Exhibit
10.29


SIXTH AMENDMENT TO OFFICE LEASE


 


                THIS SIXTH AMENDMENT TO OFFICE
BUILDING LEASE (“Sixth Amendment”) is made and entered into as of January 1,
2004, by and between DL FNBC, L.P., a Delaware limited Partnership (“Landlord”),
and FIRST NATIONAL BANK, a national banking association (“Tenant”), with
reference to the following facts:


 


                A. Columbia Centre Associates (the “Original Landlord”) and Tenant’s predecessor in interest, First National Corporation, a
bank holding company, entered into that certain Office Building Lease dated May 14, 1984, as
amended by that certain Lease Modification Agreement dated as of July 30,1993, as amended by that certain
Second Amendment to Lease dated as of February 14, 1995, as amended by that certain Third
Amendment to Office Lease dated as of February 2, 1998, as amended by that certain Fourth
Amendment to Office Lease dated as of January 11,1998, and as amended by that certain Fifth
Amendment to Office Lease dated as of September 1, 2003 (collectively, the “Lease”).


 


                B. Landlord and Tenant desire to
amend the Lease as set forth below. Unless otherwise indicated in this Sixth Amendment, all terms
with initial capital letters used herein and not otherwise defined shall have the same definitions
as the defined terms in the Lease. 


 


                THEREFORE, for good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant hereby
agree to amend the above Lease as follows:


 


                1. Reduction in Premises.
Prior to December 31, 2003, the Premises consisted of approximately 45,863 rentable square feet
on the first three floors of Building. Effective as of January 1, 2004, Tenant vacated Suites 270 and 300 of the Building which comprise approximately 14,499 rentable square feet. Therefore,
effective January 1, 2004, Section 1.4 of the Lease shall be deleted in its entirety and
replaced with the following: “The Premises shall mean Suites 100 and 200 of the Building consisting of
approximately 30,977 rentable square feet as depicted on attached Exhibit “A”.” Exhibit
“A” to the Lease is hereby deleted in its entirety and replaced with the attached Exhibit
“A” to this Sixth Amendment, and all references in the Lease to Exhibit “A” are hereby
amended to mean Exhibit “A” to this Sixth Amendment.


 


                2. Rentable Area. Section
1.5 of the Lease shall be deleted in its entirety and replaced with the
following: “30,977 square feet”.


 


                3. Building Expense Percentage. Section 1.6 of the Lease shall be
deleted in its entirety and replaced with the following: “Tenant’s Percentage
is 5.66%”.


 


                4. Reduced Premises
Commencement Date and Expiration Date.


 


                                a.               Commencement Date. The commencement date for the term of the Premises
(as reduced pursuant to this Sixth Amendment) shall be January 1, 2004.


 


                                b.               Expiration Date. Section 1.10 of the Lease shall be deleted in
its entirety and replaced with the following: “December 31, 2018”.


 


 


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                                c.               Term. The Term of the Lease
for the Premises (as reduced by this Sixth Amendment) shall begin on January 1,
2004 and end on the Expiration Date (December 31, 2018).


 


                5.               Monthly Base Rent. Sections 1.7, 1.8, 3.1, and 3.2 shall be deleted in
their entirety and replaced with the following as Section 3.1:


 


                “The monthly base rent (“Base Rent”) for Premises shall be as follows:


 


	
  1/1/04 - 12/31/04

  	
   

  	
  $74,344.80
  ($2.40/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/05 - 12/31/05

  	
   

  	
  $76,513.19
  ($2.47/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/06 - 12/31/06

  	
   

  	
  $78,991.35
  ($2.55/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/07 - 12/31/07

  	
   

  	
  $81,159.74
  ($2.62/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/08 - 12/31/08

  	
   

  	
  $83,637.90
  ($2.70/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/09 - 12/31/09

  	
   

  	
  $86,116.06
  ($2.78/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/10 - 12/31/10

  	
   

  	
  $88,594.22
  ($2.86/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  l/l/l 1 - 12/31/11

  	
   

  	
  $91,382.15
  ($2.95/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/12 - 12/31/12

  	
   

  	
  $94,170.08
  ($3.04/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/13 - 12/31/13

  	
   

  	
  $96,958.01
  ($3.13/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/14 - 12/31/14

  	
   

  	
  $99,745.94
  ($3.22/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/15 - 12/31/15

  	
   

  	
  $102,843.64
  ($3.32/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/16 - 12/31/16

  	
   

  	
  $105,941.34
  ($3.42/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/17 - 12/31/17

  	
   

  	
  $109,039.04
  ($3.52/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1/1/18 - 12/31/18

  	
   

  	
  $112,446.51
  ($3.63/Rentable Square Foot);

  	
   

  
	
   

  	
   

  	
   

  	
   

  



                The Base Rent shall be payable
in lawful money of the United States in advance, without notice, demand, deduction or offset,
commencing on January 1, 2004 and continuing on the first day of each calendar month thereafter.”


 


                6.             Right of First Refusal. Section 2.4 of the Lease
is hereby deleted in its entirety and Tenant shall have no right of first refusal
concerning the leasing of any additional space in the Building notwithstanding any contrary provisions
in any of the amendments to the Lease.


