**Exhibit 10(i)D(2)**

 

**STANDARD INDUSTRIAL/COMMERICAL MULTI-TENANTLEASE—MODIFIED NET**

**AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION**

 

 

**1.             Basic Provisions (“BasicProvisions”).**

 

1.1**           Parties:**  This Lease (**“Lease”**), dated for reference purposes only, March 20, 2002,is made by and between Jacqueline M. Clampett Jones (**“Lessor”**) and Monterey County Bank (**“Lessee”**), (collectively the **“Parties,”**or individually a **“Party”**).

 

1.2(a)**      Premises:**  That certain portion of the Building,including all improvements therein or to be provided by Lessor under the termsof this Lease, commonly known by the street address of W. S. Dolores, S of 7th,located in the City of Carmel, County of Monterey, State of California, withzip code 93921, as outlined on Exhibit B attached hereto (**“Premises”**).  The **“Building”** isthat certain building containing the Premises and generally described as(describe briefly the nature of the Building): The Fleur De Ville Building,Spaces E & F.  In addition toLessee’s rights to use and occupy the Premises as hereinafter specified, Lesseeshall have non-exclusive rights to the Common Areas (as defined in Paragraph2.7 below) as hereinafter specified, but shall not have any rights to the roof,exterior walls or utility raceways of the Building or to any other buildings inthe Industrial Center.  The Premises,the Building, the Common Areas, the land upon which they are located, alongwith all other buildings and improvements thereon, are herein collectivelyreferred to as the **“Industrial Center.”**(Also see Paragraph 2.)

 

1.2(b)**      Parking:**  None unreserved vehicle parking spaces (**“Unreserved Parking Spaces”**); and Nonereserved vehicle parking spaces (**“ReservedParking Spaces”**). (Also see Paragraph 2.6.)

 

1.3**           Term:**  5 years and 6 months (**“Original Term”**) commencing April 1, 2002 (**“Commencement Date”**) and ending September30, 2007 (**“Expiration Date”**).****(Also see Paragraph 3.)

 

1.4**           EarlyPossession:**  N/A (**“Early Possession Date”**). (Also seeParagraphs 3.2 and 3.3.)

 

1.5**           BaseRent:**  $7,000 per month (**“Base Rent”**), payable on the 1st day ofeach month commencing OCT 1, 2002. (Also see Paragraph 4.)

 

ý            Ifthis box is checked, this Lease provides for the Base Rent to be adjusted perAddendum #1, attached hereto;

 

1.6(a)**      Base RentPaid Upon Execution: **$7,000as Base Rent for the period OCT 1-31, 2002.

 

1.6(b)      **Lessee’sShare of Common Area Operating Expenses:**  26.1 percent (xxxx%) (**“Lessee’sShare”**) as determined by oprorata square footage of the Premises as compared to the total square footageof the Building or o other criteriaas described in Addendum                .

 

1.7           **SecurityDeposit:**  $7,000 (**“Security Deposit”**). (Also see Paragraph5.)

 

1.8           **PermittedUse:**  Commercial Bank (**“Permitted Use”**)****(Also see Paragraph 6.)

 

1.9           **InsuringParty.**  Lessor is the **“Insuring Party.”** (Also see Paragraph 8.)

 

1.10(a)    **RealEstate Brokers.**  Thefollowing real estate broker(s) (collectively, the **“Brokers”**) and brokerage relationships exist in thistransaction and are consented to by the Parties (check applicable boxes):

 

o                                                         representsLessor exclusively (**“Lessor’s Broker”**);

o                                                         representsLessee exclusively (**“Lessee’s Broker”**);or

o                                                         representsboth Lessor and Lessee  (**“Dual Agency”**). (Also see Paragraph 15.)

 

1.10(b)    **Payment toBrokers.**  Upon the executionof this Lease by both Parties, Lessor shall pay to said Broker(s) jointly; orin such separate shares as they may mutually designate in writing, a fee as setforth in a separate written agreement between Lessor and said Broker(s) (or inthe event there is no separate written agreement between Lessor and saidBroker(s), the sum of$           ) for brokerageservices rendered by said Broker(s) in connection with this transaction.

 

1.11         **Guarantor.**  The obligations of the Lessee under thisLease are to be guaranteed by                                                                                                                  (**“Guarantor”**). (Also see Paragraph 37.)

 

1.12         **Addendaand Exhibits.**  Attachedhereto is an Addendum or Addenda consisting of Paragraphs 49 through 54, andExhibits A through B, all of which constitute a part of this Lease.

 

**2.**             **Premises,Parking and Common Areas.**

 

2.1           **Letting.**Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, thePremises, for the term, at the rental, and upon all of the terms, covenants andconditions set forth in this Lease. Unless otherwise provided herein, any statement of square footage setforth in this Lease, or that may have been used in calculating rental and/orCommon Area Operating Expenses, is an approximation which Lessor and Lesseeagree is reasonable and the rental and Lessee’s Share (as defined in Paragraph1.6(b)) based thereon is not subject to revision whether or not the actualsquare footage is more or less.

 

2.2           **Condition.**  Lessor shall deliver the Premises to Lesseeclean and free of debris on the Commencement Date and warrants to Lessee thatthe existing plumbing, electrical systems, fire sprinkler system, lighting, airconditioning and heating systems and loading doors, if any, in the Premises,other than those constructed by Lessee, shall be in good operating condition onthe Commencement Date.  If anon-compliance with said warranty exists as of the Commencement Date, Lessorshall, except as otherwise provided in this Lease, promptly after receipt ofwritten notice from Lessee setting forth with specificity the nature and extentof such non-compliance, rectify same at Lessor’s expense.  If Lessee does not give Leasor writtennotice of a non-compliance with this warranty within thirty (30) days after theCommencement Date, correction of that non-compliance shall be the obligation ofLessee at Lessee’s sole cost and expense.

 

2.3           **Compliancewith Covenants, Restrictions and Building Code.**  Lessor warrants that any improvements (otherthan those constructed by Lessee or at Lessee’s direction) on or in thePremises which have been constructed or installed by Lessor or with Lessor’s consentor at Lessor’s direction shall comply with all applicable covenants orrestrictions of record and applicable building codes, regulations andordinances in effect on the Commencement Date. Lessor further warrants to Lessee that Lessor has no knowledge of anyclaim having been made by any governmental agency that a violation orviolations of applicable building codes, regulations, or ordinances exist withregard to the Premises as of the Commencement Date.  Said warranties shall not apply to any Alterations or UtilityInstallations (defined in Paragraph 7.3(a)) made or to be made by Lessee.  If the Premises do not comply with saidwarranties, Lessor shall, except as otherwise provided in this Lease, promptlyafter receipt of written notice from Lessee given within six (6) monthsfollowing the Commencement Date and setting forth with specificity the natureand extent of such non-compliance, take such action, at Lessor’s expense, asmay be reasonable or appropriate to rectify the non-compliance.  Lessor makes no warranty that the PermittedUse in Paragraph 1.8 is permitted for the Premises under Applicable Laws (asdefined in Paragraph 2.4).

 

2.4           **Acceptanceof Premises.**  Lessee herebyacknowledges: (a) that it has been advised by the Broker(s) to satisfy itselfwith respect to the condition of the Premises (including but not limited to theelectrical and fire sprinkler systems, security, environmental aspects, seismicand earthquake requirements, and compliance with the Americans withDisabilities Act and applicable zoning, municipal, county, state and federallaws, ordinances and regulations and any covenants or restrictions of record(collectively, **“Applicable Laws”**)and the present and future suitability of the Premises for Lessee’s intendeduse; (b) that Lessee has made such investigation as it deems necessary withreference to such matters, is satisfied with reference thereto, and assumes allresponsibility therefore as the same relate to Lessee’s occupancy of thePremises and/or the terms of this Lease; and (c) that neither Lessor, nor anyof Lessor’s agents, has made any oral or written representations or warrantieswith respect to said matters other than as set forth in this Lease.

 

2.5           **Lesseeas Prior Owner/Occupant.**  Thewarranties made by Lessor in this Paragraph 2 shall be of no force or effect ifimmediately prior to the date set forth in Paragraph 1.1 Lessee was the owneror occupant of the Premises.  In theevent, Lessee shall, at Lessee’s sole cost and expense, correct anynon-compliance of the Premises with said warranties.

 

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2.6**           VehicleParking.**  Lessee shall beentitled to use the number of Unreserved Parking Spaces and Reserved ParkingSpaces specified in Paragraph 1.2(b) on those portions of the Common Areasdesignated from time to time by Lessor for parking.  Lessee shall not use more parking spaces than said number.  Said parking spaces shall be used forparking by vehicles no larger than full-size passenger automobiles or pick-uptrucks, herein called **“Permitted SizeVehicles.” **Vehicles otherthan Permitted Size Vehicles shall be parked and loaded or unloaded as directedby Lessor in the Rules and Regulations (as defined in Paragraph 40) issued byLessor.  (Also see Paragraph 2.9)

 

(a)           Lessee shall not permit or allow anyvehicles that belong to or are controlled by Lessee or Lessee’s employees,suppliers, shippers, customers, contractors or invitees to be loaded, unloaded,or parked in areas other than those designated by Lessor for such activities.

 

(b)           If Lessee permits or allows any ofthe prohibited activities described in this Paragraph 2.6, then Lessor shallhave the right, without notice, in addition to such other rights and remediesthat it may have, to remove or tow away the vehicle involved and charge thecost to Lessee, which cost shall be immediately payable upon demand by Lessor.

 

(c)           Lessor shall at the Commencement Dateof this Lease, provide the parking facilities required by Applicable Law.

 

2.7**           CommonAreas - Definition.**  The term**“Common Areas”** is defined as allareas and facilities outside the Premises and within the exterior boundary lineof the Industrial Center and interior utility raceways within the Premises thatare provided and designated by the Lessor from time to time for the generalnon-exclusive use of Lessor, Lessee and other lessees of the Industrial Centerand their respective employees, suppliers, shippers, customers, contractors andinvitees, including parking areas, loading and unloading areas, trash areas,roadways, sideways, walkways, parkways, driveways and landscaped areas.

 

2.8**           CommonAreas - Lessee’s Rights.** Lessor hereby grants to Lessee, for the benefit of Lessee and itsemployees, suppliers, shippers, contractors, customers and invitees, during theterm of this Lease, the non-exclusive right to use, in common with othersentitled to such use, the Common Areas as they exist from time to time, subjectto any rights, powers, and privileges reserved by Lessor under the terms hereofor under the terms of any rules and regulations or restrictions governing theuse of the Industrial Center.  Under nocircumstances shall the right herein granted to use the Common Areas be deemedto include the right to store any property, temporarily or permanently, in theCommon Areas.  Any such storage shall bepermitted only by the prior written consent of Lessor or Lessor’s designatedagent, which consent may be revoked at any time.  In the event that any unauthorized storage shall occur thenLessor shall have the right, without notice, in addition to such other rights andremedies that it may have, to remove the property and charge the cost toLessee, which cost shall be immediately payable upon demand by Lessor.

