section 15.3     Recovering Rent as It Comes Due. Upon any Event of Default, in
addition to any other remedies available to Landlord at law or in equity or
under this Lease, Landlord shall have the remedy described in California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate this Lease, Landlord may, from time to
time, enforce all of its rights and remedies under this Lease, including the
right to recover all Rent as it becomes due. Such remedy may be exercised by
Landlord without prejudice to its right thereafter to terminate this Lease in
accordance with the other provisions contained in this Article 15. Landlord's
reentry to perform acts of maintenance or preservation of, or in connection with
efforts to relet, the Premises, or any portion thereof, or the appointment of a
receiver upon Landlord's initiative to protect Landlord's interest under this
Lease shall not terminate Tenant's right to possession of the Premises or any
portion thereof and, until Landlord elects to terminate this Lease, this Lease
shall continue in full force and Landlord may pursue all its remedies hereunder.
Nothing in this Article 15 shall be deemed to affect Landlord's right to
indemnification, under the indemnification clauses contained in this Lease, for
Losses arising from events occurring prior to the termination of this Lease.

 

Section 15.4     Reletting on Tenant's Behalf. If Tenant abandons the Premises
or if Landlord elects to reenter or takes possession of the Premises pursuant to
any legal proceeding or pursuant to any notice provided by Requirements, and
until Landlord elects to terminate this Lease, Landlord may, from time to time,
without terminating this Lease, recover all Rent as it becomes due pursuant to
Section 15.3 and/or relet the Premises or any part thereof for the account of
and on behalf of Tenant, on any terms, for any term (whether or not longer than
the Term), and at any rental as Landlord in its reasonable discretion may deem
advisable, and Landlord may make any Work of Improvement to the Premises in
connection therewith. Tenant hereby irrevocably constitutes and appoints
Landlord as its attorney-in-fact, which appointment shall be deemed coupled with
an interest and shall be irrevocable, for purposes of reletting the Premises
pursuant to the immediately preceding sentence. If Landlord elects to so relet
the Premises on behalf of Tenant, then rentals received by Landlord from such
reletting shall be applied:

 

(a)     First, to reimburse Landlord for the costs and expenses of such
reletting (including costs and expenses of retaking or repossessing the
Premises, removing persons and property therefrom, securing new tenants, and, if
Landlord maintains and operates the Premises, the costs thereof) and necessary
or reasonable Work of Improvement.

 

(b)     Second, to the payment of any indebtedness of Tenant to Landlord other
than Rent due and unpaid hereunder.

 

(c)     Third, to the payment of Rent due and unpaid hereunder, and the residue,
if any, shall be held by Landlord and applied in payment of other or future
obligations of Tenant to Landlord as the same may become due and payable.

 

Should the rentals received from such reletting, when applied in the manner and
order indicated above, at any time be less than the total amount owing from
Tenant pursuant to this Lease, then Tenant shall pay such deficiency to
Landlord, and if Tenant does not pay such deficiency within five (5) days of
delivery of notice thereof to Tenant, Landlord may bring an action against
Tenant for recovery of such deficiency or pursue its other remedies hereunder or
under California Civil Code Section 1951.8, California Code of Civil Procedure
Section 1161 et seq., or any similar, successor or related Requirements.

 

Section 15.5     General.

 

(a)     All rights, powers and remedies of Landlord hereunder and under any
other agreement now or hereafter in force between Landlord and Tenant shall be
cumulative and not alternative and shall be in addition to all rights, powers
and remedies given to Landlord at law or in equity. The exercise of any one or
more of such rights or remedies shall not impair Landlord's right to exercise
any other right or remedy including any and all rights and remedies of Landlord
under California Civil Code Section 1951.8, California Code of Civil Procedure
Section 1161 et seq., or any similar, successor or related Requirements.

 

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(b)     If, after Tenant's abandonment of the Premises, Tenant leaves behind any
of Tenant's Property, then Landlord shall store such Tenant's Property at a
warehouse or any other location at the risk, expense and for the account of
Tenant, and such property shall be released only upon Tenant's payment of such
charges, together with moving and other costs relating thereto and all other
sums due and owing under this Lease. If Tenant does not reclaim such Tenant's
Property within the period permitted by law, Landlord may sell such Tenant's
Property in accordance with law and apply the proceeds of such sale to any sums
due and owing hereunder, or retain said Property, granting Tenant credit against
sums due and owing hereunder for the reasonable value of such Property.

 

(c)     To the extent permitted by law, Tenant hereby waives all provisions of,
and protections under, any Requirement to the extent same are inconsistent and
in conflict with specific terms and provisions hereof.

 

Section 15.6     Interest. If any payment of Rent is not paid when due, interest
shall accrue on such payment, from the date such payment became due until paid
at the Interest Rate. Tenant acknowledges that late payment by Tenant of Rent
will cause Landlord to incur costs not contemplated by this Lease, the exact
amount of such costs being extremely difficult and impracticable to fix. Such
costs include, without limitation, processing and accounting charges, and late
charges that may be imposed on Landlord by the terms of any note secured by a
Mortgage covering the Premises. Therefore, in addition to interest, if any
amount is not paid when due, a late charge equal to five percent (5%) of such
amount shall be assessed; provided, however, that on two (2) occasions during
any calendar year of the Term, Landlord shall give Tenant notice of such late
payment and Tenant shall have a period of five (5) days thereafter in which to
make such payment before any late charge is assessed. Such interest and late
charges are separate and cumulative and are in addition to and shall not
diminish or represent a substitute for any of Landlord's rights or remedies
under any other provision of this Lease.

 

Section 15.7     Other Rights of Landlord. If Tenant fails to pay any Additional
Rent when due, Landlord, in addition to any other right or remedy, shall have
the same rights and remedies as in the case of a default by Tenant in the
payment of Fixed Rent. If Tenant is in arrears in the payment of Rent, Tenant
waives Tenant's right, if any, to designate the items against which any payments
made by Tenant are to be credited, and Landlord may apply any payments made by
Tenant to any items Landlord sees fit, regardless of any request by Tenant.

 

Section 15.8     Landlord Default. Notwithstanding anything to the contrary set
forth in this Lease, Landlord shall not be in default in the performance of any
obligation required to be performed by Landlord pursuant to this Lease unless
Landlord fails to perform such obligation within thirty (30) days after the
receipt of notice from Tenant specifying in detail Landlord's failure to
perform; provided, however, if the nature of Landlord's obligation is such that
more than thirty (30) days are required for its performance, then Landlord shall
not be in default under this Lease if it shall commence such performance within
such thirty (30) day period and thereafter diligently pursue the same to
completion. Upon any such default by Landlord under this Lease, Tenant may,
except as otherwise specifically provided in this Lease to the contrary,
exercise any of its rights provided at law or in equity.

 

ARTICLE 16

LANDLORD'S RIGHT TO CURE; FEES AND EXPENSES

 

If Tenant defaults in the performance of its obligations under this Lease,
Landlord, without waiving such default, may perform such obligations at Tenant's
expense: (a) immediately, and without notice, in the case of emergency or if the
default (i) materially interferes with the use by any other tenant of the
Building or Project, (ii) materially interferes with the efficient operation of
the Building or Project, (iii) results in a violation of any Requirement, or
(iv) results or will result in a cancellation of any insurance policy maintained
by Landlord, and (b) in any other case if such default continues after ten (10)
days from the date Landlord gives notice of Landlord's intention to perform the
defaulted obligation. All costs and expenses incurred by Landlord in connection
with any such performance by it and all costs and expenses, including reasonable
counsel fees and disbursements, incurred by Landlord in any action or proceeding
(including any unlawful detainer proceeding) brought by Landlord or in which
Landlord is a party to enforce any obligation of Tenant under this Lease and/or
right of Landlord in or to the Premises or as a result of any default by Tenant
under this Lease, shall be paid by Tenant to Landlord on demand, with interest
thereon at the Interest Rate from the date incurred by Landlord. Except as
expressly provided to the contrary in this Lease, all costs and expenses which,
pursuant to this Lease, are incurred by Landlord and payable to Landlord by
Tenant, and all charges, amounts and sums payable to Landlord by Tenant for any
property, material, labor, utility or other services which, pursuant to this
Lease, are attributable directly to Tenant's use and occupancy of the Premises
or presence at the Building or Project, or at the request and for the account of
Tenant, are provided, furnished or rendered by Landlord, shall become due and
payable by Tenant to Landlord within ten (10) Business Days after receipt of
Landlord's invoice for such amount.

 

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ARTICLE 17

NO REPRESENTATIONS BY LANDLORD; LANDLORD'S APPROVAL

 

Section 17.1     No Representations. Except as expressly set forth herein,
Landlord and Landlord's agents have made no warranties, representations,
statements or promises with respect to the Building, the Project or the Premises
and no rights, easements or licenses are acquired by Tenant by implication or
otherwise. Tenant is entering into this Lease after full investigation and is
not relying upon any statement or representation made by Landlord not embodied
in this Lease.

 

Section 17.2     Consequential Damages. Wherever in this Lease Landlord's
consent or approval is required, if Landlord refuses to grant such consent or
approval, whether or not Landlord expressly agreed that such consent or approval
would not be unreasonably withheld, Tenant shall not make or exercise, and
Tenant hereby waives, any claim for money damages (including any claim by way of
set-off, counterclaim or defense) and/or any right to terminate this Lease based
upon Tenant's claim or assertion that Landlord unreasonably withheld or delayed
its consent or approval. Tenant's sole remedy shall be an action or proceeding
to enforce such provision, by specific performance, injunction or declaratory
judgment. In no event shall Landlord or the Parties (as that term is defined in
Section 26.3, below) be liable for, and Tenant, on behalf of itself and all
other Tenant Parties, hereby waives any claim for, any indirect, consequential
or punitive damages, including loss of profits or business opportunity, arising
under or in connection with the Lease Documents. Additionally, in no event shall
Tenant be liable for, and Landlord, on behalf of itself and all other Parties,
hereby waives any claim for, any indirect, consequential or punitive damages,
including loss of profits or business opportunity, arising under or in
connection with the Lease Documents, provided, however, that, notwithstanding
the foregoing, Tenant shall be liable to Landlord for consequential damages
incurred by Landlord in connection with a holdover of the Premises by Tenant
after the expiration or earlier termination of this Lease.

 

Section 17.3     Reasonable Efforts. For purposes of this Lease, "reasonable
efforts" by Landlord shall not include an obligation to employ contractors or
labor at overtime or other premium pay rates or to incur any other overtime
costs or additional expenses whatsoever.

 

ARTICLE 18

END OF TERM

 

Section 18.1     Expiration. Upon the expiration or other termination of this
Lease, Tenant shall quit and surrender the Premises to Landlord vacant, broom
clean and in good order and condition, ordinary wear and tear and damage for
which Tenant is not responsible under the terms of this Lease excepted, and
Tenant shall remove all of Tenant's Property and Specialty Alterations. Tenant
shall not be obligated to remove any tenant improvements that existed in the
Premises on the date the Premises were delivered to Tenant that were not
installed by or on behalf of Tenant or which existed in the Premises as of the
date the Lease was executed. In addition, Tenant shall not be required to remove
any Tenant Improvements made pursuant to the Tenant Work Letter or Article 5 of
the Lease as long as such Tenant Improvements constitute normal and customary
business office improvements. Additionally, in no event shall Tenant be required
to repaint, replace, repair or patch wall or floor coverings or patch small
holes in the walls and floors or remove cables, wiring or conduits not installed
by or on behalf of Tenant.

 

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Section 18.2     Holdover Rent. Landlord and Tenant recognize that Landlord's
damages resulting from Tenant's failure to timely surrender possession of the
Premises may be substantial, may exceed the amount of the Rent payable
hereunder, and will be impossible to accurately measure. Accordingly, if
possession of the Premises is not surrendered to Landlord on the Expiration Date
or sooner termination of this Lease, in addition to any other rights or remedies
Landlord may have hereunder or at law, Tenant shall (a) pay to Landlord for each
month (or any portion thereof) during which Tenant holds over in the Premises
after the Expiration Date or sooner termination of this Lease, a sum equal to
(i) during the first thirty (30) days of such holdover, 1.5 times the Rent
payable under this Lease for the last full calendar month of the Term, and (ii) 
thereafter, 2 times the Rent payable under this Lease for the last full calendar
month of the Term, (b) be liable to Landlord for (1) any payment or rent
concession which Landlord may be required to make to any tenant obtained by
Landlord for all or any part of the Premises (a "New Tenant") in order to induce
such New Tenant not to terminate its lease by reason of the holding-over by
Tenant, and (2) the loss of the benefit of the bargain if any New Tenant shall
terminate its lease by reason of the holding-over by Tenant, and (c) indemnify
Landlord against all claims for damages by any New Tenant. No holding-over by
Tenant, nor the payment to Landlord of the amounts specified above, shall
operate to extend the Term hereof. Nothing herein contained shall be deemed to
permit Tenant to retain possession of the Premises after the Expiration Date or
sooner termination of this Lease, and no acceptance by Landlord of payments from
Tenant after the Expiration Date or sooner termination of this Lease shall be
deemed to be other than on account of the amount to be paid by Tenant in
accordance with the provisions of this Section 18.2.

 

ARTICLE 19

QUIET ENJOYMENT

 

Provided this Lease is in full force and effect and no Event of Default then
exists, Tenant may peaceably and quietly enjoy the Premises without hindrance by
Landlord or any person lawfully claiming through or under Landlord, subject to
the terms and conditions of this Lease and to all Superior Leases and Mortgages.

 

ARTICLE 20

NO SURRENDER; NO WAIVER

 

Section 20.1     No Surrender or Release. No act or thing done by Landlord or
Landlord's agents or employees during the Term shall be deemed an acceptance of
a surrender of the Premises, and no provision of this Lease shall be deemed to
have been waived by Landlord, unless such waiver is in writing and is signed by
Landlord.

 

Section 20.2     No Waiver. The failure of either party to seek redress for
violation of, or to insist upon the strict performance of, any covenant or
condition of this Lease, or any of the Rules and Regulations, shall not be
construed as a waiver or relinquishment for the future performance of such
obligations of this Lease or the Rules and Regulations, or of the right to
exercise such election but the same shall continue and remain in full force and
effect with respect to any subsequent breach, act or omission. The receipt by
Landlord of any Rent payable pursuant to this Lease or any other sums with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. No payment by Tenant or receipt by Landlord of a lesser
amount than the monthly Rent herein stipulated shall be deemed to be other than
a payment on account of the earliest stipulated Rent, or as Landlord may elect
to apply such payment, nor shall any endorsement or statement on any check or
any letter accompanying any check or payment as Rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such Rent or pursue any other remedy
provided in this Lease.