 


2





















 


                7.             Option To Extend. Section 2.5 of the Lease
shall be deleted in its entirety and replaced with the following:


 


                “Tenant shall have two (2) five (5) year options (each, an “Option”, and
collectively, the “Options”) to extend the Term of this Lease (each, an “Extension”) on the same
terms and conditions as
set forth in this Lease, except the Base Rent shall be adjusted on the first day of each Extension to the “Fair Market Rent” as reasonably determined by Landlord. In
determining the Fair Market Rent Landlord shall consider all relevant factors
including without limitation the then fair market rental, together with tenant
improvement allowances, free rent and other tenant inducements then being
offered to tenants for space of comparable size, quality, condition, and
location in comparable Class A office buildings in downtown San Diego. Each Option
shall be exercised only by written unconditional notice (each, an “Option Notice”) received by Lessor no
sooner than twelve (12) months nor later than nine (9) months before expiration
of the then applicable Term. If Landlord does not timely receive Tenant's Option
Notice of the exercise of an Option in accordance with the preceding sentence,
the Option, and, as applicable, the remaining Option, shall immediately lapse,
and there shall be no further right to extend the then applicable Term. The
Options shall be exercisable by Tenant on the express condition for Landlord's
benefit that Tenant shall not be in breach of default beyond applicable notice
and grace periods at the time of the exercise of the Option or at the
commencement of the applicable Extension. The Options are personal to Tenant,
and, in the event of any transfer of Tenant's interest in this lease or the
Premises (other than subleases for less than one half of the Premises in
accordance with the terms of the Lease) before the permitted exercise of an
Option, the Option shall not be transferred to the transferee but shall instead
automatically lapse. Additionally, the Options may only be exercised for the
entire Premises.


 


                Within sixty (60) days after receipt of Tenant’s Option Notice, Landlord shall advise Tenant of the Fair
Market Rent for the Premises for the Extension term (“Fair Rental Notice”). Tenant, within thirty (30)
days after receipt of the Fair Rental Notice, shall either (i) give Landlord
final binding written notice (“Binding Notice”)
of Tenant's exercise of its Option based on the Fair Market Rent for the
Premises set forth in the Fair Rental Notice, or (ii) if Tenant disagrees with
Landlord's determination, provide Landlord with written notice of rejection
(the “Rejection Notice”). If Tenant timely provides landlord with a
Binding Notice, Landlord and Tenant shall enter into an amendment reflecting
the Fair Market Rent for the Premises as set forth in the Fair Rental Notice.
If Tenant fails to provide Landlord with either a Binding Notice or Rejection
Notice within such 30-day period, or if Tenant timely provides Landlord with a Rejection
Notice, Landlord and Tenant shall work together reasonably to agree upon the
Fair Market Rent for the Premises that shall be paid during the Extension term.
When Landlord and Tenant have agreed upon the Fair Market Rent for the Premises,
such agreement shall be reflected in a written agreement between Landlord and
Tenant and Landlord and Tenant shall enter into an amendment reflecting the
agreed Fair Market Rent for the Premises. If Landlord and Tenant are unable to
agree upon the Fair Market Rent for the Premises within thirty (30) days after
the date Landlord receives the Rejection Notice, Landlord and Tenant shall
attempt to agree in good faith upon a single appraiser to determine the Fair
Market Rent for the Premises for a time period not to exceed five (5) days from
expiration of such 30-day period. If Landlord and Tenant are unable to agree
upon a single appraiser within this five (5) day time period, then Landlord and
Tenant shall each appoint one (1) appraiser not later than fifteen (15) days
after such 5-day timed period. Within ten (10) days thereafter, the two
appointed appraisers shall appoint a third appraiser. If either


 


3





















 


Landlord or Tenant fails to appoint its
appraiser within the prescribed time period, the single appraiser appointed
shall determine the Fair Market Rent of the Premises. If both parties fail to
appoint appraisers within the prescribed time periods, the first appraiser
thereafter selected by a party shall determine the Fair Market Rent of the
Premises. Each party shall bear the cost of its own appraiser, and the parties
shall share equally the cost of a single or a third appraiser, if applicable.
Each appraiser shall have at least five (5) years experience in the appraisal
of Class A office buildings in downtown San Diego, California and shall be
a member of one or more professional organizations such as MAI or an
equivalent. If a single appraiser is chosen, then such appraisal shall
determine the Fair Market Rent of the Premises. Otherwise, the Fair Market Rent
of the Premises shall be the arithmetic average of the two of the three
appraisals which are closest in amount, and the third appraisal shall be
disregarded. Landlord and Tenant shall instruct the appraiser(s) to complete
their determination of the Fair Market Rent of the Premises not later than
thirty (60) days before the commencement date for the Extension term; provided,
however, if the Fair Market Rent of the Premises is not determined before the
commencement date for the Extension term, then Tenant shall continue to pay to
Landlord the monthly rent in effect immediately prior to such Extension (the “Temporary Rent”), until the Fair Market Rent of the
Premises is determined. When the Fair Market Rent of the Premises is
determined, Landlord shall deliver notice of that amount to Tenant, and, if the
Fair Market Rent is higher than the Temporary Rent, Tenant shall pay to
Landlord, within ten (10) days after receipt of such notice, the difference
between the Temporary Rent actually paid by Tenant to Landlord and the new
monthly rent determined under this Section 2.5. Conversely, if the Fair
Market Rent is lower than the Temporary Rent, Landlord shall apply the
difference between the Temporary Rent actually paid by Tenant and the new
monthly rent determined under this Section 2.5 as a rental credit toward
Tenant’s next Base Rent due. Notwithstanding the above, Fair Market Rent, as
determined by the single appraiser or the appraisers, shall consider all relevant
factors including, without limitation, the then fair market rental, together
with tenant improvement allowances, free rent and other tenant inducements then
being offered to tenants for space of comparable size, quality, condition, and
location in comparable Class A office buildings in downtown San Diego,
California.”