 

2.9**           CommonAreas - Rules and Regulations.** Lessor or such other person(s) as Lessor may appoint shall have theexclusive control and management of the Common Areas and shall have the right,from time to time, to establish, modify, amend and enforce reasonable Rules andRegulations with respect thereto in accordance with Paragraph 40. Lessee agreesto abide by and conform to all such Rules and Regulations, and to cause itsemployees, suppliers, shippers, customers, contractors and invitees to so abideand conform.  Lessor shall not beresponsible to Lessee for the non-compliance with said rules and regulations byother lessees of the Industrial Center.

 

2.10         **CommonAreas - Changes.**  Lessorshall have the right, in Lessor’s sole discretion, from time to time:

 

(a)           To make changes to the Common Areas,including, without limitation, changes in the location, size, shape and numberof driveways, entrances, parking spaces, parking areas, loading and unloadingareas, ingress, egress, direction of traffic, landscaped areas, walkways andutility raceways;

 

(b)           To close temporarily any of theCommon Areas for maintenance purposes so long as reasonable access to thePremises remains available;

 

(c)           To designate other land outside theboundaries of the Industrial Center to be a part of the Common Areas;

 

(d)           To add additional buildings andImprovements to the Common Areas;

 

(e)           To use the Common Areas while engagedin making additional improvements, repairs or alterations to the IndustrialCenter, or any portion thereof; and

 

(f)            To do and perform such other actsand make such other changes in, to or with respect to the Common Areas andIndustrial Center as Lessor may, in the exercise of sound business judgment,deem to be appropriate.

 

**3.             Term.**

 

3.1**           Term.**  The Commencement Date, Expiration Date andOriginal Term of this Lease are as specified in Paragraph 1.3.

 

3.2**           EarlyPossession.**  If an EarlyPossession Date is specified in Paragraph 1.4 and if Lessee totally orpartially occupies the Premises after the Early Possession Date but prior tothe Commencement Date, the obligation to pay Base Rent shall be abated for theperiod of such early occupancy.  Allother terms of this Lease, however, (including but not limited to theobligations to pay Lessee’s Share of Common Area Operating Expenses and tocarry the insurance required by Paragraph 8) shall be in effect during suchperiod.  Any such early possession shallnot affect nor advance the Expiration Date of the Original Term.

 

                3.3**           Delay in Possession.**  If for any reason Lessor cannot deliverpossession of the Premises to Lessee by the Early Possession Date, if one isspecified in Paragraph 1.4, or if no Early Possession Date is specified, by theCommencement Date, Lessor shall not be subject to any liability therefor, norshall such failure affect the validity of this Lease, or the obligations ofLessee hereunder, or extend the term hereof, but in such case, Lessee shallnot, except as otherwise provided herein, be obligated to pay rent or performany other obligation of Lessee under the terms of this Lease until Lessordelivers possession of the Premises to Lessee. If possession of the Premises is not delivered to Lessee within sixty(60) days after the Commencement Date, Lessee may, at its option, by notice inwriting to Lessor within ten (10) days after the end of said sixty (60) dayperiod, cancel this Lease, in which event the parties shall be discharged fromall obligations hereunder; provided further, however, that if such writtennotice of Lessee is not received by Lessor within said ten (10) day period,Lessee’s right to cancel this Lease hereunder shall terminate and be of nofurther force or effect.  Except as maybe otherwise provided, and regardless of when the Original Term actuallycommences, if possession is not tendered to Lessee when required by this Leaseand Lessee does not terminate this Lease, as aforesaid, the period free of theobligation to pay Base Rent, if any, that Lessee would otherwise have enjoyedshall run from the date of delivery of possession and continue for a periodequal to the period during which the Lessee would have otherwise enjoyed underthe terms hereof, but minus any days of delay caused by the acts, changes oromissions of Lessee.

 

**4.             Rent.**

 

4.1**           BaseRent.**  Lessee shall pay BaseRent and other rent or charges, as the same may be adjusted from time to time,to Lessor in lawful money of the United States, without offset or deduction, onor before the day on which it is due under the terms of this Lease.  Base Rent and all other rent and charges forany period during the term hereof which is for less than one full month shallbe prorated based upon the actual number of days of the month involved.  Payment of Base Rent and other charges shallbe made to Lessor at the address stated herein or to such other persons or atsuch other addresses as Lessor may from time to time designate in writing toLessee.

 

4.2**           CommonArea Operating Expenses.** Lessee shall pay to Lessor during the term hereof, in addition to theBase Rent,  Lessee’s Share (as specifiedin Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafterdefined, during each calendar year of the term of this Lease, in accordancewith the following provisions:

 

(a)**           “CommonArea Operating Expenses”**  aredefined, for purposes of this Lease, as all costs incurred by Lessor relatingto the ownership and operation of the Industrial Center, including, but notlimited to, the following:

 

(i)            The operation, repair andmaintenance, in neat, clean, good order and condition, of the following:

 

(aa)         The Common Areas, including parkingareas, loading and unloading areas; trash areas, roadways, sidewalks, walkways,parkways, driveways, landscaped areas, striping, bumpers, irrigation systems,Common Area lighting facilities, fences and gates, elevators and roof.

 

(bb)         Exterior signs and any tenantdirectories.

 

(cc)         Fire detection and sprinkler systems.

 

(ii)           The cost of water, gas, electricityand telephone to service the Common Areas.

 

(iii)          Trash disposal, property managementand security services and the costs of any environmental inspections.

 

(iv)          Reserves set aside for maintenance andrepair of Common Areas.

 

(v)           Real Property Taxes (as defined inParagraph 10.2) to be paid by Lessor for the Building and the Common Areasunder Paragraph 10 hereof.

 

(vi)          The cost of the premiums for theinsurance policies maintained by Lessor under Paragraph 8 hereof.

 

(vii)         Any deductible portion of an insuredloss concerning the Building or the Common Areas.

 

(viii)        Any other services to be provided byLessor that are stated elsewhere in this Lease to be a Common Area OperatingExpense.

 

(b)           Any Common Area Operating Expensesand Real Property Taxes that are specifically attributable to the Building orto any other building in the Industrial Center or to the operation, repair andmaintenance thereof, shall be allocated entirely to the Building or to suchother building.  However, any CommonArea Operating Expenses and Real Property Taxes that are not specificallyattributable to the Building or to any other building or to the operation,repair and maintenance thereof, shall be equitably allocated by Lessor to all buildingsin the Industrial Center.

 

(c)           The inclusion of the improvements,facilities and services set forth in subparagraph 4.2(a) shall not be deemed toimpose an obligation upon Lessor to either have said improvements or facilitiesor to provide those services unless the Industrial Center already has the same,Lessor already provides the services, or Lessor has agreed elsewhere in hisLease to provide the same or some of them.

 

(d)           Lessee’s Share of Common AreaOperating Expenses shall be payable by Lessee within ten (10) days after areasonably detailed statement of actual expenses is presented to Lessee byLessor. At Lessor’s option, however, an amount may be estimated by Lessor fromtime to time of Lessee’s Share of annual Common Area Operating Expenses and thesame shall be payable monthly or quarterly, as Lessor shall designate, duringeach 12-month period of the Lease term, on the same day as the Base Rent is duehereunder. Lessor shall deliver to Lessee within sixty (60) days after theexpiration of each calendar year a reasonably detailed statement showingLessee’s Share of the actual Common Area Operating Expenses incurred during thepreceding year.  If Lessee’s paymentsunder this Paragraph 4.2(d) during said preceding year exceed Lessee’s Share asindicated on said statement, Lessee shall be credited the amount of such over-

 

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payment against Lessee’s Shareof Common Area Operating Expenses next becoming due. If Lessee’s payments underthis Paragraph 4.2(d) during said preceding year were less than Lessee’s Shareas indicated on said statement, Lessee shall pay to Lessor the amount of thedeficiency within ten (10) days after delivery by Lessor to Lessee of saidstatement.

 

**5.             Security Deposit.** Lessee shall deposit with Lessor uponLessee’s execution hereof the Security Deposit set forth in Paragraph 1.7 assecurity for Lessee’s faithful performance of Lessee’s obligations under thisLease. If Lessee fails to pay Base Rent or other rent or charges due hereunder,or otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessormay use, apply or retain all or any portion of said Security Deposit for thepayment of any amount due Lessor or to reimburse or compensate Lessor for anyliability, cost, expense, loss or damage (including attorneys’ fees) whichLessor may suffer or incur by reason thereof. If Lessor uses or applies all orany portion of said Security Deposit, Lessee shall within ten (10) days afterwritten request therefore deposit monies with Lessor sufficient to restore saidSecurity Deposit to the full amount required by this Lease. Any time the BaseRent increases during the term of this Lease, Lessee shall, upon writtenrequest from Lessor, deposit additional monies with Lessor as an addition tothe Security Deposit so that the total amount of the Security Deposit shall atall times bear the same proportion to the then current Base Rent as the InitialSecurity Deposit bears to the Initial Base Rent set forth in Paragraph 1.5.Lessor shall not be required to keep all or any part of the Security Depositseparate from its general accounts. Lessor shall, at the expiration or earliertermination of the term hereof and after Lessee has vacated the Premises,return to Lessee (or, at Lessor’s option, to the last assignee, if any, ofLessee’s interest herein), that portion of the Security Deposit not used orapplied by Lessor, Unless otherwise expressly agreed in writing by Lessor, nopart of the Security Deposit shall be considered to be held in trust, to bearinterest or other increment for its use, or to be prepayment for any monies tobe paid by Lessee under this Lease.

 

**6.****                                      Use.**

 

6.1**           PermittedUse.**

 

(a)           Lessee shall use and occupy thePremises only for the Permitted Use set forth in Paragraph 1.8, or any otherlegal use which is reasonably comparable thereto, and for no other purpose.Lessee shall not use or permit the use of the Premises in a manner that isunlawful, creates waste or a nuisance, or that disturbs owners and/or occupantsof, or causes damage to the Premises or neighboring premises or properties.

 

(b)           Lessor hereby agrees to notunreasonably withhold or delay its consent to any written request by Lessee,Lessee’s assignees or subtenants, and by prospective assignee and subtenants ofLessee, its assignees and subtenants, for a modification of said Permitted Use,so long as the same will not impair the structural integrity of theimprovements on the Premises or in the Building or the mechanical or electricalsystems therein, does not conflict with uses by other lessees, is notsignificantly more burdensome to the Premises or the Building and theimprovements thereon, and is otherwise permissible pursuant to this Paragraph6.  If Lessor elects to withhold suchconsent, Lessor shall within five (5) business days after such request give awritten notification of same, which notice shall include an explanation ofLessor’s reasonable objections to the change in use.

