**Exhibit10.12**

**LEASE**

 

THIS LEASE (“Lease”),dated for reference purposes only as of **November 12, 2003,**is made by and between Century Park, a California Limited Partnership(“Landlord”) and **Mercantile National Bank,N.A., a national bank** (“Tenant”), upon the following terms andconditions:

 
| 1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | ** **                                                                             | **Premises and Basic Lease  Information**                                            |       |
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                   |                                                                                 |       | 1.1. |   | Landlord hereby leases  to Tenant and Tenant hereby leases from Landlord, upon the terms and conditions  set |   |
| forth in this Lease,  those certain premises (the “Premises”) described in Article 1.1.1 below and  diagrammed in Exhibit “A” attached hereto and hereby made a part hereof, as  well as the right to use, in common with others, the Common Areas (as  hereinafter defined). The Premises are situated in that certain office building  (the “Building”) located at 1880 Century Park East, Los Angeles, California  90067. The land upon which the Building is located together with the Building  and related facilities and appurtenances and Common Areas shall hereinafter  be referred to as the “Project.” The terms and conditions of this Lease  include, without limitation, the following:                                                                                                                                                                                                                             |                                                                                   |
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                   |                                                                                 |       | 1.1.1 |   | **Premises**: |   | Suite** 110 **consisting of approximately 2,118 rentable  square feet on the |   |
| **ground** floor of the Building (see the  attached Exhibit “A”). The exact area of the Premises shall be determined by  applying the BOMA method of measurement (ANSI Z65.1-1996) to calculate the  square footage per the final space plan for the Premises. Should the square  footage measured from the space plan vary from that set forth in this Article  1.1.1, Landlord shall revise all figures in this Lease that are affected by  the square footage, and Landlord and Tenant shall amend this Lease  accordingly. Landlord may re-measure the Premises once within twenty (20)  days of the Commencement Date of the Initial Term. Landlord may re-measure  the Premises thereafter; provided, however that such re-measurement does  affect the economics specified in Article 1.1.4 or Article 1.1.7 herein.                                                                                                                                      |                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                   |                                                                                 |       |   |   | ** ** |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                   |                                                                                 |       | 1.1.2 |   | **Lease Term**: |   | Except for Tenant’s  occupancy of the Temporary Space pursuant to the |   |
| terms and conditions of  this Lease as set forth in Article 41 of the Lease Addendum, the term of this  Lease (the “Lease Term” or “Term”) shall begin on the **earlier** of the following dates (the  “Commencement Date”): (a) **October 1, 2004**,  or, where applicable, (b) upon Substantial Completion of the Tenant  Improvements, as defined in the construction agreement attached hereto as  Exhibit “B” and herein incorporated by reference, and, **unless terminated pursuant to Article 42 in the  Lease Addendum,** shall expire on the last day of the month that  is one hundred twenty **(120)**  months after the first day of the month after the Commencement Date, unless  sooner terminated pursuant to this Lease.                                                                                                                                                                                         |                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | 1.1.3 | ** ** | **Holding Over.** | ** ** | If Tenant, with or  without Landlord’s written consent, remains in |   |
| possession of all or  any portion of the Premises after the expiration or sooner termination of the  Lease, such holding over (“Holdover”) shall constitute and be construed as a  tenancy from month-to-month only, subject to such terms and conditions  contained herein as may reasonably and logically be construed to apply to the  Holdover, and any and all options or other preferential rights of Tenant  shall be deemed to have lapsed and to be of no further force or effect.  Either party may terminate such month-to-month tenancy by giving the other  party at least thirty (30) days written notice thereof. During such Holdover,  Base Rent (as defined below) shall be one hundred fifty percent (150%) of the  Base Rent in effect immediately prior to such Holdover. Acceptance by  Landlord of any Rent after the expiration or termination of the Lease shall  not be deemed to constitute Landlord’s consent to such Holdover. |                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | 1.1.4 | ** ** | **Base Rent**: | ** ** | The base rent (“Base  Rent”) for the Premises shall be **$2.55 **per  rentable |   |
| square foot **($5,400.90)** per month, subject to  an annual CPI adjustment (**see Article  3.2; see also Article 41 relating to the payment of rent in the Temporary Space.**).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | 1.1.5 | ** ** | **Additional Rent**: | ** ** | Amounts which are due  as Additional Rent by reason of increases in |   |
| Estimated Pass-through  Costs (as both capitalized terms are defined in Article 4 below) and all  other amounts payable by Tenant pursuant to the provisions of this Lease.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | 1.1.6 | ** ** | **Base Year**: | ** ** | **2004** is the Base Year. |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | 1.1.7 | ** ** | **Tenant’s Percentage Share:** | ** ** | **0.68%** “Tenant’s Percentage Share” shall be a  fraction, the numerator of |   |
| which shall be the  rentable square footage of the Premises and the denominator of which shall be  311,400 approximate rentable square feet for the Building.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | 1.1.8 | ** ** | **Security Deposit**: | ** ** | **None** |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | 1.1.9 | ** ** | **Permitted Use**: | ** ** | General offices and  uses related thereto that do not conflict with the |   |
| Building’s certificate  of occupancy, that comply with all applicable codes and statutes, and that  are uses commonly found in similar office buildings in the Project vicinity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** |   | ** ** | ** ** | ** ** |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** | 1.1.10 | ** ** | **Address For Notices**: | ** ** |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** **                                                                             | ** **                                                                           | ** ** |   | ** ** | ** ** | ** ** |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | **Tenant***(prior to Commencement Date)*                                               | **Tenant***(after Commencement Date)*                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Mercantile National Bank

1840 Century Park East

Los Angeles, CA   90067

  | Mercantile National  Bank

1880 Century Park East,  Suite 800

Los Angeles, CA 90067 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Contact: Mr.  Scott A. Montgomery

Phone:  310/282-6778                           | Contact: Mr.  Scott A. Montgomery

Phone: 310/  282-6778                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                   | With a Copy to:                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                   | Ted Simpson                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                   | Cushman &  Wakefield                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                   | 601 Figueroa  Street, Suite 4700                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                   | Los Angeles, CA  90017                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                   | Telephone:  213/955-5100                                                        |
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**Landlord****                                              **Century Park, a California limitedpartnership, c/o Held Properties, Inc., 1880 Century Park East, Suite 500, LosAngeles, CA 90067.                     Seealso Article 25 of this Lease.

1.1.11      **Parking Rights**:  **Two andOne-Half automobile spaces per 1,000 rentable square feet, currently calculatedas Six (6)** automobile spaces at the Building’s prevailingparking rates.  See also Article 31herein.  **See also Article 46 of the Lease Addendum.**

1.1.12**     Guarantor(s)**:                        N/A

1.1.13**     Broker:                                **Cushman& Wakefield of California, Inc.

1.2           **Common Areas.**   The term “Common Area(s)” as used in thisLease shall mean all areas and facilities in the Project which are provided anddesignated from time to time by Landlord for the general use and convenience ofTenant and other tenants of the Project and their respective employees andinvitees. Common Areas include, without limitation, the lobby areas, walkways,parking facilities, landscaped areas, sidewalks, corridors, washrooms (if notpart of the Premises), stairways, elevators, walls, common telephone andelectrical closets, loading docks, plazas, service areas, and all other areasof the Project intended for common use. Floors wholly occupied by Tenant or any other tenant shall not have anyfacilities which shall be used in common with other tenants, except forelevators, fire stairs, shafts, utility and service closets, and similarinstallations.  Tenant, its employees andinvitees shall have a nonexclusive right to use the Common Areas, subject toLandlord’s rights and duties as hereinafter set forth.  Without Tenant’s consent and withoutliability to Tenant, so long as Tenant’s access to the Premises **and parking area or Tenant’s** ability toconduct business therefrom is not materially impaired and provided that Landlorduses reasonable effort (including performing such work after normal businesshours, if reasonably required) to minimize any interference with Tenant’s useand access of the Premises and parking areas during normal business hours,Landlord shall have the right to do the following:

1.2.1        Establish and enforce in anondiscriminatory, consistently applied manner, reasonable rules andregulations concerning the maintenance, management, use and operation of theCommon Areas;

1.2.2        Temporarily close any Common Area formaintenance, alterations or improvements;

1.2.3        Select, appoint and/or contract with anyperson or entity for the purpose of operating and maintaining the Common Areas;and

1.2.4        Change, **except for the number and location of parking spaces**, thesize, use, shape or nature of the Common Area provided that doing so does notmaterially affect the existing ingress and egress to the Building, or changethe character of the Building to less than a first class office building.

2.             **Commencement Date; Early Entry**

2.1           **Exceptas set forth in Article 42**, this Lease shall not be void orvoidable, nor shall Landlord be subject to any liability as a result of anydelay in the Commencement Date for any reason. Except for Tenant Delays, as defined in the Construction Agreement,payment of rent shall not commence until the Premises are available foroccupancy by Tenant with all work to be performed pursuant to the ConstructionAgreement substantially completed **and theDepartment of Building and Safety has signed the permit card, indicating thatoccupancy is permitted**.

2.2           Within thirty (30) business daysafter Tenant’s occupancy of the Premises, or as soon thereafter as possible,the **Landlord shall draft a statement**,and the parties hereto shall execute a written statement setting forth theCommencement Date and the date of expiration of this Lease; provided, however,the enforceability of this Lease and the Commencement Date shall not beaffected should either party fail or refuse to execute such statement.

2.3           Provided that Tenant or Tenant’sagents do not interfere with or delay the Substantial Completion of Landlord’sWork in the Premises, or otherwise cause additional cost or expense toLandlord, Tenant and Tenant’s agents shall be permitted to enter the Premisesup to fourteen (14) days prior to the Commencement Date for the purpose ofinstalling telephones, cabling, fixtures and equipment.  Such early entry shall be subject to all theterms of such permission and all the provisions of this Lease which could bereasonably and logically construed as applying thereto, except that Tenantshall not be required to pay Rent.

 

3.             **Base Rent; Adjustments;General Rent Provisions**.

3.1           Tenant shall pay to Landlord as BaseRent for the Premises, without prior notice or demand, the amount specified inArticle 1.1.4, in advance, on or before the first day of each and everycalendar month during the Lease Term. All payments received by Landlord from Tenant shall be applied to theoldest payment obligation owed by Tenant to Landlord.

3.2           Base Rent as set forth in Section1.1.4 above shall be increased effective as of each anniversary of theCommencement Date during the term (“Adjustment Date”) to an amount which shallbe determined by adding to the Base Rent an amount equal to the Base Rentmultiplied by the percentage of increase, if any, of the “Consumer Price Indexfor All Urban Consumers, Los Angeles-Anaheim-Riverside, California, SubgroupAll Items (1982-1984=100)”, published by the United States Department of Labor,Bureau of Labor Statistics (the “CPI”) for the calendar month which is four (4)months immediately preceding the month in which the Adjustment Date occurs (the“Adjustment Index”) as compared with the CPI for the calendar month which isfour (4) months immediately preceding the Commencement Date (the “Base Index”);provided, however, that in no event shall the adjusted and then current rent bedecreased.

 

                For example, if (i) the Base Rent as of theCommencement Date is $1,000; (ii) the Base Index is 300; (iii) the AdjustmentIndex for the first Adjustment Date is 315; (iv) the Adjustment Index for theSecond Adjustment Date is 327; and (v) the Adjustment Index for the thirdAdjustment Date is 330; the Base Rent shall be increased as follows:

 

                                                                                                A)                                  As of the first Adjustment Date —   315/300 = 1.05 x $1,000 = $1,050

                                                                                                B)                                    As of the second Adjustment Date —327/300 = 1.09 x $1,000 = $1,090

                                                                                                C)                                    As of the third Adjustment Date — 330/300= 1.10 x $1,000 = $1,100

 

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                If the Adjustment Index isunavailable on the date on which the first installment of Base Rent as adjustedshall become due, Tenant shall continue to pay the then effective Rent payableby Tenant until the Adjustment Index is available, and the adjustment, if any,shall be paid retroactively with Base Rent for the first month in which theAdjustment Index is available.  If theBureau of Labor Statistics ceases to use the 1982-1984 base of 100 as the basisof calculation for the CPI, then the Base Index and the Adjustment Index shallbe adjusted in accordance with the conversion formula published by the Bureauof Labor Statistics.  If, at any timerequired for the determination of the amount of any adjustment in Base Rent,the CPI is no longer published or issued, Landlord shall reasonably select areliable governmental or other non-partisan publication evaluating theinformation theretofore used in determining the CPI.

 

3.3           For any period during the Lease Termwhich is less than one (1) month, Base Rent, Additional Rent (defined inArticle 4.1), and any other sums which are payable by Tenant under the Lease(all of which shall be deemed “Rent”) shall be prorated based upon a thirty(30) day month.

3.4           Rent under this Lease shall be paidto Landlord, without deduction, offset or abatement (except as otherwise may bespecifically set forth in this Lease) at Landlord’s address as specified inArticle 1.1.10 above. Landlord shall have the right to accept all payments ofRent and other payments, whether full or partial, and to negotiate checks inpayment thereof without any waiver of its rights, irrespective of anyconditions to the contrary sought to be imposed by Tenant.  Rent paid by check shall not be deemed paidto Landlord until funds clear and the check is honored.  If any noncash payment is not paid by thebank or other financial institution on which it is drawn, Landlord shall havethe right to require Tenant to make future payments by certified funds.

 

4.             **Additional Rent**.

4.1           **Computation of AdditionalRent**  During each December ofthe Lease Term, or as soon thereafter as reasonably practical, Landlord shallprovide Tenant with its good faith written estimate of the amount, if any, bywhich the Tax Costs (as defined in Article 4.3 below) and/or the Operating Costs(as defined in Article 4.4 below) for the coming calendar year are projected toexceed those of the Base Year (collectively referred to as “EstimatedPass-through Costs”).  On or before thefirst day of each month during the ensuing calendar year, Tenant shall pay toLandlord as additional rent (“Additional Rent”), in addition to and at the timeprovided for payment of Base Rent, one-twelfth (1/12th) of theamount computed by multiplying Tenant’s Percentage Share by the amount of theEstimated Pass-through Costs for Taxes and/or one-twelfth (1/12th)of the amount computed separately with respect to Operating Costs.  In the event that Landlord does not provideTenant with such written estimate in December, Tenant shall continue to makemonthly payments of Additional Rent on the basis of the prior year’s EstimatedPass-through Costs until the first day of the month after Landlord providessuch written estimate to Tenant, at which time Tenant shall commence makingmonthly Additional Rent payments based upon the revised Estimated Pass-throughCosts, and additionally shall pay to Landlord a one-time retroactive sum foreach month that has elapsed since December the amount by which the AdditionalRent payable pursuant to the revised Estimated Pass-through Costs exceeds theamount Tenant paid based on the prior year’s Estimated Pass-through Costs.  **Landlordshall use its commercially best efforts to deliver its written estimate withinsix (6) months of the end of the calendar year**.  Under no circumstances shall the provisionsof this Article 4 cause the Base Rent to be reduced.  Neither Landlord’s failure to deliver, northe late delivery of such statement or statements shall constitute a default byLandlord hereunder, nor a waiver of Landlord’s right to receive any AdditionalRent or to later collect Additional Rent accrued as provided hereinabove.  The Tax Costs and Operating Costs for theBase Year shall be deemed to constitute Landlord’s agreed contribution toOperating Costs and Tax Costs and is neither a representation nor a warrantythat such Base Year costs will reflect actual Operating Costs or Tax Costs forany succeeding year.  If, during anycalendar year including the Base Year, the Building is less than ninety-five percent(95%) occupied, then for the purpose of computing Additional Rent duehereunder, the variable components of the Operating Costs and Tax Costsactually incurred during such calendar year shall be increased to approximatethe amounts which would have been payable if the Building had been ninety-fivepercent (95%) occupied.