 

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ARTICLE 21

WAIVER OF TRIAL BY JURY

 

TO THE EXTENT PERMITTED BY APPLICABLE REQUIREMENTS, THE PARTIES HEREBY AGREE
THAT THIS LEASE CONSTITUTES A WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY
PURSUANT TO THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 631 AND
EACH PARTY DOES HEREBY CONSTITUTE AND APPOINT THE OTHER PARTY ITS TRUE AND
LAWFUL ATTORNEY-IN-FACT, WHICH APPOINTMENT IS COUPLED WITH AN INTEREST, AND EACH
PARTY DOES HEREBY AUTHORIZE AND EMPOWER THE OTHER PARTY, IN THE NAME, PLACE AND
STEAD OF SUCH PARTY, TO FILE THIS LEASE WITH THE CLERK OR JUDGE OF ANY COURT OF
COMPETENT JURISDICTION AS A STATUTORY WRITTEN CONSENT TO WAIVER OF TRIAL BY
JURY.

 

LANDLORD'S INITIALS: _____

TENANT'S INITIALS: _____

 

 

 

ARTICLE 22

NOTICES

 

Except as otherwise expressly provided in this Lease, all consents, notices,
demands, requests, approvals or other communications given under this Lease
shall be in writing and shall be deemed sufficiently given or rendered if
delivered by hand (provided a signed receipt is obtained) or if sent by
registered or certified mail (return receipt requested) or by a nationally
recognized overnight delivery service making receipted deliveries, addressed to
Landlord and Tenant as set forth in Article 1, and to any Mortgagee or Lessor
who shall require copies of notices and whose address is provided to Tenant, or
to such other address(es) as Landlord, Tenant or any Mortgagee or Lessor may
designate as its new address(es) for such purpose by notice given to the other
in accordance with the provisions of this Article 22. Any such approval,
consent, notice, demand, request or other communication shall be deemed to have
been given on the date of receipted delivery, refusal to accept delivery or when
delivery is first attempted but cannot be made due to a change of address for
which no notice is given or three (3) Business Days after it shall have been
mailed as provided in this Article 22, whichever is earlier.

 

ARTICLE 23

RULES AND REGULATIONS

 

All Tenant Parties shall observe and comply with the Rules and Regulations, as
supplemented or amended from time to time with reasonable amendments or
supplements. Landlord reserves the right, from time to time, to adopt additional
reasonable Rules and Regulations and to amend the Rules and Regulations then in
effect with reasonable amendments or supplements. Nothing contained in this
Lease shall impose upon Landlord any obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other lease against any
other Building tenant, and Landlord shall not be liable to Tenant for violation
of the same by any other tenant, its employees, agents, visitors or licensees,
provided that Landlord shall enforce the Rules or Regulations against Tenant in
a non-discriminatory fashion.

 

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ARTICLE 24

BROKER

 

Landlord has retained Landlord's Agent as leasing agent in connection with this
Lease and Landlord will be solely responsible for any fee that may be payable to
Landlord's Agent. Landlord agrees to pay a commission to Tenant's Broker
pursuant to a separate written agreement between Landlord and Tenant's Broker.
Each of Landlord and Tenant represents and warrants to the other that neither it
nor its agents have dealt with any broker in connection with this Lease other
than Landlord's Agent and Tenant's Broker. Each of Landlord and Tenant shall
indemnify, defend, protect and hold the other party harmless from and against
any and all Losses which the indemnified party may incur by reason of any claim
of or liability to any broker, finder or like agent (other than Landlord's Agent
and Tenant's Broker) arising out of any dealings claimed to have occurred
between the indemnifying party and the claimant in connection with this Lease,
and/or the above representation being false.

 

ARTICLE 25

INDEMNITY

 

Section 25.1     Waiver of Liability. Neither Landlord nor any of its
Indemnitees shall be liable or responsible in any way for, and Tenant hereby
waives all claims against the Indemnitees with respect to or arising out of
(a) any death or any injury of any nature whatsoever that may be suffered or
sustained by Tenant or any employee, licensee, invitee, guest, agent or customer
of Tenant or any other person, from any causes whatsoever except to the extent
such injury or death is caused by the gross negligence or willful misconduct of
the Indemnitees; or (b) any loss or damage or injury to any property outside or
within the Premises belonging to Tenant or its employees, agents, customers,
licensees, invitees, guests or any other person; except to the extent such
injury or damage is to property not covered by insurance carried (or required to
be carried) by Tenant and is caused by the gross negligence or willful
misconduct of the Indemnitees. Subject to the foregoing, none of the Indemnitees
shall be liable for any damage or damages of any nature whatsoever to persons or
property caused by explosion, fire, theft or breakage, by sprinkler, drainage or
plumbing systems, by failure for any cause to supply adequate drainage, by the
interruption of any public utility or service, by steam, gas, water, rain or
other substances leaking, issuing or flowing into any part of the Premises, by
natural occurrence, acts of the public enemy, riot, strike, insurrection, war,
court order, requisition or order of governmental body or authority, or for any
damage or inconvenience which may arise through repair, maintenance or
alteration of any part of the Building, or by anything done or omitted to be
done by any tenant, occupant or person in the Building. In addition, none of the
Indemnitees shall be liable for any loss or damage for which Tenant is required
to insure, nor for any loss or damage resulting from any construction,
alterations or repair, provided that such loss or damage is not caused by the
gross negligence or willful misconduct of any such Indemnitee.

 

Section 25.2     Tenant's Indemnity. Tenant shall not do or permit to be done
any act or thing upon the Premises, the Building or the Project which may
subject Landlord to any liability or responsibility for injury, damages to
persons or property or to any liability by reason of any violation of any
Requirement, and shall exercise such control over the Premises as to fully
protect Landlord against any such liability. Except to the extent of any such
injury or damage resulting from the negligence or willful misconduct of Landlord
or Landlord's agents, employees, representatives, contractors, or invitees,
Tenant shall indemnify, defend, protect and hold harmless each of the
Indemnitees from and against any and all Losses, resulting from any claims
(i) against the Indemnitees arising from any act, omission or negligence of any
Tenant Party, (ii) against the Indemnitees arising from any accident, injury or
damage to any person or to the property of any person and occurring in or about
the Premises, and (iii) against the Indemnitees resulting from any breach,
violation or nonperformance of any covenant, condition or agreement of this
Lease on the part of Tenant to be fulfilled, kept, observed or performed.

 

Section 25.3     Landlord's Indemnity. Except to the extent that any such claim
results from the negligence or willful misconduct of Tenant, Tenant Parties or
Tenant's contractors, Landlord shall indemnify, defend, protect and hold
harmless Tenant from and against all Losses incurred by Tenant arising from any
accident, injury or damage to any person or the property of any person in or
about the Common Areas (specifically excluding the Premises) to the extent
attributable to the gross negligence or willful misconduct of Landlord, or its
employees, agents, representatives, or contractors, or (ii) a breach of any
representation or warranty made by Landlord or of any other covenant condition
or obligation to be performed by Landlord under this Lease.

 

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Section 25.4     Defense and Settlement. If any claim, action or proceeding is
made or brought against any Indemnitee, then upon demand by an Indemnitee,
Tenant, at its sole cost and expense, shall resist or defend such claim, action
or proceeding in the Indemnitee's name (if necessary), by attorneys approved by
the Indemnitee, which approval shall not be unreasonably withheld (attorneys for
Tenant's insurer shall be deemed approved for purposes of this Section 25.4).
Notwithstanding the foregoing, an Indemnitee may retain its own attorneys to
participate or assist in defending any claim, action or proceeding involving
potential liability in excess of the amount available under Tenant's liability
insurance carried under Section 11.1 for such claim and Tenant shall pay the
reasonable fees and disbursements of such attorneys. If Tenant fails to
diligently defend or if there is a legal conflict or other conflict of interest,
then Landlord may retain separate counsel at Tenant's expense. Notwithstanding
anything herein contained to the contrary, Tenant may direct the Indemnitee to
settle any claim, suit or other proceeding provided that (a) such settlement
shall involve no obligation on the part of the Indemnitee other than the payment
of money, (b) any payments to be made pursuant to such settlement shall be paid
in full exclusively by Tenant at the time such settlement is reached, (c) such
settlement shall not require the Indemnitee to admit any liability, and (d) the
Indemnitee shall have received an unconditional release from the other parties
to such claim, suit or other proceeding.

 

ARTICLE 26

MISCELLANEOUS

 

Section 26.1     Delivery. This Lease shall not be binding upon Landlord or
Tenant unless and until Landlord shall have executed and delivered a fully
executed copy of this Lease to Tenant.

 

Section 26.2     Transfer of Project. Provided that the transferee assumes in
writing the obligations of Landlord hereunder arising from and after the
Landlord Transfer (defined below), Landlord's obligations under this Lease shall
not be binding upon the Landlord named herein after the sale, conveyance,
assignment or transfer (collectively, a "Landlord Transfer") by such Landlord
(or upon any subsequent landlord after the Landlord Transfer by such subsequent
landlord) of its interest in the Building or the Project, as the case may be,
and in the event of any such Landlord Transfer, Landlord (and any such
subsequent Landlord) shall be entirely freed and relieved of all covenants and
obligations of Landlord hereunder arising from and after the date of the
Landlord Transfer, and the transferee of Landlord's interest (or that of such
subsequent Landlord) in the Building or the Project, as the case may be, shall
be deemed to have assumed all obligations under this Lease arising from and
after the date of the Landlord Transfer.

 

Section 26.3     Limitation on Liability. The liability of Landlord for
Landlord's obligations under this Lease and any other documents executed by
Landlord and Tenant in connection with this Lease (collectively, the "Lease
Documents") shall be limited to Landlord's interest in the Building and Tenant
shall not look to any other property or assets of Landlord or the property or
assets of any direct or indirect partner, member, manager, shareholder,
director, officer, principal, employee or agent of Landlord (collectively, the
"Parties") in seeking either to enforce Landlord's obligations under the Lease
Documents or to satisfy a judgment for Landlord's failure to perform such
obligations; and none of the Parties shall be personally liable for the
performance of Landlord's obligations under the Lease Documents.

 

Section 26.4     Rent. All amounts payable by Tenant to or on behalf of Landlord
under this Lease, whether or not expressly denominated Fixed Rent, Tenant's Tax
Payment, Tenant's Operating Payment, Additional Rent or Rent, shall constitute
rent for the purposes of Section 502(b)(6) of the United States Bankruptcy Code.

 

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Section 26.5     Entire Document. This Lease (including any Schedules and
Exhibits referred to herein and all supplementary agreements provided for
herein) contains the entire agreement between the parties and all prior
negotiations and agreements are merged into this Lease. All of the Schedules and
Exhibits attached hereto are incorporated in and made a part of this Lease,
provided that in the event of any inconsistency between the terms and provisions
of this Lease and the terms and provisions of the Schedules and Exhibits hereto,
the terms and provisions of this Lease shall control.

 

Section 26.6     Governing Law. This Lease shall be governed in all respects by
the laws of the State of California.

 

Section 26.7     Unenforceability. If any provision of this Lease, or its
application to any person or entity or circumstance, shall ever be held to be
invalid or unenforceable, then in each such event the remainder of this Lease or
the application of such provision to any other person or entity or any other
circumstance (other than those as to which it shall be invalid or unenforceable)
shall not be thereby affected, and each provision hereof shall remain valid and
enforceable to the fullest extent permitted by law.

 

Section 26.8     Lease Disputes.

 

(a)      Tenant agrees that all disputes arising, directly or indirectly, out of
or relating to this Lease, and all actions to enforce this Lease, shall be dealt
with and adjudicated in the state courts of the State of California or the
United States District Court for the Central District of California and for that
purpose hereby expressly and irrevocably submits itself to the jurisdiction of
such courts. Tenant agrees that so far as is permitted under applicable law,
this consent to personal jurisdiction shall be self-operative and no further
instrument or action, other than service of process in one of the manners
specified in this Lease, or as otherwise permitted by law, shall be necessary in
order to confer jurisdiction upon it in any such court.

 

(b)     To the extent that Tenant has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, Tenant irrevocably waives
such immunity in respect of its obligations under this Lease.

 

Section 26.9     Landlord's Agent. Unless Landlord delivers notice to Tenant to
the contrary, Landlord's Agent is authorized to act as Landlord's agent in
connection with the performance of this Lease, and Tenant shall be entitled to
rely upon correspondence received from Landlord's Agent. Tenant acknowledges
that Landlord's Agent is acting solely as agent for Landlord in connection with
the foregoing; and neither Landlord's Agent nor any of its direct or indirect
partners, members, managers, officers, shareholders, directors, employees,
principals, agents or representatives shall have any liability to Tenant in
connection with the performance of this Lease, and Tenant waives any and all
claims against any and all of such parties arising out of, or in any way
connected with, this Lease, the Building or the Project.

 

Section 26.10     Estoppel. Within ten (10) Business Days following request from
Landlord, any Mortgagee or any Lessor, Tenant shall deliver to Landlord a
statement executed and acknowledged by Tenant, in form reasonably satisfactory
to Landlord, (a) stating the Commencement Date and the Expiration Date, and that
this Lease is then in full force and effect and has not been modified (or if
modified, setting forth all modifications), (b) setting forth the date to which
the Fixed Rent and any Additional Rent have been paid, together with the amount
of monthly Fixed Rent and Additional Rent then payable, (c) stating whether or
not, to the best of Tenant's knowledge, Landlord is in default under this Lease,
and, if Landlord is in default, setting forth the specific nature of all such
defaults, (d) stating the amount of the Letter of Credit, if any, and/or the
Security Deposit, if any, under this Lease, (e) stating whether there are any
subleases or assignments affecting the Premises, (f) stating the address of
Tenant to which all notices and communications under the Lease shall be sent,
and (g) responding to any other matters reasonably requested by Landlord, such
Mortgagee or such Lessor. Tenant acknowledges that any statement delivered
pursuant to this Section 26.10 may be relied upon by any purchaser or owner of
the Project or the Building, or all or any portion of Landlord's interest in the
Project or the Building or any Superior Lease, or by any Mortgagee, or assignee
thereof or by any Lessor, or assignee thereof.