 

6.2           **HazardousSubstances.**

 

(a)**           ReportableUses Require Consent.**  Theterm **“Hazardous Substance”** as usedin this Lease shall mean any product, substance, chemical, material or wastewhose presence, nature, quantity and/or intensity of existence, use,manufacture, disposal, transportation, spill, release or effect, either byitself or in combination with other materials expected to be on the Premises,is either: (i) potentially injurious to the public health, safety or welfare,the environment, or the Premises; (ii) regulated or monitored by anygovernmental authority; or (iii) a basis for potential liability of Lessor toany governmental agency or third party under any applicable statute or commonlaw theory. Hazardous Substance shall include, but not be limited to,hydrocarbons, petroleum, gasoline, crude oil or any products or by-productsthereof.  Lessee shall not engage in anyactivity in or about the Premises which constitutes a Reportable Use (ashereinafter defined) of Hazardous Substances without the express prior written consentof Lessor and compliance in a timely manner (at Lessee’s sole cost and expense)with all Applicable Requirements (as defined in Paragraph 6.3).  **“ReportableUse”**shall mean (i) the installation or use or any above or belowground storage tank,  (ii) thegeneration, possession, storage, use, transportation, or disposal of aHazardous Substance that requires a permit from, or with respect to which areport, notice, registration or business plan is required to be filed with, anygovernmental authority, and  (iii) thepresence in, on or about the Premises of a Hazardous Substance with respect towhich any Applicable Laws require that a notice be given to persons entering oroccupying the Premises or neighboring properties. Notwithstanding theforegoing, Lessee may, without Lessor’s prior consent, but upon notice toLessor and in compliance with all Applicable Requirements, use any ordinary andcustomary materials reasonably required to be used by Lessee in the normalcourse of the Permitted Use, so long as such use is not a Reportable Use and doesnot expose the Premises or neighboring properties to any meaningful risk ofcontamination or damage or expose Lessor to any liability therefor. Inaddition, Lessor may (but without any obligation to do so) condition itsconsent to any Reportable Use of any Hazardous Substance by Lessee uponLessee’s giving Lessor such additional assurances as Lessor, in its reasonablediscretion, deems necessary to protect itself, the public, the Premises and theenvironment against damage, contamination or injury and/or liability therefor,including but not limited to the installation (and, at Lessor’s option, removalon or before Lease expiration or earlier termination) of reasonably necessaryprotective modifications to the Premises (such as concrete encasements) and/orthe deposit of an additional Security Deposit under Paragraph 5 hereof.

 

(b)**           Dutyto Inform Lessor.**  If Lesseeknows, or has reasonable cause to believe, that a Hazardous Substance has cometo be located in, on, under or about the Premises or the Building, other thanas previously consented to by Lessor, Lessee shall immediately give Lessorwritten notice thereof, together with a copy of any statement, report, notice,registration, application, permit, business plan, license, claim, action, orproceeding given to, or received from, any governmental authority or privateparty concerning the presence, spill, release, discharge of, or exposure to,such Hazardous Substance including but not limited to all such documents as maybe involved in any Reportable Use involving the Premises. Lessee shall notcause or permit any Hazardous Substance to be spilled or released in, on, underor about the Premises (including, without limitation, through the plumbing orsanitary sewer system).

 

(c)           **Indemnification. **Lessee shall indemnify, protect,defend and hold Lessor, its agents, employees, lenders and ground lessor, ifany, and the Premises, harmless from and against any and all damages,liabilities, judgments, costs, claims, liens, expenses, penalties, loss ofpermits and attorneys’ and consultants’ fees arising out of or involving anyHazardous Substance brought onto the Premises by or for Lessee or by anyoneunder Lessee’s control. Lessee’s obligations under this Paragraph 6.2(c) shallinclude, but not be limited to, the effects of any contamination or injury toperson, property or the environment created or suffered by Lessee, and the costof investigation (including consultants’ and attorneys’ fees and testing),removal, remediation, restoration and/or abatement thereof, or of anycontamination therein involved, and shall survive the expiration or earliertermination of this Lease. No termination, cancellation or release agreemententered into by Lessor and Lessee shall release Lessee from its obligationsunder this Lease with respect to Hazardous Substances, unless specifically soagreed by Lessor in writing at the time of such agreement.

 

                6.3**           Lessee’s Compliance withRequirements. **Lessee shall,at Lessee’s sole cost and expense, fully, diligently and in a timely manner,comply with all **“Applicable Requirements,”**whichterm is used in this Lease to mean all laws, rules, regulations, ordinances,directives, covenants, easements and restrictions of record, permits, therequirements of any applicable fire insurance underwriter or rating bureau, andthe recommendations of Lessor’s engineers and/or consultants, relating in anymanner to the Premises (including but not limited to matters pertaining to (i)industrial hygiene, (ii) environmental conditions on, in, under or about thePremises, including soil and groundwater conditions, and (iii) the use,generation, manufacture, production, installation, maintenance, removal,transportation, storage, spill, or release of any Hazardous Substance), now ineffect or which may hereafter come into effect.  Lessee shall, within five (5) days after receipt of Lessor’swritten request, provide Lessor with copies of all documents and information,including but not limited to permits, registrations, manifests, applications,reports and certificates, evidencing Lessee’s compliance with any ApplicableRequirements specified by Lessor, and shall immediately upon receipt, notifyLessor in writing (with copies of any documents involved) of any threatened oractual claim, notice, citation, warning, complaint or report pertaining to orinvolving failure by Lessee or the Premises to comply with any ApplicableRequirements.

 

6.4**           Inspection;Compliance with Law. **Lessor,Lessor’s agents, employees, contractors and designated representatives, and theholders of any mortgages, deeds of trust or ground leases on the Premises (**“Lenders”)**shall have the right to enterthe Premises at any time in the case of an emergency, and otherwise atreasonable times, for the purpose of inspecting the condition of the Premisesand for verifying compliance by Lessee with this Lease and all ApplicableRequirements (as defined in Paragraph 6.3), and Lessor shall be entitled toemploy experts and/or consultants in connection therewith to advise Lessor withrespect to Lessee’s activities, including but not limited to Lessee’sinstallation, operation, use, monitoring, maintenance, or removal of anyHazardous Substance on or from the Premises. The costs and expenses of any such inspections shall be paid by theparty requesting same, unless a Default or Breach of this Lease by Lessee or aviolation of Applicable Requirements or a contamination, caused or materiallycontributed to by Lessee, is found to exist or to be imminent, or unless theinspection is requested or ordered by a governmental authority as the result ofany such existing or imminent violation or contamination. In such case, Lesseeshall upon request reimburse Lessor or Lessor’s Lender, as the case may be, forthe costs and expenses of such inspections.

 

**7.             Maintenance, Repairs, UtilityInstallations, Trade Fixtures and Alterations.**

 

7.1**           Lessee’sObligations.**

 

(a)           Subject to the provisions ofParagraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions andBuilding Code), 7.2 (Lessor’s Obligations), 9 (Damage or Destruction), and 14(Condemnation), Lessee shall, at Lessee’s sole cost and expense and at alltimes, keep the Premises and every part thereof in good order, condition andrepair (whether or not such portion of the Premises requiring repair, or themeans of repairing the same, are reasonably or readily accessible to Lessee,and whether or not the need for such repairs occurs as a result of Lessee’suse, any prior use, the elements or the age of such portion of the Premises),including, without limiting the generality of the foregoing, all equipment orfacilities specifically serving the Premises, such as plumbing, heating, airconditioning, ventilating, electrical, lighting facilities, boilers, fired orunfired pressure vessels, fire hose connections if within the Premises,fixtures, interior walls, interior surfaces of exterior walls, ceilings,floors, windows, doors, plate glass, and skylights, but excluding any itemswhich are the responsibility of Lessor pursuant to Paragraph 7.2 below. Lessee,in keeping the Premises in good order, condition and repair, shall exercise andperform good maintenance practices. Lessee’s obligations shall includerestorations, replacements or renewals when necessary to keep the Premises andall improvements thereon or a part thereof in good order, condition and stateof repair.

 

(b)           Lessee shall, at Lessee’s sole costand expense, procure and maintain a contract, with copies to Lessor , incustomary form and substance for and with a contractor specializing andexperienced in the inspection, maintenance and service of the heating, airconditioning and ventilation system for the Premises. However, Lessor reservesthe right, upon notice to Lessee, to procure and maintain the contract for theheating, air conditioning and ventilating systems, and if Lessor so elects,Lessee shall reimburse Lessor, upon demand, for the cost thereof.

 

(c)           If Lessee fails to perform Lessee’sobligations under this Paragraph 7.1, Lessor may enter upon the Premises afterten (10) days’ prior written notice to Lessee (except in the case of anemergency, in which case no notice shall be required), perform such obligationson Lessee’s behalf, and put the Premises in good order, condition and repair,in accordance with Paragraph 13.2 below.

 

7.2**           Lessor’sObligations. **Subject to theprovisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants,Restrictions and Building Code), 4.2 (Common Area Operating Expenses), 6 (Use),7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation),Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in goodorder, condition and repair the foundations, exterior walls, structuralcondition of interior bearing walls, exterior roof, fire sprinkler and/orstandpipe and hose (if located in the Common Areas) or other automatic fireextinguishing system including fire alarm and/or smoke

 

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detection systems andequipment, fire hydrants, parking lots, walkways, parkways, driveways, landscaping,fences, signs and utility systems serving the Common Areas and all partsthereof, as well as providing the services for which there is a Common AreaOperating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior surfacesof exterior walls nor shall Lessor be obligated to maintain, repair or replacewindows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter ineffect which would otherwise afford Lessee the right to make repairs atLessor’s expense or to terminate this Lease because of Lessor’s failure to keepthe Building, Industrial Center or Common Areas in good order, condition andrepair.

 

7.3**           UtilityInstallations, Trade Fixtures, Alterations.**

 

(a)           **Definitions;Consent Required. **The term **“Utility Installations”** is used in thisLease to refer to all air lines, power panels, electrical distribution,security, fire protection systems, communications systems, lighting fixtures,heating, ventilating and air conditioning equipment, plumbing, and fencing in,on or about the Premises.  The term **“Trade Fixtures”** shall mean Lessee’smachinery and equipment which can be removed without doing material damage tothe Premises.  The term **“Alterations”** shall mean any modificationof the improvements on the Premises which are provided by Lessor under theterms of this Lease, other than Utility Installations or Trade Fixtures.  **“Lessee-OwnedAlterations and/or Utility Installations”** are defined as Alterationsand/or Utility Installations made by Lessee that are not yet owned by Lessorpursuant to Paragraph 7.4(a).  Lesseeshall not make nor cause to be made any Alterations or Utility Installationsin, on, under or about the Premises without Lessor’s prior writtenconsent.  Lessee may, however, makenon-structural Utility Installations to the interior of the Premises (excludingthe roof) without Lessor’s consent but upon notice to Lessor, so long as theyare not visible from the outside of the Premises, do not involve puncturing,relocating or removing the roof or any existing walls, or changing orinterfering with the fire sprinkler or fire detection systems and thecumulative cost thereof during the term of this Lease as extended does notexceed $2,500.00

 

(b)           **Consent.**  Any Alterations or Utility Installationsthat Lessee shall desire to make and which require the consent of the Lessorshall be presented to Lessor in written form with detailed plans.  All consents given by Lessor, whether byvirtue of Paragraph 7.3(a) or by subsequent specific consent, shall be deemedconditioned upon: (i) Lessee’s acquiring all applicable permits required bygovernmental authorities; (ii) the furnishing of copies of such permitstogether with a copy of the plans and specifications for the Alteration orUtility Installation to Lessor prior to commencement of the work thereon; and(iii) the compliance by Lessee with all conditions of said permits in a promptand expeditious manner.  Any Alterationsor Utility Installations by Lessee during the term of this Lease shall be donein a good and workmanlike manner, with good and sufficient materials, and be incompliance with all Applicable Requirements. Lessee shall promptly upon completion thereof furnish Lessor with asbuilt plans and specifications therefor. Lessor may, (but without obligation to do so) condition its consent toany requested Alteration or Utility Installation that costs $2,500.00 or moreupon Lessee’s providing Lessor with a lien and completion bond in an amountequal to one and one-half times the estimated cost of such Alteration orUtility Installation.