4.2           **Reconciliation ofEstimated Pass-through Costs to Actual**  By July 1st of each year, Landlordshall furnish to Tenant a written statement of reconciliation (the“Reconciliation”), showing Landlord’s actual Operating Costs and Taxes for thepreceding calendar year, together with a statement of adjustments necessary toreconcile any sums paid by Tenant hereunder during such calendar year pursuantto Article 4.1 with those sums actually payable and due hereunder for such calendaryear.  Any reference to Landlord’s“actual” Operating Costs or Tax Costs in this Article 4 shall be deemed toinclude an allowance for adjustment to reflect the level of occupancy of theBuilding to the extent provided above. If the Reconciliation shows that Tenant owes additional sums hereunder,Tenant shall pay such sums to Landlord within thirty (30) days after receipt ofthe Reconciliation.  If theReconciliation shows that Tenant overpaid Additional Rent, such overpaymentshall be refunded or credited to Tenant within thirty (30) days after Tenant’sreceipt of the Reconciliation. Landlord’s obligation to reconcile, Tenant’sobligation to pay, and Landlord’s obligation to credit or refund shall survivethe expiration or sooner termination of the Lease. Landlord’s failure todeliver the Reconciliation to Tenant as provided herein shall not constitute adefault by Landlord nor waive Landlord’s right to collect all Additional Rentand other sums due hereunder.  Where onlya portion of a calendar year falls within the Lease Term, Landlord shallreasonably prorate the estimated (or actual) Operating Costs and/or Tax Costsfor such calendar year.

4.3           **Tax Costs. **“Tax Costs” shall mean the sum ofthe following: any and all real property taxes, assessments (including, but notlimited to, general and special assessments and possessory interests), charges,surcharges, license and other fees, levies, cost of improvement bonds and anyand all other taxes (other than income, franchise, inheritance and estate orgift taxes of Landlord) on or relating to all or a portion of the Projectincluding any legal or equitable interest of Landlord therein, that may beimposed, levied, assessed or charged for any reason by any authority having thedirect or indirect power to tax including, but not limited to, the UnitedStates or the state, county or city in which the Project is located, or anyother local governmental authority, agency, district or political subdivisionthereof, together with personal property taxes, assessments, fees and charges(other than those paid by Tenant pursuant to Article 26 below) and fees of taxconsultants and attorneys retained to seek a reduction, to contest or to act insome other manner in connection with any of the foregoing Tax Costs, togetherwith any tax, assessment or other amounts (including, without limitation,commercial rental taxes) imposed, levied or charged as a substitute for or asupplement to the foregoing.  **Except as provided in Article 45 in the Lease Addendum**,Tax Costs shall

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include increases causedby increases in tax rates as well as increases caused by additional orincreased assessed values for any reason including transfers of title to theBuilding or the Project, to the extent not precluded elsewhere in thisLease.   **See also, Paragraph 48 of the Lease Addendum**.

4.4           **Operating Costs.**

4.4.1        **Definition of OperatingCosts.  **“Operating Costs”shall mean the sum of any and all costs, expenses and disbursements of any kindpaid or incurred by Landlord in connection with the management, operation,security, maintenance, and repair of the Project, calculated in accordance withthe audited financial statements of Landlord, including, but not be limited to,salaries, wages, benefits and related costs for employees; management fees,either as charged to Landlord by outside management companies or not exceedingthe amount typically charged by outside management companies if Landlord orLandlord’s affiliate manages the Project; charges for utilities and servicesprovided to all tenants in accordance with Article 13.1 herein, including butnot limited to janitorial services, window cleaning, elevator services, HVACservices, security services (including any taxes thereon); the cost of insuranceas specified in Article 12.6 herein; outside accounting fees; office supplies;building cleaning supplies and materials; garbage and waste collection; and areasonable allowance for depreciation (or amortization) with respect tomachinery and equipment and other capital expenditures and improvements;provided, however, that the only depreciation (or amortization andexpenditures) includable in Operating Costs shall be a reasonable allowance fordepreciation (or amortization) over the useful life of the improvements, asdetermined by Landlord’s accountants to conform with applicable tax laws.  **SeeParagraph 49 of the Lease Addendum.**

4.4.2        **Definition of RequiredAlterations **“RequiredAlterations” are any changes, alterations or improvements to the Project(excluding those attributable exclusively to Tenant’s specific use andoccupancy of the Premises, which alterations shall be Tenant’s soleresponsibility), including, but not limited to, the installation ormodification of electrical, mechanical, water sprinkler, or other energy orlife safety systems or components, required by any rule, regulation or lawwhich became enacted and effective after the Commencement Date.  The capital costs relating to such RequiredAlterations, including all related financing costs, shall be amortized over theuseful life of the Required Alterations, as determined by Landlord’saccountants to conform with applicable tax laws.

4.5           **Audit.**     If Tenant disputes the amount of anyAdditional Rent due under Article 4, Tenant shall have the right, afterreasonable notice, to inspect Landlord’s accounting records at Landlord’saccounting office during its normal business hours and, if after suchinspection Tenant still disputes the amount of Additional Rent owed, Tenant mayretain a mutually-acceptable national or regionally-recognized independentcertified public accounting firm to certify to the parties its determination ofthe proper amount of Operating Costs and Tax Costs payable by Tenant.  After such determination has been made, andif a dispute continues to exist between Tenant and Landlord, an independentaccountant mutually-agreed upon by both Landlord and Tenant may be retained todetermine the amount of any Additional Rent due **or credited**.  If thecertification discloses that the Operating Costs and Tax Costs charged toTenant exceed the audited operating costs by more than five percent (5%), thecost of such certification shall be borne by Landlord. Otherwise, the cost ofthe certification shall be borne by Tenant.

5.             **Security Deposit**. [**IntentionallyDeleted**]

 

6.             **Restrictions on Use;Compliance with Laws**.

6.1           Tenant shall use and occupy thePremises only for the specific uses, and those related thereto, specified inArticle 1.1.9 above for no other uses whatsoever.  Tenant shall use and occupy the Premises inaccordance with Article 36, Rules and Regulations.  In addition to the rules and regulations inArticle 36, Tenant shall not: (a) do or permit anything to be done in or aboutthe Premises which will in any way obstruct or materially interfere with therights of other tenants or occupants of the Building or injure or annoy them;(b) use or allow the Premises to be used for any unlawful purpose; (c) cause ormaintain or permit any nuisance in or about the Premises; (d) cause or permitany hazardous or toxic waste, substance or material, other than generally usedoffice materials, to be brought to the Premises or used, handled, stored ordisposed of in or about the Premises; (e) conduct business or other activity inor about the Premises that places an unreasonable or excessive burden upon thepublic and Common Areas or the utility systems of the Project; or (f) commit orsuffer the commission of any waste in or about the Premises.

6.2           Tenant shall not place a load uponany floor that exceeds 70 pounds per square foot, without Landlord’s priorwritten approval.  Tenant shall notinstall any equipment, apparatus or device in the Premises which causesvibrations or excessive noise.

6.3           Tenant shall not use the Premises orpermit anything to be done in or about the Premises which in any way conflictswith any law, statute, ordinance or governmental rule or regulation now inforce or which may hereafter be enacted or promulgated.  **Withrespect to the condition of the Premises**, Tenant shall, at itssole cost and expense, promptly comply with all applicable laws, statutes,ordinances and governmental rules, regulations and requirements now in force orwhich may hereafter be in force and with the requirements of any board of fireunderwriters or other similar body now or hereafter constituted relating to oraffecting **Tenant’s specific nature of use**of the Premises **and to all building codesrequiring modifications to the Premises due to the improvements made by or forTenant in the Premises.  Notwithstandinganything to the contrary in this Lease, except for grandfathered rights andvariances, it shall be Landlord’s obligation, at Landlord’s cost and expense,to comply with all applicable laws relating to the Building and the Building’ssystems in general, without regard to specific use, including modificationsrequired to obtain the necessary building permits for the Work to be performedin accordance with the Construction Agreement attached hereto as Exhibit B**.  Tenant shall not knowingly do or permitanything to be done in or about the Premises or bring or keep anything thereinwhich will in any way increase the rate of any insurance upon the Building orany of its contents, or cause cancellation of said insurance or otherwiseaffect said insurance in any manner. Tenant shall be responsible for any increase in cost of Landlord’sinsurance caused by or resulting from Tenant’s breach of the obligationscontained herein.

6.4           Pursuant to Article 6.1(d) above,other than commonly used business office supplies, Tenant shall not permit noruse, generate, store, transport or dispense on the Premises any flammable,radioactive materials, hazardous wastes, chemicals, environmental poisons,pollutants, contaminants, or other substances demonstrated as hazardous ortoxic pursuant to the Comprehensive Environmental Response Compensation andLiability Act of 1980, as amended; the Hazardous Materials 

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TransportationAct; the Resource Conservation and Recovery Act; the California Health andSafety Code, or regulations issued under any of said acts (collectively,“Applicable Environmental Laws”) without the prior written consent ofLandlord.  Any such Landlord consent shallbe conditioned upon (a) Tenant’s separate written agreement to handle, store,use and dispose of such materials in accordance with all applicableenvironmental laws, and (b) Tenant’s separate written agreement to indemnifyand hold Landlord harmless from any and all liability including consequentialdamages directly or indirectly arising out of Tenant’s storage, use, ordisposal of such materials, including without limitation the cost of anyrequired or necessary repair, clean up or detoxification as a result thereof.  Tenant’s failure to provide a separatewritten agreement to handle, store, use and dispose and to indemnify Landlordshall not abrogate or eliminate Tenant’s obligations hereunder.

6.5           As used herein, the term “HazardousMaterial” means any hazardous or toxic substance, material or waste which is orbecomes regulated by any local governmental authority, the state in which theProject is located or the United States government.  The term “Hazardous Material” includes,without limitation, any material or substance that is (i) defined as a“Hazardous Substance” under appropriate state law provisions, (ii) petroleum,(iii) asbestos, (iv) designated as a “Hazardous Substance” pursuant to Section311 of the Federal Water Pollution Control Act (33 U.S.C. section 1321), (v)defined as a “Hazardous Waste” pursuant to Section 1004 of the Federal ResourceConservation and Recovery Act, 42 U.S.C. section 6901 *et seq*.(42 U.S.C. section 6903), (vi) defined as a “Hazardous Substance” pursuant toSection 101 of the Comprehensive Environmental Response, Compensation andLiability Act, 42 U.S.C. sections 9601 *et seq*. (42U.S.C. section 9601), or (vii) defined as a “Regulated Substance” pursuant toSubchapter IX, Solid Waste Disposal Act (Regulation of Underground StorageTanks), 42, U.S.C. sections 6991 *et seq*.

6.6           Excluding commonly used businessoffice supplies, as well as any preexisting asbestos and asbestos containingmaterials (“ACMs”) in the Building, Tenant shall, at Tenant’s sole expense andwith counsel reasonably acceptable to Landlord, indemnify, defend and holdharmless Landlord and Landlord’s shareholders, directors, officers, employees,partners, affiliates, and agents (“Landlord Indemnities”) with respect to alllosses arising out of or resulting from the release of any Hazardous Materialin or about the Premises or the Project, **byTenant, Tenant’s Agents, contractors or invitees other than Landlord orLandlord’s Indemnitees** or the violation of any ApplicableEnvironmental Law, by Tenant or Tenant’s agents, contractors or invitees (otherthan Landlord and Landlord Indemnities) pursuant to Article 6.4(b) above.  This indemnification includes all losses,liabilities, obligations, penalties, fines, claims, actions (including remedialor enforcement actions of any kind and administrative or judicial proceedings,orders or judgments), damages (including consequential damages and punitivedamages) and costs (including attorney, consultant and expert fees andexpenses) resulting from the release of any Hazardous Substances or violationof any Applicable Environmental Law **byTenant or Tenant’s agents, contractors or invitees other than Landlord andLandlord’s Indemnitees**. This indemnification shall survive the expiration or sooner terminationof the Lease. (**See Lease AddendumParagraph 50 and 51.)**

 

7.             **Improvements andAlterations.**

7.1           **Alterations, Additions orImprovements.  Without the prior written consent ofLandlord, and except for non-structural, cosmetic alterations costing less thanFifty Thousand Dollars ($50,000) (“Cosmetic Alterations**”),Tenant shall not make nor cause alterations, additions, or improvements in, onor to any part of the Premises or the Project, except to install freestandingfurniture and floor coverings, where such freestanding furniture does not placea load on the floor that exceeds 70 pounds per square foot.  Except as provided above, any alterations,additions or improvements to the Premises desired by Tenant shall be made inaccordance with plans and specifications approved in advance in writing byLandlord and pursuant to any applicable governmental permits.  Landlord’s approval of Tenant’s plans andspecifications shall not constitute Landlord’s representation or warranty as tothe adequacy of the plans and specifications or their compliance withapplicable laws.

7.2           **Contractors forImprovements.  Except for any Cosmetic Alterations**,any alterations, additions or improvements to the Premises desired by Tenant,other than any specified in the Approved Plans as defined in Exhibit B, if any,shall be made by Landlord or contractors selected by Landlord for Tenant’saccount.  Landlord’s contractor shallhave all major work items bid by three subcontractors or vendors.  **Landlord’scontractor and Tenant shall mutually approve subcontractors for major workitems (i.e., items that cost more than Thirty Thousand Dollars ($30,000).  Landlord’s contractor shall use its bestefforts to hire such mutually approved qualified subcontractors with the lowestbids**.

7.3           **Landlord’s Consent toImprovements.**  Landlord mayimpose as a condition to its consent to alterations, additions or improvementsto the Premises desired by Tenant such requirements as Landlord may reasonablydeem necessary including, without limitation, requirements relating to themanner in which the work is done and the times during which the work is to beaccomplished **so long as such requirementsdo not impose additional costs**. At Landlord’s request, but at Tenant’s sole cost and expense, at theexpiration or sooner termination of this Lease, Tenant shall have Landlord’scontractor remove any and all improvements, additions or personal property **that are not typical in comparable first classbuildings** in the Premises caused to be installed by Tenant otherthan the initial Tenant Improvements described in Article 7.5 below. **At the time Landlord approves such improvements,Landlord shall specify which improvements it will require Tenant to remove atthe end of the Lease Term.** Landlord’s contractor at Tenant’s sole cost and expense shall repair anydamage done to the Premises in connection with such removal.

7.4           **Changes to Structure orMechanical or Electrical Systems.** Notwithstanding any provision herein that permits Tenant to make its ownalterations, additions or improvements to the Premises, Tenant shall not makeany alterations, additions or improvements to the Premises which wouldnegatively affect the Building’s structure or its mechanical or electricalsystems, or which would materially interfere with or disrupt other tenants inthe Building or any work then being carried out therein by Landlord or itscontractors.

7.5           **Initial TenantImprovements.**  Landlord shallconstruct or have Landlord’s contractor construct the improvements in thePremises (the “Tenant Improvements”), if any, pursuant to Exhibit B, ifany.  Tenant may install certain movablepersonal property (*e.g.*, filesystems, furniture) in the Premises, which Tenant shall remove upon theexpiration or earlier termination of the Lease.

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7.6           **Standard for Improvements.**  Any alterations, additions or improvements tothe Premises shall be manufactured and installed in a good, workmanlike,diligent, prompt and expeditious manner in compliance with all Buildingspecifications, applicable laws and Applicable Environmental Laws.

 

8.             **Repairs and Maintenance**.

8.1           The Premises at Tenant’s move-in willbe in good operating condition, free of debris and structurally sound inaccordance with industry standards in the Project area.  By taking possession of the Premises, Tenantshall be deemed to have conclusively agreed to accept the Premises as being ingood order, condition and repair, subject to “punchlist” items and latentdefects **and any representations orwarranties that may be set forth elsewhere in this Lease**.  Except as required by Article 20 below andordinary wear and tear **and subject toArticle 8.2 with regard to any Building Systems in or about the Premises**,Tenant shall, at all times during the Lease Term hereof and at Tenant’s solecost and expense, keep the Premises and every part thereof in good condition,order and repair except repairs resulting from the negligence, recklessness orwillful wrongful act of Landlord or Landlord’s representatives, employees orother agents (collectively, “Landlord’s Agents”).  Landlord shall have no obligation to alter,remodel, improve, repair, decorate or paint the Premises or any part thereof,or maintain any nonstandard items installed in the Premises by or at therequest of Tenant, except as specified in Articles 13 and 20 below or inExhibit B, if any.  No representationsrelating to the condition of the Premises, the Building or the Project havebeen made by Landlord or Landlord’s Agents to Tenant, except as may bespecifically set forth in this Lease.