 

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Section 26.11     Certain Interpretational Rules. For purposes of this Lease,
whenever the words "include", "includes", or "including" are used, they shall be
deemed to be followed by the words "without limitation" and, whenever the
circumstances or the context requires, the singular shall be construed as the
plural, the masculine shall be construed as the feminine and/or the neuter and
vice versa. This Lease shall be interpreted and enforced without the aid of any
canon, custom or rule of law requiring or suggesting construction against the
party drafting or causing the drafting of the provision in question. The
captions in this Lease are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Lease or the
intent of any provision hereof.

 

Section 26.12     Parties Bound. The terms, covenants, conditions and agreements
contained in this Lease shall bind and inure to the benefit of Landlord and
Tenant and, except as otherwise provided in this Lease, to their respective
legal representatives, successors, and assigns.

 

Section 26.13     Memorandum of Lease. This Lease shall not be recorded;
however, at Landlord's request, Landlord and Tenant shall promptly execute,
acknowledge and deliver a memorandum with respect to this Lease sufficient for
recording and Landlord may record the memorandum at Landlords cost. Within ten
(10) days after the end of the Term, Tenant shall enter into such documentation
as is reasonably required by Landlord to remove the memorandum of record at
Landlord's cost.

 

Section 26.14     Counterparts. This Lease and any other Lease Documents may be
executed in two (2) or more counterparts, which may be delivered electronically,
via facsimile or by other means. Each party may rely upon signatures delivered
electronically or via facsimile as if such signatures were originals. Each party
that delivers counterparts electronically or via facsimile shall endeavor
thereafter to deliver counterparts containing original signatures to the other
party; however, the failure to deliver counterparts containing original
signatures shall not affect the validity of any counterparts previously
delivered electronically or via facsimile. Each counterpart of this Lease (or of
any of the other Lease Documents, as the case may be) shall be deemed to be an
original thereof, and all such counterparts (including those delivered
electronically or via facsimile), when taken together, shall constitute one and
the same instrument.

 

Section 26.15     Survival. All obligations and liabilities of Landlord or
Tenant to the other which accrued before the expiration or other termination of
this Lease, and all such obligations and liabilities which by their nature or
under the circumstances can only be, or by the provisions of this Lease may be,
performed after such expiration or other termination, shall survive the
expiration or other termination of this Lease. Without limiting the generality
of the foregoing, the rights and obligations of the parties with respect to any
indemnity under this Lease, and with respect to any Rent and any other amounts
payable under this Lease, shall survive the expiration or other termination of
this Lease.

 

Section 26.16     Code Waivers. Tenant hereby waives any and all rights under
and benefits of Subsection 1 of Section 1931, 1932, Subdivision 2, 1933,
Subdivision 4, 1941, 1942 and 1950.7 (providing that a Landlord may only claim
from a security deposit only those sums reasonably necessary to remedy defaults
in the payment of rent, to repair damage caused by a tenant or to clean the
premises) of the California Civil Code, Section 1265.130 of the California Code
of Civil Procedure (allowing either party to petition a court to terminate a
lease in the event of a partial taking), and Section 1174(c) of the California
Code of Civil Procedure and Section 1951.7 of the California Civil Code
(providing for Tenant's right to satisfy a judgment in order to prevent a
forfeiture of this Lease or requiring Landlord to deliver written notice to
Tenant of any reletting of the Premises), and any similar law, statute or
ordinance now or hereinafter in effect.

 

Section 26.17     Hazardous Substance Disclosure. California law requires
landlords to disclose to tenants the presence or potential presence of certain
Hazardous Materials. Accordingly, Tenant is hereby advised that occupation of
the Premises and use of the common areas of the Project may lead to exposure to
Hazardous Materials such as, but not limited to, gasoline, diesel and other
vehicle fluids, vehicle exhaust, office maintenance fluids, tobacco smoke, and
building materials containing chemicals, such as formaldehyde. In addition,
California's Proposition 65, Health and Safety Code Section 25249.6 et. seq.,
requires notice that some of these Hazardous Materials are known by the State of
California to cause cancer or reproductive harm.

 

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Section 26.18     Inability to Perform. This Lease and the obligation of Tenant
to pay Rent and to perform all of the other covenants and agreements of Tenant
hereunder shall not be affected, impaired or excused by any Unavoidable Delays.
Landlord shall use reasonable efforts to promptly notify Tenant of any
Unavoidable Delay which prevents Landlord from fulfilling any of its obligations
under this Lease.

 

Section 26.19     Intentionally Omitted.

 

Section 26.20     Financial Statements. Within ten (10) Business Days after
Landlord's written request, which request shall only be made in connection with
a sale or refinancing of the Project or in the Event of Default, Tenant shall
deliver to Landlord (i) Tenant's audited financial statements for the most
recently completed fiscal year or (ii) if audited statements for Tenant are not
prepared, then unaudited financial statements for the most recent fiscal year of
Tenant which shall be certified to be true and correct by Tenant's Chief
Financial Officer. Upon Landlord's request, Tenant shall provide such additional
information as Landlord may reasonably request to enable Landlord to assess the
credit-worthiness of Tenant as a tenant of the Building. Landlord shall endeavor
to ensure that all financial statements furnished by Tenant are kept
confidential by Landlord and any Mortgagee or prospective purchaser that may
receive the same, and that such statements are used only for the purpose of
assessing the credit-worthiness of Tenant as a tenant of the Building.
Notwithstanding the foregoing, in the event that (i) stock in the entity which
constitutes Tenant under this Lease (as opposed to an entity that "controls"
Tenant or is otherwise an "affiliate" of Tenant) is publicly traded on a
national stock exchange, and (ii) Tenant has its own, separate and distinct 10K
and 10Q filing requirements (as opposed joint or cumulative filings with an
entity that controls Tenant or with entities which are otherwise affiliates of
Tenant), then Tenant's obligation to provide Landlord with a copy of its most
recent current financial statement shall be deemed satisfied.

 

Section 26.21     Development of the Project.

 

(a)     In General. Landlord reserves the right to subdivide all or a portion of
the Project. Tenant agrees to execute and deliver, upon demand by Landlord and
in the form requested by Landlord, any additional documents needed to conform
this Lease to the circumstances resulting from such subdivision. If portions of
the Project or property adjacent to the Project (collectively, the "Other
Improvements") are owned or later acquired by an entity other than Landlord or
an affiliate of Landlord, Landlord, at its option, may enter into an agreement
with the owner or owners of any or all of the Other Improvements to provide
(i) for reciprocal rights of access and/or use of the Project and the Other
Improvements, (ii) for the common management, operation, maintenance,
improvement and/or repair of all or any portion of the Project and the Other
Improvements, provided that Tenant's rights under this Lease are not materially
impaired, (iii) for the allocation of a portion of the Operating Expenses and
Taxes to the Other Improvements and the operating expenses and taxes for the
Other Improvements to the Project, and (iv) for the use or improvement of the
Other Improvements and/or the Project in connection with the improvement,
construction, and/or excavation of the Other Improvements and/or the Project.
Nothing contained herein shall be deemed or construed to limit or otherwise
affect Landlord's right to convey all or any portion of the Project or any other
of Landlord's rights described in this Lease.

 

(b)     Building Renovations. It is specifically understood and agreed that
Landlord has made no representation or warranty to Tenant and has no obligation
and has made no promises to alter, remodel, improve, renovate, repair or
decorate the Premises, the Building, or any part of the Project and that no
representations respecting the condition of the Premises or the Project have
been made by Landlord to Tenant except as may be specifically set forth herein
or in the Tenant Work Letter. However, Tenant hereby acknowledges that Landlord
may during the Term renovate, improve, alter, or modify (collectively, the
"Renovations") the Project, the Building and/or the Premises, including without
limitation the Common Areas, the Building Systems, the roof and structural
portions of the Building, which Renovations may include, without limitation,
(i) converting subterranean levels of the Building from storage space to parking
facilities, (ii) modifying the Common Areas and tenant spaces to comply with
applicable Requirements, including regulations relating to the physically
disabled, seismic conditions, and building safety and security, and
(iii) installing new floor covering, lighting, and wall coverings in the Common
Areas, and in connection with any Renovations, Landlord may, among other things,
erect scaffolding or other necessary structures in the Building, limit or
eliminate access to portions of the Project, including portions of the Common
Areas, or perform work in the Building, which work may create noise, dust or
leave debris in the Building. Tenant hereby agrees that such Renovations and
Landlord's actions in connection with such Renovations shall in no way
constitute a constructive eviction of Tenant nor entitle Tenant to any abatement
of Rent. Landlord shall use commercially reasonable efforts to minimize
interference with Tenant's business operations and shall, to the extent
practical, perform any work on Tenant's floor(s) after normal working hours.
Landlord shall have no responsibility or for any reason be liable to Tenant for
any direct or indirect injury to or interference with Tenant's business arising
from the Renovations, nor shall Tenant be entitled to any compensation or
damages from Landlord for loss of the use of the whole or any part of the
Premises or of Tenant's personal property or improvements resulting from the
Renovations or Landlord's actions in connection with such Renovations, or for
any inconvenience or annoyance occasioned by such Renovations or Landlord's
actions, provided that the foregoing shall not limit Landlord's liability, if
any, pursuant to applicable Requirements for personal injury and property damage
to the extent caused by the gross negligence or willful misconduct of Landlord,
its agents, employees or contractors.

 

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Section 26.22     Tax Status of Beneficial Owner. Tenant recognizes and
acknowledges that Landlord and/or certain beneficial owners of Landlord may from
time to time qualify as real estate investment trusts pursuant to Sections 856
et seq. of the Tax Code and that avoiding (a) the loss of such status, (b) the
receipt of any income derived under any provision of this Lease that does not
constitute “rents from real property” (in the case of real estate investment
trusts), and (c) the imposition of income, penalty or similar taxes (each an
“Adverse Event”) is of material concern to Landlord and such beneficial owners.
In the event that this Lease or any document contemplated hereby could, in the
opinion of counsel to Landlord, result in or cause an Adverse Event, Tenant
agrees to reasonably cooperate with Landlord in negotiating an amendment or
modification thereof and shall at the request of Landlord execute and deliver
such documents reasonably required to effect such amendment or modification. Any
amendment or modification pursuant to this Section 26.22 shall be structured so
that the economic results to Landlord and Tenant shall be substantially similar
to those set forth in this Lease without regard to such amendment or
modification. Without limiting any of Landlord's other rights under this Section
26.22, Landlord may waive the receipt of any amount payable to Landlord
hereunder and such waiver shall constitute an amendment or modification of this
Lease with respect to such payment. Tenant expressly covenants and agrees not to
enter into any sublease or assignment which provides for rental or other payment
for such use, occupancy, or utilization based in whole or in part on the net
income or profits derived by any person from the property leased, used,
occupied, or utilized (other than an amount based on a fixed percentage or
percentages of receipts or sales), and that any such purported sublease or
assignment shall be absolutely void and ineffective as a conveyance of any right
or interest in the possession, use, occupancy, or utilization of any part of the
Premises. Landlord shall bear the entirety of any costs and expenses incurred by
Tenant in connection with this Section 26.23 including, without limitation,
legal fees, and Landlord shall promptly reimburse Tenant for all such costs paid
by Tenant.

 

Section 26.23     Authority. If Tenant is a corporation, trust, limited
liability company or partnership, each individual executing this Lease on behalf
of Tenant hereby represents and warrants that Tenant is a duly formed and
existing entity qualified to do business in California and that Tenant has full
right and authority to execute and deliver this Lease and that each person
signing on behalf of Tenant is authorized to do so. In such event, Tenant shall,
within ten (10) Business Days after request by Landlord, deliver to Landlord
satisfactory evidence of such authority, and, upon demand by Landlord, Tenant
shall also deliver to Landlord satisfactory evidence of (i) good standing in
Tenant's state of formation and (ii) qualification to do business in California.

 

Section 26.24     Attorneys' Fees. In the event that either Landlord or Tenant
should bring suit for the possession of the Premises, for the recovery of any
sum due under this Lease, or because of the breach of any provision of this
Lease or for any other relief against the other, then all costs and expenses,
including reasonable attorneys' fees, incurred by the prevailing party therein
shall be paid by the other party.

 

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Section 26.25     Abatement of Rent. In the event that Tenant is prevented from
using, and does not use, the Premises or any portion thereof, as a result of any
failure to provide services, utilities or access to the Premises to the extent
Landlord is obligated to provide same under this Lease (any such set of
circumstances to be known as an “Abatement Event”), then Tenant shall give
Landlord notice of such Abatement Event, and if such Abatement Event continues
for five (5) consecutive Business Days after Landlord’s receipt of any such
notice, (the “Eligibility Period”), then the Fixed Rent, Tenant’s Tax Payment,
and Tenant’s Operating Payment shall be abated or reduced, as the case may be,
after the expiration of the Eligibility Period for such time that Tenant
continues to be so prevented from using, and does not use, the Premises or a
portion thereof, in the proportion that the rentable area of the portion of the
Premises that Tenant is prevented from using, and does not use, bears to the
total rentable area of the Premises; provided, however, in the event that Tenant
is prevented from using, and does not use, a portion of the Premises for a
period of time in excess of the Eligibility Period and the remaining portion of
the Premises is not sufficient to allow Tenant to effectively conduct its
business therein, and if Tenant does not conduct its business from such
remaining portion, then for such time after expiration of the Eligibility Period
during which Tenant is so prevented from effectively conducting its business
therein, the Fixed Rent, Tenant’s Tax Payment, and Tenant’s Operating Payment
for the entire Premises shall be abated for such time as Tenant continues to be
so prevented from using, and does not use, the Premises. If, however, Tenant
reoccupies any portion of the Premises during such period, the Rent allocable to
such reoccupied portion, based on the proportion that the rentable area of such
reoccupied portion of the Premises bears to the total rentable area of the
Premises, shall be payable by Tenant from the date Tenant reoccupies such
portion of the Premises. Such right to abate Fixed Rent, Tenant’s Tax Payment,
and Tenant’s Operating Payment shall be Tenant’s sole and exclusive remedy at
law or in equity for an Abatement Event. To the extent Tenant is entitled to
abatement without regard to the Eligibility Period because of an event described
in Section 11.3 or Article 12 of this Lease, then the Eligibility Period shall
not be applicable. Except as provided in this Section 26.25, nothing contained
herein shall be interpreted to mean that Tenant is excused from paying Rent due
hereunder.