 


If Tenant timely exercises
the Option, “Term” shall mean, for all purposes under the Lease, the sum of
(a) the Term, as defined under Section 4c. of the Sixth Amendment to
Office Lease, plus (b) the term of the Extension for which the Option has
been exercised.”


 


8.             Building Expense Adjustments  Section 3.3(a)
of the Lease is hereby deleted in its entirety and replaced with the following:


 


“Commencing January 1,
2004, Tenant shall pay Tenant’s Percentage of Building Expenses in excess of
the Building Expenses for calendar base year 2004 (the “Base Year”).
The Base Year Building Expenses shall be calculated to reflect an assumption
that the Building and its assessor’s parcel is fully assessed for real property
tax purposes, and, that the Building is occupied at the greater of
(i) ninety-five percent (95%), or (ii) the actual occupancy of the
Building. During calendar year 2005, Tenant shall not be responsible for paying
Tenant’s Percentage of increases in Controllable Building Expenses (as defined
below) that exceed six percent (6%) of Base Year Controllable Building
Expenses. Commencing calendar year 2006, Tenant’s obligation to pay Tenant’s
Percentage of increases in Controllable Building Expenses


 


 


4





















 


shall not increase
by more than six percent (6%) over its share of the prior year’s Controllable Building Expenses. As used herein, the
term “Controllable Building Expenses” shall
mean that portion of Building
Expenses not consisting of costs of insurance premiums (as defined in Section 3.3(d) of the Lease), Real
Property Taxes and Assessments (as defined in Section 9 of this Sixth Amendment, below) and
utilities.”


 


                9. Building Expenses. In Section 3.3(c) of the Lease, Real
Property Taxes and Assessments shall be added to the definition of Building Expenses. “Real Property Taxes and Assessments” shall mean any form of assessment,
license fee, license tax, business license fee, commercial rental tax, levy, charge, improvement bond,
tax, water and sewer rents and charges, utilities and communications taxes and charges or
similar or dissimilar imposition imposed by any authority having the direct power to tax,
including any city, county, state or federal government, or any school, agricultural, lighting,
drainage or other improvement or special assessment district thereof, or any other governmental
charge, general and special, ordinary and extraordinary, foreseen and unforeseen, which may be
assessed against any legal or equitable interest of Landlord in the Premises and the Building.


 


                10. Condition of the Premises. Tenant hereby acknowledges that (i)
Tenant is currently
occupying the Premises pursuant to the terms of the Lease, and therefore Tenant accepts the Premises in their presently
existing, “as-is” condition, and (ii) neither Landlord nor any agent of Landlord has made any
representation or warranty regarding the condition of the Premises or the suitability of the
Premises for the conduct of Tenant’s business.


 


                11. Financial Statements.
Tenant shall deliver to Landlord a complete and accurate set of its published financial statements
(as contained in its 10-K report) for the calendar/fiscal year 2002 concurrently with Tenant’s
delivery to Landlord of an execution original of this Sixth Amendment. Tenant shall also provide
Landlord with a 2003 version of the 10-K report, in a reasonable time-frame following the
compilation of such report.


 


                12. Parking. Section
1.12 of the Lease shall be deleted in its entirety and replaced with the following: “Thirty-one (31)
spaces, of which six (6) shall be reserved spaces for use by Tenant’s customers as shown on the
parking diagram attached hereto as Exhibit A”. The first paragraph of Section 16.2 shall be
deleted in its entirety and replaced with the following:


 


                “Effective January 1, 2004, the
rental rate for each parking space shall be One Hundred Sixty and 00/100 Dollars ($160.00) per
month, subject to increase pursuant to Exhibit “D” to the Lease. Additionally, Tenant shall be
entitled to Tenant’s pro-rata share of visitor and handicapped parking, as may be required by applicable law.”