8.2           Subject to the provisions of Article8.1 above and Article 20 below, Landlord shall maintain the Common Areas, thefoundation and structural portions of the Building **(which shall include but not limited to floor/ceilingslabs, roof, curtain wall, exterior glass and mullions, columns, beams, shafts(including elevator shafts) parking areas, plazas, pavement and curbs(collectively, “Building Structures”)**, and the plumbing,heating, ventilation and air conditioning (“HVAC”), fire, life, safety,mechanical and electrical systems **(collectively,“Building Systems”)** providing the services and utilities to befurnished by Landlord pursuant to Article 13.1 below, in good order andcondition; provided, however if any maintenance and repairs are caused by theact, neglect, fault, or omission of any duty by Tenant or Tenant’s agents,servants, employees, or invitees (collectively, “Tenant’s Agents”), Tenantshall pay to Landlord the reasonable cost of such maintenance and repairs.  Landlord shall not be liable for any failureto make any such repairs or to perform any maintenance unless such failurepersists for an unreasonable time after Tenant gives written notice to Landlordof the need for such repairs or maintenance. Notwithstanding anything in this Lease to the contrary, in the event ofan interruption in essential services to the Premises (defined for thesepurposes as the failure to provide HVAC service, electrical service, elevatorservice, water or restroom facilities) or Tenant’s access to Premises ismaterially impaired, and such interruption or impairment continues for a periodof five (5) consecutive days or twenty (20) days in any one calendar year,Tenant shall be entitled to an abatement of Rent for the period that suchservices are not provided where such interruption or impairment materiallyinterferes with the normal business conduct of Tenant in the Premises.  If any such interruption occurs during aperiod when Tenant is not otherwise required to pay Rent, Tenant’s free rentperiod shall be extended for the number of days that the services were notprovided.  Tenant waives the right tomake repairs at Landlord’s expense under any law, statute or ordinance now orhereafter in effect.

 

9.             **Liens**.     Tenant shall keep the Project free from anyliens arising out of any work performed, materials furnished or obligationsincurred by Tenant.  If within twenty(20) days following the imposition of any lien and written notice thereof toTenant, Tenant does not cause the lien to be released of record by payment orposting of a proper bond, Landlord shall have, in addition to all otherremedies provided herein and at law or in equity, the right to cause the liento be released by such means as it deems proper including, but not limited to,payment of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred in connectiontherewith shall be considered Additional Rent and shall be payable to Landlordby Tenant within thirty (30) days after receipt of notice from Landlord, withinterest at the Interest Rate (as defined in Article 27 below).  Landlord shall have the right at all times topost and keep posted on the Premises, any notices permitted or required by law,or which Landlord shall deem proper, for the protection of Landlord, theProject and by other parties having an interest therein from mechanic’s andmaterialmen’s liens.  Tenant shall giveLandlord at least 15 business days prior written notice of commencement of anywork on the Premises.

 

10.           **Assignment and Subletting**.

10.1         Tenant shall not have the right toassign the Lease, or sublease all or any portion of the Premises withoutLandlord’s consent, **which shall not beunreasonably withheld, conditioned or delayed**.  If Landlord consents to an assignment orsublease, such assignment or sublease shall be subject to all the terms andconditions of the Lease, and on Landlord-approved forms.  Any assignment, sublease or other transferwithout Landlord’s prior written consent shall be void.

10.2         In determiningwhether to consent to an assignment or a sublease, Landlord may consider thenature of the proposed use and business and the financial stature of theproposed transferee.  In addition,Landlord reserves the right to condition any such consent upon its reasonabledetermination that the proposed assignee’s or subtenant’s use of the Premiseswill not adversely materially impact on the Common Areas or utility systems ofthe Building.

10.3         Tenant shall notenter into any proposed assignment, sublease or other transfer of any interestherein or in the Premises which would (a) detract from the first-classcharacter or image of the Building, or (b) cause a breach by Landlord of anyloan obligation or agreement, any covenants, conditions, restrictions and leaseobligations of record, or any insurance policy. (Upon Tenant’s request, Landlord shall provide Tenant with a list of anyexisting rights in favor of any other tenant in the Building.)

10.4         Tenant shall giveLandlord fifteen (15) days prior written notice of its intention to assign,sublease or otherwise transfer its Lease. Tenant shall submit the following information on Landlord-approved formswith such notice and with a written request for Landlord’s consent to anyassignment, sublease or transfer: (a) all transfer and related documents, (b)financial statements or other financial information, certified by a certifiedpublic accountant **or officer of theCompany**, sufficient to enable Landlord to make an informedjudgment as to the financial capabilities of the proposed transferee, and (c)such other information, related to the proposed transfer and the partiesinvolved therein as Landlord reasonably requests in writing.  Landlord, at its option, may void anytransaction that does not comply with provisions of this Article 10.

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10.5         If Landlord does notconsent to the proposed sublease or assignment, or other transfer, **within fifteen (15) days**, Tenant shallnot complete such proposed assignment or sublease.  On the other hand, if Landlord consents tosuch proposed sublease or assignment, or other transfer, Tenant shall berequired to pay Landlord’s reasonable legal and administrative fees not toexceed $1,000 for any assignment or sublease. In addition, if Landlord consents to the proposed assignment orsublease: (a) any subtenant shall agree that if Landlord gives such subtenantnotice that Tenant is in default under this Lease, such subtenant shallthereafter make all sublease or other payments directly to Landlord, whichsublease payments will be received by Landlord without any liability to honorthe sublease (except to credit such payments against sums due under the Lease)and any subtenant shall agree to attorn to Landlord or its successors andassigns should the Lease be terminated for any reason, voluntarily, orotherwise, except that in no event shall Landlord or its successors or assignsbe obligated to accept such attornment and (b) Landlord may require thatsubtenant not then be in default hereunder in any respect.

10.6         The partiesacknowledge that Landlord’s economic stake in the Project is significantlygreater than Tenant’s economic stake in this Lease.  Accordingly, the parties have expresslybargained for the following allocation of any **“Profits” (as defined in Article 59 in the Lease Addendum)**to be derived by Tenant from any assignment or subletting or other transfer ofthis Lease.  **Except in the case of a Permitted Transferee asdefined in Article 10.9 below (in which case no Transfer Premium is due)**,**in the event Tenant assigns or subleasesmore than fifty percent (50%) of the Premises,** Tenant shall berequired to pay Landlord fifty percent (50%) of any rent, key money, transferconsideration, or other premiums of any kind or nature on the sublease,assignment or transfer in excess of the Base Rent payable by Tenant under thisLease on a per rentable square foot basis net of Tenant’s costs incurred tofacilitate the transfer (the “Transfer Premium”).  Such payments shall be paid, in the samemanner and at the same time as Tenant receives such Transfer Premium, whethersuch Transfer Premium is in the form of an increased rental, a lump sum paymentor any other form of consideration.  Ifsuch sublease, assignment or transfer pertains to a portion of the Premises only,any Transfer Premium shall be computed on the assumption that Tenant’s Rent andother sums due hereunder are allocable on a pro rata per square footbasis.  **[See Lease Addendum Article 52]**

10.7         The provisions ofthis Article 10 shall apply regardless of whether such assignment, sublease orother transfer is made in compliance with the provisions of this Lease.  Any payments made to Landlord pursuant tothis Article 10 shall not cure any default under this Lease arising from suchassignment, sublease or transfer. Tenant shall not artificially structure anysublease, assignment or other transfer or take any other steps to circumvent orto reduce the amount payable to Landlord under this Article 10.  The amount payable to Landlord under thisArticle 10 shall be the amount that would have been payable to Landlord had theTenant not artificially structured the sublease, assignment or transfer orotherwise tried to circumvent this Article 10.

10.8         No assignment, sublease or othertransfer shall release Tenant from any of its obligations hereunder.  Landlord’s consent to any one transfer shallapply only to the specific transaction thereby authorized and such consentshall not waive the duty of Tenant or any transferee to obtain Landlord’sconsent to any other or subsequent transfer, or modify or limit Landlord’srights hereunder in any way.  Landlord’sacceptance of Rent directly from any assignee, subtenant or other transfereeshall not be construed as Landlord’s consent thereto nor Landlord’s agreementto accept the attornment of any subtenant in the event of any termination ofthis Lease.  In no event shall Landlord’senforcement of any provision of this Lease against transferee be deemed awaiver of Landlord’s right to enforce any Lease provision against Tenant orother person.

10.9         If Tenant is acorporation, an unincorporated association or a partnership (including, withoutlimitation, a limited liability company (“LLC”) or a limited liabilitypartnership (“LLP”)), any cumulative transfer, assignment or hypothecation ofany stock or interest in such corporation, association or partnership greaterthan forty-nine percent (49%) thereof, or any cumulative transfer, assignmentor hypothecation (other than in the ordinary course of business) of any assetof such corporation, association, partnership, LLC or LLP greater thanforty-nine percent (49%) thereof (“Change in Control”), shall be deemed anassignment within the meaning and provisions of this Article 10.  The foregoing shall not apply tocorporations, where forty-nine percent (49%) or more of the stock is tradedthrough a regional, national or over-the-counter exchange.  Provided that the transferee’s use ispermitted under the Lease and provided that Tenant notifies Landlord of itsintention at least thirty (30) days prior to such assignment or sublease, thennotwithstanding anything in this Lease to the contrary, Tenant shall have theright, without obtaining Landlord’s consent or paying any Transfer Premium, todo the following: (a) assign this Lease or sublet all or any part of thePremises to a parent, wholly-owned subsidiary or affiliate of Tenant; (b)transfer a majority or controlling interest in the Tenant to an entity with afinancial strength **sufficient to meet theobligations set forth in this Lease**; (c) assign this Lease orsublet all or any part of the Premises to an entity into which Tenant is mergedor by which it has been acquired; (d) assign this Lease or sublet all or any part of the Premises to an entityor entities of the Tenant created by the division of Tenant into one or moreseparate corporations and/or partnerships **(collectively,a “Permitted Transferee”)**.

10.10       Notwithstandingany of the foregoing provisions, covenants and conditions to the contrary, inthe event that this Lease is assigned to any person or entity pursuant to theprovisions of the Bankruptcy Code, 11 U.S.C. 101 et seq. (the “BankruptcyCode”), any and all moneys or other consideration payable or otherwise to bedelivered in connection with such assignment shall be paid or delivered toLandlord, shall be and remain the exclusive property of the Landlord and shallnot constitute property of Tenant or of the estate of Tenant within the meaningof the Bankruptcy Code. Any and all moneys or other consideration constitutingLandlord’s property under the preceding sentence not paid or delivered toLandlord shall be held in trust by the bankruptcy trustee in possession ordebtor in possession for the benefit of the Landlord and shall promptly be paidto or turned over to Landlord.  If Tenantproposes to assign this Lease pursuant to the provisions of the Bankruptcy Codeto any person or entity who shall have made a bona fide offer to accept anassignment of this Lease on terms acceptable to Tenant, then notice of suchproposed assignment setting forth (a) the name and address of such person, (b)all of the terms and conditions of such offer, (c) the adequate assuranceprovided by Tenant to assure such person’s future performance under the Leaseincluding, without limitation, the assurance referred to in Section 365 of theBankruptcy Code, or any such successor or substitute legislation or rulethereto, shall be given to Landlord by Tenant no later than twenty (20) daysafter receipt of such bona fide offer by Tenant.  Tenant shall make application to a court ofcompetent jurisdiction for authority and approval to enter into such assignmentand assumption.  Landlord shall thereuponhave the prior right and option, to be exercised by notice to Tenant given atany time prior to the effective date of such proposed assignment, to accept anassignment of this Lease upon the same terms and conditions and for the sameconsideration, if any, as the bona fide offer made by such person, less anybrokerage commissions, attorneys’ fees, tenant improvement costs or othercharges which may be payable out of the consideration to be paid by such personfor the assignment of this Lease.  Anyperson or entity to which this Lease is assigned 

 

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pursuant to theprovisions of the Bankruptcy Code shall be deemed without further act or deedto have assumed all of the obligations arising under this Lease on and afterthe date of such assignment.  Any suchassignee shall upon demand execute and deliver to Landlord an instrumentconfirming such assumption.  Subject tothis Article 10 and Article 20 below, the Lease provisions shall be bindingupon and shall inure to the benefit of the parties hereto and their respectiveheirs, executors, administrators, successors and assigns.

 

11.           **Waiver; Indemnity.**

11.1         Tenant, as a material part of theconsideration to Landlord, hereby assumes all risk of damage to personalproperty of Tenant, or injury to persons in or about the Premises, **except to the extent caused by the negligence,recklessness or willful misconduct of Landlord or Landlord’s Agents**.  Notwithstanding any contrary provisionherein, and except to the extent arising from the negligence, recklessness orwillful misconduct of the Landlord, or Landlord’s Agents, Landlord shall not beliable and Tenant hereby waives all claims against Landlord for any injury ordamage to any person or property or any other loss (including, but not limitedto loss of income), which may be sustained by the person, goods, wares,merchandise or property of Tenant, or Tenant’s Agents, or any other person inor about the Premises, the Building, or the Project by or from any causewhatsoever.  Without limiting thegenerality of the foregoing, **except to theextent caused by negligence, recklessness or willful misconduct of the Landlordor Landlord’s Agents**, Landlord shall not be liable for anydamage caused by or resulting from: (a) water leakage of any character from theroof, walls, windows, basement, or any other portion of the Premises or theProject; (b) fire, steam, electricity, gas or oil, or by any interruption ofutilities or services, or by any tenant, occupant, or other person; or (c) anyother cause whatsoever, in, on or about the Premises or the Project.  Notwithstanding any contrary provision inthis Lease, Landlord shall not in any event be liable for consequential damageshereunder.

11.2         Subject to Article 12.7 below, exceptto the extent that claims arise from the negligence, recklessness or willfulmisconduct of Landlord, Tenant shall indemnify and hold Landlord (as used inthis Article 11.2, “Landlord” shall refer to Landlord and Landlord’s Agents)harmless from and against any and all claims, demands, losses, damages,liabilities, costs and expenses (including, but not limited to, reasonableattorney’s fees) arising from Tenant’s use or **occupancy of the Premises**, from the conduct of Tenant’sbusiness, from any act or omission, work or thing done, permitted or sufferedby Tenant (or any officer, employee, agent, contractor, representative,licensee, guest, invitee or visitor thereof) in or about the Project, or fromany default under this Lease by Tenant. If any action or proceeding is broughtagainst Landlord by reason of any such matter, Tenant shall, upon notice fromLandlord, defend Landlord in such action or proceeding at Tenant’sexpense.  The provisions of this Article11 shall survive the expiration or termination of this Lease for a period ofninety (90) days with respect to any claims or liability arising from eventsoccurring prior to such expiration or termination.

11.3         Notwithstanding anything in this Leaseto the contrary, except to the extent that claims arise from the negligence,recklessness or willful misconduct of Tenant, Tenant (as used in thisArticle 11.3, “Tenant” shall refer to Tenant and Tenant’s Agents) shallnot be liable for and Landlord shall indemnify Tenant and hold Tenant harmlessfrom and against all suits, actions, damages, liability and expense inconnection with loss of life, bodily or personal injury or property damagearising from or out of any occurrence, in, upon, at or from the Project.