 

Section 26.26     Reasonableness and Good Faith. Except for (i) matters for
which there is a standard of consent or discretion specifically set forth in
this Lease, (ii) matters which could have an adverse effect on the structure of
the Building or the Building Systems, or which could affect the exterior
appearance of the Building, or (iii) matters covered by Article 15 (Defaults;
Remedies) of this Lease (collectively, the "Excepted Matters"), any time the
consent of Landlord or Tenant is required, such consent shall not be
unreasonably withheld, conditioned or delayed, and, except with regard to the
Excepted Matters, whenever this Lease grants Landlord or Tenant the right to
take action, exercise discretion, establish rules and regulations or make an
allocation or other determination, Landlord and Tenant shall act reasonably;
provided, however, Landlord and Tenant shall act in good faith at all times
under this Lease.

 

Section 26.27     Fitness Center. Landlord and Tenant hereby acknowledge and
agree that Landlord has constructed a fitness center (the "Fitness Center") at
the Project to service tenants of the Project. The employees of Tenant shall
have the non-exclusive right during the Term to use the Fitness Center without
additional membership fees or charges. The Fitness Center may be modified,
altered, relocated or otherwise changed by Landlord from time to time during the
Lease Term, in Landlord's discretion. Additionally, Landlord shall have the
right at any time during the Term to terminate the operation of the Fitness
Center, provided, however, that in no event shall Landlord exercise such right
during the initial five (5) years of the Term. Landlord reserves the right to
control the manner and hours in which the Fitness Center is maintained and
operated. Tenant shall comply with such rules, regulations and requirements
relating to the Fitness Center as Landlord may from time to time promulgate.
Tenant hereby acknowledges and agrees that the costs associated with the Fitness
Center shall be included in Operating Expenses for purposes of this Lease.

 

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ARTICLE 27

LETTER OF CREDIT

 

Section 27.1     Form of Letter of Credit; Letter of Credit Amount. Tenant
shall, within two (2) weeks following Tenant's execution and delivery of this
Lease (the "Letter of Credit Delivery Date"), deliver to Landlord, as protection
for the full and faithful performance by Tenant of all of its obligations under
this Lease and for all losses and damages Landlord may suffer as a result of any
breach or default by Tenant under this Lease, an irrevocable and unconditional
negotiable standby letter of credit (the "Letter of Credit"), in the form
attached hereto as Exhibit H and containing the terms required herein, payable
in the City of Los Angeles, California, running in favor of Landlord and issued
by a solvent, nationally recognized bank with a long term rating of A or higher
(by Standard Poor's) or a long term rating of A2 or higher (by Moody's), under
the supervision of the Superintendent of Banks of the State of California, or a
national banking association, in the amount of $407,566.00 (the "Letter of
Credit Amount"). In no event shall Landlord be obligated to disburse any portion
of the Tenant Improvement Allowance until Landlord has received the Letter of
Credit in compliance with the terms of this Article 27. The Letter of Credit
shall (i) be "callable" at sight, irrevocable and unconditional, (ii) be
maintained in effect, whether through renewal or extension, for the period from
the Commencement Date and continuing until the date (the "LC Expiration Date")
that is one hundred twenty (120) days after the expiration of the Term (as the
same may be extended), and Tenant shall deliver a new Letter of Credit or
certificate of renewal or extension to Landlord at least ninety (90) days prior
to the expiration of the Letter of Credit then held by Landlord, without any
action whatsoever on the part of Landlord, (iii) be fully assignable by
Landlord, its successors and assigns, (iv) permit partial draws and multiple
presentations and drawings, and (v) be otherwise subject to the International
Standby Practices 1998, International Chamber of Commerce Publication No. 590.
If Tenant exercises its option to extend the Term pursuant to Section 2.5 of
this Lease then, not later than ninety (90) days prior to the commencement of
the Renewal Term, Tenant shall deliver to Landlord a new Letter of Credit or
certificate of renewal or extension evidencing the LC Expiration Date as one
hundred twenty (120) days after the expiration of the Renewal Term. The form and
terms of the Letter of Credit and the bank issuing the same (the "Bank") shall
be acceptable to Landlord, in Landlord's sole discretion. Landlord, or its then
managing agent, shall have the right to draw down an amount up to the face
amount of the Letter of Credit if any of the following shall have occurred or be
applicable: (1) such amount is due to Landlord under the terms and conditions of
this Lease, or (2) Tenant has filed a voluntary petition under the U.S.
Bankruptcy Code or any state bankruptcy code (collectively, "Bankruptcy Code"),
or (3) an involuntary petition has been filed against Tenant under the
Bankruptcy Code, or (4) the Bank has notified Landlord that the Letter of Credit
will not be renewed or extended through the LC Expiration Date or (5) the long
term rating of the Bank has been downgraded to BBB or lower (by Standard &
Poor's) or Baa2 or lower (by Moody's) and Tenant has failed to deliver a new
Letter of Credit from a bank with a long term rating of A or higher (by Standard
& Poor's) or A2 or higher (by Moody's) and otherwise meeting the requirements
set forth in this Article 27 within thirty (30) days following notice from
Landlord. The Letter of Credit will be honored by the Bank regardless of whether
Tenant disputes Landlord's right to draw upon the Letter of Credit.

 

Section 27.2     Transfer of Letter of Credit by Landlord. The Letter of Credit
shall also provide that Landlord, its successors and assigns, may, at any time
and without notice to Tenant and without first obtaining Tenant's consent
thereto, transfer (one or more times) all or any portion of its interest in and
to the Letter of Credit to another party, person or entity, as a part of the
assignment by Landlord of its rights and interests in and to this Lease or as
may be required by a Mortgagee. In the event of a transfer of Landlord's
interest in the Building, Landlord shall transfer the Letter of Credit, in whole
or in part, to the transferee and thereupon Landlord, without any further
agreement between the parties, shall be released by Tenant from all liability
therefor, and it is agreed that the provisions hereof shall apply to every
transfer or assignment of the whole or any portion of said Letter of Credit to a
new landlord. In connection with any such transfer of the Letter of Credit by
Landlord, Tenant shall, at Tenant's sole cost and expense, execute and submit to
the Bank such applications, documents and instruments as may be necessary to
effectuate such transfer, and Tenant shall be responsible for paying the Bank's
transfer and processing fees in connection therewith, provided that in no event
shall Tenant be liable for any such costs more than three (3) times during the
initial Term.

 

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Section 27.3     Maintenance of Letter of Credit by Tenant. If, as a result of
any drawing by Landlord on the Letter of Credit, the amount of the Letter of
Credit shall be less than the Letter of Credit Amount, Tenant shall, within five
(5) days thereafter, provide Landlord with additional letter(s) of credit in an
amount equal to the deficiency, and any such additional letter(s) of credit
shall comply with all of the provisions of this Article 27, and if Tenant fails
to comply with the foregoing, notwithstanding anything to the contrary contained
in Section 15.1 of this Lease, the same shall constitute an incurable Event of
Default by Tenant. Tenant further covenants and warrants that it will neither
assign nor encumber the Letter of Credit or any part thereof and that neither
Landlord nor its successors or assigns will be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance. Without limiting the
generality of the foregoing, if the Letter of Credit expires earlier than the LC
Expiration Date, Landlord will accept a renewal thereof (such renewal letter of
credit to be in effect and delivered to Landlord, as applicable, not later than
ninety (90) days prior to the expiration of the Letter of Credit), which shall
be irrevocable and automatically renewable as above provided through the LC
Expiration Date upon the same terms as the expiring Letter of Credit or such
other terms as may be acceptable to Landlord in its sole discretion. However, if
the Letter of Credit is not timely renewed, or if Tenant fails to maintain the
Letter of Credit in the amount and in accordance with the terms set forth in
this Article 27, Landlord shall have the right to present the Letter of Credit
to the Bank in accordance with the terms of this Article 27, and the proceeds of
the Letter of Credit may be applied by Landlord against any Rent payable by
Tenant under this Lease that is not paid when due and/or to pay for all losses
and damages that Landlord has suffered or that Landlord reasonably estimates
that it will suffer as a result of any breach or default by Tenant under this
Lease. Any unused proceeds shall constitute the property of Landlord and need
not be segregated from Landlord's other assets. Landlord agrees to pay to Tenant
within thirty (30) days after the LC Expiration Date the amount of any proceeds
of the Letter of Credit received by Landlord and not applied against any Rent
payable by Tenant under this Lease that was not paid when due or used to pay for
any losses and/or damages suffered by Landlord (or reasonably estimated by
Landlord that it will suffer) as a result of any breach or default by Tenant
under this Lease; provided, however, that if prior to the LC Expiration Date a
voluntary petition is filed by Tenant, or an involuntary petition is filed
against Tenant by any of Tenant's creditors, under the Bankruptcy Code, then
Landlord shall not be obligated to make such payment in the amount of the unused
Letter of Credit proceeds until either all preference issues relating to
payments under this Lease have been resolved in such bankruptcy or
reorganization case or such bankruptcy or reorganization case has been
dismissed.

 

Section 27.4     Landlord's Right to Draw Upon Letter of Credit. Tenant hereby
acknowledges and agrees that Landlord is entering into this Lease in material
reliance upon the ability of Landlord to draw upon the Letter of Credit upon the
occurrence of any breach or default on the part of Tenant under this Lease. If
Tenant shall breach any provision of this Lease or otherwise be in default
hereunder, Landlord may, but without obligation to do so, and without notice to
Tenant, draw upon the Letter of Credit, in part or in whole, to cure any breach
or default of Tenant and/or to compensate Landlord for any and all damages of
any kind or nature sustained or which Landlord reasonably estimates that it will
sustain resulting from Tenant's breach or default. The use, application or
retention of the Letter of Credit, or any portion thereof, by Landlord shall not
prevent Landlord from exercising any other right or remedy provided by this
Lease or by any applicable law, it being intended that Landlord shall not first
be required to proceed against the Letter of Credit, and shall not operate as a
limitation on any recovery to which Landlord may otherwise be entitled. Tenant
agrees not to interfere in any way with payment to Landlord of the proceeds of
the Letter of Credit, either prior to or following a "draw" by Landlord of any
portion of the Letter of Credit, regardless of whether any dispute exists
between Tenant and Landlord as to Landlord's right to draw upon the Letter of
Credit. No condition or term of this Lease shall be deemed to render the Letter
of Credit conditional to justify the issuer of the Letter of Credit in failing
to honor a drawing upon such Letter of Credit in a timely manner. Tenant agrees
and acknowledges that (a) the Letter of Credit constitutes a separate and
independent contract between Landlord and the Bank, (b) Tenant is not a third
party beneficiary of such contract, (c) Tenant has no property interest
whatsoever in the Letter of Credit or the proceeds thereof, and (d) in the event
Tenant becomes a debtor under any chapter of the Bankruptcy Code, neither
Tenant, any trustee, nor Tenant's bankruptcy estate shall have any right to
restrict or limit Landlord's claim and/or rights to the Letter of Credit and/or
the proceeds thereof by application of Section 502(b)(6) of the U. S. Bankruptcy
Code or otherwise.

 

Section 27.5     Letter of Credit Not a Security Deposit. Landlord and Tenant
acknowledge and agree that in no event or circumstance shall the Letter of
Credit or any renewal thereof or any proceeds thereof be (i) deemed to be or
treated as a "security deposit" within the meaning of California Civil Code
Section 1950.7, (ii) subject to the terms of such Section 1950.7, or (iii)
intended to serve as a "security deposit" within the meaning of such Section
1950.7. The parties hereto (A) recite that the Letter of Credit is not intended
to serve as a security deposit and such Section 1950.7 and any and all other
laws, rules and regulations applicable to security deposits in the commercial
context ("Security Deposit Laws") shall have no applicability or relevancy
thereto and (B) waive any and all rights, duties and obligations either party
may now or, in the future, will have relating to or arising from the Security
Deposit Laws.

 

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Section 27.6     Reduction in Letter of Credit Amount. To the extent that Tenant
is not in default under this Lease effective as of the applicable Reduction Date
(defined below) and has not been in default under this Lease, beyond any
applicable notice and cure period prior to the Reduction Date, then the Letter
of Credit Amount shall be reduced by twenty-five percent (25%) on (i) the first
day of the twenty-fifth (25th) month of the Term, (ii) the first day of the
thirty-seventh (37th) month of the Term, and (iii) the first day of the
forty-ninth (49th) month of the Term (each date referenced in items (i) through
(iii) above shall be referred to herein as the "Reduction Date"). To the extent
that Tenant is entitled to a reduction of the Letter of Credit pursuant to the
terms of this Section 27.6, then Tenant shall have the right to reduce the
Letter of Credit Amount as set forth above via the delivery to Landlord of
either (x) an amendment to the existing Letter of Credit (in form and content
reasonably acceptable to Landlord) modifying the Letter of Credit Amount to the
amount then required under this Article 27, or (y) an entirely new Letter of
Credit (in the form and content otherwise required in this Article 27) in the
total Letter of Credit Amount then required under this Article 27.

 

ARTICLE 28

PARKING

 

Tenant shall have the right, but not the obligation, to rent from Landlord,
commencing on the Commencement Date, up to twenty-four (24) unreserved parking
passes on a monthly basis throughout the Term, which parking passes shall
pertain to the Project parking facility servicing the Project ("Project Parking
Facility"). Additionally, Tenant shall have the right to convert up to three (3)
of the unreserved parking passes allocated to Tenant to reserved parking spaces.
The location of any reserved parking spaces rented by Tenant shall be determined
by Landlord Tenant may change the number of parking passes rented pursuant to
this Article 28 upon thirty (30) days prior written notice to Landlord, provided
that in no event shall Tenant be entitled to rent more than the amount and type
of parking passes allotted to Tenant as set forth in this Article 28 above.
Landlord shall have the right to provide parking for the Project at off-site
locations other than the Project Parking Facility (without relocating Tenant's
passes for the Project Parking Facility as specified above), and in such event,
said off-site parking areas shall be deemed part of the Project for purposes of
this Lease, provided that any such off-site parking areas shall be located
within a four (4) minute to and from the Building. Landlord shall have the right
to change, delete or modify such off-site parking areas. Tenant shall pay to
Landlord for automobile parking passes on a monthly basis the prevailing rate
charged from time to time at the location of such parking passes. The prevailing
rate charged for parking passes as of the date hereof is (i) $187.20 for each
unreserved parking pass, and (ii) $256.88 for each single reserved parking
space. In addition, Tenant shall be responsible for the full amount of any taxes
imposed by any governmental authority in connection with the renting of such
parking passes by Tenant or the use of the Project Parking Facility by Tenant.
Tenant's continued right to use the parking passes is conditioned upon Tenant
abiding by all rules and regulations which are prescribed from time to time for
the orderly operation and use of the Project Parking Facility, including any
sticker or other identification system established by Landlord or an operator of
the Project Parking Facility, Tenant's cooperation in seeing that Tenant's
employees and visitors also comply with such rules and regulations and Tenant
not being in default under this Lease. Tenant's insurance and indemnification
obligations in Articles 11 and 25 of this Lease shall be fully applicable to
Tenant's use of the Project parking facility. Landlord specifically reserves the
right to change the size, configuration, design, layout and all other aspects of
the Project Parking Facility at any time and Tenant acknowledges and agrees that
Landlord may, without incurring any liability to Tenant and without any
abatement of Rent under this Lease, from time to time, close-off or restrict
access to the Project Parking Facility for purposes of permitting or
facilitating any such construction, alteration or improvements. Landlord may
delegate its responsibilities hereunder to a parking operator in which case such
parking operator shall have all the rights of control attributed hereby to the
Landlord. The parking passes rented by Tenant pursuant to this Article 28 are
provided to Tenant solely for use by Tenant's own personnel and such passes may
not be transferred, assigned, subleased or otherwise alienated by Tenant without
Landlord's prior approval. Tenant may validate visitor parking by such method or
methods as the Landlord may establish, at the validation rate from time to time
generally applicable to visitor parking.