 

(c)           **LienProtection.** Lessee shall paywhen due all claims for labor or materials furnished or alleged to have beenfurnished to or for Lessee at or for use on the Premises, which claims are ormay be secured by any mechanic’s or materialmen’s lien against the Premises orany interest therein.  Lessee shall giveLessor not less than ten (10) days' notice prior to the commencement of anywork in, on, or about the Premises, and Lessor shall have the right to postnotices of non-responsibility in or on the Premises as provided by law.  If Lessee shall, in good faith, contest thevalidity of any such lien, claim or demand, then Lessee shall, at its soleexpense, defend and protect itself, Lessor and the Premises against the sameand shall pay and satisfy any such adverse judgment that may be renderedthereon before the enforcement thereof against the Lessor of the Premises.  If Lessor shall require, Lessee shallfurnish to Lessor a surety bond satisfactory to Lessor in an amount equal toone and one-half times the amount of such contested lien claim or demand,indemnifying Lessor against liability for the same, as required by law for theholding of the Premises free from the effect of such lien or claim.  In addition, Lessor may require Lessee topay Lessor’s attorneys’ fees and costs in participating in such action ifLessor shall decide it is to its best interest to do so.

 

7.4**           Ownership,Removal, Surrender, and Restoration.**

 

(a)**           Ownership. **Subject to Lessor’s right torequire their removal and to cause Lessee to become the owner thereof ashereinafter provided in this Paragraph 7.4, all Alterations and UtilityInstallations made to the Premises by Lessee shall be the property of and ownedby Lessee, but considered a part of the Premises. Lessor may, at any time andat its option, elect in writing to Lessee to be the owner of all or anyspecified part of the Lessee-Owned Alterations and Utility Installations.  Unless otherwise instructed per Subparagraph7.4(b) hereof, all Lessee-Owned Alterations and Utility Installations shall, atthe expiration or earlier termination of this Lease, become the property ofLessor and remain upon the Premises and be surrendered with the Premises byLessee.

 

(b)**           Removal. **Unless otherwise agreed inwriting, Lessor may require that any or all Lessee-Owned Alterations or UtilityInstallations be removed by the expiration or earlier termination of thisLease, notwithstanding that their installation may have been consented to byLessor.  Lessor may require the removalat any time of all or any part of any Alterations or Utility Installations madewithout the required consent of Lessor.

 

(c)**           Surrender/Restoration. **Lessee shall surrender thePremises by the end of the last day of the Lease term or any earliertermination date, clean and free of debris and in good operating order,condition and state of repair, ordinary wear and tear excepted.  Ordinary wear and tear shall not include anydamage or deterioration that would have been prevented by good maintenancepractice or by Lessee performing all of its obligations under this Lease.  Except as otherwise agreed or specifiedherein, the Premises, as surrendered, shall include the Alterations and UtilityInstallations.  The obligation of Lesseeshall include the repair of any damage occasioned by the installation,maintenance or removal of Lessee’s Trade Fixtures, furnishings, equipment, andLessee-Owned Alternations and Utility Installations, as well as the removal ofany storage tank installed by or for Lessee, and the removal, replacement, orremediation of any soil, material or ground water contaminated by Lessee, allas may then be required by Applicable Requirements and/or good practice,Lessee’s Trade Fixtures shall remain the property of Lessee and shall beremoved by Lessee subject to its obligation to repair and restore the Premisesper this Lease.

 

**8**.**             Insurance;Indemnity.**

 

8.1**           Paymentof Premiums. **The cost of thepremiums for the insurance policies maintained by Lessor under this Paragraph 8shall be a Common Area Operating Expense pursuant to Paragraph 4.2 hereof.  Premiums for policy periods commencing priorto, or extending beyond, the term of this Lease shall be prorated to coincidewith the corresponding Commencement Date or Expiration Date.

 

8.2**           LiabilityInsurance.**

 

(a)**           Carriedby Lessee. **Lessee shallobtain and keep in force during the term of this Lease a Commercial 

General Liability policy ofinsurance protecting Lessee, Lessor and any Lender(s) whose names have beenprovided to Lessee in writing (as additional insureds) against claims forbodily injury, personal injury and property damage based upon, involving orarising out of the ownership, use, occupancy or maintenance of the Premises andall areas appurtenant thereto.  Suchinsurance shall be on an occurrence basis providing single limit coverage in anamount not less than $1,000,000 per occurrence with an “AdditionalInsured-Managers or Lessors of Premises” endorsement and contain the “Amendmentof the Pollution Exclusion” endorsement for damage caused by heat, smoke orfumes from a hostile fire.  The policyshall not contain any Intra-insured exclusions as between insured persons ororganizations, but shall include coverage for liability assumed under thisLease as an **“Insured contract”** forthe performance of Lessee’s indemnity obligations under this Lease.  The limits of said insurance required bythis Lease or as carried by Lessee shall not, however, limit the liability ofLessee nor relieve Lessee of any obligation hereunder.  All insurance to be carried by Lessee shallbe primary to and not contributory with any similar insurance carried byLessor, whose insurance shall be considered excess insurance only.

 

(b)**           Carriedby Lessor.** Lessor shall alsomaintain liability insurance described in Paragraph 8.2(a) above, in additionto and not in lieu of, the insurance required to be maintained by Lessee.  Lessee shall not be named as an additionalinsured therein.

 

8.3**           PropertyInsurance-Building, Improvements and Rental Value.**

 

(a)**           Buildingand Improvements. **Lessorshall obtain and keep in force during the term of this Lease a policy orpolices in the name of Lessor, with loss payable to Lessor and to anyLender(s), insuring against loss or damage to the Premises.  Such insurance shall be for full replacementcost, as the same shall exist from time to time, or the amount required by anyLender(s), but in no event more than the commercially reasonable and availableinsurable value thereof if, by reason of the unique nature or age of theimprovements involved, such latter amount is less than full replacementcost.  Lessee-Owned Alterations andUtility Installations, Trade Fixtures and Lessee’s personal property shall beinsured by Lessee pursuant to Paragraph 8.4. If the coverage is available and commercially appropriate, Lessor’spolicy or policies shall insure against all risks of direct physical loss ordamage (except the perils of flood and/or earthquake unless required by aLender), including coverage for any additional costs resulting from debrisremoval and reasonable amounts of coverage for the enforcement of any ordinanceor law regulating the reconstruction or replacement of any undamaged sectionsof the Building required to be demolished or removed by reason of theenforcement of any building, zoning, safety or land use laws as the result of acovered loss, but not including plate glass insurance.  Said policy or policies shall also contain anagreed valuation provision in lieu of any co-insurance clause, waiver ofsubrogation, and inflation guard protection causing an increase in the annualproperty insurance coverage amount by a factor of not less than the adjustedU.S. Department of Labor Consumer Price Index for All Urban Consumers for thecity nearest to where the Premises are located.

 

(b)**           RentalValue. **Lessor shall alsoobtain and keep in force during the term of this Lease a policy or policies inthe name of Lessor, with loss payable to Lessor and any Lender(s), insuring theloss of the full rental and other charges payable by all lessees of theBuilding to Lessor for one year (including all Real Property Taxes, insurancecosts, all Common Area Operating Expenses and any scheduled rental increases).  Said insurance may provide that in the eventthe Lease is terminated by reason of an insured loss, the period of indemnityfor such coverage shall be extended beyond the date of the completion ofrepairs or replacement of the Premises, to provide for one full year’s loss ofrental revenues from the date of any such loss.  Said insurance shall contain an agreed valuation provision inlieu of any co-insurance clause, and the amount of coverage shall be adjustedannually to reflect the projected rental income, Real Property Taxes, insurancepremium costs and other expenses, if any, otherwise payable, for the next12-month period.  Common Area OperatingExpenses shall include any deductible amount in the event of such loss.

 

(c)**           AdjacentPremises.**  Lessee shall payfor any increase in the premiums for the property insurance of the Building andfor the Common Ares or other buildings in the Industrial Center if saidincrease is caused by Lessee’s acts, omissions, use or occupancy of thePremises.

 

(d)**           Lessee’sImprovements. **Since Lessoris the Insuring Party, Lessor shall not be required to insure Lessee-OwnedAlterations and Utility Installations unless the item in question has becomethe property of Lessor under the terms of this Lease.

 

8.4**           Lessee’sProperty Insurance.** Subjectto the requirements of Paragraph 8.5, Lessee at its cost shall either byseparate policy or, at Lessor’s option, by endorsement to a policy alreadycarried, maintain insurance coverage on all of Lessee’s personal property,Trade Fixtures and Lessee-Owned Alterations and Utility Installations in, on,or about the Premises similar in coverage to that carried by Lessor as theInsuring Party under Paragraph 8.3(a). Such insurance shall be full replacement cost coverage with a deductiblenot to exceed $1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for thereplacement of personal property and the restoration of Trade Fixtures andLessee-Owned Alterations and Utility Installations.  Upon request from Lessor, Lessee shall provide Lessor withwritten evidence that such insurance is in force.

 

8.5**           InsurancePolicies.**  Insurance requiredhereunder shall be in companies duly licensed to transact business in the statewhere the Premises are located, and maintaining during the policy term a “GeneralPolicyholders Rating” of at least B+, V, or such other rating as may requiredby a Lender, as set forth in the most current issue of “Best’s InsuranceGuide.” Lessee shall not do or permit to be done anything which shallinvalidate the insurance polices referred to in

 

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this Paragraph 8. Lessee shallcause to be delivered to Lessor, within seven (7) days after the earlier of theEarly Possession Date or the Commencement Date, certified copies of, or certificatesevidencing the existence and amounts of, the insurance required under Paragraph8.2(a) and 8.4.  No such policy shall becancelable or subject to modification except after thirty (30) days’ priorwritten notice to Lessor.  Lessee shallat least thirty (30) days prior to the expiration of such policies, furnishLessor with evidence of renewals or “Insurance binders” evidencing renewalthereof, or Lessor may order such insurance and charge the cost thereof toLessee, which amount shall be payable by Lessee to Lessor upon demand.