 

12.           **Insurance.**

12.1         Throughout the Lease Term hereof,Tenant shall carry and maintain, at its own expense, the following types,amounts and forms of insurance:

12.1.1      **Commercial GeneralLiability Insurance**.** **A policy of commercial generalliability insurance with a combined single limit of One Million Dollars($1,000,000) per occurrence with Two Million Dollars ($2,000,000) aggregatecoverage, in the name of Tenant (naming, as additional insureds, Landlord, itsmanagement company Held Properties, Inc., and, if requested by Landlord, anymortgagee, trust deed holder, or secured party with an interest in thisLease).  Tenant’s liability coverageshall include, without limitation, all coverage typically provided by the BroadForm Comprehensive General Liability Endorsement, including broad form propertydamage, and premises-operations coverage, products-completed operationscoverage, owners and contractors protective coverage, and the broadest form ofcontractual liability coverage, the last of which shall cover the insuringprovisions of this Lease and the performance by Tenant of the indemnityagreements in Article 11 above. Such policy shall provide coverage on anoccurrence basis.  The amount of such insurancerequired hereunder shall be subject to adjustment from time to time asreasonably requested by Landlord, but Landlord shall not raise such coverageamounts to an extent where they materially exceed that customarily carried byprudent tenants in first class office buildings in the Project area.

12.1.2      **Tenant’s PropertyInsurance**.  Tenant shallprocure and maintain property insurance coverage for: (a) all office furniture,trade fixtures, office equipment, merchandise and all other items of Tenant’sproperty in, on or about the Premises and the Project, including propertyinstalled by, for or at the expense of Tenant and (b) Tenant Improvements.  Tenant’s property insurance shall be writtenon the broadest available “all risk” (special causes of loss) policy form andshall include an agreed amount endorsement for no less than one hundred percent(100%) of the full replacement cost (new, without deduction for depreciation)of the covered items and property.  Theproperty insurance coverage shall include vandalism and malicious mischiefcoverage, sprinkler leakage coverage and earthquake sprinkler leakage coverage.

**12.1.3     Plate GlassInsurance.       Tenant shall, at Tenant’scost and expense, procure and maintain insurance coverage for all plate glass.**

12.2         **Recovery for Tenant’sNegligence**.  All of thepolicies that Tenant is required to obtain pursuant to the provisions ofArticle 12.1 above shall be issued by companies legally authorized to dobusiness in California.  Although namedas an additional insured and subject to the provisions of Article 12.7 of thisLease, Landlord shall be entitled to recover under said policies for any lossoccasioned to it, its servants, agents and employees, by reason of thenegligence, recklessness or willful misconduct of Tenant.

12.3         **Delivery of Certificate,Policy and Endorsements**. Prior to Tenant’s occupancy of the Premises, Tenant shall provideLandlord with evidence of compliance with Tenant’s insurance requirements underthe Lease, including the endorsements specified in Article 12.1, and, asavailable, certified certificates for all insurance policies regarding thePremises, executed by an authorized agent of the insurer or insurers.  Each insurance policy shall provide that itmay not be modified or 

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canceled without **ten (10)** days prior written notice toLandlord (by any means described in Article 27 below) and to any otheradditional insureds.  At least **ten (10)** days prior to the expirationof any of such policies, Tenant shall furnish Landlord with a renewal or bindertherefor.

12.4         **Blanket Insurance**.  Tenant may carry insurance by a combinationof primary, excess and umbrella policies, provided that the policies areabsolutely concurrent in all respects regarding the coverage afforded by thepolicies.  The coverage of any excess orumbrella policy must be at least as broad as the coverage of the primarypolicy.  All insurance policies carriedby Tenant for Tenant’s Premises and personal property shall be primary andnon-contributory with respect to any other insurance available to and purchasedby Landlord.

12.5         **Tenant’s Failure to ObtainInsurance**.  If Tenant fails tocarry any insurance policy required hereunder or to furnish certificatespursuant hereto, Landlord may, upon no less than ten (10) business days priorwritten notice, and without waiving Tenant’s default, obtain suchinsurance.  In such case, Tenant, withthe next month’s Rent due hereunder, shall reimburse Landlord for the costthereof including interest at the Interest Rate specified in Article 27.

12.6         **Landlord’s Insurance**.  During the Lease Term, Landlord shall procureand maintain property and liability insurance for the Project in suchreasonable amounts, and with such reasonable coverage, as would be carried by aprudent owner of a similar building in the Project area, or as any lienholdermay require.  Tenant acknowledges that itshall not be a named insured or an additional insured in such policies, andthat it has no right to receive any proceeds from any such insurance policiescarried by Landlord.  Landlord may butshall not be required to carry insurance coverage for damages caused by floodor earthquake.

12.7         **Waiver of Subrogation**.  Landlord and Tenant hereby waive all causesof action and rights of recovery against each other, against all subtenants orassignees of Tenant and against any other person or entity holding an interestin the Project (together, the “Affected Parties”) and against the agents,officers and employees of the Affected Parties for any loss occurring to theproperty of the Affected Parties resulting from any of the perils insuredagainst under any and all insurance policies (including self-insurance) ineffect at the time of any such loss or which, under this Lease, were requiredto be insured against, regardless of cause or origin of such loss, includingthe negligence, recklessness or willful misconduct of the Affected Parties orthe agents, officers or employees of the Affected Parties.  Landlord and Tenant shall each use commerciallyreasonably efforts to cause their respective insurers to issue an endorsementdenying such insurer any rights of subrogation against the other party.

12.8         **Increases in Premiums dueto Tenant’s Use or Occupancy**. If, after Landlord provides notice to Tenant that the insurance carrieris proposing increased premiums to the Project due to Tenant’s use or occupancyof the Premises, and Tenant fails to cease the offending use within ten (10)business days after receipt of such notice, Tenant shall pay said increases ininsurance premiums.

 

13.           **Services and Utilities.**     13.1            Throughoutthe Lease Term, Landlord shall provide the following services and utilitiestwenty-four (24) hours per day on every day during the Lease Term, unlessotherwise stated below.

 

13.1.1      Subject to all governmental rules,regulations and guidelines applicable thereto, Landlord shall provide heating,ventilation and air conditioning (“HVAC”) to the Premises in a mannerconsistent with a first class office building from Monday through Friday, from8:00 a.m. to 6:00 p.m. and on Saturday from 9:00 a.m. to 1:00 p.m., except forthe celebratory days of the following holidays: New Year’s Day, Memorial Day,Independence Day, Labor Day, Thanksgiving and Christmas (collectively “BusinessHours”).   **After hours HVAC is currently available to Tenant at no direct charge forthe first five (5) years of the Lease Term but shall be included in OperatingCosts under Article 4.  Thereafter,Landlord may charge Tenant for after-hours HVAC cost, at Landlord’s actualcost, calculated to include wear and tear and amortization of equipment andelectrical.**

13.1.2      Landlord shall at all times provideelectricity to the Premises for lighting and power of not less than three (3)watts per rentable square foot demand load on a continuous annualizedbasis.  Landlord shall also provideelectrical lighting in all Common Areas, parking facilities or storage areasand replace building standard lamps and ballasts as required.

13.1.3      Landlord shall provide hot and cold waterto the Building’s rest rooms (and, as applicable, to any sink, refrigerator ordishwasher in the Premises).

13.1.4      Landlord shall provide passenger elevatorservice at all times; provided, however, after Business Hours, Landlord maydecrease the availability of passenger elevator service so long as at least onecar services the floor on which the Premises are located.

13.1.5      Landlord shall provide non-exclusivefreight elevator service to Tenant, subject to reasonable andnon-discriminatory scheduling by Landlord. After Business Hours, Tenant may becharged at a rate equal to Landlord’s cost of providing such freight elevatorservice.

13.1.6      Landlord shall provide **24-hour** security for the Project in amanner consistent with the security systems, equipment and proceduresmaintained in **comparable first classoffice buildings** in the Project area. **In addition to Landlord’s covenant to provide 24-hoursecurity to the Project, Tenant shall provide to the Premises its own securitysystem.**

13.1.7      Landlord shall provide normal janitorialservices five (5) days per week, similar to that furnished in comparable firstclass office buildings in the Project area and in accordance with the buildingstandard janitorial and cleaning service specifications.

13.1.8      Landlord shall provide grounds care,including the sweeping of walkways and parking areas, removal of rainwater (asmay be required) and maintenance of the landscaping in an attractive mannerconsistent with other office buildings in the Project area.

13.1.9      Landlord shall operate and maintain theProject in accordance with the standards of maintenance and operation as arecustomary for other comparable first class buildings in the Project area.

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13.1.10    Landlord shall provide controlled access tothe Premises 24 hours a day, every day.

13.2         Without the prior written consent ofLandlord, Tenant shall not use in the Premises any apparatus, device, machineor equipment that uses excess lighting, heating, ventilation or airconditioning, electricity or water; nor shall Tenant connect any apparatus ordevice to sources of electrical current or water except through existingelectrical outlets or water pipes in the Premises.  If Tenant requires electricity in excess ofthe amount provided pursuant to Article 13.1.2 herein, or any other resource inexcess of that customarily supplied for use of similar premises in comparablefirst class buildings in the Project area, Tenant shall first request theconsent of Landlord.  As a condition toits consent, Landlord may cause a separate metering device to be installed inthe Premises, at Tenant’s cost and expense. Tenant shall promptly pay the cost of all excess resources consumedwithin the Premises, together with any additional administrative expensesincurred by Landlord in connection therewith. Any sums payable by Tenant to Landlord under this Article 13 also shallbe considered Additional Rent and may be included in any installment of Rentthereafter becoming due.  Landlord shallhave the same remedies for a default in payment of such sums as for a defaultin the payment of Rent.

13.3         Except as provided otherwise in thisLease, Landlord shall not be in default or be liable for any damages directlyor indirectly resulting from any interruption of utilities or services causedby: (a) the installation or repair of any equipment in connection with thefurnishing of utilities or services; (b) acts of God or the elements, labordisturbances of any character, any other accidents or any other conditionsbeyond the reasonable control of Landlord, or due to repairs or improvements tothe Premises or the Project; or (c) the limitation, curtailment, rationing orrestriction imposed by any governmental agency or service or utility supplier onuse of water or electricity, gas or any other form of energy or any otherservice or utility whatsoever serving the Premises or the Project.  .

 

14.           **Estoppel Certificate           **Within **twenty (20)** days after any writtenrequest from Landlord, Tenant shall execute and deliver to Landlord acertificate (the “Estoppel Certificate”) provided by Landlord’s current orprospective lender or prospective purchaser stating: (a) that this Lease isthen in full force and effect and has not been modified (or if modified, settingforth all modifications or attaching all amendments to the Lease), (b) the thencurrent Base Rent and the date to which said Rent has been paid, and (c)whether or not Landlord is then under default of this Lease and if so, thenature of such default and date notice of default was given Landlord. Landlordand Tenant intend that any existing or prospective lender or any prospectivepurchaser or assignee of Tenant may rely on such Estoppel Certificate.  Failure of Tenant to provide**, within five (5) days after notice and opportunity tocure,** Landlord with a Estoppel Certificate as provided aboveshall be a default under the Lease.

 

15.           **Subordination;Requirements of Lenders.**

15.1         This Lease shall be subject andsubordinate at all times to (a) all ground leases or underlying leases whichmay now exist affecting all or any portion of the Project, and (b) the lien ofany mortgage or deed of trust which may now exist affecting all or any portionof the Project.

15.2         If any ground lease or underlying leaseterminates for any reason or any mortgage or deed of trust is foreclosed or adeed in lieu of foreclosure is made for any reason, then Tenant shall,notwithstanding any subordination, attorn to and become the tenant of thesuccessor-in-interest.   It shall be a conditionto any future subordination of this Lease that the ground lessor, air spacelessor, or mortgagee or beneficiary requesting such subordination shall agreethat so long as Tenant is not in default under this Lease **as defined Article 17**, Tenant’s possessionof the Premises shall not be disturbed as a result of such termination,foreclosure or deed in lieu of foreclosure. Tenant shall execute and deliver,within thirty (30) days of demand by Landlord, any additional, commerciallyreasonable documents evidencing the priority or subordination of this Lease andthe attornment of Tenant with respect to any such ground leases or underlyingleases or the lien of any such mortgage or deed of trust. [**See Article 44 of the Lease Addendum.**]

 

16.           **Access by Landlord.**

16.1         Landlord (and its agents, contractorsand employees) reserves the right, without abatement of Rent, to enter thePremises at reasonable times and after reasonable advance notice (except incases of emergency) to inspect it, to supply janitorial services and any otherservice to be provided by Landlord to Tenant hereunder, to show the Premises toany prospective purchaser, beneficiary, mortgagee, to post notices ofnon-responsibility, to make any alteration, improvement or repair to thePremises required by law or consented to by Tenant, or, during the last six (6)months of the Lease Term, to show it to prospective tenants.  For the purpose of making any alterations,improvement or repair to the Premises or any portion of the Project, Landlordmay erect, use and maintain scaffolding, pipes, conduits and other necessarystructures in and through the Project and the Premises where reasonablyrequired by the character of the work to be performed and in conformance withgood construction practices, provided that entrance to the Premises shall notbe blocked thereby, and provided further that Landlord works expeditiously anduses its best efforts to minimize any interference with Tenant’s use of andaccess to the Premises.  At Tenant’selection, Tenant may accompany Landlord and all persons entering under theauthority or right of Landlord, during any such entry.  Tenant hereby waives any claim for damages orabatement of Rent for any injury or inconvenience to or interference withTenant’s business, any loss of occupancy or quiet enjoyment of the Premises,and any other loss occasioned thereby, except as otherwise set forth in theLease or to the extent arising from the negligence, recklessness or willfulmisconduct of Landlord or Landlord’s employees, agents, representatives,contractors, or invitees.

16.2         For each of the aforesaid purposes,Landlord shall at all times have and retain a key to all of the doors in, uponand about the Premises, excluding Tenant’s vaults and safes, and Landlord shallhave the right to use any and all means which Landlord may deem reasonablynecessary or proper to open said doors in any emergency, and any such entry tothe Premises or portions thereof by Landlord shall not under any circumstancesbe construed or deemed to be a forcible or unlawful entry into, or a detainerof, the Premises, or an eviction, actual or constructive, of Tenant from thePremises or any portion thereof. If at any time during the Lease Term Tenantwishes to re-key its Premises, all such re-keying shall be done by Landlordwith locks and hardware supplied by Landlord all at Tenant’s sole cost andexpense.

 

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17.           **Default by Tenant**.

17.1         The occurrence of any of the followingshall constitute a breach of the Lease, and a default if not cured by Tenantafter notice and a reasonable opportunity to cure such breach:

17.1.1      Failure by Tenant to pay Rent or anyamount due hereunder when such amount becomes payable in accordance with thisLease, or to duly, promptly and completely perform any obligation of Tenantunder Articles 14 or 15 above, and continuation of such failure for a period ofthree (3) business days after receipt of the written statutory notice fromLandlord to Tenant specifying the nature of such failure.

17.1.2      Failure by Tenant in the due, prompt andcomplete performance or observance of any other express or implied covenant,agreement or obligation of Tenant contained in this Lease, and the continuationof such failure for a period of thirty (30) days after written notice fromLandlord to Tenant specifying the nature of such failure; provided, however,that if any such failure cannot reasonably be cured within such period, Tenantshall not be deemed to be in default hereunder if Tenant promptly commencessuch cure within such period and thereafter diligently pursues such cure tocompletion.

17.1.3      Tenant’s abandoning the Premises, whichshall mean for these purposes, Tenant’s absence for a period of more than two(2) weeks from the Premises while otherwise in default of this **Lease as described in this Article 17**.

17.1.4      Tenant, its assignee, sublessee, othertransferee, successor or any guarantor of this Lease gives to Landlord anyfinancial statement or representation which proves to be materially false ormaterially misleading.