 

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day
and year first above written.

 

LANDLORD:

 

ARBORETUM COURTYARD, L.L.C.,

a Delaware limited liability company

 

By:_____________________________

Name:__________________________

Its:_____________________________

 

TENANT:

CATASYS, INC.,

a California corporation

 

By:                                                                 

Name:                                                             

Title:                                                               

 

By:                                                                  

Name:                                                             

Title:                                                                

 

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EXHIBIT A

 

Floor Plan of Premises

 

The floor plan which follows is intended solely to identify the general location
of the Premises, and should not be used for any other purpose. All areas,
dimensions and locations are approximate, and any physical conditions indicated
may not exist as shown.

 

 

 

[ex_129611img001.jpg]

 

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EXHIBIT B

 

Definitions

 

Base Rate: The annual rate of interest publicly announced from time to time by
Citibank, N.A., or its successor, in New York, New York as its "base rate" (or
such other term as may be used by Citibank, N.A., from time to time, for the
rate presently referred to as its "base rate").

 

Building Standard Installations: The type of core and shell improvements
typically provided by Landlord in connection with the initial occupancy of
tenants in the Building.

 

Building Systems: The mechanical, electrical, plumbing, sanitary, sprinkler,
heating, ventilation and air conditioning, security, fire and life-safety,
elevator and other service systems or facilities of the Building up to the point
of connection of localized distribution to the Premises (excluding, however,
supplemental HVAC systems of tenants, sprinklers and the horizontal distribution
systems within and servicing the Premises and by which mechanical, electrical,
plumbing, sanitary, heating, ventilating and air conditioning, security,
life-safety and other service systems are distributed from the base Building
risers, feeders, panelboards, etc. for provision of such services to the
Premises).

 

Business Days: All days, excluding Saturdays, Sundays and Observed Holidays.

 

Common Areas: The lobby, plaza and sidewalk areas, subterranean parking
facilities (if any) and other similar areas of general access and the areas on
individual multi-tenant floors in the Building devoted to corridors, elevator
lobbies, restrooms, and other similar facilities serving the Premises.

 

Comparable Buildings: Class A office buildings located in the media and
entertainment district of Santa Monica, California, including the following
buildings: Lantana Center, 2700 Colorado, Colorado Center, Water Garden,
2041-2115 Colorado Ave., Santa Monica Gateway, Westside Media Center, and
2100-2110 Colorado Ave.

 

Excluded Expenses: (a) Taxes; (b) franchise or income taxes imposed upon
Landlord; (c) mortgage amortization and interest, except to the extent the same
may be included in Operating Expenses pursuant to the terms of Section 7.1(e) of
this Lease; (d) leasing commissions; (e) the cost of tenant installations and
decorations incurred in connection with preparing space for any Building tenant,
including work letters and concessions; (f) fixed rent under Superior Leases, if
any; (g) management fees to the extent in excess of the greater of (A) three and
one-half percent (3.5%) of the gross rentals and other revenues collected for
the Project, and (B) fees charged by Landlord or related entities for the
management by any of them of other first class properties in the area of the
Building; (h) wages, salaries and benefits paid to any persons above the grade
of property manager or chief engineer (or employees with equivalent
responsibilities regardless of job title) and their respective immediate
supervisors; (i) legal and accounting fees relating to (A) disputes with
tenants, prospective tenants or other occupants of the Building, (B) disputes
with purchasers, prospective purchasers, mortgagees or prospective mortgagees of
the Building or the Project or any part of either, or (C) negotiations of
leases, contracts of sale or mortgages; (j) costs of services provided to other
tenants of the Building on a "rent-inclusion" basis which are not provided to
Tenant on such basis; (k) costs that are reimbursed out of insurance, warranty
or condemnation proceeds, or which are reimbursed by Tenant or other tenants
other than pursuant to an expense escalation clause; (l) costs in the nature of
penalties or fines; (m) except with respect to management fees (which are
subject to (g) above),costs for services, supplies or repairs paid to any
related entity in excess of costs that would be payable in an "arm's length" or
unrelated situation for comparable services, supplies or repairs;
(n) allowances, concessions or other costs and expenses of improving or
decorating any demised or demisable space in the Building; (o) advertising and
promotional expenses in connection with leasing of the Building; (p) the costs
of installing, operating and maintaining a specialty improvement, including a
cafeteria, lodging or private dining facility, or an athletic, luncheon or
recreational club unless Tenant is permitted to make use of such facility
without additional cost (other than payments for key deposits, use of towels or
other incidental items) or on a subsidized basis consistent with other users;
(q) any costs or expenses (including fines, interest, penalties and legal fees)
arising out of Landlord's failure to timely pay Operating Expenses or Taxes;
(r) costs incurred to comply with applicable Requirements relating to any
Hazardous Materials which were in existence in the Building or on the Project
prior to the date of this Lease, and were of such a nature that a federal, State
or municipal governmental authority, if it had then had knowledge of the
presence of such Hazardous Materials, in the state, and under the conditions
that it then existed in the Building or on the Project, would have then required
the removal of such Hazardous Materials or other remedial or containment action
with respect thereto (the “Pre-Existing Hazardous Materials”); (s) costs
incurred to remove, remedy, contain, or treat Hazardous Materials, which
Hazardous Materials are brought into the Building or onto the Project after the
date of this Lease by Landlord, any other tenant of the Building or any third
party and is of such a nature, at that time, that a federal, State or municipal
governmental authority, if it had then had knowledge of the presence of such
Hazardous Materials, in the state, and under the conditions, that it then
existed in the Building or on the Project, would have then required the removal
of such Hazardous Materials or other remedial or containment action with respect
thereto; (t) the cost of capital improvements other than those expressly
included in Operating Expenses pursuant to Section 7.1; (u) interest, fines or
penalties for late payment or violations of applicable Requirements by Landlord,
and (v) costs of replacements, alterations or improvements necessary to make the
Building or the Project comply with applicable Requirement in effect and
applicable to the Building and/or the Project prior to the date of this Lease,
except to the extent the need for such replacements, alterations or improvements
is caused by Tenant Parties (in which case Tenant shall nonetheless be
responsible for such costs in accordance with Article 8 of this Lease),
provided, however, that the provisions of this sub-item (v) shall not preclude
the inclusion of costs of compliance with applicable Requirements enacted prior
to the date of this Lease if such compliance is required for the first time by
reason of any amendment, modification or reinterpretation of an applicable
Requirement which is imposed after the date of this Lease.

 

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Governmental Authority: The United States of America, the City of Santa Monica,
County of Los Angeles, or State of California, or any political subdivision,
agency, department, commission, board, bureau or instrumentality of any of the
foregoing, now existing or hereafter created, having jurisdiction over the
Project.

 

Hazardous Materials: Any substances, materials or wastes currently or in the
future deemed or defined in any Requirement as "hazardous substances," "toxic
substances," "contaminants," "pollutants" or words of similar import.

 

HVAC System: The Building System designed to provide heating, ventilation and
air conditioning.

 

Indemnitees: Landlord, Landlord's Agent, each Mortgagee and Lessor, and each of
their respective direct and indirect partners, officers, shareholders,
directors, members, managers, trustees, beneficiaries, employees, principals,
contractors, servants, agents, and representatives.

 

Lease Year: The first Lease Year shall commence on the Commencement Date and
shall end on the last day of the calendar month preceding the month in which the
first anniversary of the Commencement Date occurs. Each succeeding Lease Year
shall commence on the day following the end of the preceding Lease Year and
shall extend for twelve (12) consecutive months; provided, however, that the
last Lease Year shall expire on the Expiration Date.

 

Lessor: A lessor under a Superior Lease.

 

Losses: Any and all losses, liabilities, damages, claims, judgments, fines,
suits, demands, costs, interest and expenses of any kind or nature (including
reasonable attorneys' fees and disbursements) incurred in connection with any
claim, proceeding or judgment and the defense thereof, and including all costs
of repairing any damage to the Premises, the Building or the Project or the
appurtenances of any of the foregoing to which a particular indemnity and hold
harmless agreement applies.

 

Mortgage(s): Any mortgage, trust indenture or other financing document which may
now or hereafter affect the Premises, the Project, the Building or any Superior
Lease and the leasehold interest created thereby, and all renewals, extensions,
supplements, amendments, modifications, consolidations and replacements thereof
or thereto, substitutions therefor, and advances made thereunder.

 

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Mortgagee(s): Any mortgagee, trustee or other holder of a Mortgage.

 

Observed Holidays: New Year's Day, Martin Luther King Day, Presidents Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day,
plus days observed by the State of California, the City of Santa Monica as
holidays, and/or any local union recognized holidays.

 

Ordinary Business Hours: 8:00 a.m. to 6:00 p.m. on Business Days and 9:00 a.m.
to 1:00 p.m. on Saturdays.

 

Prohibited Use: Any use or occupancy of the Premises that in Landlord's
reasonable judgment would: (a) cause damage to the Project, the Building or any
equipment, facilities or other systems therein; (b)  impair the appearance of
the Building or Project; (c)  interfere with the efficient and economical
maintenance, operation and repair of the Premises, the Building or the Project
or the equipment, facilities or systems thereof; (d)  adversely affect any
service provided to, and/or the use and occupancy by, any Project or Building
tenant or occupant, and/or injure or annoy any Project or Building tenant or
occupants by reason of noise, odors, or vibrations; (e) violate the certificate
of occupancy issued for the Premises, the Building or the Project;
(f) materially and adversely affect the first-class image of the Building or
Project; or (g) result in protests or civil disorder or commotions at, or other
disruptions of the normal business activities in, the Project. Prohibited Use
also includes the use of any part of the Premises for: (i) a restaurant or bar;
(ii) the preparation, consumption, storage, manufacture or sale of food or
beverages (except in connection with vending machines (provided that each
machine, where necessary, shall have a waterproof pan thereunder and be
connected to a drain) and/or warming kitchens installed for the use of Tenant's
employees only), liquor, tobacco or drugs; (iii) the business of photocopying,
multilith or offset printing (except photocopying in connection with Tenant's
own business); (iv) a school or classroom; (v) lodging or sleeping; (vi) the
operation of retail facilities (meaning a business whose primary patronage
arises from the generalized solicitation of the general public to visit Tenant's
offices in person without a prior appointment) of a savings and loan association
or retail facilities of any financial, lending, securities brokerage or
investment activity; (vii) a payroll office; (viii) a barber, beauty or manicure
shop; (ix) an employment agency or similar enterprise; (x) offices of any
Governmental Authority, any foreign government, the United Nations, or any
agency or department of the foregoing; (xi) the manufacture, retail sale,
storage of merchandise or auction of merchandise, goods or property of any kind
to the general public which could reasonably be expected to create a volume of
pedestrian traffic substantially in excess of that normally encountered in the
Premises; (xii) the rendering of medical, dental or other therapeutic or
diagnostic services; or (xiii) any illegal purposes or any activity constituting
a nuisance.

 

Requirements: All present and future laws, rules, orders, ordinances,
regulations, statutes, requirements, codes and executive orders, extraordinary
and ordinary of (i) all Governmental Authorities, including, without limitation,
(A) the Americans With Disabilities Act, 42 U.S.C. §12101 (et seq.), and any law
of like import, and all rules, regulations and government orders with respect
thereto, and (B) any of the foregoing relating to Hazardous Materials,
environmental matters, public health and safety matters and landmarks
protection, (ii) any applicable fire rating bureau or other body exercising
similar functions, affecting the Project or the maintenance, use or occupation
thereof, or any street, avenue or sidewalk comprising a part of or in front
thereof or any vault in or under the same, (iii) all requirements of all
insurance bodies affecting the Premises, (iv) utility service providers, and
(v) Mortgagees or Lessors. "Requirements" shall also include the terms and
conditions of any certificate of occupancy issued for the Premises or the
Building, and any other covenants, conditions or restrictions affecting the
Building and/or the Project from time to time.

 

Rules and Regulations: The rules and regulations annexed to and made a part of
this Lease as Exhibit F, as they may be modified from time to time by Landlord.

 

Specialty Alterations: Alterations and Tenant Improvements which are not
standard office installations such as kitchens, executive bathrooms, raised
computer floors, computer room installations, supplemental HVAC equipment, safe
deposit boxes, vaults, libraries or file rooms requiring reinforcement of
floors, internal staircases, slab penetrations, conveyors, dumbwaiters, and
other Alterations or Tenant Improvements of a similar character. All Specialty
Alterations are Above-Building Standard Installations.

 

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Substantial Completion: As to any construction performed by any party in the
Premises, "Substantial Completion" or "Substantially Completed" means that such
work has been completed, as reasonably determined by Landlord's architect, in
accordance with (a) the provisions of this Lease applicable thereto, (b) the
plans and specifications for such work, and (c) all applicable Requirements,
except for minor details of construction, decoration and mechanical adjustments,
if any, the noncompletion of which does not materially interfere with Tenant's
use of the Premises or which in accordance with good construction practices
should be completed after the completion of other work in the Premises or
Building.

 

Superior Lease(s): Any ground or underlying lease of the Project or any part
thereof heretofore or hereafter made by Landlord and all renewals, extensions,
supplements, amendments, modifications, consolidations, and replacements
thereof.

 

Tax Code: The Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder, as amended.

 

Tenant Delay: Any action or inaction by Tenant, which actually delays Landlord
in fulfilling any of Landlord's obligations under this Lease.