 


                13. Commission.
Landlord agrees that it is responsible for the payment of a brokerage commission to Newmark of
Southern California, Inc. (“Broker”),
pursuant to a separate agreement between Landlord and Broker. Landlord shall have no
other obligations or liabilities whatsoever with regard to payment of any commission or fees
to any parties in connection with this Sixth Amendment or the Lease to the extent such
parties claim a right to a commission or fees through their dealings with Tenant.
Payment of the commission is expressly conditioned upon execution by both Landlord and Tenant
of this Sixth Amendment. Tenant represents that it has had no dealings with any other
brokers in regards to this Sixth Amendment


 


5





















or the Lease other
than Broker. Other than the commission payable to Broker, Landlord and Tenant each represent and warrant to the
other that no broker or finder is entitled to any further commission or finder’s fee resulting from
any action on its part. Each party agrees to indemnify, defend, protect and hold the other
harmless against any claim, loss, damage, cost or liability for any broker’s commission or finder’s fee
asserted as a result of its own act or omission in connection with this transaction. Notwithstanding the
foregoing, under no circumstances shall Broker or any other broker, finder or third party be
deemed to be a third party beneficiary under this Sixth Amendment or the Lease.


 


                14.           Tenant Improvements. Tenant shall have the right, at Tenant’s sole cost
and expense
(except as provided in Section 3.2 of the Work Letter Agreement attached hereto
as Exhibit “B”), to construct Tenant Improvements (as
defined Section 1 of Work Letter Agreement) in accordance with the terms and conditions
set forth in the Work Letter Agreement.


 


                15.           No Other Amendments. The Lease referred to hereinabove and this Sixth Amendment constitute the entire agreement
by and between Landlord and Tenant and supercede any other agreement or representation, written or
oral, that either party may hereinafter assert or allege exist, and the Lease, as hereby modified,
remains in full force, except as amended by this Sixth Amendment, and is hereby ratified and
reaffirmed.


 


                16.           Conflicts. If any conflict between this Sixth Amendment and the
Lease should arise, the terms of this Sixth Amendment shall control.


 


                17.           Successor and Assigns. This Sixth Amendment shall be binding upon and inure to the benefit of the successors and
assigns of the respective parties hereto.


 


                18.           Exhibits. The exhibits attached hereto are incorporated herein
by reference.


 


                19.           Countemarts. This Sixth Amendment may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which shall
together constitute a single instrument.


 


[SIGNATURES ON
FOLLOWING PAGE]


 


6





















 


                The parties have executed this
Sixth Amendment as of the date
first written above.


 


	
  LANDLORD:

  	
  TENANT:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DL FNBC, L.P., a
  Delaware limited partnership

  	
  FIRST NATIONAL
  BANK, a national banking association

  
	
   

  	
   

  	
   

  	
   

  
	
  By: G&I IV
  Investment FNBC Corp., a

  	
   

  	
   

  	
   

  
	
  Delaware
  corporation, Its General

  	
   

  	
   

  	
   

  
	
  Partner

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By :

  	
  /s/ Francis X.
  Tansey

  	
   

  	
  By:

  	
  /s/ Robert M.
  Borgman

  
	
  Name

  	
  FRANCIS X. TANSEY

  	
   

  	
  Name:

  	
  ROBERT M.
  BORGMAN

  
	
  Title:

  	
  PRESIDENT

  	
   

  	
  Title:

  	
  PRESIDENT, FNB.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Victor R.
  Santoro

  
	
   

  	
  Name:

  	
  VICTOR R.
  SANTORO

  
	
   

  	
  Title:

  	
  EVP, CFO FCB

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [Signature of
  two authorized officers of Tenant

  
	
   

  	
  is required.]

  	
   

  	
   

  
							



 


 


7





















 


EXHIBIT
“A”


 


DEPICTION
OF PREMISES


 


 


 


	
  

  	
   

  	
  

  
	
  FIRST
  NATIONAL BANK CENTER

  FIRST FLOOR

  	
   

  	
  FIRST
  NATIONAL BANK CENTER

  SECOND FLOOR

  



 


 


	
  [ILLEGIBLE]

  
	
  INITIAL

  
	
   

  
	
  [ILLEGIBLE]

  
	
  INITIAL

  



 


 


EXHIBIT
“A”


 


 


 





















 


EXHIBIT “B”


 


WORK LETTER AGREEMENT


 


In connection with
the Sixth Amendment to which this Work Letter Agreement is attached (the “Sixth Amendment”),
and in consideration of the mutual covenants hereinafter contained, Landlord and Tenant agree as follows
(unless otherwise indicated in this Work Letter Agreement, defined terms used herein have the same
definitions as the defined terms used in the Sixth Amendment or the Lease):


 


                1.             TENANT IMPROVEMENTS.
The tenant improvements (the “Tenant Improvements”) for the Premises, which may be
constructed by Tenant at Tenant’s sole cost and expense (except as provided in Paragraph 3.2,
below with respect to the Tenant Improvement Allowance), include all improvements and
fixtures to be constructed in and for the Premises pursuant to the approved Construction
Documents (as defined in Paragraph 2.1, below), including without limitation, all carpet, wall
coverings, millwork, doors, counters and partitions; all demising walls; built-in secretarial
desks, work stations, and credenzas; conference room tables; all corridors and modifications to the
bathrooms in the Premises; all lunchrooms, kitchens, computer rooms, utility rooms and other
special rooms; Tenant’s entry door signs; built-in and movable furniture; and all other tenant
improvements for the Premises. Except to the extent set forth in the immediately preceding
sentence, the Tenant Improvements shall not include and the Tenant Improvement Allowance shall not
be used for items such as Tenant’s equipment, computer systems, and telephones. Tenant
may install non-Tenant Improvement items during the same time period as the construction
of the Tenant Improvements.