17.1.5      The insolvency of Tenant; the making byTenant of any assignment for the benefit of creditors; the filing by or againstTenant of a petition to have Tenant adjudged bankrupt or of a petition forreorganization or arrangement under any law relating to bankruptcy, insolvencyor creditors’ rights in general (unless in the case of a petition filed againstTenant, the same is dismissed within sixty (60) days); the appointment of atrustee or receiver to take possession of all or a substantial part of Tenant’sassets or of Tenant’s interest under this Lease, where such seizure is notdischarged within sixty (60) days.  Theoccurrence of any of the acts or events referred to in this Article withrespect to any Guarantor of this Lease shall also constitute a defaulthereunder.

17.1.6      The attachment, execution or otherjudicial seizure of a substantial portion of Tenant’s assets or of Tenant’sinterest in this Lease, where such seizure is not discharged within sixty (60)days.

17.2         The notices referred to in Article17.1.1 and 17.1.2 above shall be in lieu of, and not in addition to, any noticerequired under Section 1161 et seq. of the California Code of Civil Procedure.

 

18.           **Remedies of Landlord**.

18.1         Inthe event of Tenant’s default under this Lease as provided in Article 17 above,Landlord, at Landlord’s option, and without limiting Landlord in the exerciseof any other right or remedy Landlord may have on account of such default, andwithout any further demand or notice, may terminate this Lease, recoverpossession of the Premises and/or, to the extent permitted by California CivilCode Section 1951.3 or any other law, remove all persons and property from thePremises, which property shall be stored by Landlord at a warehouse or elsewhereat the risk, expense and for the account of Tenant.

18.2         On termination of this Lease asprovided in Article 18.1 above, Landlord shall be entitled to recover fromTenant the aggregate of:

18.2.1      The worth at the time of the award of theunpaid Rent, as defined in Article 3.2, late charges and interest earned as ofthe date of the termination hereof;

18.2.2       The worth at the time of the award of theamount by which the unpaid Rent, late charges, interest and other amounts duehereunder, which would have been earned after the date of termination hereofuntil the time of the award, exceeds the amount of such unpaid Rent, latecharges and interest that Tenant proves could have been reasonably avoided byLandlord mitigating its damages;

18.2.3      The worth at the time of the award of theamount by which the unpaid Rent for the balance of the term hereof after thetime of the award exceeds the amount of such unpaid Rent, interest and latecharges that Tenant proves could have been reasonably avoided by Landlordmitigating its damages; and

18.2.4      Any other amount necessary to compensateLandlord for the detriment proximately caused by Tenant’s uncured default underthis Lease, including but not limited to brokerage commissions and advertisingexpenses, expenses incurred for removing and storing any of Tenant’s propertyremaining on the Premises, expenses of remodeling the Premises for a new tenantand any special concessions made to obtain a new tenant.

18.3         For the purposes of this Article 18,the “time of the award” shall mean the date upon which the judgment in anyaction brought by Landlord against Tenant by reason of such default is enteredor such earlier date as the court may determine; the “worth at the time ofaward” (referred to in Articles 18.2.1 and 18.2.2) shall be computed byincluding interest at the Interest Rate and late charges set forth in Article27 below; and the “worth at the time of award” (referred to in Article 18.2.3)shall be computed by applying the discount rate of the Federal Reserve Bank ofSan Francisco at the time of the award plus one percent (1%) per annum.

18.4         Nothing in this Article 18 shall bedeemed to alter Landlord’s right to indemnification under the indemnificationclause or clauses contained in this Lease for claims or liabilities arisingfrom events occurring prior to the termination of this Lease.

18.5         Notwithstanding anything to thecontrary set forth herein, Landlord’s reentry into the Premises to perform actsof maintenance or preservation of, or in connection with efforts to relet thePremises, or any portion thereof, or the appointment of a receiver uponLandlord’s initiative to protect Landlord’s interest under this Lease shall notterminate Tenant’s right to possession of the Premises or any portion thereofand, until Landlord does elect to terminate this Lease, this Lease shallcontinue in full force and Landlord may pursue all its remedies hereunderincluding, without limitation, the right to recover from Tenant as they becomedue hereunder all Rent and other charges required to be paid by Tenant underthe terms of this Lease.

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18.6         If Tenant abandons the Premises, or ifLandlord elects to reenter or take possession of the Premises pursuant to anylegal proceeding or pursuant to any notice provided by law, and until Landlordelects to terminate this Lease, Landlord may, from time to time, withoutterminating this Lease, recover all Rent as it becomes due under Article 18.5above, subject to interest and late charges as set forth in Article 27, and/orrelet the Premises or any part thereof for the account of and on behalf ofTenant, on any terms, for any term (whether or not longer than the Lease Term)and at any rental rate as Landlord in its reasonable discretion may deemadvisable, and Landlord may make any alterations and repairs to the Premises inconnection therewith.  In the event thatLandlord shall elect to so relet the Premises on behalf of Tenant, then baserent and additional rent received by Landlord from such reletting shall beapplied:

18.6.1      First, to reimburse Landlord for thereasonable costs and expenses of such reletting (including, without limitation,legal and other costs and expenses of repossessing the Premises, removingpersons and property therefrom, obtaining new tenants, brokerage fees, costs ofpreparing the Premises for occupancy by such new tenants, and, if Landlordmaintains and operates the Premises, the costs thereof).

18.6.2      Second, to the payment of any indebtednessof Tenant to Landlord other than Base Rent, adjustments to Base Rent,Additional Rent and other sums due and unpaid hereunder.

18.6.3      Third, to the payment of Rent and othersums due and unpaid hereunder; the residue, if any, shall be held by Landlordand applied in payment of other or future obligations of Tenant to Landlord asthey may become due and payable.

18.7         Should the rent received from suchreletting, when applied in the manner and order indicated above, be less thanthe total amount owing from Tenant pursuant to this Lease, then Tenant shallpay such deficiency to Landlord, and if Tenant does not pay such deficiencywithin five (5) days of its receipt of written notice, Landlord may bring anaction against Tenant for recovery of such deficiency or pursue its otherremedies hereunder or under California Civil Code Section 1951.8, CaliforniaCode of Civil Procedure Section 1161 et seq., or any similar, successor orrelated provision of law.

18.8         All rights, powers and remedies ofLandlord under the Lease and any other agreement between Landlord and Tenantshall 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 suchrights or remedies shall not impair Landlord’s right to exercise any otherright or remedy, including, without limitation, any and all rights and remediesof Landlord under California Civil Code Section 1951.8, California Code ofCivil Procedure Section 1161 et seq., or any similar, successor or relatedprovision of law.

18.9         **[IntentionallyDeleted]**

18.10       If Tenant abandons the Premises andleaves behind any items of personal property, then Landlord shall store suchproperty at Tenant’s cost and expense at a warehouse or any other location atthe risk of Tenant, and Tenant’s property shall be released only upon Tenant’spayment of any and all moving and storage charges, as well as any expense ordamages incurred as a result of the removal, moving and storage of suchproperty, together with all sums due and owing under this Lease. If Tenant doesnot reclaim such property within the period permitted by law, Landlord may sellsuch property in accordance with law and apply the proceeds of such sale to anysums due and owing hereunder, or retain said property, granting Tenant creditagainst sums due and owing hereunder for the reasonable value of such property.

18.11       To the extent permitted by law, Tenantand Landlord each hereby waive all provisions of, and protection under, anydecisions, statutes, rules, regulations and other laws of the State ofCalifornia to the extent same are inconsistent and in conflict with specificterms and provisions of this Article 18.

19.           **Default by Landlord;Limitation of Liability.**

19.1         Landlord shall not be deemed to be indefault hereunder unless Landlord does not perform its material obligationsunder the Lease after written notice of Landlord’s breach by Tenant to Landlordand to such other parties whose names and addresses are furnished to Tenant.  The notice shall specify that Landlord hasfailed to perform such obligations; provided, however, that if the nature ofsuch obligations is such that more than thirty (30) days are reasonablyrequired for their cure, Landlord shall not be deemed to be in default hereunderif Landlord or any such other party(ies) commences such cure within such thirty(30) day period and thereafter diligently pursues such cure to completion.

19.2         If Landlord is in default hereunderand, as a consequence thereof, Tenant recovers a judgment against Landlord,such judgment may be satisfied only out of the right, title and interest ofLandlord in the Project and out of the rent or other revenue receivable byLandlord from the Project, or out of the proceeds receivable by Landlord fromthe sale or other disposition of all or any portion of Landlord’s right, titleand interest in the Project. Neither Landlord nor any of the partners ofLandlord shall be personally liable for any deficiency or otherwise.

20.           **Damage and Destruction.**

20.1         If the Project (whether or notincluding the Premises) is damaged by an insured casualty (or a casualty forwhich Landlord is required to insure under the terms of this Lease) occurringmore than six (6) months prior to the expiration of this Lease and anyextensions thereof, Landlord shall forthwith repair same, or cause same to berepaired, to the extent that insurance proceeds are made available to Landlordtherefor and provided that such repairs can, in Landlord’s reasonable opinion,be made within one hundred eighty (180) days from the date of such damage  under the laws and regulations of thefederal, state and local governmental authorities having jurisdictionthereof.  Landlord agrees to repair anycasualty damage as long as the uninsured portion of such casualty damage doesnot exceed $15.00 per rentable square foot.

20.2         If (a) the Premises or the Project isdamaged by an uninsured casualty which costs more than $15.00 per rentablesquare foot to repair, (b) the casualty repair requires more than one hundredeighty (180) days to complete without payment of overtime or other premium or(c) if the Premises, or the Project is damaged by a casualty as described inArticle 20.1 above within the last six (6) months of this Lease and anyextensions thereof, then Landlord shall have the option within **thirty** (**30**) days from the date of such damage either to (1) notifythe Tenant of its election to continue the Lease, in which event Landlord shallthereafter repair such damage; or (2) notify the Tenant of its election to immediatelyterminate this Lease, in which event this Lease shall be so terminated.  Landlord shall refund to Tenant any Rentpreviously paid for any period of 

 

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time subsequent to theearlier of such termination or untenantability of the Premises.  Notwithstanding any contrary provisionherein, Landlord shall not be required to repair any casualty damage to theproperty of Tenant or to repair or replace any paneling, decorations, railings,floor coverings, alterations, additions, fixtures or improvements installed onthe Premises by or at the expense of Tenant. **To the extent permitted by law,**Tenant hereby waives the provisions of Section 1932, subdivision 2, and Section1933, subdivision 4, of the Civil Code of California, and any similar law,statute or ordinance now or hereafter in effect.

20.3         Until the Premises are restored, Rentshall be abated in the proportion that the area of the Premises renderedunusable by Tenant bears to the total area of the Premises.  Except for abatement of Rent, Tenant shallhave no claim against the Landlord for any damage suffered by reason of (a) anydamage to the Premises, (b) such repairs, or (c) any inconvenience,interruption, annoyance, loss of business, or continued expense of operationcaused by such damage or repair, except to the extent resulting from thenegligence, recklessness or willful misconduct of Landlord, its employeesagents, representatives, contractors or invitees.

20.4         Should the Premises be damaged or destroyedby fire or other casualty insured under a standard fire and casualty insurancepolicy (or which could be insured under a standard fire and casualty insurancepolicy), Landlord shall within **forty-five**(**45**) days of the date ofthe casualty, notify Tenant in writing of Landlord’s good faith estimate of thetime necessary to repair and rebuild the Premises.  If such estimate sets forth a period of onehundred eighty (180) days or less, Landlord shall, except as otherwise providedherein this Article, repair and/or rebuild the same with reasonablediligence.  Landlord’s obligationhereunder shall be limited to the Building and Tenant Improvements originallyprovided by Landlord at the Commencement Date, and any alterations provided byLandlord that Landlord has not requested Tenant to remove upon expiration ofthe Lease Term.

 

21.           **Eminent Domain.**

21.1         If the entire Premises, or enoughthereof so as to render the balance thereof not reasonably usable for theconduct of Tenant’s business, is taken or appropriated by a governmental agencyunder the power of eminent domain or conveyed in lieu thereof, either partyhereto may terminate this Lease by serving written notice upon the other partyhereto within thirty (30) days thereafter. If any substantial part of the Project excluding the Premises is takenor appropriated by a governmental agency under the power of eminent domain orconveyed in lieu thereof, Landlord may so terminate this Lease.  In either event, Landlord shall receive (andTenant shall assign to Landlord upon demand by Landlord) any income, Rent,award or any interest therein which may be paid in connection therewith, andTenant shall have no claim for any part of any sum so paid, whether or notattributable to the value of the unexpired Lease Term; provided, however, thatnothing herein shall prevent Tenant from pursuing a separate award inconnection with the taking of Tenant’s removable tangible personal propertyplaced in the Premises solely at Tenant’s expense, for Tenant’s relocation costsand for loss of goodwill.

21.2         If a part of the Premises is so taken,appropriated or conveyed by a governmental agency, and neither party heretoelects to terminate this Lease, then Base Rent and Additional Rent payablehereunder shall be abated in the proportion that the portion of the Premises sotaken, appropriated or conveyed bears to the area of the entire Premises.

21.3         Notwithstanding anything to thecontrary contained in this Article 21, if the temporary use or occupancy of anypart of the Premises (for a period not to exceed 60 days) is taken orappropriated by a governmental agency under the power of eminent domain orconveyed in lieu thereof during the Lease Term, this Lease shall be and remainunaffected by such taking, appropriation or conveyance and Tenant shallcontinue to pay in full all Rent payable by Tenant.  In the event of any such temporary taking,appropriation or conveyance, Tenant shall be entitled to receive that portionof any award that represents compensation for loss of this use or occupancy ofthe Premises during the Lease Term, and Landlord shall be entitled to receivethe balance of such award.  To the extentthat it is inconsistent with the above, each party hereto hereby waives the provisionsof Section 1265.130 of the California Code of Civil Procedure allowing eitherparty to petition a court to terminate this Lease in the event of a partialtaking of the Premises.

 

22.           **Sale by Landlord.**  If Landlord sells or transfers all or anyportion of the Project including the Premises, Landlord shall, uponconsummation of the sale or transfer, be released from any liability relatingto its obligations or covenants thereafter to be performed or observed underthis Lease, and Tenant agrees to look solely to Landlord’s successor-in-interestwith respect to such liability.  IfLandlord transfers or credits any security deposit or prepaid Rent toLandlord’s successor-in-interest, then upon such transfer Landlord shall bedischarged from any further liability therefor.

 

23.           **Surrender of Premises.**  Upon the expiration or sooner termination ofthe Lease, Tenant shall surrender to Landlord the Premises broom clean and freeof debris, with all repairs, changes, alterations, additions and improvementsthereto, in good order, condition and repair, ordinary wear and tear and damagefrom insured casualty excepted.  AtTenant’s sole cost and expense, Tenant shall upon expiration or soonertermination of the Lease: (a) remove its personal property from the Premises;(b) remove any improvements to the Premises caused to be installed by Tenantthat Landlord may require Tenant to remove pursuant to Article 7.3; and (c)repair any damage caused by the removal of any such property orimprovements.  If Tenant leaves any personalproperty at the Premises, Landlord may remove such personal property anddispose of it, at Tenant’s expense.

 

24.           **Quiet Enjoyment.**  So long as Tenant is not in defaulthereunder, Tenant shall have the right to the quiet peaceful enjoyment andpossession of the Premises and the use of the Common Areas during the LeaseTerm, subject to the terms and conditions of this Lease.

 

25.           **Notices.**  Any notice, demand or other communication tobe given under the provisions of this Lease shall be in writing to theappropriate address set forth in Article 1.1.10 (or such address furnished byeither party hereto to the other party hereto in writing) and shall be (a)personally served, (b) mailed by United States registered or certified mail,return receipt requested, postage prepaid, (c) sent by a nationally recognizedcourier service (e.g. Federal Express) for next day delivery, to be confirmedin writing by such courier or (d) sent by electronic facsimile with appropriateprovisions for confirmation of receipt.  Serviceby mail shall be deemed complete on the day of actual delivery as shown by theaddressee’s registered or certified mail receipt or at the expiration of thethird business day after the date of mailing, whichever first occurs.  Service by personal service or 

 

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courier shall be deemedcomplete on receipt.  Service byelectronic facsimile shall be deemed complete on confirmation of receipt ifreceived prior to the close of business, and on the next business day ifreceived after the close of business.