 

Tenant-Insured Improvements: All Tenant Improvements, Alterations and any other
alterations, modifications or tenant improvements in the Premises, regardless of
whether such Tenant Improvements, Alterations, or other alterations,
modifications or tenant improvements are installed by Landlord or Tenant.

 

Tenant Party: Tenant and any subtenants or occupants of the Premises and their
respective agents, contractors, subcontractors, employees, invitees or
licensees.

 

Tenant's Property: Tenant's movable fixtures and movable partitions, telephone
and other equipment, computer systems, telecommunications, data and other
cabling, trade fixtures, furniture, furnishings, and other items of personal
property which are removable without material damage to the Building.

 

Unavoidable Delays: Landlord's inability to fulfill or delay in fulfilling any
of its obligations under this Lease expressly or impliedly to be performed by
Landlord or Landlord's inability to make or delay in making any repairs,
additions, alterations, improvements or decorations or Landlord's inability to
supply or delay in supplying any equipment or fixtures, if Landlord's inability
or delay is due to or arises by reason of strikes, labor troubles or by
accident, or by any cause whatsoever beyond Landlord's reasonable control,
including governmental preemption in connection with a national emergency,
Requirements or shortages, or unavailability of labor, fuel, steam, water,
electricity or materials, or material delays caused by Tenant or other tenants,
mechanical breakdown, acts of God, acts of war, enemy action, terrorism,
bio-terrorism, civil commotion, fire or other casualty.

 

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EXHIBIT C

 

TENANT WORK LETTER

 

This Tenant Work Letter shall set forth the terms and conditions relating to the
construction of the "Tenant Improvements," as that term is defined in Section
2.1 below, in the Premises. This Tenant Work Letter is essentially organized
chronologically and addresses the issues of the construction of the Premises, in
sequence, as such issues will arise during the actual construction of the
Premises. All references in this Tenant Work Letter to Articles or Sections of
"the Lease" shall mean the relevant portion of Articles 1 through 28 of the
Lease to which this Tenant Work Letter is attached as Exhibit C and of which
this Tenant Work Letter forms a part, and all references in this Tenant Work
Letter to Sections of "this Tenant Work Letter" shall mean the relevant portion
of Sections 1 through 5 of this Tenant Work Letter. All initially capitalized
words not separately defined herein shall have the meanings given to such words
in the Lease.

 

SECTION 1

CONSTRUCTION DRAWINGS FOR THE PREMISES

 

1.1     Construction of Demising Work; Corridor Work.

 

1.1.1     Demising Work. Landlord and Tenant hereby acknowledge and agree that,
as of the date hereof, the Premises comprises a portion of a larger undemised
space (the "Adjacent Space"). Landlord, as part of the Tenant Improvements
(defined in Section 2.1 below), shall cause the Premises to be separately
demised from the Adjacent Space by the construction of a new, Building-standard
demising wall (the "Demising Wall"), which Demising Wall shall be installed in
the location approximately depicted on Schedule 1, attached hereto (the exact
location of which shall be reasonably approved by Landlord and Tenant) (the
"Demising Work"). Such Demising Work may include, without limitation, (i) the
separation of all mechanical, electrical, plumbing ("MEP") and HVAC systems
affected thereby and any necessary balancing of the HVAC in the Premises and the
Adjacent Space, (ii) the closure of the ceilings on both sides of the Demising
Wall, (iii) the performance of all work required to ensure that all HVAC, fire
sprinklers and fire/life safety systems, lights and outlets on each side of the
Demising Wall shall be fully operational and in compliance with applicable
Requirements, (iv) the installation of studs, acoustical insulation and dry wall
ready for finish on both sides of the Demising Wall and any necessary
penetrations, fire dampers and sound traps, and (v) the painting and/or
finishing of both sides of the Demising Wall. All costs incurred by Landlord in
connection with the Demising Work shall be deducted from the Tenant Improvement
Allowance (defined in Section 2.1, below).

 

1.1.2     Corridor Work. Landlord and Tenant hereby acknowledge and agree that,
Landlord will have to (i) reconfigure the corridor designated on Schedule 2,
attached hereto, and (ii) install a Building standard door in the location
designated on Schedule 2, attached hereto, in order to provide proper exiting
for the Premises (the work referenced in item (i) and (ii) above shall
collectively be referred to herein as the "Corridor Work"). The Corridor Work
shall be completed by Landlord in accordance with Building standards. Tenant
shall have no right to modify or alter the Corridor Work. All costs incurred by
Landlord in connection with the Corridor Work shall be deducted from the Tenant
Improvement Allowance.

 

SECTION 2

TENANT IMPROVEMENT ALLOWANCE

 

2.1     Tenant Improvement Allowance. Tenant shall be entitled to a one-time
tenant improvement allowance (the "Tenant Improvement Allowance") in the amount
of $354,105.00 (i.e., $45.00 per rentable square foot of the Premises) for the
costs relating to the initial design and construction of Tenant's improvements
which are permanently affixed to the Premises (the "Tenant Improvements"). In no
event shall Landlord be obligated to make disbursements pursuant to this Tenant
Work Letter in a total amount which exceeds the Tenant Improvement Allowance.
All Tenant Improvements for which the Tenant Improvement Allowance has been made
available shall be deemed Landlord's property under the terms of the Lease.    

 

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2.2     Unused Tenant Improvement Allowance. Subject to the terms hereof,
provided that Tenant is not in default of this Lease, upon notice from Tenant to
Landlord, Tenant shall be entitled to use up any unused portion of the Tenant
Improvement Allowance (i) for the installation of cabling in the Premises,
(ii) for the purchase of furniture, fixture and equipment in the Premises, or
(iii) as a credit against the next monthly Fixed Rent due under this Lease (the
items referenced in (i) and (ii) above shall be referred to herein as the
"Reimbursable Items". In the event that Tenant desires to use any unused Tenant
Improvement Allowance for the Reimbursable Items, then Tenant shall submit
invoices to Landlord, marked as having been paid, and such other documentation
as may be required by Landlord, and such expenses shall be reimbursed by
Landlord to Tenant within forty-five (45) days after Landlord's receipt of such
invoices and documentation. Notwithstanding anything contained herein to the
contrary, in the event that Tenant Improvement Allowance is not fully utilized
by Tenant under this Tenant Work Letter (whether for Tenant Improvements,
Reimbursable Items or as a credit against Base Rent, as and to the extent
permitted hereunder) on or before December 31, 2019, then such unused amounts
shall revert to Landlord and Tenant shall have no further rights with respect
thereto.

 

2.3     Disbursement of the Tenant Improvement Allowance. Except as otherwise
set forth in this Tenant Work Letter, the Tenant Improvement Allowance shall be
disbursed by Landlord (each of which disbursements shall be made pursuant to
Landlord's disbursement process) for costs related to the construction of the
Tenant Improvements and for the following items and costs (collectively, the
"Tenant Improvement Allowance Items"): (i) payment of the fees of the
"Architect" and the "Engineers," as those terms are defined in Section 3.1 of
this Tenant Work Letter, and payment of the fees incurred by, and the cost of
documents and materials supplied by, Landlord and Landlord's consultants in
connection with the preparation and review of the "Construction Drawings," as
that term is defined in Section 3.1 of this Tenant Work Letter; (ii) the cost of
any changes in the Base Building when such changes are required by the
Construction Drawings; and (iii) the cost of any changes to the Construction
Drawings or Tenant Improvements required by all applicable building codes (the
"Code").

 

2.4     Standard Tenant Improvement Package. Landlord has established
specifications (the "Specifications") for the Building standard components to be
used in the construction of the Tenant Improvements in the Premises
(collectively, the "Building Standards"), which Specifications shall be supplied
to Tenant by Landlord. The quality of Tenant Improvements shall be equal to or
of greater quality than the quality of the Specifications, provided that
Landlord may, at Landlord's option, require the Tenant Improvements to comply
with certain Specifications. Landlord may make changes to the Specifications for
the Building Standards from time to time.

 

SECTION 3

CONSTRUCTION DRAWINGS

 

3.1     Selection of Architect/Construction Drawings. Tenant shall retain the
architect/space planner reasonably approved by Landlord (the "Architect") to
prepare the "Construction Drawings," as that term is defined in this Section
3.1. Tenant shall retain the engineering consultants designated by Landlord (the
"Engineers") to prepare all plans and engineering working drawings relating to
the structural, mechanical, electrical, plumbing, HVAC, lifesafety, and
sprinkler work of the Tenant Improvements. The plans and drawings to be prepared
by Architect and the Engineers hereunder shall be known collectively as the
"Construction Drawings." All Construction Drawings shall comply with the drawing
format and specifications as determined by Landlord, and shall be subject to
Landlord's approval. Tenant and Architect shall verify, in the field, the
dimensions and conditions as shown on the relevant portions of the base Building
plans, and Tenant and Architect shall be solely responsible for the same, and
Landlord shall have no responsibility in connection therewith. Landlord's review
of the Construction Drawings as set forth in this Section 3, shall be for its
sole purpose and shall not imply Landlord's review of the same, or obligate
Landlord to review the same, for quality, design, Code compliance or other like
matters. Accordingly, notwithstanding that any Construction Drawings are
reviewed by Landlord or its space planner, architect, engineers and consultants,
and notwithstanding any advice or assistance which may be rendered to Tenant by
Landlord or Landlord's space planner, architect, engineers, and consultants,
Landlord shall have no liability whatsoever in connection therewith and shall
not be responsible for any omissions or errors contained in the Construction
Drawings, and Tenant's waiver and indemnity set forth in this Lease shall
specifically apply to the Construction Drawings.

 

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3.2     Final Space Plan. On or before the date set forth in Schedule 3,
attached hereto, Tenant and the Architect shall prepare the final space plan for
Tenant Improvements in the Premises (collectively, the "Final Space Plan"),
which Final Space Plan shall include a layout and designation of all offices,
rooms and other partitioning, their intended use, and equipment to be contained
therein, and shall deliver the Final Space Plan to Landlord for Landlord's
approval. At Landlord's option, prior to the submission of the "Final Working
Drawings," as that term is defined in Section 3.3, below, Tenant shall supply
Landlord with intermediate stages of the Construction Drawings.

 

3.3     Final Working Drawings. On or before the date set forth in Schedule 3,
Tenant, the Architect and the Engineers shall complete the architectural and
engineering drawings for the Premises, and the final architectural working
drawings in a form which is complete to allow subcontractors to bid on the work
and to obtain all applicable permits (collectively, the "Final Working
Drawings") and shall submit the same to Landlord for Landlord's approval.

 

3.4     Permits. The Final Working Drawings shall be approved by Landlord (the
"Approved Working Drawings") prior to the commencement of the construction of
the Tenant Improvements. Landlord shall be responsible for obtaining applicable
building permits in connection with the construction of the Tenant Improvements
(the "Permits"), provided that to the extent that Landlord shall be unable to
obtain or is delayed in obtaining the Permits due to the design of the Tenant
Improvements, as set forth in the Approved Working Drawings, including, without
limitation, due to the failure of the Approved Working Drawings, or the
improvements set forth therein, to comply with applicable governmental laws,
rules, regulations or requirements (in any event, a "Tenant Caused Permit
Failure"), such delay shall be considered a "Tenant Delay," as that term is
defined in Section 5.2 of this Tenant Work Letter. Tenant shall cooperate with
all Landlord requests in connection with Landlord's obtaining of the Permits
and/or matters affecting Landlord's ability to obtain the Permits.

 

3.5     Change Orders. No changes, modifications or alterations in the Approved
Working Drawings may be made without the prior written consent of Landlord,
provided that Landlord may withhold its consent, in its sole discretion, to any
change in the Approved Working Drawings if such change would directly or
indirectly delay the "Substantial Completion" of the Premises as that term is
defined in Section 5.1 of this Tenant Work Letter.

 

3.6     Time Deadlines. Tenant shall use its best, good faith, efforts and all
due diligence to cooperate with the Architect, the Engineers, and Landlord to
complete all phases of the Construction Drawings and the permitting process and
to receive the permits, and with Contractor for approval of the "Cost Proposal,"
as that term is defined in Section 4.2 of this Tenant Work Letter, as soon as
possible after the execution of the Lease, and, in that regard, shall meet with
Landlord on a scheduled basis to be determined by Landlord, to discuss Tenant's
progress in connection with the same. The applicable dates for approval of
items, plans and drawings as described in this Section 3, Section 4, below, and
in this Tenant Work Letter are set forth and further elaborated upon in Schedule
3 (the "Time Deadlines"), attached hereto. Tenant agrees to comply with the Time
Deadlines.

 

SECTION 4

CONSTRUCTION OF THE TENANT IMPROVEMENTS

 

4.1     Contractor. The contractor that shall construct the Tenant Improvements
(the "Contractor") shall be selected by Landlord. Landlord shall independently
retain Contractor, on behalf of Tenant, to construct the Tenant Improvements in
accordance with the Approved Working Drawings and the Cost Proposal and Landlord
shall supervise the construction by Contractor.

 

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4.2     Cost Proposal. After the Approved Working Drawings are signed by
Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in
accordance with the Approved Working Drawings, which cost proposal shall
include, as nearly as possible, the cost of all Tenant Improvement Allowance
Items to be incurred by Tenant in connection with the design and construction of
the Tenant Improvements (the "Cost Proposal"). Tenant shall approve and deliver
the Cost Proposal to Landlord within five (5) business days of the receipt of
the same, and upon receipt of the same by Landlord, Landlord shall be released
by Tenant to purchase the items set forth in the Cost Proposal and to commence
the construction relating to such items. The date by which Tenant must approve
and deliver the Cost Proposal to Landlord shall be known hereafter as the "Cost
Proposal Delivery Date".

 

4.3     Construction of Tenant Improvements by Contractor under the Supervision
of Landlord.

 

4.3.1     Over-Allowance Amount. On the Cost Proposal Delivery Date, Tenant
shall deliver to Landlord cash in an amount (the "Over-Allowance Amount") equal
to the difference between (i) the amount of the Cost Proposal and (ii) the
amount of the Tenant Improvement Allowance. The Over-Allowance Amount shall be
disbursed by Landlord prior to the disbursement of any then remaining portion of
the Tenant Improvement Allowance, and such disbursement shall be pursuant to the
same procedure as the Tenant Improvement Allowance. In the event that, after the
Cost Proposal Delivery Date, any revisions, changes, or substitutions shall be
made to the Construction Drawings or the Tenant Improvements, any additional
costs which arise in connection with such revisions, changes or substitutions or
any other additional costs shall be paid by Tenant to Landlord immediately upon
Landlord's request as an addition to the Over-Allowance Amount. All Tenant
Improvements paid for by the Over-Allowance Amount shall be deemed Landlord's
property under the terms of the Lease. Tenant hereby acknowledges and agrees
that Tenant shall be responsible for all costs associated with the Tenant
Improvements to the extent the same exceed the Tenant Improvement Allowance
(notwithstanding the content of the Cost Proposal).