 


                2.             PLANS AND SPECIFICATIONS.


 


                2.1.          Space Plan and Construction
Documents. “Construction Documents” means plans and specifications prepared
by Tenant’s Consultants (defined below), and approved by Landlord in its reasonable discretion.
Landlord shall approve or disapprove and Construction Documents submitted to Landlord for
approval within ten (10) business days after receipt of the Construction Documents by Landlord.
Tenant covenants, represents and warrants that the Construction Documents and any future modifications to
the Construction Documents (a) are or shall be consistent and compatible with the Building,
and the Building’s equipment and systems, (b) comply with all applicable codes and ordinances
and regulations of governmental agencies having jurisdiction, (c) comply with all of the
Building’s insurance regulations, and (d) are or shall be in a design build format and in such detail
as/may be reasonably required by Landlord and Landlord’s Consultants (as defined in Paragraph
2.2, below).


 


                2.2           Tenant’s Consultants. Tenant’s space planners,
architects and engineers (collectively, “Tenant’s Consultants”)
shall perform the engineering work, if any, for Tenant’s plumbing, electrical (which may be
performed by Tenant), mechanical, heating, ventilation, air conditioning and structural requirements
(“Engineers”), all of which shall be
subject to Landlord’s
reasonable approval. Tenant’s Consultants shall cooperate with Landlord and Landlord’s space planner, architects,
engineers, construction supervisors, building manager, building manager’s engineers, and other
consultants (collectively, “Landlord’s Consultants”)
to


 


EXHIBIT “B”


Page 1 of 8


 


 


 


 





















 


assure that the
Construction Documents are compatible with the plans and specifications for the Building.


 


                2.3.          Changes to Plans. Tenant shall not be permitted to change Construction Documents after Landlord’s approval
thereof without first obtaining Landlord’s consent, which consent shall not be unreasonably
withheld. Landlord shall notify Tenant of its approval or disapproval (with reasons therefor)
within three (3) business days after Tenant’s submittal of the changes.


 


                2.4.          Landlord’s Review. Landlord’s review and approval of
Construction Documents as set forth in this Paragraph 2 shall be for its sole
purpose and shall not imply Landlord’s review of the same, or obligate Landlord to
review the same, for quality, design, compliance with building codes or applicable laws or
other like matters. Accordingly, notwithstanding that Construction Documents are
reviewed by Landlord or Landlord’s Consultants, and notwithstanding any advice or
assistance which may be rendered to Tenant by Landlord or Landlord’s Consultants, Landlord shall
have no liability whatsoever in connection therewith and shall not be responsible for any
omissions or errors contained in Construction Documents. Furthermore, Tenant and Tenant’s
Consultants shall verify, in the field, the dimensions and conditions as shown on the relevant
portions of the plans for the Building, and Tenant and Tenant’s Consultants shall be solely
responsible for the same, and Landlord shall have no responsibility in connection therewith.


 


                2.5.          Permits. Tenant shall be responsible for obtaining and maintaining any necessary governmental approvals and permits,
including applicable building permits and approvals, relating to any Tenant Improvements and
Construction Documents. Tenant agrees that neither Landlord nor Landlord’s Consultants shall
be responsible for obtaining any permits for any proposed Tenant Improvements, and that tenant
shall be solely responsible for obtaining such permits and certificates; provided, however, that
Landlord shall cooperate (without any additional liability, responsibility, cost or expense
to Landlord) with Tenant in executing permit applications and performing other ministerial acts
reasonably necessary to enable Tenant to obtain any such permits or certificates of occupancy.


 


3.     TENANT IMPROVEMENT COSTS/ALLOWANCE.


 


                3.1.          Tenant Improvement Costs. As used herein, the term “Tenant Improvement Costs” shall mean all of the costs to design,
construct and install the Tenant Improvements, including without limitation, the costs
of the following:


 


                                3.1.1.       all design work required to improve the Premises, including without
limitation, space planning, architectural and engineering design and documents,
interior design and documents, graphics design and documents, and the fees of
Tenant’s Consultants;


 


                                3.1.2.       all permits, connection fees, plan
checks, inspections and license fees related to the construction and
installation of Tenant Improvements required in and for the Premises; and


 


 


Page 2 of 8


 


 


 





















 


3.1.3.       All other costs related to the construction and installation of the
Tenant Improvements, including, without limitation, the costs of:


(a)           Construction,
installation, modification, delivery and distribution to the Premises of all
HVAC, electrical, plumbing, life safety (other than strobe lights), and sprinkler systems; 


(b)           The cost of installing suite and directory signage
in accordance with Landlord’s criteria; 


(c)           The cost of labor, materials, supplies, contractor’s
overhead, fees and general conditions;



(d)           Demolition and removal of
any existing improvements in the
Premises.


Tenant Improvement Costs shall not include the costs of Tenant’s equipment, computer systems, and telephones which actually constitute or would
normally constitute Tenant’s personal property; such personal property-type items shall not be considered part of the Tenant Improvements. The equipment,
computer systems, and telephones shall
be paid for by Tenant at its sole cost and expense and not out of the Improvement Allowance.