 

8.6           **Waiverof Subrogation.** Without affecting any other rights or remedies,Lessee and Lessor each hereby release and relieve the other, and waive theirentire right to recover damages (whether in contract or in tort) against theother, for loss or damage to their property arising out of or incident to theperils required to be Insured against under Paragraph 8. The effect of suchreleases and waivers of the right to recover damages shall not be limited bythe amount of Insurance carried or required, or by any deductibles applicablethereto.  Lessor and Lessee agree tohave their respective insurance companies issuing property damage Insurancewaive any right to subrogation that such companies may have against Lessor orLessee, as the case may be, so long as the insurance is not invalidatedthereby.

 

8.7**           Indemnify.**  Except for Lessor’s negligence and/or breachof express warranties, Lessee shall indemnify, protect, defend and holdharmless the Premises, Lessor and its agents, Lessor’s master or ground lessor,partners and Lenders, from and against any and all claims, loss of rents and/ordamages, costs, liens, judgments, penalties, loss of permits, attorneys’ andconsultants’ fees, expenses and/or liabilities arising out of, involving, or inconnection with, the occupancy of the Premises by Lessee, the conduct ofLessee’s business, any act, omission or neglect of Lessee, its agents,contractors, employees or invitees, and out of any Default of Breach by Lesseein the performance in a timely manner of any obligation on Lessee’s part to beperformed under this Lease.  Theforegoing shall include, but not to be limited to, the defense or pursuit ofany claim or any action or proceeding involved therein, and whether or not (inthe case of claims made against Lessor) litigated and/or reduced to judgment.In case any action or proceeding be brought against Lessor by reason of any ofthe foregoing matters, Lessee upon notice from Lessor shall defend the same atLessee’s expense by counsel reasonably satisfactory to Lessor and Lessor shallcooperate with Lessee in such defense. Lessor need not have first paid any suchclaim in order to be so indemnified.

 

8.8**           Exemptionof Lessor from Liability.** Lessor shall not be liable for injury ordamage to the person or goods, wares, merchandise or other property of Lessee,Lessee’s employees, contractors, invitees, customers, or any other person in orabout the Premises, whether such damage or injury is caused by or results fromfire, steam, electricity, gas, waters or rain, or from the breakage, leakage,obstruction or other defects of pipes, fire sprinklers, wires, appliances,plumbing, air conditioning or lighting fixtures, or from any other cause,whether said injury or damage results from conditions arising upon the Premisesor upon other portions of the Building of which the Premises are a part, fromother sources or places, and regardless of whether the cause of such damage orinjury or the means of repairing the same is accessible or not, Lessor shallnot be liable for any damages arising from any act or neglect of any otherlessee of Lessor nor from the failure by Lessor to enforce the provisions ofany other lease in the Industrial Center. Notwithstanding Lessor’s negligence or breach of this Lease, Lessorshall under no circumstances be liable for injury to Lessee’s business or forany loss of income or profit therefrom.

 

**9.             Damage or Destruction.**

 

9.1           **Definitions.**

 

(a)           **“PremisesPartial Damage”** shall mean damage or destruction to the Premises,other than Lessee-Owned Alterations and Utility Installations, the repair costof which damage or destruction is less than fifty percent (50%) of the thenReplacement Cost (as defined in Paragraph 9.1(d)) of the Premises (excludingLessee-Owned Alternations and Utility Installations and Trade Fixtures)immediately prior to such damage or destruction.

 

(b)           **“PremisesTotal Destruction”** shall mean damage or destruction to the Premises,other than Lessee-Owned Alterations and Utility Installations, the repair costof which damage or destruction is fifty percent (50%) or more of the thenReplacement Cost of the Premises (excluding Lessee-Owned Alterations andUtility Installations and Trade Fixtures) immediately prior to such damage ordestruction.  In addition, damage ordestruction to the Building, other than Lessee-Owned Alterations and UtilityInstallations and Trade Fixtures of any lessees of the Building, the cost ofwhich damage or destruction is fifty percent (50%) or more of the thenReplacement Cost (excluding Lessee-Owned Alterations and Utility Installationsand Trade Fixtures of any lessees of the Building) of the Building shall, atthe option of Lessor, be deemed to be Premises Total Destruction.

 

(c)           **“InsuredLoss”** shall mean damage or destruction to the Premises, other thanLessee-Owned Alterations and Utility Installations and Trade Fixtures, whichwas caused by an event required to be covered by the insurance described inParagraph 8.3(a) irrespective of any deductible amounts or coverage limitsinvolved.

 

(d)           **“ReplacementCost”** shall mean the cost to repair or rebuild the improvementsowned by Lessor at the time of the occurrence to their condition existingimmediately prior thereto, including demolition, debris removal and upgradingrequired by the operation of applicable building codee, ordinances or laws, andwithout deduction or depreciation.

 

(e)           **“HazardousSubstance Condition”** shall mean the occurrence or discovery of acondition involving the presence of, or a contamination by, a HazardousSubstance as defined in Paragraph 6.2(a), in, on, or under the Premises.

 

9.2           **PremisesPartial Damage - Insured Loss**. If Premises Partial Damage that is an Insured Loss occurs, then Lessorshall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixturesor Lessee-Owned Alterations and Utility Installations) as soon as reasonablypossible and this Lease shall continue in full force and effect.  In the event, however, that there is ashortage of insurance proceeds and such shortage is due to the fact that, byreason of the unique nature of the improvements in the Premises, fullreplacement cost insurance coverage was not commercially reasonable andavailable, Lessor shall have no obligation to pay for the shortage in insuranceproceeds or to fully restore the unique aspects of the premises unless Lesseeprovides Lessor with the funds to cover same, or adequate assurance thereof,within ten (10) days following receipt of written notice of such shortage andrequest therefor.  If Lessor receives saidfunds or adequate assurance thereof within said ten (10) day period, Lessorshall complete them as soon as reasonably possible and this Lease shall remainin full force and effect.  If Lessordoes not receive such funds or assurance within said period, Lessor maynevertheless elect by written notice to Lessee within ten (10) days thereafterto make such restorations and repair as is commercially reasonable with Lessorpaying any shortage in proceeds, in which case this Lease shall remain in fullforce and effect.  If Lessor does notreceive such funds or assurance within such ten (10) day period, and if Lesserdoes not so elect to restore and repair, then this Lease shall terminate sixty(60) days following the occurrence of the damage or destruction.  Unless otherwise agreed, Lessee shall in noevent have any right to reimbursement from Lessor for any funds contributed byLessee to repair any such damage or destruction.  Premises Partial Damage due to flood or earthquake shall besubject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that theremay be some insurance coverage, but the net proceeds of any such Insuranceshall be made available for the repairs it made by either Party.

 

9.3           **PartialDamage - Uninsured Loss.**  IfPremises Partial Damage that is not an insured Loss occurs, unless caused by anegligent or willful act of Lessee (in which event Lessee shall make therepairs at Lessee’s expense and this Lease shall continue in full force andeffect), Lessor may at Lessor’s option either (i) repair such damage as soon asreasonably possible at Lessor’s expense, in which event this Lease shallcontinue in full force and effect, or (ii) give written notice to Lessee withinthirty (30) days after receipt by Lessor of knowledge of the occurrence of suchdamage of Lessor’s desire to terminate this Lease as of the date sixty (60)days following the date of such notice. In the event Lessor elects to give such notice of Lessor’s intention toterminate this Lease, Lessee shall have the right within ten (10) days afterthe receipt of such notice to give written notice to Lessor of Lessee’scommitment to pay for the repair of such damage totally at Lessee’s expense andwithout reimbursement from Lessor. Lessee shall provide Lessor with the required funds or satisfactoryassurance thereof within thirty (30) days following such commitment fromLessee.  In such event this Lease shallcontinue in full force and effect and Lessor shall proceed to make such repairsas soon as reasonably possible after the required funds are available.  If Lessee does not give such notice andprovide the funds or assurance thereof with in the times specified above, thisLease shall terminate as of the date specified in Lessor’s notice oftermination.

 

9.4           **TotalDestruction.** Notwithstanding any other provision hereof, if PremisesTotal Destruction occurs (including any destruction required by any authorizedpublic authority), this Lease shall terminate sixty (60) days following thedate of such Premises Total Destruction, whether or not the damage ordestruction is an insured Loss or was caused by a negligent or willful act ofLessee.  In the event, however, that thedamage or destruction was caused by Lessee, Lessor shall have the right torecover Lessor’s damages from Lessee except as released and waived in Paragraph9.7.

 

9.5           **DamageNear End of Term.**If at any time during the last six (6) months ofthe term of this Lease there is damage for which the cost to repair exceeds onemonth’s Base Rent, whether or not an insured Loss, Lessor may, at Lessor’soption, terminate this Lease effective sixty (60) days following the date ofoccurrence of such damage by giving written notice to Lessee of Lessor’selection to do so within thirty (30) days after the date of occurrence of suchdamage.  Provided, however, if Lessee atthat time has an exercisable option to extend this Lease or to purchase thePremises, then Lessee may preserve this Lease by (a) exercising such option,and (b) providing Lessor with any shortage in insurance proceeds (or adequateassurance thereof) needed to make the repairs on or before the earlier of (i)the date which is ten (10) days after Lessee’s receipts of Lessor’s writtennotice purporting to terminate this Lease, or (ii) the day prior to the dateupon which such option expires. If Lessee duly exercises such option duringsuch period and provides Lessor with funds (or adequate assurance thereof) tocover any shortage in insurance proceeds, Lessor shall, at Lessor’s expenserepair such damage as soon as reasonably possible and this Lease shall continuein full force and effect.  If Lesseefails to exercise such option and provide such funds or assurance during suchperiod, then this Lease shall terminate as of the date set forth in the firstsentence of this Paragraph 9.5.

 

9.6           **Abatementof Rent; Lease’s Remedies.**

 

(a)           In the event of (I) Premises PartialDamage or (II) Hazardous Substance Condition for which Lessee is not legallyresponsible, the Base Rent Common Area Operating Expenses and other charges, ifany, payable by Lessee hereunder for the period during which such damage orcondition, its repair, remediation or restoration continues, shall be abated inproportion to the degree to which Lessee’s use of the Premises is impaired, butnot in excess of proceeds from insurance required to be carried under Paragraph8.3(b).  Except for abatement of BaseRent, Common Area Operating Expenses and other charges, if any, as aforesaid,all other obligations of Lessee hereunder shall be performed by Lessee andLessee shall have no claim against Lessor for any damage suffered by reason ofany such damage, destruction, repair, remediation or restoration.

 

(b)           If Lesser shall be obligated torepair or restore the Premises under the provisions of this Paragraph 9 andshall not commence, in a substantial and meaningful way, the repair orrestoration of the Premises within ninety (90) days after such obligation shallaccrue, Lessee may, at any time prior to the commencement of such repair orrestoration, give written notice to Lessor and to any Lenders of which Lesseehas a actual notice of Lessee’s election to terminate this Lease on a date notless than sixty (60) days following the giving of such notice.  If Lessee gives such notice to Lesser andsuch Lenders and such repair or restoration is not commenced within thirty (30)days after receipt of such notice, this Lease shall terminate as of the datespecified in said notice.  If Lessor ora Lender commences the repair or restoration of the Premises within (30) daysafter the receipt of such notice, this Lease shall continue in full force andeffect.  **“Commence”** as used in this Paragraph 9.6 shall mean either theunconditional authorization of the preparation of the required plans, or thebeginning of the actual work on the Premises, whichever occurs first.