 

26.           **Personal Property Taxes.**  Tenant shall pay before delinquency alltaxes, assessments, license fees and other charges (collectively, “Tenant’sTaxes”) that are levied and assessed against Tenant’s trade fixtures and otherpersonal property installed or located in or on the Premises that becomepayable during the Lease Term.  On demandby Landlord, Tenant shall furnish Landlord with satisfactory evidence of suchpayments.  If any taxes on Tenant’spersonal property are levied against Landlord or Landlord’s property, or if theassessed value of the Building is increased by the inclusion of a value placedon Tenant’s personal property or above-standard leasehold improvements, Tenant,on demand, shall immediately reimburse Landlord for any such taxes.  Landlord shall have the right to pay thesetaxes regardless of the validity of the levy. Notwithstanding the foregoing, Landlord agrees to: (a) notify Tenant inwriting prior to paying any taxes under this Article 26 on Tenant’s behalf(“Landlord’s Tax Notice”), and (b) not pay any such taxes on Tenant’s behalf ifTenant notifies Landlord in writing within five (5) business days after itreceives Landlord’s Tax Notice that Tenant, in good faith, disputes that theassessed taxes are properly due and owing by Tenant, provided that Tenantdiligently pursues such dispute with the appropriate taxing authority in goodfaith within thirty (30) days from notice.

 

27.           **Interest and Late Charges**.  Any Rent, Additional Rent or other amount notpaid by Tenant to Landlord when due hereunder shall bear interest from the duedate until paid, unless otherwise specifically provided herein, at a rate (the“Interest Rate”) equal to the lesser of (a) the rate per annum announced fromtime to time by Bank of America, N.A. as its prime rate (or, if such bank failsto announce such rate, then the prime rate announced by the Chase ManhattanBank, USA, N.A.) plus two (2) percentage points, or (b) the maximum ratepermitted by law.  The payment of suchinterest shall not excuse or cure any such default by Tenant under thisLease.  In addition to such interest, ifany Rent, Additional Rent or other amount is not paid within ten (10) days ofwhen due, a late charge equal to five percent (5%) of such amount shall beassessed against Tenant, which late charge Tenant hereby agrees is a reasonableestimate of the damages Landlord would suffer as a result of Tenant’s latepayment.  The parties agree that it wouldbe impracticable and extremely difficult to fix Landlord’s actual damages insuch event.  Such interest and latecharges are separate and cumulative and are in addition to and shall notdiminish or substitute for any or all of Landlord’s rights or remedies underany other provision of this Lease.

 

28.           **Collection Agency andAttorneys’ Fees**.** **Tenant shall pay the costsincurred by Landlord if Landlord uses a collection agency or attorneys tocollect any moneys unpaid by Tenant or to enforce the terms of this Lease. Inany action to enforce or interpret this Lease, including any suit by Landlordfor the recovery of Rent or possession of the Premises, the non-prevailingparty shall pay to the prevailing party its actual attorneys’ fees.  The prevailing party will be determined bythe court, arbitrator or arbitration panel before whom the action was broughtbased upon an assessment of which party’s major arguments or positions couldfairly be said to have prevailed. Any attorneys’ fees and other costs andexpenses incurred by the prevailing party in enforcing a judgment under thisLease shall be recoverable separately from and in addition to any other amountincluded in such judgment in favor or the prevailing party.

 

29.           **Light and Air.**  Tenant covenants and agrees that nodiminution of light, air or view by any structure that may hereafter be erectedshall entitle Tenant to any reduction of Rent under this Lease, result in anyliability of Landlord to Tenant, or in any other way affect this Lease orTenant’s obligations hereunder.

 

30.           **Signs and Directory.**

30.1         Without the prior written consent ofLandlord, Tenant shall not place, construct or maintain any sign,advertisement, awning, banner or other decoration on or visible from, orotherwise use, the exterior of the Premises or any other portion of theProject.  All door signs on the exteriorof the Premises must be installed by Landlord, at Tenant’s sole cost andexpense or as part of any tenant improvement allowance, that the Landlordprovides for installation of improvements to the Premises, and must conform tostandards of the Project as to size, style, placement, color and number of thenames, and other matters as reasonably determined by Landlord.  In the event that Tenant violates theforegoing, Landlord may remove the sign without any liability, and may chargeTenant the expense incurred, including but not limited to the cost incurred forthe repair of the wall, door surface or other area on which the sign wasmounted.

30.2         Landlord shall place, construct andmaintain a directory in the Building lobby and in such other locations, if any,as Landlord, in its sole discretion, may determine, which directory(ies) shallbe for the display of the business names of Building tenants and theirrespective suite numbers.  Landlord shallhave the sole right to determine and change from time to time the type of suchdirectory(ies) and all common Project signage, including, but not limited to,size of letters, style, color content and placement.  Tenant shall have the right at Landlord’scost to three (3) lines per directory per 1,000 rentable square feet of thePremises, but listings on such directory(ies) shall be limited to professionalpersonnel of Tenant located principally at the Premises.  Tenant shall notify Landlord in writing ofthe business names that it desires to include on any such directory and shall,upon demand by Landlord, pay the cost associated with any subsequent changes tosuch names on the directory.

 

31.           **Parking. **Subject to applicable rules andregulations any other charges, fees and taxes to be collected by Landlord, orother parking operator, Tenant shall have the right, but not the obligation,throughout the Lease Term to lease the number of parking spaces in the parkingfacility that serves the Building at such parking rate(s) and upon such otherterms as may be specified in Article 1.1.11. Notwithstanding anything to the contrary contained herein, Tenant shallbe obligated to lease at least fifty percent (50%) of the parking spacesdesignated in Article 1.1.11 for the entire Lease Term.    Tenant may lease additional parking spaceson an “as available” monthly basis.  IfTenant desires to relinquish any of the spaces that Tenant is leasing, Tenantshall give not less than thirty (30) days notice thereof to Landlord.  Tenant may not sell, assign or transfer itsparking rights hereunder, except pursuant to a permitted sublease or assignmentof this Lease.  Except as may otherwisebe specifically provided elsewhere in this Lease, Tenant shall not be entitledto any designated, reserved, assigned or valet parking. Landlord reserves theright to establish and alter, from time to time, on a non-discriminatory basis,all parking rates, rules and regulations, provided said rates shall becomparable to rates charged by other similar buildings in the Project area.  Tenant may purchase validation stickers atthe prevailing rate then charged by the Project. **See also Article 46 of the Lease Addendum.**

 

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32.           **Brokerage Fees. **Landlord shall have no obligationto pay commissions or fees to any real estate broker, finder or intermediaryother than Tenant’s Broker, if any, listed in Article 1.1.13 and HeldProperties, Inc., who represents Landlord. Landlord and Tenant each warrant that with respect to this Lease neitherhas dealt with any other real estate broker, finder or intermediary.  To the extent that Tenant breaches theforegoing, any commissions or fees payable with respect to this Lease shall bepaid exclusively by Tenant, and Landlord shall have no obligation of any kindwith respect to such commissions or fees. Landlord agrees to pay a commission to Tenant’s Broker pursuant to aseparate agreement.

 

33.           **Relocation Right.               **[**Intentionally Deleted**] 

 

34.           **Authority.**  If Tenant is a corporation, trust orpartnership, each individual executing this Lease on behalf of Tenantrepresents and warrants that he or she is duly authorized to so execute anddeliver this Lease, and within ten (10) days after its execution shall deliverto Landlord satisfactory evidence of such authority.  If Tenant or Guarantor is a corporation, itshall, upon demand, also deliver satisfactory evidence of (a) good standing inCalifornia, and in Tenant’s or Guarantor’s state of incorporation, (b)qualification to do business in California, and (c) a corporate resolution dulycertified by the secretary of Tenant or Guarantor authorizing execution anddelivery of this Lease or Guarantee, as the case may be, by the parties whohave signed it on behalf of Tenant or Guarantor.

 

35.           **Miscellaneous.**

35.1         If either Landlord or Tenant waives theperformance of any term, covenant or condition contained in this Lease, suchwaiver shall not be deemed to waive any other breach of the same or of anyother term, covenant or condition contained herein.  Furthermore, the acceptance of Rent byLandlord shall not constitute a waiver of any preceding breach by Tenant of anyterm, covenant or condition of this Lease, other than the failure of Tenant topay the particular Rent so accepted, regardless of Landlord’s knowledge of suchbreach at the time of Landlord’s acceptance of such Rent.  Failure by Landlord to enforce any of theterms, covenants or conditions of this Lease for any length of time shall notbe deemed to waive or to affect the right of Landlord to insist thereafter uponstrict performance by Tenant.  Landlord’sor Tenant’s waiver of any term, covenant or condition of this Lease may only bemade by a written document signed by the waiving party.

35.2         Any voluntary or other early surrenderof this Lease by Tenant, mutual termination hereof or prior termination hereofby Landlord shall not work a merger, and shall, at the option of Landlord,terminate all or any existing subleases or sub-tenancies.  If Landlord elects to assume any sublease orenter into a lease with any subtenant, such assumption shall not relieve Tenantof any remaining liability under this Lease.

35.3         This Lease shall not be recorded; andno memorandum of lease shall be recorded without Landlord’s prior writtenconsent.

35.4         Rent, Additional Rent and all othersums payable under this Lease must be paid in lawful money of the United Statesof America.

35.5         This Lease may be executed incounterparts with the same effect as if both parties hereto had executed thesame document.  Both counterparts shallbe construed together and shall constitute a single lease.

35.6         Nothing contained in this Lease shallbe construed to create the relationship of principal and agent, partnership,joint venture or any other relationship between the parties hereto, other thanthe relationship of Landlord and Tenant.

35.7         Any provision of this Lease that provesto be invalid, void or illegal shall in no way affect, impair or invalidate anyother provision hereof, and such other provisions shall remain in full forceand effect.

35.8         The term “Premises” shall be deemed toinclude (unless, based on the context, such meaning would clearly beunintended) the space hereby demised and all improvements on or at any timehereafter constructed or built in such space.

35.9         The term “Tenant” or any pronoun usedin place thereof shall indicate and include the masculine or feminine, thesingular or plural number, individual, firms or corporations, and any Tenant’ssuccessor in interest.

35.10       The section headings herein are forconvenience of reference only and shall in no way define, increase, limit ordescribe the scope or intent of any provision of this Lease.

35.11       If this Lease is entered into byco-tenants, the obligations of such co-tenants hereunder shall be joint andseveral.

35.12       Time is of the essence of this Lease andall of its provisions.

35.13       The laws of California shall in allrespects govern this Lease.  The partiesacknowledge that the laws of California may change by virtue of legislativeenactment or judicial decision.  Theparties further acknowledge that they have entered into this Lease based on thelaws of California at the time of the execution of this Lease, and each herebyexpressly waives any future rights, benefits, or advantages derived from or asa result of any future changes in the law of California to the extent notinconsistent with the terms of the Lease. In any action or proceeding arising therefrom, Tenant hereby consents to(a) the jurisdiction of any competent court within the state of California, (b)service of process by any means authorized by the laws of the state ofCalifornia, and (c) trial without a jury except for actions primarily basedupon personal injury.

35.14       This Lease contains the entire agreementof the parties hereto with respect to the subject matter hereof and supersedesany previous negotiations, and may not be modified, except by a writtendocument executed by the parties hereto. There have been no representations or understandings made between theparties other than those set forth in this Lease.  Without limiting the generality of theforegoing, Tenant specifically acknowledges and agrees that neither Landlordnor any broker, agent or representative thereof has made any warranty orrepresentation with respect to the tenant mix of the Building, the identity ofprospective tenants or other tenants of the Building, profitability orsuitability of the Premises for Tenant’s use, the state of repair of theProject and the Premises, or the amount and extent of provided services, exceptas otherwise specifically set forth herein.

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35.15       If any guarantee of this Lease isrequired by Landlord, such guarantee shall be in the form and content attachedhereto or, if none, as supplied and/or approved by Landlord.

35.16       The words “person” and “persons” as usedherein shall include individuals, firms, partnerships, associations andcorporations.

35.17       The language in all parts of this Leaseshall be construed simply according to its fair meaning, and not strictly foror against Landlord or Tenant.  Anyreference to any Article herein shall be deemed to include all subsectionsthereof unless otherwise specified or reasonably required from thecontext.  Any reference to “days” or“months” herein shall refer to calendar days or months, respectively, unlessspecifically provided to the contrary. Unless clearly inconsistent with the context, any reference herein tothe “term hereof” or “the Lease Term” shall refer to the term of this Lease asthe same may be extended pursuant to any extension option(s) containedherein.  The terms “herein”, “hereunder”and “hereof” as used in this Lease shall mean “in this Lease” and “under thisLease” or “of this Lease” respectively, except as otherwise specifically setforth in this Lease.

35.18       All exhibits and the addendum referred toin this Lease are incorporated herein as a part hereof.

35.19       Tenant hereby acknowledges and agreesthat the exterior walls of the Building and the area between the demising wallsof premises and the finished ceilings and floors of the Premises and the slabof the floor above or below have not been demised hereby and that the usethereof, together with the right to install, maintain, use, repair and replacepipes, ducts, conduits and wires leading through, under, above or alongside thePremises, is hereby reserved unto Landlord.

35.20       The submittal of this Lease by Landlordor its agent or representative for examination or execution by Tenant does notconstitute an option or offer to lease the Premises upon the terms andconditions contained herein or a reservation of the Premises in favor ofTenant.  This Lease shall becomeeffective only upon the execution hereof by Landlord and Tenant and delivery ofa fully executed counterpart hereof to Tenant.

35.21       Tenant warrants and represents thatneither its execution of this Lease nor its performance hereunder will violateany agreement, instrument, contract, law, rule or regulation by which Tenant isbound.  Tenant shall indemnify Landlordagainst any loss, cost, damage or liability including, without limitation,reasonable attorneys’ fees and related costs arising out of Tenant’s breach ofthis warranty and representation.

 

36.           **Rules and Regulations**.  Tenant shall observe and comply with therules and regulations set forth in this Article 36 and any and all reasonablemodifications thereof and additions thereto established in writing by Landlordwritten notice of which has been given to Tenant.  Landlord shall not be responsible for thenon-observance of, or noncompliance with, any of said rules and regulations byany other tenant or occupant of the Building, but Landlord shall use itsreasonable efforts to enforce the rules and regulations in a non-discriminatoryand consistent manner.  In the event ofany conflict between said rules and regulations and other provisions hereof,the latter shall control.

36.1         Tenant shall not obstruct, encumber oruse any sidewalks, entrance, passages, courts, elevators, vestibules,stairways, corridors or halls or Common Area for any purpose other than ingressand egress to and from the Premises or the Building.

36.2         Tenant shall neither attach any awningor other projection to the outside walls or windows of the Building, nor attachor hang any curtains, blinds, shades, drapes or screen to, in or on any windowor door of the Premises without the prior written consent of Landlord.  Such awnings, projections, curtains, blinds,shades, drapes, screens and other fixtures must be of a quality, type, design,color, material, installation and general appearance approved by Landlord.  All electrical fixtures hung in offices orspaces along the window perimeter of the Premises must be of a quality, type,design, bulb color, size and general appearance approved by Landlord and mustbe installed by Landlord at Tenant’s cost.

36.3         Tenant shall not cover or obstruct thesashes, sash doors, skylights, windows, and doors that admit light or air intothe interior Common Areas, nor shall any articles be placed on the windowsillsof the Project.

36.4         No articles or signs shall be placed infront of or affixed to any part of the exterior of the Building, nor placed inpublic portions thereof without the prior written consent of Landlord.

36.5         The water and janitorial closets andother plumbing fixtures shall not be used for any purposes other than those forwhich they were constructed, and no sweepings, rubbish, rags or othersubstances shall be thrown or stored therein. All damages resulting from any misuse of the fixtures shall be borne byTenant to the extent caused by Tenant or Tenant’s agents, servants, employees,contractors, visitors or licensees.