 

4.3.2     Contractor's Warranties and Guaranties. Landlord hereby assigns to
Tenant all warranties and guaranties by Contractor relating to the Tenant
Improvements, and Tenant hereby waives all claims against Landlord relating to,
or arising out of the construction of, the Tenant Improvements.

 

4.3.4     Tenant's Covenants. Tenant hereby indemnifies Landlord for any loss,
claims, damages or delays arising from the actions of Architect on the Premises
or in the Building. Within ten (10) days after completion of construction of the
Tenant Improvements, Tenant shall cause Contractor and Architect to cause a
Notice of Completion to be recorded in the office of the County Recorder of the
county in which the Building is located in accordance with Section 3093 of the
Civil Code of the State of California or any successor statute and furnish a
copy thereof to Landlord upon recordation, failing which, Landlord may itself
execute and file the same on behalf of Tenant as Tenant's agent for such
purpose. In addition, immediately after the Substantial Completion of the
Premises, Tenant shall have prepared and delivered to the Building a copy of the
"as built" plans and specifications (including all working drawings) for the
Tenant Improvements.

 

SECTION 5

COMPLETION OF THE TENANT IMPROVEMENTS;
LEASE COMMENCEMENT DATE

 

5.1     Ready for Occupancy. The Premises shall be deemed "Ready for Occupancy"
upon the Substantial Completion of the Premises including actual delivery of the
Premises to Tenant in the condition required under the Lease. For purposes of
this Lease, "Substantial Completion" of the Premises shall occur upon the
completion of construction of the Tenant Improvements in the Premises pursuant
to the Approved Working Drawings (as reasonably determined by Landlord), with
the exception of any punch list items and any tenant fixtures, work-stations
(including any related fixture and/or equipment electrification), built-in
furniture, or equipment (including security and other Tenant systems) to be
installed by Tenant or under the supervision of Contractor, and as evidenced by
delivery of written notice to Tenant that Substantial Completion has occurred.

 

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5.2     Delay of the Substantial Completion of the Premises. Except as provided
in this Section 5.2, the Lease Commencement Date shall occur as set forth in the
Lease and Section 5.1, above. If there shall be a delay or there are delays in
the Substantial Completion of the Premises or in the occurrence of any of the
other conditions precedent to the Commencement Date, as set forth in of the
Lease, as a direct, indirect, partial, or total result of:

 

5.2.1     Tenant's failure to timely approve any matter requiring Tenant's
approval;

 

5.2.2     A breach by Tenant of the terms of this Tenant Work Letter or the
Lease (including, without limitation, any failure by Tenant to pay any amount
due under this Tenant Work Letter);

 

5.2.3     Tenant's request for changes in the Space Plan, the Tenant
Improvements, or, once completed, the Approved Working Drawings, or Tenant's
request for changes which cause the Approved Working Drawings to not be a
logical extension of the Space Plan;

 

5.2.4     Tenant's requirement for materials, components, finishes or
improvements which are not available in a commercially reasonable time given the
anticipated date of Substantial Completion of the Premises, as set forth in the
Lease, or which are different from, or not included in, Landlord's standard
improvement package items for the Building;

 

5.2.5     Changes to the base, shell and core work of the Building required by
the Approved Working Drawings; or

 

5.2.6     Any Tenant Caused Permit Failure; or

 

5.2.7     Any other acts or omissions of Tenant, or its agents, or employees
causing actual delays resulting in material interference to the timely
occurrence of the Lease Commencement Date;

 

(each, a "Tenant Delay") then, notwithstanding anything to the contrary set
forth in the Lease or this Tenant Work Letter and regardless of the actual date
of the Substantial Completion of the Premises, the date of Substantial
Completion of the Premises shall be deemed to be the date the Substantial
Completion of the Premises would have occurred if no Tenant delay or delays, as
set forth above, had occurred.

 

Notwithstanding the foregoing, no Tenant Delay shall occur unless and until
Landlord has provided written notice to Tenant (a "Delay Notice") specifying the
action or inaction that Landlord contends constituted a Tenant Delay. If such
action or inaction is not cured within two (2) Business Days after Tenant's
receipt of the Delay Notice, then a Tenant Delay, as set forth in such notice,
shall be deemed to have occurred commencing as of the date such notice is
received by Tenant and continuing for the number of days Substantial Completion
of the Premises is delayed as a result of such action or in action; provided,
however, that in no event shall Landlord be obligated to deliver more than one
(1) Delay Notice the parties hereby agreeing that a Tenant Delay shall be deemed
to have occurred upon the occurrence of the same (without the requirement for
Landlord to deliver a Delay Notice and/or to provide the Tenant cure period
provided above) for the second (2nd) and every subsequent Tenant Delay, if
applicable.

 

5.3     Punchlist. Within thirty (30) days following the Commencement Date,
Tenant shall be entitled to deliver to Landlord a punchlist of the items
comprising the Tenant Improvements which require correction or completion and
Landlord shall diligently perform the work necessary to complete the Tenant
Improvements pursuant to the Approved Working Drawings. Landlord shall use
commercially reasonable efforts to complete such punchlist items within thirty
(30) days following Landlord's receipt of Tenant's notice setting forth such
punchlist items.

 

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Arboretum Courtyard

[Catasys, Inc.]

 

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SECTION 6

MISCELLANEOUS

 

6.1     Tenant's Entry Into the Premises Prior to Substantial Completion.
Provided that Tenant and its agents do not interfere with Contractor's work in
the Building and the Premises, Contractor shall allow Tenant access to the
Premises prior to the Substantial Completion of the Premises for the purpose of
Tenant installing overstandard equipment or fixtures (including Tenant's data
and telephone equipment) in the Premises. Prior to Tenant's entry into the
Premises as permitted by the terms of this Section 6.1, Tenant shall submit a
schedule to Landlord and Contractor, for their approval, which schedule shall
detail the timing and purpose of Tenant's entry. Tenant shall hold Landlord
harmless from and indemnify, protect and defend Landlord against any loss or
damage to the Building or Premises and against injury to any persons caused by
Tenant's actions pursuant to this Section 6.1.

 

6.2     Freight Elevators. Landlord shall, consistent with its obligations to
other tenants of the Building, make the freight elevator reasonably available to
Tenant in connection with initial decorating, furnishing and moving into the
Premises.

 

6.3     Tenant's Representative. Tenant has designated Susan Etzel as its sole
representative with respect to the matters set forth in this Tenant Work Letter,
who, until further notice to Landlord, shall have full authority and
responsibility to act on behalf of the Tenant as required in this Tenant Work
Letter.

 

6.4     Landlord's Representative. Landlord has designated Patricia Costopoulos
as its sole representative with respect to the matters set forth in this Tenant
Work Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter.

 

6.5     Tenant's Agents. All subcontractors, laborers, materialmen, and
suppliers retained directly by Tenant shall all be union labor in compliance
with the then existing master labor agreements.

 

6.6     Time of the Essence in This Tenant Work Letter. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. In all instances where Tenant is required to approve or deliver
an item, if no written notice of approval is given or the item is not delivered
within the stated time period, at Landlord's sole option, at the end of such
period the item shall automatically be deemed approved or delivered by Tenant
and the next succeeding time period shall commence.

 

6.7     Tenant's Lease Default. Notwithstanding any provision to the contrary
contained in this Lease, if an event of default as described in the Lease, or a
default by Tenant under this Tenant Work Letter, has occurred at any time on or
before the Substantial Completion of the Premises, then (i) in addition to all
other rights and remedies granted to Landlord pursuant to the Lease, Landlord
shall have the right to cause Contractor to cease the construction of the
Premises (in which case, Tenant shall be responsible for any delay in the
Substantial Completion of the Premises caused by such work stoppage as set forth
in Section 5 of this Tenant Work Letter), and (ii) all other obligations of
Landlord under the terms of this Tenant Work Letter shall be forgiven until such
time as such default is cured pursuant to the terms of the Lease.

 

6.8     Cooperation by Tenant. Tenant acknowledges that the timing of the
completion of the Approved Work Drawings and the Tenant Improvements is of the
utmost importance to Landlord. Accordingly, Tenant hereby agrees to fully and
diligently cooperate with all reasonable requests by Landlord in connection with
or related to the design and construction of the Tenant Improvements, and in
connection therewith, shall respond to Landlord's requests for information
and/or approvals, except as specifically set forth herein to the contrary,
within two (2) business days following request by Landlord.

 

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SCHEDULE 1

 

LOCATION OF DEMISING WALL

 

[ex_129611img002.jpg]

 

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SCHEDULE 1

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Arboretum Courtyard

[Catasys, Inc.]

 

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SCHEDULE 2

 

CORRIDOR WORK

 

[ex_129611img003.jpg]

 

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Arboretum Courtyard

[Catasys, Inc.]

 

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SCHEDULE 3

 

TIME DEADLINES

 

 

Dates

Actions to be Performed

     

A.

October 15, 2018

Final Space Plan to be completed by Tenant and delivered to Landlord.

     

B.

November 15, 2018

Tenant to deliver Final Working Drawings to Landlord.

     

C.

Five (5) business days after the receipt of the Cost Proposal by Tenant

Tenant to approve Cost Proposal and deliver Cost Proposal to Landlord.

 

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EXHIBIT D

 

Design Standards

 

(a)     HVAC. The Building HVAC System serving the Premises is designed to
maintain average temperatures within the Premises during Ordinary Business Hours
of (i) not less than 68º F. during the heating season when the outdoor
temperature is 40º F. or more and (ii) not more than 78º F. during the cooling
season, when the outdoor temperatures are at 89º F. dry bulb with, in the case
of clauses (i) and (ii), a population load per floor of not more than one person
per 250 square feet of usable area, other than in dining and other special use
areas per floor for all purposes, and shades fully drawn and closed, including
lighting and power, and to provide at least 0.15 CFM of outside ventilation per
square foot of rentable area.  Use of the Premises, or any part thereof, in a
manner exceeding the foregoing design conditions or rearrangement of
partitioning after the initial preparation of the Premises which interferes with
normal operation of the air-conditioning service in the Premises may require
changes in the air-conditioning system serving the Premises at Tenant's expense.

 

(b)     Electrical. The Building Electrical system serving the Premises is
designed to provide electricity as follows:

 

(i)     High voltage (480/277 Volt) connected power for lighting, as required by
applicable Requirements, and

 

(ii)     3.5 watts per usable square foot of low voltage (120/208 volt)
connected power for convenience receptacles.

 

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[Catasys, Inc.]

 

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EXHIBIT E

 

Cleaning Specifications

 

GENERAL CLEANING

 

NIGHTLY

 

General Offices:

 

 

1.

All hard surfaced flooring to be swept using approved preparation.

 

 

2.

Carpet sweep all carpets, moving only light furniture (desks, file cabinets,
etc. not to be moved).

 

 

3.

Hand dust and wipe clean all furniture, fixtures and window sills.

 

 

4.

Empty all waste receptacles and remove wastepaper.

 

 

5.

Wash clean all Building water fountains and coolers.

 

 

6.

Sweep all private stairways.

 

Lavatories:

 

 

1.

Sweep and wash all floors, using proper disinfectants.

 

 

2.

Wash and polish all mirrors, shelves, bright work and enameled surfaces.

 

 

3.

Wash and disinfect all basins, bowls and urinals.

 

 

4.

Wash all toilet seats.

 

 

5.

Hand dust and clean all partitions, tile walls, dispensers and receptacles in
lavatories and restrooms.

 

 

6.

Empty paper receptacles, fill receptacles from tenant supply and remove
wastepaper.

 

 

7.

Fill toilet tissue holders from tenant supply.

 

 

8.

Empty and clean sanitary disposal receptacles.

 

WEEKLY

 

 

1.

Vacuum all carpeting and rugs.

 

 

2.

Dust all door louvers and other ventilating louvers within a person's normal
reach.

 

 

3.

Wipe clean all brass and other bright work.

 

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NOT MORE THAN 3 TIMES PER YEAR

 

High dust premises complete including the following:

 

 

1.

Dust all pictures, frames, charts, graphs and similar wall hangings not reached
in nightly cleaning.

 

 

2.

Dust all vertical surfaces, such as walls, partitions, doors, door frames and
other surfaces not reached in nightly cleaning.

 

 

3.

Dust all venetian blinds.

 

 

4.

Wash all windows.

 

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[Catasys, Inc.]

 

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EXHIBIT F

 

Rules and Regulations

 

1.     Nothing shall be attached to the outside walls of the Building. Other
than Building standard blinds, no curtains, blinds, shades, screens or other
obstructions shall be attached to or hung in or used in connection with any
exterior window or entry door of the Premises, without the prior consent of
Landlord.

 

2.     No sign, advertisement, notice or other lettering visible from the
exterior of the Premises shall be exhibited, inscribed, painted or affixed to
any part of the Premises without the prior written consent of Landlord. All
lettering on doors shall be inscribed, painted or affixed in a size, color and
style acceptable to Landlord.

 

3.     The grills, louvers, skylights, windows and doors that reflect or admit
light and/or air into the Premises or Common Areas shall not be covered or
obstructed by Tenant, nor shall any articles be placed on the window sills,
radiators or convectors.

 

4.     Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the Building,
and upon written notice from Landlord, Tenant shall refrain from or discontinue
such advertising.

 

5.     Common Areas shall not be obstructed or encumbered by any Tenant or used
for any purposes other than ingress of egress to and from the Premises and for
delivery of merchandise and equipment in a prompt and efficient manner, using
elevators and passageways designated for such delivery by Landlord.

 

6.     Except in those areas designated by Tenant as "security areas," all locks
or bolts of any kind shall be operable by the Building's Master Key. No locks
shall be placed upon any of the doors or windows by Tenant, nor shall any
changes be made in locks or the mechanism thereof which shall make such locks
inoperable by the Building's Master Key. Tenant shall, upon the termination of
its Lease, deliver to Landlord all keys of stores, offices and lavatories,
either furnished to or otherwise procured by Tenant and in the event of the loss
of any keys furnished by Landlord, Tenant shall pay to Landlord the cost
thereof.