 

9.7           **HazardousSubstance Conditions.**  If aHazardous Substance Condition occurs, unless Lessee is legally responsibletherefor (In which case Lessee shall make the investigation and remediationthereof required by Applicable Requirements and this Lease shall continue infull force and effect, but subject

 

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to Lessor’s rights underParagraph 6.2(c) and Paragraph 13), Lessor may at Lessor’s option either (i)Investigate and remediate such Hazardous Substance Condition, if required, assoon as reasonably possible at Lessor’s expense, in which event this Leaseshall continue in full force and effect, or (ii) if the estimated cost toinvestigate and remediate such condition exceeds twelve (12) times the thenmonthly Base Rent or $100,000 whichever is greater, give written notice toLessee within thirty (30) days after receipt by Lessor of knowledge of theoccurrence of such Hazardous Substance Condition of Lessor’s desire to terminatethis Lease as of the date sixty (60) days following the date of suchnotice.  In the event Lessor elects togive such notice of Lessor’s intention to terminate this Lease, Lessee shallhave the right within ten (10) days after the receipt of such notice to givewritten notice to Lessor of Lessee’s commitment to pay for the excess costs of(a) Investigation and remediation of such Hazardous Substance Condition to theextent required by Applicable Requirements, over (b) an amount equal to twelve(12) times the then monthly Base Rent or $100,000, whichever is greater.  Lessee shall provide Lessor with the fundsrequired of Lessee or satisfactory assurance thereof within thirty (30) daysfollowing said commitment by Lessee, in such event this Lease shall continue infull force and effect, and Lessor shall proceed to make such investigation andremediation as soon as reasonably possible after the required funds areavailable.  If Lessee does not give suchnotice and provide the required funds or assurance thereof within the timeperiod specified above, this Lease shall terminate as of the date specified inLessor’s notice of termination.

 

9.8**           Termination- Advance Payments.**  Upontermination of this Lease pursuant to this Paragraph 9, Lessor shall return toLessee any advance payment made by Lessee to Lessor and so much of Lessee’sSecurity Deposit as has not been, or is not then required to be, used by Lessorunder the terms of this Lease.

 

9.9**           Waiverof Statutes.**  Lessor andLessee agree that the terms of this Lease shall govern the effect of any damageto or destruction of the Premises and the Building with respect to thetermination of this Lease and hereby waive the provisions of any present orfuture statute to the extent it is inconsistent herewith.

 

**10.          Real Property Taxes.**

 

10.1**         Paymentof Taxes.**  Lessor shall paythe Real Property Taxes, as defined in Paragraph 10.2, applicable to theIndustrial Center, and except as otherwise provided in Paragraph 10.3, any suchamounts shall be included in the calculation of Common Area Operating Expensesin accordance with the provisions of Paragraph 4.2.

 

10.2**         RealProperty Tax Definition.**  Asused herein, the term **“Real Property Taxes”**shall include any form of real estate tax or assessment, general, special,ordinary or extraordinary, and any license fee, commercial rental tax,improvement bond or bonds, levy of tax (other than inheritance, personal incomeor estate taxes) imposed upon the Industrial Center by any authority having thedirect or indirect power to tax, including any city, state or federalgovernment, or any school, agricultural, sanitary, fire, street, drainage, orother improvement district thereof, levied against any legal or equitableinterest of Lessor in the Industrial Center or any portion thereof, Lessor’sright to rent or other income therefrom, and/or Lessor’s business of leasingthe Premises.  The term **“Real Property Taxes”** shall also includeany tax, fee, levy, assessment or charge, or any increase therein.  Imposed by reason of events occurring, orchanges in Applicable Law taking effect, during the term of this Lease,including but not limited to a change in the ownership of the Industrial Centeror in the Improvements thereon, the execution of this Lease, or anymodification, amendment or transfer thereof, and whether or not contemplated bythe Parties. In calculating Real Property Taxes for any calendar year, the RealProperty Taxes for any real estate tax year shall be included in thecalculation of Real Property Taxes for such calendar year based upon the numberof days which such calendar year and tax year have in common.

 

10.3**         AdditionalImprovements.**  Common AreaOperating Expenses shall not include Real Property Taxes specified in the taxassessor’s records and work sheets as being caused by additional improvementsplaced upon the Industrial Center by other lessees or by Lessor for theexclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay toLessor at the time Common Area Operating Expenses are payable under Paragraph4.2, the entirety of any increase in Real Property Taxes if assessed solely byreason of Alterations, Trade Fixtures of Utility Installations placed upon thePremises by Lessee or at Lessee’s request.

 

10.4**         JointAssessment.**  If the Buildingis not separately assessed, Real Property Taxes allocated to the Building shallbe an equitable proportion of the Real Property Taxes for all of the land andimprovements included within the tax parcel assessed, such proportion to bedetermined by Lessor from the respective valuations assigned in the assessor’swork sheets or such other information as may be reasonably available.  Lessor’s reasonable determination thereof,in good faith, shall be conclusive.

 

10.5**         Lessee’sProperty Taxes.**  Lessee shallpay prior to delinquency all taxes assessed against and levied uponLessee-Owned Alterations and Utility Installations, Trade Fixtures,furnishings, equipment and all personal property of Lessee contained in thePremises or stored within the Industrial Center.  When possible, Lessee shall cause its Lessee-Owned Alterationsand Utility Installations, Trade Fixtures, furnishings, equipment and all otherpersonal property to be assessed and billed separately from the real propertyof Lessor.  If any of Lessee’s saidproperty shall be assessed with Lessor’s real property, Lessee shall pay Lessorthe taxes attributable to Lessee’s property within ten (10) days after receiptof a written statement setting forth the taxes applicable to Lessee’s property.

 

**11.          Utilities.**  Lessee shall pay directly for all utilitiesand services supplied to the Premises, including but not limited toelectricity, telephone, security, gas and cleaning of the Premises, togetherwith any taxes thereon.  If any such utilitiesor services are not separately metered to the Premises or separately billed tothe Premises, Lessee shall pay to Lessor a reasonable proportion to bedetermined by Lessor of all such charges jointly metered or billed with otherpremises in the Building, in the manner and within the time periods set forthin Paragraph 4.2(d).

 

**12.          Assignment and Subletting.**

 

12.1         **Lessor’sConsent Required.**

 

(a)           Lessee shall not voluntarily or byoperation of law assign, transfer, mortgage or otherwise transfer or encumber(collectively, “assign”) or sublet all or any part of Lessee’s interest in thisLease or in the Premises without Lessor’s prior written consent given under andsubject to the terms of Paragraph 36.

 

(b)           A change in the control of Lesseeshall constitute an assignment requiring Lessor’s consent.  The transfer, on a cumulative basis, oftwenty-five percent (25%) or more of the voting control of Lessee shallconstitute a change in control for this purpose.

 

(c)           The involvement of Lessee or itsassets in any transaction, or series of transactions (by way of merger, sale,acquisition, financing, refinancing, transfer, leveraged buy-out or otherwise),whether or not a formal assignment or hypothecation of this Lease or Lessee’sassets occurs, which results or will result in a reduction of the Net Worth ofLessee, as hereinafter defined, by an amount equal to or greater thantwenty-five percent (25%) of such Net Worth of Lessee as it was represented toLessor at the time of full execution and delivery of this Lease or at the timeof the most recent assignment to which Lessor has consented, or as it existsimmediately prior to said transaction or transactions constituting suchreduction, at whichever time said Net Worth of Lessee was or is greater, shallbe considered as assignment of this Lease by Lessee to which Lessor mayreasonably withhold its consent.  **“Net Worth of Lessee”** for purposes of thisLease shall be the net worth of Lessee (excluding any Guarantors) establishedunder generally accepted accounting principles consistently applied.

 

(d)           An assignment of subletting ofLessee’s interest in this Lease without Lessor’s specific prior written consentshall, at Lessor’s option, be a Default curable after notice per Paragraph13.1, or a non-curable Breach without the necessity of any notice and graceperiod.  If Lessor elects to treat suchunconsented to assignment or subletting as a non-curable Breach, Lessor shallhave the right to either: (i) terminate this Lease, or (ii) upon thirty (30)days’ written notice (**“Lessor’s Notice”**),increase the monthly Base Rent for the Premises to the greater of the then fairmarket rental value of the Premises, as reasonably determined by Lessor, or onehundred ten percent (110%) of the Base Rent then in effect.  Pending determination of the new fair marketrental value, if disputed by Lessee, Lessee shall pay the amount set forth inLessor’s Notice, with any overpayment credited against the next installment(s)of Base Rent coming due, and any underpayment for the period retroactively tothe effective date of the adjustment being due and payable immediately upon thedetermination thereof.  Further, in theevent of such Breach and rental adjustment, (i) the purchase price of anyoption to purchase the Premises held by Lessee shall be subject to similaradjustment to the then fair market value as reasonably determined by Lessor(without the Lease being considered an encumbrance or any deduction fordepreciation or obsolescence, and considering the Premises at its highest andbest use and in good condition) or one hundred ten percent (110%) of the pricepreviously in effect, (ii) any index-oriented rental or price adjustmentformulas contained in this Lease shall be adjusted to require that the baseIndex be determined with reference to the Index applicable to the time of suchadjustment, and (iii) any fixed rental adjustments scheduled during theremainder of the Lease term shall be increased in the same ratio as the newrental bears to the Base Rent in effect immediately prior to the adjustmentspecified in Lessor’s Notice.

 

(e)           Lessee’s remedy for any breach ofthis Paragraph 12.1 by Lessor shall be limited to compensatory damages and/orinjunctive relief.

 

12.2         **Termsand Conditions Applicable to Assignment and Subletting**

 

(a)           Regardless of Lessor’s consent, anyassignment or subletting shall not (i) be effective without the express writtenassumption by such assignee or sublessee of the obligations of Lessee underthis Lease, (ii) release Lessee of any obligations hereunder, nor (iii) alterthe primary liability of Lessee for the payment of Base Rent and other sums dueLessor hereunder or for the performance of any other obligations to beperformed by Lessee under this Lease.

 

(b)           Lessor may accept any rent orperformance of Lessee’s obligations from any person other than Lessee pendingapproval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment northe acceptance of any rent for performance shall constitute a waiver orestoppel of Lessor’s right to exercise its remedies for the Default or Breachby Lessee of any of the terms, covenants or conditions of this Lease.

 

(c)           The consent of Lessor to anyassignment or subletting shall not constitute a consent to any subsequentassignment or subletting by Lessee or to any subsequent or successiveassignment or subletting by the assignee or sublessee.  However, Lessor may consent to subsequentsublettings and assignments of the sublease or any amendments or modificationsthereto without notifying Lessee or anyone else liable under this Lease or thesublease and without obtaining their consent, and such action shall not relievesuch persons from liability under this Lease or the sublease.