36.6         **Exceptfor Cosmetic Alterations,** Tenant shall not mark, paint, drillinto or in any way deface any part of the Premises or the Project, or stringany wires except with the prior written consent of Landlord and as Landlord maydirect. Notwithstanding the foregoing, Landlord hereby consents to the hangingof normal office decorations.

3.67         No animal (except for seeing-eye dogsor other ADA-approved animals), bird of any kind, or bicycles shall be broughtinto or kept in or about the Premises or the Building.

36.8         Prior to leaving the Premises for theday, Tenant shall use its best efforts to conserve energy and electricity,including but not limited to drawing or lowering window coverings andextinguishing all lights.

36.9         Tenant shall not make, or permit to bemade, any unseemly or disturbing noises or smells, or disturb or interfere withoccupants of or visitors to the Building or neighboring buildings.  Tenant shall not throw anything out of thedoors, windows or skylights or down the passageways.  Tenant shall at all times keep the doorsclosed from Tenant’s suite into the Common Areas of the Project except uponprior written approval of Landlord.

36.10       Tenant shall not permit any principal,agent, servant, employee, contractor, visitor or licensee to smoke any tobaccoproducts or any non-tobacco products.  Nosmoking of any substance will be allowed in the Building at any time.  Landlord reserves the right to exclude orexpel from the Building any person who, in Landlord’s judgment, is smoking anytobacco or non-tobacco products.  If, inLandlord’s judgment, Tenant, or Tenant’s principals, agents, servants,employees, 

 

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contractors, visitors orlicensee continue to smoke after adequate warning continues to smoke anytobacco or non-tobacco product, then Landlord may provide Tenant with a noticeof default and give Tenant 30 days to cure or quit the premises.

36.11       Neither Tenant nor any of Tenant’sagents, servants, employees, contractors, visitors or licensees shall at anytime bring or keep upon the Premises any inflammable, combustible or explosivefluid, chemical or substance except in such small quantities and in originalmanufacturer’s containers as may reasonably be required for the properoperation and maintenance of Tenant’s office equipment.  All quantities of the inflammable,combustible or explosive fluids, chemicals or substances shall be stored as perguidelines set forth on their containers in a safe manner. After use, anyhazardous wastes shall be disposed of by certified hazardous waste methods inaccordance with the manufacturers’ instructions.

36.12       Landlord shall deliver keys to Tenantupon Tenant’s occupancy.  Tenant shallnot place any additional locks, bolts or mail slots of any kind upon any of thedoors or windows, nor shall Tenant change any existing locks or the mechanismthereof without Landlord’s prior written consent.  Upon the termination of the tenancy, Tenantmust turn over to Landlord all keys for the Premises or the Project and, in theevent of the loss of any keys so furnished, Tenant shall pay to Landlord thecost thereof.

36.13       Delivery or removal of any safes,freight, furniture, fixtures, bulky matter or heavy equipment of anydescription must take place during the hours which Landlord or its agent mayreasonably determine from time to time, upon previous notice to the Landlordand in a manner and at times reasonably prescribed by Landlord, and the personsemployed by Tenant for such work are subject to Landlord’s reasonable priorapproval.  Landlord reserves the right toprescribe the weight and position of all safes, or other extra heavy equipmentor furniture or improvements so as to distribute the weight or to requirereinforcing at the cost of Tenant. Landlord reserves the right to inspect all safes, freight or other bulkyarticles to be brought into the Building and to exclude from the Building allsafes, freight or other bulky articles which violate any of these Rules andRegulations of this Lease, normal office equipment excluded.

36.14       Tenant shall not occupy or permit anyportion of the Premises to be occupied in a way that is not otherwise permittedby and consistent with Article 1.1.9, or is not generally consistent with thecharacter and nature of all other tenancies in the Building.

36.15       Tenant shall not purchase janitorial ormaintenance or other like service from any company or persons not approved byLandlord, except that Landlord’s approval shall not be required in connectionwith any maintenance or other like service that does not affect the structureor other major systems of the Building. Landlord shall approve a sufficient number of sources of such services toprovide Tenant with a reasonable selection, but only in such instances and tosuch extent, as Landlord in its judgment considers consistent with security andproper operation of the Building.

36.16       Landlord shall have the right to prohibitany advertising or business conducted by Tenant referring to the Buildingwhich, in Landlord’s opinion, tends to impair the reputation of the Building orits desirability as a first class office building, and upon notice fromLandlord, Tenant shall refrain from or cease such advertising.

36.17       Outside of Business Hours, Landlordreserves the right to exclude from the Building all persons who are nototherwise authorized by Tenant to enter the Premises.

36.18       Tenant’s interior designers andinstallers of Tenant’s decoration, furniture, carpentry, wall coverings, andwindow coverings, shall, while in the Building or elsewhere in the Project, besubject to and under the control and direction of the Building manager (but notas agent or servant of said manager or of Landlord).

36.19       If the Premises is or becomes infestedwith vermin as a result of the use or any misuse or neglect by Tenant, itsagents, servants, employees, contractors, visitors or licensees, then Landlordshall forthwith at Tenant’s expense cause the same to be exterminated bylicensed exterminators to the satisfaction of Landlord and, as necessary, fromtime to time thereafter.

36.20       Tenant shall make requests for servicesat and as instructed by the office of the Building.

36.21       Canvassing, soliciting and peddling inthe Building are prohibited and Tenant shall cooperate to prevent the same.

36.22       No air conditioning unit(s) shall beinstalled or used by Tenant without Landlord’s written consent.

36.23       No hand trucks or dollies, except thoseequipped with rubber tires and side guards, may be used in any space in theProject, either by Tenant or by jobbers or others. Tenant shall not permit itscustomers, clients or invitees to wait in the public corridors of theBuilding.  Tenant shall not permit itsemployees to loiter or smoke in the interior Common Areas.

36.24       Tenant, Tenant’s agents, servants,employees, contractors, licensees or visitors shall not park or stop anyvehicles in any driveways, service entrances, or areas posted as “No Parking”or “No Stopping.”

36.25       Landlord shall install and maintain forthe Premises, at Landlord’s sole cost and expense, such safety equipment as maybe mandated by applicable governmental authority.

36.26       Tenant shall not use the name of theBuilding for any purpose other than as the address of the Tenant’s business inthe Premises, nor shall Tenant use any picture of the Building in itsadvertising, stationery or in any other manner without the prior writtenpermission of Landlord.  Landlordexpressly reserves the right at any time to change name of the Building orProject without in any manner being liable to Tenant therefor.

 

37.           **Compliance with Laws. **Landlord shall pay the cost of anyrepairs, capital additions, replacements or take any other actions necessary tocause the Building to comply with governmental laws, statutes or regulationsthat are in effect, applicable to and enforced with respect to the Buildingand/or the Premises as of the Commencement Date, including but not limited toAmerican with Disabilities Act (“ADA”).

 

38.           **Good Faith.**  Without regard to any references to the terms“sole” or “absolute”, except for matters which could adversely affect theBuilding’s plumbing, HVAC or electrical systems, or its exterior appearance (inwhich case Landlord shall have the right to act in its sole and absolutediscretion, exercised in good faith), any time the consent of Landlord orTenant is 

 

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required, such consentshall not be unreasonably withheld or delayed. Whenever the Lease grants Landlord or Tenant the right to take action,exercise discretion, establish rules and regulations or make allocations orother determinations, Landlord and Tenant shall act reasonably and in goodfaith and take no action which might result in the frustration of thereasonable expectations of a sophisticated tenant or landlord concerning theLease.

 

IN WITNESS WHEREOF, the parties hereto have executedthis Lease as of                                            ,2003.
| **LANDLORD**                     | ** **            | **TENANT**                                      |
|----------------------------------|-----------------------|-------------------------------------------------|
| ** **                       | ** **            | ** **                                      |
| Century Park,                    | ** **            | Mercantile National Bank, N.A., a National Bank |
| a California limited partnership | ** **            |                                            |
| By:                              | Held Properties, Inc. |                                            |   |   |
| Its:                             | Director of Leasing   |                                            |   |   |
|                             |                  |                                            |   |   |
|                             |                  |                                            |   |   |
| By:                              |                  |                                            | By: |   |
|                             | Joel R. Delman        |                                            |   | Scott A. Montgomery |
| Its:                             | Management Company    |                                            | Its: | President and Chief Executive Officer |

 

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**LEASE ADDENDUM**

 

ThisAddendum is attached to and made a part of that certain office lease (this“Lease”) dated November 12, 2003 between Century Park, a California limitedpartnership, as Landlord (“Landlord”) and **MercantileNational Bank, N.A., a National Bank,** as Tenant (“Tenant”)relating to the premises (“Premises”) known as Suite **110** consisting of approximately **2,118** rentable square feet on the **1st** floor of the Building locatedat 1880 Century Park East, Los Angeles, California.  The provisions set forth below shallsupersede any inconsistent provisions set forth in the Lease.  Except as otherwise provided below,capitalized items used below shall have their respective meaning set forth inthe Lease.

 

39.           **Optionto Renew. **Provided thatTenant is not in default under this Lease and provided that the Lease has notbeen terminated as a result of Tenant’s default or other acts or failures toact by Tenant, Tenant shall have an option to renew the Lease for **two** additional five (5) year term**s** (**eachan** “Extended Term”). Tenant shall provide Landlord with at least six (6) months but not morethan twelve (12) months prior written notice indicating its intention toexercise such option to renew.  Therights contained in this Article **39**shall be personal to the originally named Tenant and may not be assigned nortransferred except with Landlord’s written consent.

                                39.1         Themonthly base rent during the Extended Term shall be an amount equal to thePrevailing Rate (as hereinafter defined) at the time of the commencement of theExtended Term for space leased within the previous six months that areComparable Transactions, as defined below. The term “Prevailing Rate” shall mean the monthly rent per rentablesquare foot that Landlord has accepted in contemporaneous transactions betweennonaffiliated parties for non-expansion, renewal and non-equity tenants ofcomparable creditworthiness, for comparable space, comparable use and comparablelease terms (collectively, “Comparable Transactions”) in the Building.  If there are no Comparable Transactions inthe Building, then the Prevailing Rate shall be prevailing fair market rentalvalue for Comparable Transactions in the Project area.  In any determination of ComparableTransactions, appropriate consideration shall be given to the rental rates,abatement provisions or other concessions, brokerage commissions, if any, thatactually have been paid by Landlord (or other landlords) in similartransactions, length of the lease term, size and location of the premises beingleased, building standard tenant improvement allowances, if any, and othergenerally applicable conditions of tenancy. The intent is that Tenant will obtain the same rent and other economicbenefits that Landlord would otherwise give in Comparable Transactions and thatLandlord will make and receive the same economic payments and concessions thatLandlord would otherwise make and receive in Comparable Transactions.

                                39.2         IfLandlord and Tenant are unable to agree on the Prevailing Rate, then Landlordand Tenant shall agree upon, and jointly appoint, one arbitrator who shall bean active real estate broker in the Project area over the most recent 5-yearperiod.  If the Landlord and Tenant failto agree upon and appoint an arbitrator, then the appointment of the arbitratorshall be made by the Presiding Judge of the Superior Court, or if he or sherefuses to act, by any judge having jurisdiction over the parties.  Within five (5) business days after saidappointment, Landlord and Tenant may submit to the arbitrator (with a copy tothe other party) any market data and additional information that such partydeems relevant to the determination of the Prevailing Rate and the other partymay submit a reply in writing within five (5) business days thereafter.  The determination of the arbitrator shall belimited solely to the issue of whether Landlord’s or Tenant’s submittedPrevailing Rate is the closest to the actual fair market rent for the Premises,taking into account the criteria of Comparable Transactions.  Neither Landlord nor Tenant may consult withsuch arbitrator as to his or her opinion of the fair market rent prior to theappointment or resolution of the issue regarding Prevailing Rate for thePremises.

                                39.3         Withinfifteen (15) days of being appointed, the arbitrator shall decide whether theparties shall use Landlord’s or Tenant’s submitted Prevailing Rate, and shallso notify Landlord and Tenant.  Thedecision of the arbitrator shall be binding upon the Landlord and Tenant.  The cost of the arbitration shall be paid bythe Landlord and Tenant equally.

                                39.4         Rentduring the Extended Term shall continue to be subject to adjustment based uponTenant’s pro-rata share of increases in Recurring Operating Costs except thatthe new base year shall be the calendar year in which the Extended Termcommences.

                                39.5         IfTenant fails to exercise in a timely manner the option to renew hereinprovided, said option to renew shall expire and have no further force andeffect.  Tenant’s exercise of said optionto renew shall not operate to cure any uncured default by Tenant under thisLease, nor to extinguish or impair any rights or remedies of Landlord arisingby virtue of such default.  If the Leaseor Tenant’s right to possession of the Premises terminates in any mannerwhatsoever before Tenant exercises the option to renew herein provided, suchoption to renew shall terminate; or if Tenant has assigned the Premises to anunaffiliated, independent third party, then immediately upon such assignment,the transferability of the option to renew shall be reasonably approved byLandlord, provided Tenant notifies Landlord in writing at the time of suchassignment of its desire to transfer the option provided hereunder.

40.           **TenantImprovements. **In the event Tenant does not use the entireallowance, Tenant shall have the right to use up to $15.00 per usable squarefoot as a rent credit amortized over the first sixty (60) months of the LeaseTerm.

 

41.           **FirstClass Financial Institute Use Provisions**.

 

41.1.1      During the Lease Term, Tenant shall not:(a) do or permit anything to be done in or about the Premises, the Building orthe Project that has been prohibited or may hereafter be enacted or promulgatedby governmental authorities to be prohibited, or in any way obstruct orinterfere with the rights of others;  (b)use or allow the Premises to be used for any improper, immoral or objectionablepurpose or do any act tending to injure the reputation of the Building or theProject; or (c) commit or allow to be committed any waste upon the Premises, orany nuisance or other act or thing that may disturb the quiet enjoyment of anyother occupant or tenant of the Project.

 

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41.1.2      In the event Landlord has approvedTenant’s remaining open for business after normal business hours, the, unlessotherwise provided herein, such approval shall be conditioned upon Tenantpaying, as Additional Rent, all additional costs incurred by Landlord as aresult thereof.

 

41.1.3      Tenant shall, at Tenant’s cost andexpense, keep the Premises orderly, neat, safe, clean and free from rubbish anddirt, shall provide, at its cost and expense, for janitorial services infurtherance thereof, and shall store all trash, garbage and other solid wastewithin the Premises in such areas as Landlord may designate for such storage.

 

                41.1.4      Tenant shall, at its own cost and expense, provide its ownsecurity system, including separate keys for the Premises.  Tenant shall provide Landlord with copies ofthe main keys for use in event of emergency only.

 

                41.1.5      Tenant shall, at its own cost and expense, provide for itsplate glass windows to be washed and cleaned on a regular basis.