3.2.          Tenant Improvement Allowance. 
Tenant shall be solely responsible for payment on a timely, lien-free basis of the entire Tenant Improvement Costs; provided, however, that Landlord shall contribute for the benefit of Tenant
an allowance of up to, but not exceeding,
Ten and 00/100 Dollars ($10.00) per
rentable square foot (which
Landlord and Tenant agree is
30,977 rentable square feet) of Premises (the “Tenant Improvement Allowance”)
to pay towards the Tenant Improvement Costs. The Tenant Improvement Allowance shall be disbursed in the manner described in Paragraph 3.4, below, and shall be used solely to assist Tenant in the payment
of the Tenant Improvement Costs. All Tenant
Improvements affixed to the building, whether or not
the cost thereof is covered by
the Tenant Improvement Allowance, shall become the property of Landlord upon their installation in
the Premises and shall remain
on the Premises at all times during and upon expiration of the Term. 


3.3.          Excess Costs.  Tenant shall be responsible for all Tenant Improvement Costs
and Tenant shall pay all such costs
directly to the contractor or other
party requesting payment as and when due, provided that nothing contained in this sentence shall be construed to waive Tenant’s right to
receive the Tenant Improvement
Allowance. 


3.4.          Disbursement of Tenant Improvement Allowance.  The Tenant Improvement Allowance shall be
paid upon completion of the Tenant Improvements on the
basis set forth below; provided,
under no circumstances shall Landlord pay any portion of the Tenant Improvement Allowance prior to January 1,
2009. Tenant shall submit to Landlord, from time-to-time during construction of the Tenant Improvements and upon completion of the Tenant Improvements, a written request for
disbursement of all or a portion of the Tenant Improvement Allowance (“Request”). The Request shall include a copy of all bills and
invoices (“Bills and Invoices”) which Tenant has or is required to pay and a certification
from Tenant’s construction
representative and the Selected Contractor (as defined in Paragraph 4.1, below)
that the amount 


 


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set forth in the
Request has been paid or is due and owing, together with a copy of appropriate (as determined by Landlord in its
reasonable discretion) conditional and final lien releases and waivers, as applicable for a project in
progress or a completed project, as appropriate, and all other information reasonably requested by
Landlord. Upon Landlord’s (a) receipt of such Bills and Invoices, information, and lien releases and
waivers, (b) Landlord’s determination that no person or entity has, or will have any right to file a
mechanic’s, materialmen’s or design professional’s lien against the Premises, (c)
determination that Substantial Completion (as defined in Paragraph 4.4, below) of the Tenant
Improvements has occurred, and (d) determination that no substandard work exists which
adversely affects the Building systems or the structural or exterior appearance of the Building
or any other tenant’s use of its leased premises in the Building, Landlord shall issue a check
equal to the sum of the Bills and Invoices but not to exceed the remaining amount of the Tenant
Improvement Allowance. Landlord shall have the option to issue all checks issued in
connection with work that has not yet been paid as payable jointly to Tenant and the Selected Contractor
and/or any subcontractors. Notwithstanding the foregoing, under no circumstances
shall Landlord pay any Tenant Improvement Allowance for Tenant Improvements when
Substantial Completion of same occurs after December 31,
2010, and Tenant acknowledges and agrees that it shall be solely responsible for one hundred percent (100%) of all
Tenant Improvement Costs incurred for such Tenant Improvements notwithstanding the possibility that
there exists any unused amount of the Tenant Improvement Allowance. Notwithstanding the foregoing,
Tenant may commence and/or complete the Tenant Improvements to the Premises prior
to January 1, 2009; provided, however, that Landlord shall
reimburse Tenant for such costs incurred in accordance with this Section
3.4 of the Sixth Amendment, up to the amount of the Tenant
Improvement Allowance, but not before January 1, 2009.


 


                                3.5.          No Credit for Unused Portion of the Tenant Improvement
Allowance. Any unused portion of the Tenant Improvement Allowance upon completion
of the Tenant Improvements shall not be refunded to Tenant or credited to the payment
of Base Rent under any circumstances.


 


                4.             CONSTRUCTION OF TENANT IMPROVEMENTS.


 


                                4.1.          Selected Contractor. Tenant
shall competitively bid construction of the Tenant Improvements to contractors which have been
reasonably approved by Landlord. “Selected Contractor”
means the contractor who is reasonably acceptable to Landlord and Tenant. Tenant shall enter into a
construction contract with the Selected Contractor and Tenant shall be solely responsible for the
performance of the work of the Tenant Improvements to be performed by the Selected Contractor and
all Tenant’s Agents (defined below) performing services for the Tenant and/or the Selected Contractor
in accordance with the provisions of this Work Letter Agreement. Tenant shall deliver a copy of
the construction contract to Landlord within three (3)
business days after request by Landlord.


 


                                4.2.          Tenant’s Agents. All
subcontractors, laborers, materialmen and suppliers used by Tenant (such subcontractors, laborers,
materialmen, and suppliers, and the Selected Contractor are referred to collectively herein as “Tenant’s Agents”) must be approved in writing by Landlord, which approval shall not be
unreasonably withheld or delayed.