 

(d)           In the event of any Default or Breachof Lessee’s obligation under this Lease, Lessor may proceed directly againstLessee, any Guarantors or anyone else responsible for the performance of theLessee’s obligations under this Lease, including any sublessee, without firstexhausting Lessor’s remedies against any other person or entity responsibletherefor to Lessor, or any security held by Lessor.

 

(e)           Each request for consent to anassignment or subletting shall be in writing, accompanied by informationrelevant to Lessor’s determination as to the financial and operationalresponsibility and appropriateness of the proposed assignee or sublessee,including but not limited to the intended use and/or required modification ofthe Premises, if any, together with a non-refundable deposit of $1,000 or tenpercent (10%) of the monthly Base Rent applicable to the portion of thePremises which is the subject of the proposed assignment or sublease, whicheveris greater, as reasonable consideration for Lessor’s considering and processingthe request for consent.  Lessee agreesto provide Lessor with such other or additional information and/ordocumentation as may be reasonably requested by Lessor.

 

(f)            Any assignee of, or sublessee under,this Lease shall, by reason of accepting such assignment or entering into suchsublease, be deemed, for the benefit of Lessor, to have assumed and agreed toconform and comply with each and every term, covenant, condition and obligationherein to be observed or performed by Lessee during the term of said assignmentor sublease, other than such obligations as are contrary to or inconsistentwith provisions of an assignment or sublease to which Lessor has specificallyconsented in writing.

 

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(g)           The occurrence of a transactiondescribed in Paragraph 12.2(c) shall give Lessor the right (but not theobligation) to require that the Security Deposit be increased by an amountequal to six (6) times the then monthly Base Rent, and Lessor may make theactual receipt by Lessor of the Security Deposit increase a condition toLessor’s consent to such transaction.

 

(h)           Lessor, as a condition to giving itsconsent to any assignment or subletting, may require that the amount andadjustment schedule of the rent payable under this Lease be adjusted to what isthen the market value and/or adjustment schedule for property similar to thePremises as then constituted, as determined by Lessor.

 

12.3     **Additional Terms and Conditions Applicable to Subletting**.  The following terms and conditions shallapply to any subletting by Lessee of all or any part of the Premises and shallbe deemed included in all subleases under this Lease whether or not expresslyincorporated therein:

 

(a)           Lessee hereby assigns and transfersto Lessor all of Lessee’s interest in all rentals and income arising from anysublease of all or a portion of the Premises heretofore or hereafter made byLessee, and Lessor may collect such rent and income and apply same towardLessee’s obligations under this Lease; provided, however, that until a Breach(as defined in Paragraph 13.1) shall occur in the performance of Lessee’sobligations under this Lease, Lessee may, except as otherwise provided in thisLease, receive, collect and enjoy the rents accruing under such sublease.  Lessor shall not, by reason of the foregoingprovision or any other assignment of such sublease to Lessor, nor by reason ofthe collection of the rents from a sublessee, be deemed liable to the sublesseefor any failure of Lessee to perform and comply with any of Lessee’sobligations to such sublessee under such Sublease.  Lessee hereby irrevocably authorizes and directs any suchsublessee, upon receipt of a written notice from Lessor stating that a Breachexists in the performance of Lessee’s obligations under this Lease, to pay toLessor the rents and other charges due and to become due under thesublease.  Sublessee shall rely upon anysuch statement and request from Lessor and shall pay such rents and othercharges to Lessor without any obligation or right to inquire as to whether suchBreach exists and notwithstanding any notice from or claim from Lessee to thecontrary.  Lessee shall have no right orclaim against such sublessee, or, until the Breach has been cured, againstLessor, for any such rents and other charges so paid by said sublessee toLessor.

 

(b)           In the event of a Breach by Lessee inthe performance of its obligations under this Lease, Lessor, at its option andwithout any obligation to do so, may require any sublessee to attorn to Lessor,in which event Lessor shall undertake the obligations of the sublessor undersuch sublease from the time of the exercise of said option to the expiration ofsuch sublease; provided, however, Lessor shall not be liable for any prepaidrents or security deposit paid by such sublessee to such sublessor or for anyother prior defaults or breaches of such sublessor under such sublease.

 

(c)           Any matter or thing requiring theconsent of the sublessor under a sublease shall also require the consent ofLessor herein.

 

(d)           No sublessee under a subleaseapproved by Lessor shall further assign or sublet all or any part of thePremises without Lessor’s prior written consent.

 

(e)           Lessor shall deliver a copy of anynotice of Default or Breach by Lessee to the sublessee, who shall have theright to cure the Default of Lessee within the grace period, if any, specifiedin such notice. The sublessee shall have a right of reimbursement and offsetfrom and against Lessee for any such Defaults cured by the sublessee.

 

**13**.      **Default; Breach; Remedies.**

 

13.1     **Default; Breach.** Lessor and Lessee agree that if an attorneyis consulted by Lessor in connection with a Lessee Default or Breach (ashereinafter defined), $350.00 is a reasonable minimum sum per such occurrencefor legal services and costs in the preparation and service of a notice ofDefault, and that Lessor may include the cost of such services and costs insaid notice as rent due and payable to cure said default. A**“Default”** by Lessee is defined as afailure by Lessee to observe, comply with or perform any of the terms,covenants, conditions or rules applicable to Lessee under this Lease. A**“Breach”** by Lessee is defined as theoccurrence of any one or more of the following Defaults, and, where a graceperiod for cure after notice is specified herein, the failure by Lessee to curesuch Default prior to the expiration of the applicable grace period, and shallentitle Lessor to pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:

 

(a)           The vacating of the Premises withoutthe intention to reoccupy same, or the abandonment of the Premises.

 

(b)           Except as expressly otherwiseprovided in this Lease, the failure by Lessee to make any payment of Base Rent,Lessee’s Share of Common Area Operating Expenses, or any other monetary paymentrequired to be made by Lessee hereunder as and when due, the failure by Lesseeto provide Lessor with reasonable evidence of insurance or surety bond requiredunder this Lease, or the failure of Lessee to fulfill any obligation under thisLease which endangers or threatens life or property, where such failurecontinues for a period of three (3) days following written notice thereof by oron behalf of Lessor to Lessee.

 

(c)           Except as expressly otherwiseprovided in this Lease, the failure by Lessee to provide Lessor with reasonablewritten evidence (in duly executed original form, if applicable) of (i)compliance with Applicable Requirements per Paragraph 6.3, (ii) the inspection,maintenance and service contracts required under Paragraph 7.1(b), (iii) therescission of an unauthorized assignment or subletting per Paragraph 12.1, (iv)a Tenancy Statement per Paragraphs 16 or 37, (v) the subordination ornon-subordination of this Lease per Paragraph 30, (vi) the guaranty of theperformance of Lessee’s obligations under this Lease if required underParagraphs 1.11 and 37, (vii) the execution of any document requested underParagraph 42 (easements), or (viii) any other documentation or informationwhich Lessor may reasonably require of Lessee under the terms of this lease,where any such failure continues for a period of ten (10) days followingwritten notice by or on behalf of Lessor to Lessee.

 

(d)           A Default by Lessee as to the terms,covenants, conditions or provisions of this Lease, or of the rules adoptedunder Paragraph 40 hereof that are to be observed, complied with or performedby Lessee, other than those described in Subparagraphs 13.1(a), (b) or (c),above, where such Default continues for a period of thirty (30) days afterwritten notice thereof by or on behalf of Lessor to Lessee; provided, however,that if the nature of Lessee’s Default is such that more than thirty (30) daysare reasonably required for its cure, then it shall not be deemed to be aBreach of this Lease by Lessee if Lessee commences such cure within said thirty(30) day period and thereafter diligently prosecutes such cure to completion.

 

                                (e)           Theoccurrence of any of the following events: (i) the making by Lessee of anygeneral arrangement or assignment for the benefit of creditors; (ii) Lessee’sbecoming a “debtor” as defined in 11 U.S. Code Section 101 or any successorstatute thereto (unless, in the case of a petition filed against Lessee, thesame is dismissed within sixty (60) days); (iii) the appointment of a trusteeor receiver to take possession of substantially all of Lessee’s assets locatedat the Premises or of Lessee’s interest in this Lease, where possession is notrestored to Lessee within thirty (30) days; or (iv) the attachment, executionor other judicial seizure of substantially all of Lessee’s assets located atthe Premises or of Lessee’s interest in this Lease, where such seizure is notdischarged within thirty (30) days; provided, however, in the event that anyprovision of this Subparagraph 13.1(e) is contrary to any applicable law, suchprovision shall be of no force or effect, and shall not affect the validity ofthe remaining provisions.

 

(f)            The discovery by Lessor that anyfinancial statement of Lessee or of any Guarantor, given to Lessor by Lessee orany Guarantor, was materially false.

 

(g)           If the performance of Lessee’sobligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii)the termination of a Guarantor’s liability with respect to this Lease otherthan in accordance with the terms of such guaranty, (iii) a Guarantor’sbecoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’srefusal to honor the guaranty, or (v) a Guarantor’s breach of its guarantyobligation on an anticipatory breach basis, and Lessee’s failure, within sixty(60) days following written notice by or on behalf of Lessor to Lessee of anysuch event, to provide Lessor with written alternative assurances of security,which, when coupled with the then existing resources of Lessee, equals orexceeds the combined financial resources of Lessee and the Guarantors thatexisted at the time of execution of this Lease.

 

13.2**     Remedies**.  If Lessee fails to perform any affirmativeduty or obligation of Lessee under this Lease, within ten (10) days afterwritten notice to Lessee (or in case of an emergency, without notice), Lessormay at its option (but without obligation to do so), perform such duty orobligation on Lessee’s behalf, including but not limited to the obtaining ofreasonably required bonds, insurance policies, or governmental licenses, permitsor approvals.  The costs and expenses ofany such performance by Lessor shall be due and payable by Lessee to Lessorupon invoice therefor.  If any checkgiven to Lessor by Lessee shall not be honored by the bank upon which it isdrawn, Lessor, at its own option, may require all future payments to be madeunder this Lease by Lessee to be made only by cashier’s check.  In the event of a Breach of this Lease byLessee (as defined in Paragraph 13.1), with or without further notice ordemand, and without limiting Lessor in the exercise of any right or remedywhich Lessor may have by reason of such Breach, Lessor may:

 