 

42.           **Option to Terminate.**

 

                42.1         **Optionto Terminate (Ground Floor).** **Landlord will use its best effortsto reach and execute, by April 1, 2004, an agreement with Krueger International(the “Ground Floor Tenant”) an agreement to amend the Ground Floor Tenant’slease to reduce its space, which reduced space will become the subject of alease (the “Ground Floor Lease”) between Tenant and Landlord.  If Landlord and Ground Floor Tenant fail toexecute by April 1, 2004, such amendment of the Ground Floor Tenant’s Lease, orif Landlord fails to deliver the Ground Floor Premises by October 1, 2004,Tenant shall have the right to terminate this Lease by written notice.  If Tenant terminates this Lease pursuant tothis Article 42.1, this Lease shall become null and void.  Furthermore, Landlord and Tenant have enteredinto that certain Lease of even date herewith under which Tenant is to leaseSuite 800 in the Building (the “Suite 800 Lease”).  Pursuant to Paragraph 42.2 of the Suite 800Lease, Tenant may terminate the Suite 800 Lease if Landlord or Landlord’scontractor is unable to deliver Suite 800 to Tenant in accordance with theterms of the Suite 800 Lease.  If Tenantterminates the Suite 800 Lease, this Lease will terminate on the same day asthe Suite 800 Lease, and as of such date, this Lease shall become null andvoid, and Tenant shall have no further obligation or liability hereunder.**

 

42.2         **Optionto Terminate (Fifth Year Anniversary).**  At any time prior to the date nine monthsprior to the fifth (5th) anniversary date of the Commencement Date, Tenant shall have the option, with written noticeto Landlord, to terminate the Lease.  ThePremises subject to the termination notice shall be referred to as the“Canceled Premises.”  The terminationshall be effective as of the day before the fifth (5th) anniversarydate of the Commencement Date.  Tenant’sdelivery of the Termination Notice to Landlord shall be accompanied by anamount equal to the Lease Termination Fee, which will be equal to theunamortized Tenant Improvement Allowance and leasing commissions plus three (3)months Base Rent, **which amount shall beSixty-One Thousand One Hundred Fifty-Seven Dollars ($61,157.00)**

 

43.           **Signage.**

 

43.1         **Tenant’sMonument Sign.**Tenant shallhave the non-exclusive right to have its name (including its logo) displayed,at Landlord’s sole cost and expense, on a monument sign located in the front ofthe Building (the “Monument Sign”).   **Such signage shall be no smaller than any othertenant’s sign.**  **Until the Monument Sign has been installed, Tenantshall have the right at Tenant’s cost and expense to have a temporary sign tobe installed at a mutually agreed location that is visible by a passing vehiclefrom Century Park East.**

 

43.2         **Requirements****.**  Tenant’s right to maintain its name on theMonument Sign shall be subject to the following requirements:

 

a.                                       All expenses inconnection with the construction, installation and maintenance of Tenant’s signshall be paid by Landlord.

 

b.                                      The design,size, location, materials, colors and lighting of the Monument Sign shall bedetermined by Tenant and Landlord.

 

c.                                       Landlord shallhave the right to relocate, redesign or reconstruct the Monument Sign from timeto time **so longas the Monument Sign is visible by a passing vehicle, as described insub-section (e).**

 

d.                                       The cost ofgraphics related to Tenant’s portion of sign will be part of the TenantImprovement Allowance.

 

e.             **The Monument Sign shall be visible by a passingvehicle on Century Park East.**

 

Tenantshall also have the right to install tasteful signage, similar to that used byother banks in the geographic area, regarding its services in its windowsfacing the lobby and exterior of the building.

 

44.           **Non-Disturbance. **Landlordshall use its best efforts to secure as soon as commercially possible a commerciallyreasonable Non-Disturbance Agreement from the Lender, the form of which shallbe provided to Tenant prior to lease execution.

 

45.           **Proposition13.**  **[See Article 48.1]**

 

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46.           **Parking.**  Tenant shall have the right, during the LeaseTerm or any extension thereof, to lease two and one-half (2.5) parking spacesper every 1,000 rentable square foot leased, at the then current prevailingrates.  However, the parking rates shallnot be increased during the first twelve (12) months of the Lease Term.  Tenant shall be entitled to lease twenty-fivepercent (25%) of such parking spaces as “VIP Call-Down” spaces.  Tenant shall receive a twenty percent (20%)discount on parking validation sticker books purchased in quantities of FiveThousand Dollars ($5,000.00) or more.

47.           **Option to Negotiate forAdditional Space.**      Subject to the rights of existing tenantsthat have been granted as of the date hereof, Tenant shall have an optionduring the Lease Term to negotiate for additional space (“ONAS”) **on the ground floor** (“ONAS Space”) bygiving Landlord written notice of Tenant’s desire for additional space.  Provided that Tenant is not in default underthe Lease, and subject to availability of **groundfloor space**, Landlord shall offer ONAS Space to Tenant (subjectto Tenant’s right of renewal set forth in this Lease) at a prevailing rent andbase year determined in the same manner as during the Extended Term as setforth in Article **39**;provided, however, that if Tenant exercises its option in the first year of theLease Term, the terms and conditions for the ONAS Space shall be the same asthose contained in this Lease.  Tenantshall have a period of ten (10) business days in which to either accept orreject Landlord’s offer.  If Tenant doesnot timely accept the ONAS Space specified in Landlord’s notice, Landlord maylease the ONAS Space to any third party. If Tenant exercises the ONAS, Landlord and Tenant promptly shall executeand deliver an amendment to this Lease reflecting the terms of the ONAS Space.This ONAS shall be personal to Tenant or any entity described in Article 10 andmay not be assigned nor otherwise transferred to any assignee or sub-tenantwithout Landlord’s consent.

 

48.           **Exclusions from Tax Costs.**  Notwithstanding anything in this Lease to thecontrary, the following items shall be excluded from the definition of TaxCosts.

                                48.1         Anyincreases in Tax Costs resulting from a reassessment due to a sale or change ofownership in the Project occurring during the **Initial** Lease Term, except for change in ownershipresulting from a non-voluntary foreclosure sale, deed in lieu of foreclosure orsimilar transfer of interest.

                                48.2         TaxCosts for the Base Year and any subsequent year shall be calculated withouttaking into account any decreases in real estate taxes that may be obtained inconnection with Revenue and Taxation Code Section 51 (“Proposition 8”).

                                48.3         Anyexcess profits taxes, franchise taxes, gift taxes, capital stock taxes,inheritance and succession taxes, estate taxes, federal and state income taxesand other taxes to the extent applicable to Landlord’s general or net income(as opposed to rents or receipts);

                                48.4         AnyTax Costs based on taxes on tenant improvements in any space in the Buildingbased upon an assessed level in excess of Building standard improvements, tothe extent that the related taxes are separately designated on the tax bill;

                                48.5         AnyTax Costs based on penalties incurred as a result of Landlord’s negligence,inability or unwillingness to pay, and/or to file any tax or informationalreturns with respect to, any real property taxes when due, and any additionalcosts arising as a result of Landlord’s failure to pay taxes in the maximumnumber of installments;

                                48.6         Any Tax Costs based on increase of, orreassessment in, real property taxes and assessments resulting from majoralterations, improvements, modifications or renovations to the Project, to theextent that the related taxes are separately designated on the tax bill;

                                48.7         Anycosts or expenses incurred by Landlord for personal property taxes, leaseholdtaxes in lieu thereof, or taxes or assessments levied in lieu thereof, or inaddition thereto;

                                48.8         Anyother taxes or assessments charged or levied against Landlord that are notdirectly incurred as a result of the operation of the Building.

49.           **Exclusions from OperatingCosts.  **Notwithstandinganything in this Lease to the contrary, the following items shall be excludedfrom the definition of Operating Costs:

                                49.1.        Costsincurred for repairs or other work to the Project occasioned by fire, windstormor other insurable casualty or by the exercise of eminent domain or anyexpenditures for which Landlord is reimbursed.

                                49.2         Marketingcosts, advertising costs, promotional expenses, leasing commissions, attorneys’fees, space planning costs, and other costs and expenses incurred in connectionwith any lease, sublease and/or assignment negotiations and transactions withcurrent or prospective tenants or other occupants of the Building.

                                49.3         Costsincurred for renovating or otherwise improving or decorating, painting orredecorating space for other tenants or occupants of the Building.

                                49.4         Thecost incurred for special services or utilities separately chargeable to othertenants.

                                49.5         Depreciationand amortization except as provided above.

                                49.6         Expensesincurred for services or other benefits that are not offered to Tenant butwhich are provided to another tenant or occupant of the Building.

                                49.7         Legalfees and related costs, together with any damages awarded by a court of law orarbitration panel to Tenant or any other tenants, or any repair and maintenancecosts incurred by Landlord due to the violation by Landlord or any tenant ofthe terms and conditions of any lease in the Building.

                                49.8         Overheadand profit increment paid to subsidiaries or affiliates of Landlord forservices on or to the Project, to the extent that the costs of such servicesexceed competitive costs of such services for similar buildings in the Projectarea.

 

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                                49.9         Intereston debt or amortization payments on any mortgage or mortgages, and rental underany ground or underlying lease or leases, or other financing costs, includingpoints, commitment fees, or legal costs related thereto.

                                49.10       Landlord’sin-house accounting or legal costs, general overhead and executive salaries,except for salaries of project manager, project engineer or other employees tothe extent directly related to the operation and management of the Project.

                                49.11       Anycompensation paid to clerks, attendants or other persons in commercialconcessions operated by Landlord.

                                49.12       Allitems and services for which Tenant reimburses Landlord or pays directly tothird parties.

                                49.13       Any costs, fines or penalties incurreddue to violations by Landlord of any governmental rule or authority, or due toLandlord’s negligence, recklessness or willful misconduct.

                                49.14       Costsincurred for sculpture, paintings or other objects of art.

                                49.15       Rentalsand other related expenses incurred in leasing air-conditioning systems,elevators or other equipment ordinarily considered of a capital nature, exceptequipment which is used in providing janitorial services and which is notaffixed to the Building.

                                49.16       Costsincurred in the testing, encapsulation or other treatment or removal ofasbestos, Hazardous Materials as defined herein, or other substances considereddetrimental to the health or the environment of occupants of the Building including,without limitation, the cost and expense incurred by or on behalf of Landlordin removing and disposing any cooling or chilling system and the chemicals usedin the HVAC system from either (1) the Building or (2) another tenant’spremises within the Building, **or (3)Tenant’s Premises**.

                                49.17       Thevalue of any lost income to Landlord of any office space in the Project that isutilized for the management of the Building.

                                49.18       Costsincurred by Landlord to remedy any defects in the design, installation,construction, or materials used in any part of the Project.

                                49.19       Costsincurred by Landlord in compliance with the Americans with Disabilities Act(the “ADA”) or statutes, laws regulations or other legislation of similarimport.

                                49.20       Costsof Landlord’s charitable or political contributions.

                                49.21       Insurancepremiums to the extent any tenant causes Landlord’s existing insurance premiumsto increase or requires Landlord to purchase additional insurance, to theextent that any related premiums are separately designated on the insurancebill.

                                49.22       Increasesin reserves not presently being maintained for future expenses.

                                49.23       Costsassociated with the ownership of the Project or Landlord or Landlord’s propertymanager, as distinguished from the cost of Building operations, including thecosts of partnership or corporate accounting (other than partnership taxpreparation) and legal matters, selling or syndicating any of Landlord’sinterest in the Project; and disputes between Landlord and Landlord’s propertymanager.

                                49.24       Maintenanceto or replacement of any utility, mechanical or other system solely dedicatedto the single use of any other tenant.

                                49.25       Costsrelating to any areas leased on a triple net basis.

                                49.26       Premiumsfor earthquake or flood insurance, unless included in recalculating theOperating Costs for the Base Year, or other costs relating to expansion inscope of services or addition of new services not included in the Base Year.

**                                49.27      Costs of items considered capital repairs,replacements, improvements and equipment under generally accepted accountingprinciples consistently applied or otherwise (“Capital Items”) except for (i)the annual amortization (amortized as provided in Article 4.4) of costs,including financing costs, if any, incurred by Landlord after the CommencementDate for any capital improvements installed or paid for by Landlord andrequired by any new (or change in) laws, rules or regulations of anygovernmental or quasi-governmental authority which are enacted after theCommencement Date; (ii)  the annualamortization (amortized as provided in Article 4.4) of costs, includingfinancing costs, if any, of any equipment, device or capital improvementpurchased or incurred as a labor-saving measure or to affect other economics inthe operation or maintenance of the Building (provided the annual amortizedcosts does not exceed the actual cost savings realized and such savings do notredound primarily to the benefit of any particular tenant.**

                50.           Tenant acknowledges that Landlord has advised Tenant thatthe Building contains or, because of its age, is likely to containasbestos-containing materials (“ACMs”). If Tenant undertakes any alterations, additions, or improvements to thePremises, as permitted by Article 7, Tenant shall, in addition to complyingwith the requirements of Article 7, undertake the alterations, additions, orimprovements in a manner that avoids disturbing ACMs in the Building.  If ACMs are likely to be disturbed in thecourse of such work, Tenant shall notify Landlord, and Landlord shall, at itssole cost, encapsulate or remove the ACMs in accordance with an approvedasbestos-removal plan and otherwise in accordance with all applicableEnvironmental Laws, including giving all notices required by Health and SafetyCode sections 2591-25919.7.

 

51.           **Landlordhas removed or has caused to be removed all accessible, friable ACMs in thePremises.**  Landlord shalluse its best efforts to comply with all Applicable Environmental Laws in thePremises, and throughout the Project during the Lease Term. Landlord shall, atLandlord’s sole expense and with counsel reasonably acceptable to Tenant,indemnify, defend and hold harmless Tenant and Tenant’s shareholders,directors, officers, employees, partners, affiliates and agents (“TenantIndemnitees”) with respect to all losses arising out of or resulting from therelease of any Hazardous Material in or about the Premises or the Project, orthe violation of any Applicable Environmental Laws, existing prior to the 

 

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Commencement Date or brought onto the Premisesor Project by Landlord, or Landlord’s agents, employees, contractors orinvitees (other than Tenant and Tenant Indemnitees).  This indemnification includes all losses,liabilities, obligations, penalties, fines, claims, actions (including remedialor enforcement actions of any kind and administrative or judicial proceedings,orders or judgments), damages (including consequential damages and punitivedamages), and costs (including attorneys, consultants or experts fees andexpenses) resulting from the release or violation. This indemnification shallsurvive the expiration or sooner termination of the Lease.

 

**                52.          Profits (Article 10.6).**         **For the purposes of Article 10.6, “Profits” shall meanthe gross revenue received from the assignee or sublessee during the assignmentor the sublease term with respect to the space covered by the assignment orsublease (“Transferred Space”) less: (i) the gross revenue paid to Landlord byTenant during the period of the assignment or sublease term with respect to theTransferred Space; (b) any improvement allowance or other economic concession(planning allowance, moving expenses, etc.) paid by Tenant to sublessee orassignee; (c) brokers’ commissions; (d) attorneys’ fees; (e) costs ofadvertising the space for sublease or assignment; (f) unamortized cost ofinitial and subsequent improvements to the Premises by Tenant; and (g) anyother costs actually paid in assigning or subletting the Transferred Space orin negotiating or effectuating the assignment or sublease. \**

 

                53.  **Night Depository and ATM. **Landlord grants to Tenant theexclusive right to install and maintain an automated teller machine (“ATM”) atthe Building during the term of this Lease and any extensions hereof.  The ATM shall be located in a mutually agreedto location on the exterior of the Building adjacent to the Premises such thatdeposits will go directly into the Tenant’s safe in the interior of thePremises.  Tenant shall also have theright to install a night depository window into its Premises.  Tenant shall pay the cost of the installationand maintenance of the ATM and night depository, including installation of anyrequired lighting; provided, however, that Tenant may use a portion of theTenant Improvement Allowance for such purposes. Tenant shall comply with all regulations and laws related to theinstallation, maintenance, and use of the ATM and night depository.

 

 

IN WITNESS WHEREOF, theparties hereto have executed this Lease as of                                          ,2003.

 
| **LANDLORD**                     | ** **            | **TENANT**                                      |
|----------------------------------|-----------------------|-------------------------------------------------|
| ** **                       | ** **            | ** **                                      |
| Century Park,                    | ** **            | Mercantile National Bank, N.A., a National Bank |
| a California limited partnership | ** **            |                                            |
| By:                              | Held Properties, Inc. |                                            |   |   |
| Its:                             | Management Company    |                                            |   |   |
|                             |                  |                                            |   |   |
|                             |                  |                                            |   |   |
| By:                              |                  |                                            | By: |   |
|                             | Joel R. Delman        |                                            |   | Scott A. Montgomery |
| Its:                             | Director of Leasing   |                                            | Its: | President and Chief Executive Officer |

 

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