 


 


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                4.3.          Landlord’s General Conditions for Tenant’s Agents and
Tenant Improvement Work. Tenant’s and Tenant’s Agent’s construction of the Tenant Improvements shall comply with the following: (i) the Tenant Improvements shall be
constructed in strict accordance with the approved Construction Documents, (ii) Tenant and
Tenant’s Agents shall not, in any way, interfere with, obstruct, or delay, any other work in
the Building; (iii) Tenant’s Agents shall submit schedules of all work relating to
the Tenant Improvements to Landlord and the Selected Contractor and the Selected Contractor
and Landlord shall, within three (3) business days of receipt thereof, inform Tenant’s
Agents of any reasonable changes which are necessary thereto, and Tenant’s Agents shall adhere to such
corrected schedule; and (iv) Tenant shall abide by all reasonable rules made by Landlord’s Building
contractor or Landlord’s Building manager with respect to the use of freight, loading dock and
service elevators, storage of materials, coordination of work with the contractors of other
tenants, and any other matter in connection with this Work Letter Agreement, including, without
limitation, the construction of the Tenant Improvements; provided such rules shall not be
discriminatorily applied against Tenant nor unreasonably delay Tenant’s construction of the Tenant
Improvement.


 


                4.4.          Requirements of Tenant’s Agents. Each of Tenant’s Agents shall guarantee to Tenant and for the benefit
of Landlord that the portion of the Tenant Improvements for which it is responsible shall be free
from any defects in workmanship and materials for a period of not less than one (1) year from the date of
Substantial Completion thereof. Each of Tenant’s Agents shall be responsible for the
replacement or repair, without additional charge, of all work done or furnished in accordance with its
contract that shall become defective within one (1) year after
the Substantial Completion of the work performed by such contractor or
subcontractors. The correction of such work shall include, without additional
charge, all additional expenses and damages incurred in connection with such
removal or replacement of all or any part of the Tenant Improvements and/or the
Building that may be damaged or disturbed thereby. All such warranties or guarantees as to
materials or workmanship of or with respect to the Tenant Improvements shall be contained in the
construction contract or subcontract and shall be written such that such guarantees or warranties
shall inure to the benefit of both Landlord and Tenant, as their respective interests may appear, and
can be directly enforced by either. Tenant covenants to give to Tenant any assignment or other
assurances which may be necessary to effect such right of direct enforcement. For purposes hereof,
“Substantial
Completion” of the Tenant Improvements shall occur upon the completion of
construction of the Tenant Improvements pursuant to the approved Construction Documents, with
the exception of any punchlist items.


 


                4.5.          Governmental Compliance. Tenant shall cause Tenant’s Agents to construct the Tenant Improvements in
compliance with the following: (i) all state, federal, city or quasi governmental laws, codes,
ordinances and regulations, as each may apply according to the rulings of the controlling public
official, agent or other person; (ii) applicable standards of the American Insurance Association (formerly,
the National Board of Fire Underwriters) and the National Electrical Code; and (iii) building material
manufacturer’s specifications.


 


                4.6.          Supervision/Inspection by Landlord. Landlord shall have the right to inspect construction of the Tenant
Improvements at all times; provided, however, that Landlord’s failure to inspect construction of the
Tenant Improvements shall in no event constitute a waiver of any of Landlord’s rights hereunder nor
shall Landlord’s inspection of the Tenant Improvements constitute Landlord’s approval of the
same. Should Landlord, in good faith,


 


 


 


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reasonably
disapprove any portion of the Tenant Improvements, Landlord shall notify Tenant
in writing of
such disapproval and shall specify in reasonable detail the items disapproved; provided, however, that Landlord shall
not disapprove any portion of the Tenant Improvements which have been constructed in accordance
with the approved Construction Documents. Any defects or deviations in, and/or disapproval by
Landlord of, the Tenant Improvements shall be rectified by Tenant at no expense to Landlord,
provided however, that if Landlord determines that a defect or deviation exists or disapproves of
any matter in connection with any portion of the Tenant Improvements and such defect, deviation or
matter might adversely affect the mechanical, electrical, plumbing, heating, ventilating
and air conditioning or life safety systems of the Building, the structure or exterior appearance
of the Building or any other tenant’s use of its leased premises, Landlord may take such action as
Landlord deems reasonably necessary, at Tenant’s expense and without incurring any liability
on Landlord’s part, to correct any such defect, deviation and/or matter, including, without
limitation, causing the cessation of performance of the construction of the Tenant
Improvements until such time as the defect, deviation and/or matter is corrected to Landlord’s
satisfaction. Landlord shall not charge any fee for its inspection of the Tenant Improvement work.


 


                4.7.          Notice of Completion; Copy “As Built” Plans. Within ten (10) days after Substantial Completion of construction of
the Tenant Improvements, Tenant shall cause a Notice of Completion to be recorded in the office of the
Recorder of the County of San Diego in accordance with Paragraph 3093 of the Civil Code of
the State of California or any successor statute, and shall furnish a copy thereof to Landlord
upon such recordation. If Tenant fails to do so, Landlord may execute and file the same on behalf
of Tenant as Tenant’s agent for such purpose, at Tenant’s sole cost and expense. At the
conclusion of construction, (i) Tenant shall cause its Architect and the Selected Contractor (a) to
update the approved Construction Documents as necessary to reflect all changes made to
the approved Construction Documents during the course of construction, (b) to certify to
the best of their knowledge that the “record set” of as built drawings are true and correct, which
certification shall survive the expiration or termination of this Lease, and (c) to deliver to
Landlord two (2) sets of sepias of such as
built drawings within ninety (90) days following issuance of a temporary
certificate of occupancy for the Premises, and (ii) Tenant shall deliver to
Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the
improvements, equipment, and systems in the Premises.