 

7.     Tenant shall keep the entrance door to the Premises closed at all times.

 

8.     All movement in or out of any freight, furniture, boxes, crates or any
other large object or matter of any description must take place during such
times and in such elevators as Landlord may prescribe. Landlord reserves the
right to inspect all articles to be brought into the Building and to exclude
from the Building all articles which violate any of these Rules and Regulations
or the Lease. Landlord may require that any person leaving the public areas of
the Building with any article to submit a pass, signed by an authorized person,
listing each article being removed, but the establishment and enforcement of
such requirement shall not impose any responsibility on Landlord for the
protection of any Tenant against the removal of property from the Premises.

 

9.     All hand trucks shall be equipped with rubber tires, side guards and such
other safeguards as Landlord may require.

 

10.     No Tenant Party shall be permitted to have access to the Building's
roof, mechanical, electrical or telephone rooms without permission from
Landlord.

 

11.     Tenant shall not permit or suffer the Premises to be occupied or used in
a manner offensive or objectionable to Landlord or other occupants of the
Building by reason of noise, odors, vibrations or interfere in any way with
other tenants or those having business therein.

 

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12.     Tenant shall not employ any person or persons other than the janitor of
Landlord for the purpose of cleaning the Premises, unless otherwise agreed to by
Landlord. Tenant shall not cause any unnecessary labor by reason of such
Tenant's carelessness or indifference in the preservation of good order and
cleanliness.

 

13.     Tenant shall store all its trash and recyclables within its Premises. No
material shall be disposed of which may result in a violation of any
Requirement. All refuse disposal shall be made only though entryways and
elevators provided for such purposes and at such times as Landlord shall
designate. Tenant shall use the Building's hauler.

 

14.     Tenant shall not deface any part of the Building. No boring, cutting or
stringing of wires shall be permitted, except with prior consent of Landlord,
and as Landlord may direct.

 

15.     The water and wash closets, electrical closets, mechanical rooms, fire
stairs and other plumbing fixtures shall not be used for any purposes other than
those for which they were constructed and no sweepings, rubbish, rags, acids or
other substances shall be deposited therein. All damages resulting from any
misuse of the fixtures shall be borne by Tenant where a Tenant Party caused the
same.

 

16.     Tenant, before closing and leaving the Premises at any time, shall see
that all lights, water faucets, etc. are turned off. All entrance doors in the
Premises shall be kept locked by Tenant when the Premises are not in use.

 

17.     No bicycles, in-line roller skates, vehicles or animals of any kind
(except for seeing eye dogs) shall be brought into or kept by any Tenant in or
about the Premises or the Building.

 

18.     Canvassing or soliciting in the Building is prohibited.

 

19.     Employees of Landlord or Landlord's Agent shall not perform any work or
do anything outside of the regular duties, unless under special instructions
from the office of Landlord or in response to any emergency condition.

 

20.     Tenant is responsible for the delivery and pick up of all mail from the
United States Post Office.

 

21.     Landlord reserves the right to exclude from the Building during other
than Ordinary Business Hours all persons who do not present a valid Building
pass. Tenant shall be responsible for all persons for whom a pass shall be
issued at the request of Tenant and shall be liable to Landlord for all acts of
such persons.

 

22.     No smoking shall be permitted in, on or about the Premises, the Building
or the Project. Tenant shall comply with the State of California "No-Smoking"
law set forth in California Labor Code Section 6404.5, or any successor statute,
and any local "No-Smoking" ordinance which may be in effect from time to time
and which is not superseded by such State law.

 

23.     Landlord shall not be responsible to Tenant or to any other person or
entity for the non-observance or violation of these Rules and Regulations by any
other tenant or other person or entity. Tenant shall be deemed to have read
these Rules and Regulations and to have agreed to abide by them as a condition
to its occupancy of the Premises.

 

24.     The review/alteration of Tenant drawings and/or specifications by
Landlord's Agent and any of its representatives is not intended to verify
Tenant's engineering or design requirements and/or solutions. The
review/alteration is performed to determine compatibility with the Building
Systems and lease conditions. Tenant renovations must adhere to the Building's
applicable Standard Operating Procedures and be compatible with all Building
Systems.

 

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EXHIBIT G

 

VIA HAND DELIVERY

 

 

____________, 20__

 

 

_________________

_________________

_________________

_________________

 

 

RE:     Lease ("Lease") dated ______________, 20__ between, ___________ as
"Tenant", and Arboretum Courtyard, L.L.C., as "Landlord", for the premises
located at 2120 Colorado Avenue, Santa Monica, California, Suite ______

 

Commencement Agreement

 

Dear ______________:

 

 

We have deemed the Work in Suite ______ "substantially complete" (subject to
punchlist items that have been noted on the walkthroughs) as of ______________.
In accordance with Articles 1 and 2 and Exhibit G of the above-referenced Lease,
this letter is to confirm the following:

 

Premises consist of _______ square feet on the ___ floor and are hereby
delivered by the Landlord as of ______________.

 

Commencement Date is _______________.

 

Tenant's Share of the Premises is ___________%.

 

Expiration Date is ___________, 20___ unless earlier terminated.

 

Should Landlord not receive a signed response within ten (10) days from the date
above, the aforementioned dates shall be deemed to be accepted by Tenant.

 

If you concur with the aforementioned, please execute and return one original
copy to my attention.

 

Thank you.

ACCEPTED AND AGREED:

 

 

Sincerely,

___________________________

 

 

TISHMAN SPEYER

By: _________________________

 

 

 

Name:_______________________

 

 

__________________

Title:________________________

Property Manager

 

 

789956.06/WLA

377061-00006/sb/sb

EXHIBIT G

-1-

Arboretum Courtyard

[Catasys, Inc.]

 

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EXHIBIT H

 

FORM OF LETTER OF CREDIT

 

 

Form of Letter of Credit

 

[LETTERHEAD OF ISSUER OF LETTER OF CREDIT]

 

____________________ (MONTH, DAY, YEAR)

 

 

 

ARBORETUM COURTYARD, L.L.C.

C/O TISHMAN SPEYER PROPERTIES, L.P.

45 ROCKEFELLER PLAZA

NEW YORK, NEW YORK 10111

ATTENTION: CHIEF FINANCIAL OFFICER

 

REF:     IRREVOCABLE LETTER OF CREDIT NO. _____________

 

GENTLEMEN:

 

WE HEREBY OPEN OUR UNCONDITIONAL IRREVOCABLE CLEAN LETTER OF CREDIT NO.
__________ IN YOUR FAVOR AVAILABLE BY YOUR DRAFT(S) AT SIGHT FOR AN AMOUNT NOT
TO EXCEED IN THE AGGREGATE ($__________) EFFECTIVE IMMEDIATELY.

 

ALL DRAFTS SO DRAWN MUST BE MARKED "DRAWN UNDER IRREVOCABLE LETTER OF CREDIT OF
[ISSUING BANK], NO. __________, DATED _______________, 20__."

 

THIS LETTER OF CREDIT IS ISSUED, PRESENTABLE AND PAYABLE AT OUR OFFICE AT
_________________________, OR SUCH OTHER OFFICE AS WE MAY DESIGNATE BY WRITTEN
NOTICE TO YOU, AND EXPIRES WITH OUR CLOSE OF BUSINESS ON ____________________.
IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE AUTOMATICALLY
EXTENDED FOR ADDITIONAL TWELVE MONTH PERIODS THROUGH ____________________
[INSERT DATE WHICH IS ONE-HUNDRED TWENTY (120) DAYS AFTER LEASE EXPIRATION],
UNLESS WE INFORM YOU IN WRITING BY REGISTERED MAIL AT THE ABOVE ADDRESS (WITH A
COPY TO TISHMAN SPEYER PROPERTIES, L.P., 45 ROCKEFELLER PLAZA, NEW YORK, NEW
YORK 10111, ATTENTION: CHIEF LEGAL OFFICER) DISPATCHED BY US AT LEAST NINETY
(90) DAYS PRIOR TO THE THEN EXPIRATION DATE THAT THIS LETTER OF CREDIT SHALL NOT
BE EXTENDED. IN THE EVENT THIS CREDIT IS NOT EXTENDED FOR AN ADDITIONAL PERIOD
AS PROVIDED ABOVE, YOU MAY DRAW HEREUNDER. SUCH DRAWING IS TO BE MADE BY MEANS
OF A DRAFT ON US AT SIGHT WHICH MUST BE PRESENTED TO US BEFORE THE THEN
EXPIRATION DATE OF THIS LETTER OF CREDIT. THIS LETTER OF CREDIT CANNOT BE
MODIFIED OR REVOKED WITHOUT YOUR CONSENT. THIS LETTER OF CREDIT IS PAYABLE IN
MULTIPLE DRAFTS AND SHALL BE TRANSFERABLE BY YOU WITHOUT ADDITIONAL CHARGE.

 

DRAWS MAY BE PRESENTED BY FACSIMILE TO OUR FAX NUMBER __________. IF
PRESENTATION IS BY FACSIMILE, THE ORIGINAL DRAFT AND THIS LETTER OF CREDIT MUST
BE SENT BY OVERNIGHT COURIER THE SAME DAY AS THE FAX PRESENTATION. IF DEMAND FOR
PAYMENT IS PRESENTED BEFORE 11:00 A.M. CENTRAL TIME, PAYMENT SHALL BE MADE TO
YOU OF THE AMOUNT DEMANDED IN IMMEDIATELY AVAILABLE FUNDS NOT LATER THAN 4:00
P.M. CENTRAL TIME ON THE FOLLOWING BUSINESS DAY. IF DEMAND FOR PAYMENT IS
PRESENTED AFTER 11:00 A.M. CENTRAL TIME, PAYMENT SHALL BE MADE TO YOU OF THE
AMOUNT DEMANDED IN IMMEDIATELY AVAILABLE FUNDS NOT LATER THAN 4:00 P.M. CENTRAL
TIME ON THE SECOND BUSINESS DAY.

 

789956.06/WLA

377061-00006/sb/sb

EXHIBIT H

-1-

 

 

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WE HEREBY DO UNDERTAKE TO PROMPTLY HONOR YOUR SIGHT DRAFT OR DRAFTS DRAWN ON US,
INDICATING OUR LETTER OF CREDIT NO. __________ FOR THE AMOUNT AVAILABLE TO BE
DRAWN ON THIS LETTER OF CREDIT UPON PRESENTATION OF YOUR SIGHT DRAFT IN THE FORM
OF SCHEDULE A ATTACHED HERETO DRAWN ON US AT OUR OFFICES SPECIFIED ABOVE DURING
OUR USUAL BUSINESS HOURS ON OR BEFORE THE EXPIRATION DATE HEREOF.

 

EXCEPT AS EXPRESSLY STATED HEREIN, THIS UNDERTAKING IS NOT SUBJECT TO ANY
AGREEMENTS, REQUIREMENTS OR QUALIFICATION. OUR OBLIGATION UNDER THIS LETTER OF
CREDIT IS OUR INDIVIDUAL OBLIGATION AND IS IN NO WAY CONTINGENT UPON
REIMBURSEMENT WITH RESPECT THERETO OR UPON OUR ABILITY TO PERFECT ANY LIEN,
SECURITY INTEREST OR ANY OTHER REIMBURSEMENT.

 

EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED, THIS LETTER OF CREDIT IS SUBJECT TO
INTERNATIONAL STANDBY PRACTICES 1998, INTERNATIONAL CHAMBER OF COMMERCE
PUBLICATION NO. 590.

 

 

[ISSUER OF LETTER OF CREDIT]
 

789956.06/WLA

377061-00006/sb/sb

EXHIBIT H

-2-

 

 

--------------------------------------------------------------------------------

 

 

SCHEDULE A

 

TO LETTER OF CREDIT

 

 

FOR VALUE RECEIVED

 

PAY AT SIGHT BY WIRE TRANSFER IN IMMEDIATELY AVAILABLE FUNDS TO
_________________________ THE SUM OF U.S. $__________ DRAWN UNDER IRREVOCABLE
LETTER OF CREDIT NO. __________, DATED _______________, 20__, ISSUED BY
_________________________.

 

TO:     [ISSUER OF LETTER OF CREDIT]

 

____________________________

[CITY, STATE]

 

 

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TABLE OF CONTENTS

Page

 

ARTICLE 1

basic lease provisions

1

     

ARTICLE 2

PREMISES; TERM; RENT

4

     

ARTICLE 3

USE AND OCCUPANCY

8

     

ARTICLE 4

CONDITION OF THE PREMISES

9

     

ARTICLE 5

ALTERATIONS

9

     

ARTICLE 6

REPAIRS

12

     

ARTICLE 7

INCREASES IN TAXES AND OPERATING EXPENSES

12

     

ARTICLE 8

REQUIREMENTS OF LAW

17

     

ARTICLE 9

SUBORDINATION

19

     

ARTICLE 10

SERVICES

19

     

ARTICLE 11

INSURANCE; PROPERTY LOSS OR DAMAGE

23

     

ARTICLE 12

EMINENT DOMAIN

26

     

ARTICLE 13

ASSIGNMENT AND SUBLETTING

27

     

ARTICLE 14

ACCESS TO PREMISES

33

     

ARTICLE 15

DEFAULT

33

     

ARTICLE 16

LANDLORD'S RIGHT TO CURE; FEES AND EXPENSES

36

     

ARTICLE 17

NO REPRESENTATIONS BY LANDLORD; LANDLORD'S APPROVAL

37

     

ARTICLE 18

END OF TERM

37

     

ARTICLE 19

QUIET ENJOYMENT

38

     

ARTICLE 20

NO SURRENDER; NO WAIVER

38

     

ARTICLE 21

WAIVER OF TRIAL BY JURY

39

     

ARTICLE 22

NOTICES

39

     

ARTICLE 23

RULES AND REGULATIONS

39

     

ARTICLE 24

BROKER

40

     

ARTICLE 25

INDEMNITY

40

     

ARTICLE 26

MISCELLANEOUS

41

     

ARTICLE 27

LETTER OF CREDIT

47

     

ARTICLE 28

PARKING

49

 

789956.06/WLA

377061-00006/sb/sb

-i-

Arboretum Courtyard

[Catasys, Inc.]

 

--------------------------------------------------------------------------------

 

 

Schedule of Exhibits

 

Exhibit A

Floor Plan of Premises

   

Exhibit B

Definitions

   

Exhibit C

Tenant Work Letter

   

Exhibit D

Design Standards

   

Exhibit E

Cleaning Specifications

   

Exhibit F

Rules and Regulations

   

Exhibit G

Form of Commencement Letter

   

Exhibit H

Form of Letter of Credit

 

789956.06/WLA

377061-00006/sb/sb

-ii-

Arboretum Courtyard

[Catasys, Inc.]