 


                4.8.          Coordination by Tenant’s Agent with Landlord. Upon Tenant’s delivery of the construction contract to Landlord
under Paragraph 4.1 of this Work Letter Agreement, Tenant shall furnish Landlord with a schedule setting
forth the projected date of the Substantial Completion of the Tenant Improvements and choosing the
critical time deadlines for each phase, item or trade relating to the construction of the
Tenant Improvements. Each party shall cooperate with the other to coordinate Tenant’s
construction of the Tenant Improvements such that Tenant can complete the Tenant Improvements in a
timely fashion. In this regard, Tenant’s Consultants, the Selected Contractor and Landlord’s
construction representative shall meet together at reasonable intervals during the
construction of the Tenant Improvements.


 


                4.9.          Construction of Tenant Improvements. Following
Landlord’s approval of the Construction Documents, Tenant’s selection of the Selected
Contractor, Tenant’s obtaining of all applicable permits and governmental approvals,
and Tenant’s compliance with the other


 


 


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provisions of this
Paragraph 4.9, Tenant shall cause the Tenant Improvements to be diligently and expeditiously constructed by the
Selected Contractor, lien free and asbestos free, in accordance with the approved Construction Documents
and such permits and approvals. If in the reasonable judgment of Landlord the presence of Tenant’s
Agents and the work that is being performed by Tenant’s Agents unreasonably and
materially disrupts tenant improvement or other work being performed by Landlord or others in the
Building, or cause labor difficulties, Landlord shall have the right, on twenty four (24) hours
written notice to Tenant, to order any or all of Tenant’s work to cease for as long as reasonably
required by Landlord.


 


                5.             INSURANCE REQUIREMENTS. During any construction of Tenant Improvements, Tenant shall ensure that
all insurance required by the terms of the Lease are in full force and effect, including, without
limitation, all insurance requirements pursuant to Section 7 of the Work Letter attached to as
Exhibit B to certain Fourth Amendment to Office Lease dated as of January 11, 1998 (as referenced in the Recital A to the Sixth Amendment).


 


                6.             INDEMNITY. Tenant’s indemnities of Landlord as set
forth in the Lease shall also apply with respect to any and all costs, losses, damages, injuries
and liabilities related in any way to any act or omission of Tenant or Tenant’s
Agents, or anyone directly or indirectly employed by any of them, or in connection with Tenant’s
non-payment of any amount arising out of the Tenant Improvements required to be paid by
Tenant. Such indemnities by Tenant shall also apply with respect to any and all costs,
losses, damages, injuries and liabilities related in any way to Landlord’s performance of any
ministerial acts reasonably necessary, (i) to permit Tenant to complete the Tenant Improvements, and (ii)
to enable Tenant to obtain any building permit, temporary certificate of occupancy or
certificate of occupancy for the Premises, except to the extent that such costs, losses, damages, injuries
or liabilities are caused by Landlord’s gross negligence or will misconduct.


 


                7.             MISCELLANEOUS.


 


                7.1.          Clean Up Expenses. Following Substantial Completion
of the Tenant Improvements, Tenant shall, at its cost, be responsible for all clean
up of the interior and exterior to the Premises necessitated by construction of the
Tenant Improvements.


 


                7.2.          Tenant’s Representative. Tenant has designated
Lyndie L. Slack as its sole representative with respect to the matters set forth in the Work
Letter Agreement, who, until further notice to the Landlord, shall have full
authority and responsibility to act on behalf of the Tenant as required in this Work Letter Agreement.


 


                7.3.          Landlord’s Representative. Landlord has designated Glenn Fibiger, Property Manager, as its sole
representative with respect to the matters set forth in this Work Letter Agreement, who, until further
notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as
required in this Work Letter Agreement.


 


                7.4.          Tenant’s Lease Default. Notwithstanding any provision
to the contrary contained in this Lease, if an event of default by Tenant as described
in the Lease, or a default by Tenant under this Work Letter Agreement, has occurred
at any time on or before Substantial Completion of the Tenant Improvements, and such
default remains uncured after the applicable


 


 


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notice and cure
periods under the Lease, then (a) in addition to all other rights and remedies granted to Landlord pursuant to the
Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant
Improvement Allowance, and/or Landlord may cause the Selected Contractor to cease the construction of the
Tenant Improvements (in which case Tenant shall be responsible for any delay in the Substantial
Completion of the Tenant Improvements caused by such work stoppage and such delay shall not
be a Landlord Delay), and (b) all
other obligations
of Landlord under the terms of this Work Letter Agreement shall be forgiven
until such time as
such default is cured pursuant to the terms of the Lease.


 


 


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