(a)           Terminate Lessee’s right topossession of the Premises by any lawful means, in which case this Lease andthe term hereof shall terminate and Lessee shall immediately surrenderpossession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) theworth at the time of the award of the unpaid rent which had been earned at thetime of termination; (ii) the worth at the time of award of the amount by whichthe unpaid rent which would have been earned after termination until the timeof award exceeds the amount of such rental loss that the Lessee proves couldhave been reasonably avoided; (iii) the worth at the time of award of theamount by which the unpaid rent for the balance of the term after the time ofaward exceeds the amount of such rental loss that the Lessee proves could bereasonably avoided; and (iv) any other amount necessary to compensate Lessorfor all the detriment proximately caused by the Lessee’s failure to perform itsobligations under this Lease or which in the ordinary course of things would belikely to result therefrom, including but not limited to the cost of recoveringpossession of the Premises, expenses of reletting, including necessaryrenovation and alteration of the Premises, reasonable attorneys’ fees, and thatportion of any leasing commission paid by Lessor in connection with this Leaseapplicable to the unexpired term of this Lease.  The worth at the time of award of the amount referred to inprovision (iii) of the immediately preceding sentence shall be computed bydiscounting such amount at the discount rate of the Federal Reserve Bank of SanFrancisco or the Federal Reserve Bank District in which the Premises arelocated at the time of award plus one percent (1%).  Efforts by Lessor to mitigate damages caused by Lessee’s Defaultor Breach of this Lease shall not waive Lessor’s right to recover damages underthis Paragraph 13.2.  If termination ofthis Lease is obtained through the provisional remedy of unlawful detainer,Lessor shall have the right to recover in such proceeding the unpaid rent anddamages as are recoverable therein, or Lessor may reserve the right to recoverall or any part thereof in a separate suit for such rent and/or damages.  If a notice and grace period required underSubparagraph 13.1(b), (c) or (d) was not previously given, a notice to pay rentor quit, or to perform or quit, as the case may be, given to Lessee under anystatute authorizing the forfeiture of leases for unlawful detainer shall alsoconstitute the applicable notice for grace period purposes required bySubparagraph 13.1(b), (c) or (d).  Insuch case, the applicable grace period under the unlawful detainer statue shallrun concurrently after the one such statutory notice, and the failure of Lesseeto cure the Default within the greater of the two (2) such grace periods shallconstitute both an unlawful detainer and a Breach of this Lease entitlingLessor to the remedies provided for in this Lease and/or by said statute.

 

(b)           Continue the Lease and Lessee’s rightto possession in effect (in California under California Civil Code Section1951.4) after Lessee’s Breach and recover the rent as it becomes due, providedLessee has the right to sublet or assign, subject only to reasonablelimitations.  Lessor and Lessee agreethat the limitations on assignment and subletting in this Lease are reasonable.  Acts of maintenance or preservation, effortsto relet the Premises, or the appointment of a receiver to protect the Lessor’sinterest under this Lease, shall not constitute a termination of the Lessee’sright to possession.

 

(c)           Pursue any other remedy now orhereafter available to Lessor under the laws or judicial decisions of the statewherein the Premises are located.

 

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(d)           The expiration or termination of thisLease and/or the termination of Lessee’s right to possession shall not relieveLessee from liability under any indemnity provisions of this Lease as tomatters occurring or accruing during the term hereof or by reason of Lessee’soccupancy of the Premises;

 

13.3     **Inducement Recapture In Event of Breach.**  Any agreement by Lessor for the free orabated rent or other, charges applicable to the Premises, or for the giving orpaying by Lessor to or for Lessee of any cash or other bonus, inducement orconsideration for Lessee’s entering into this Lease, all of which concessionsare hereinafter referred to as **“InducementProvisions”** shall be deemed conditioned upon Lessee’s full andfaithful performance of all of the terms, covenants and conditions of thisLease to be performed or observed by Lessee during the term hereof as the samemay be extended.  Upon the occurrence ofa Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any suchInducement Provision shall automatically be deemed deleted from this Lease andof no further force or effect, and any rent, other charge, bonus, inducement orconsideration theretofore abated, given or paid by Lessor under such anInducement Provision shall be immediately due and payable by Lessee to Lessor,and recoverable by Lessor, as additional rent due under this Lease,notwithstanding any subsequent cure of said Breach by Lessee.  The acceptance by Lessor of rent or the cureof the Breach which initiated the operation of this Paragraph 13.3 shall not bedeemed a waiver by Lessor of the provisions of this Paragraph 13.3 unlessspecifically so stated in writing by Lessor at the time of such acceptance.

 

13.4     **Late Charges: **Lesseehereby acknowledges that late payment by Lessee to Lessor of rent and othersums due hereunder will cause Lessor to incur costs not contemplated by thisLease, the exact amount of which will be extremely difficult to ascertain.  Such costs include, but are not limited to,processing and accounting charges, and late charges which may be imposed uponLessor by the terms of any ground lease, mortgage or deed of trust covering thePremises. Accordingly, if any installment of rent or other sum due from Lesseeshall not be received by Lessor or Lessor’s designee within ten (10) days aftersuch amount shall be due, then, without any requirement for notice to Lessee,Lessee shall pay to Lessor a late charge equal to six percent (6%) of suchoverdue amount.  The parties herebyagree that such late charge represents a fair and reasonable estimate of thecosts Lessor will incur by reason of late payment by Lessee.  Acceptance of such late charge by Lessorshall in no event constitute a waiver of Lessee’s Default or Breach withrespect to such overdue amount, nor prevent Lessor from exercising any of theother rights and remedies granted hereunder, in the event that a late charge ispayable hereunder, whether or not collected, for three (3) consecutiveinstallments of Base Rent, then notwithstanding Paragraph 4.1 or any otherprovision of this Lease to the contrary, Base Rent shall, at Lessor’s option,become due and payable quarterly in advance.

 

13.5     **Breach by Lessor. **Lessorshall not be deemed in breach of this Lease unless Lessor falls within areasonable time to perform an obligation required to be performed byLessor.  For purposes of this Paragraph13.5, a reasonable time shall in no event be less than thirty (30) days afterreceipt by Lessor, and by and Lender(s) whose name and address shall have beenfurnished to Lessee in writing for such purpose, of written notice specifyingwherein such notice specifying wherein such obligation of Lessor has not beenperformed; provided, however, that if the nature of Lessor’s obligation is suchthat more than thirty (30) days after such notice are reasonably required forits performance, then Lessor shall not be in breach of this Lease ifperformance is commenced within such thirty (30) day period and thereafterdiligently pursed to completion.

 

14.       **Condemnation. **If thePremises or any portion thereof are taken under the power of eminent domain orsole under the threat of the exercise of said power (all of which are hereincalled “condemnation”), this Lease shall terminate as to the part so taken asof the date the condemning authority takes title or possession, whichever firstoccurs. If more than ten percent (10%) of the floor area of the Premises, ormore than twenty-five percent (25%) of the portion of the Common Areasdesignated for Lessee’s parking, is taken by condemnation, Lessee may, atLessee’s option, to be exercised in writing within ten (10) days after Lessorshall have given Lessee written notice of such taking (or in the absence ofsuch notice, within (10) days after the condemning authority shall have takenpossession) terminate this Lease as of the date the condemning authority takessuch possession. If Lessee does not terminate this Lease in accordance with theforegoing, this Lease shall remain in full force and effect as to the portionof the Premises remaining, except that the Base Rent shall be reduced in thesame proportion as the rentable floor area of the Premises taken bears to thetotal rentable floor area of the Premises. No reduction of Base Rent shall occur if the condemnation does not applyto any portion of the Premises.  Anyaward for the taking of all or any part of the Premises under the power ofeminent domain or any payment made under threat of the exercise of such powershall be the property of Lessor, whether such award shall be made ascompensation for diminution of value of the leasehold or for the taking of thefee, or as severance damages; provided, however, that Lessee shall be entitledto any compensation, separately awarded to Lessee for Lessee’s relocationexpenses and/or loss of Lessee’s Trade Fixtures.  In the event that this Lease is not terminated by reason of suchcondemnation, Lessor shall to the extent of its net severance damages received,over and above Lessee’s Share of the legal and other expenses incurred byLessor in the condemnation matter, repair any damage to the Premises caused bysuch condemnation authority, Lessee shall be responsible for the payment of anyamount in excess of such net severance damages required to complete suchrepair.

 

**15.****      Brokers’ Fees.**

** **

15.1         **ProcuringCause. **The Broker(s) namedin Paragraph 1.10 is/are the procuring cause of this Lease.

 

15.2         **AdditionalTerms. **Under Lessor andBroker(s). have otherwise agreed in writing, Lessor agrees that: (a) if Lesseeexercise any Option (as defined in Paragraph 39.1) granted under this Lease orany Option subsequently granted, or (b) if Lessee acquires any rights to thePremises or other premises in which Lessor has an interest, or (c) if Lesseeremains in possession of the Premises with the consent of Lessor after theexpiration of the term of this Lease after having failed to exercise an Option,or (d) if said brokers are the procuring cause of any other lease or saleentered into between the Parties pertaining to the Premises and/or any adjacentproperty in which Lessor has an interest, or (e) if Base Rent is increased,whether by agreement or operation of an escalation clause herein, then as toany of said transactions, Lessor shall pay said Broker(s) a fee in accordancewith the schedule of said Broker(s) in effect at the time of the execution ofthis Lease.

 

15.3**         Assumptionof Obligations.**  Any buyer ortransferee of Lessor’s interest in this Lease, whether such transfer is byagreement or by operation of law, shall be deemed to have assumed Lessor’sobligation under this Paragraph 15. Each Broker shall be an intended third party beneficiary of theprovisions of Paragraph 1.10 and of this Paragraph 15 to the extent of itsinterest in any commission arising from this Lease and may enforce that rightdirectly against Lessor and its successors.

 

15.4**         Representationsand Warranties. **Lessee andLessor each represent and warrant to the other that it has had no dealings withany person, firm, broker or finder other than as named in Paragraph 1.10(a) inconnection with the negotiation of this Lease and/or the consummation of thetransaction contemplated hereby, and that no broker or other person, firm orentity other than said named Broker(s) is entitled to any commission orfinder’s fee in connection with said transaction .  Lessee and Lessor do each hereby agree to indemnify, protect,defend and hold the other harmless from and against liability for compensationor charges which may be claimed by any such unnamed broker, finder or othersimilar party by reason of any dealings of actions of the indemnifying Party,including any costs, expenses, and/or attorneys’ fees reasonably incurred withrespect thereto.

 

**16.          Tenancy and Financial Statements.**

 

16.1         **TenancyStatement. **Each Party (as **“Responding Party”**) shall within ten (10)days after written notice from the other Party (the**“Requesting Party”**.) execute, acknowledge and deliver to theRequesting Party a statement in writing in a form similar to the then mostcurrent **“Tenancy Statement”** formpublished by the American Industrial Real Estate Association, plus suchadditional information, confirmation and/or statements as may be reasonablyrequested by the Requesting Party.

 

16.2         **FinancialStatement. **If Lessor desiresto finance, refinance, or sell the Premises or the Building, or any partthereof, Lessee and all Guarantors shall deliver to any potential lender orpurchaser designated by Lessor such financial statements of Lessee and suchGuarantors as may be reasonably required by such lender or purchaser, includingbut not limited to Lessee’s financial statements for the past three (3)years.  All such financial statementsshall be received by Lessor and such lender or purchaser in confidence andshall be used only for the purposes herein set forth.

 

**17.****      Lessor’sLiability.**  The term **“Lessor”**as used herein shall mean theowner or owners at the time in question of the fee title to the Premises.  In the event of a transfer of Lessor’s titleor Interest in the Premises or in this Lease, Lessor shall deliver to thetransferee or assignee (in cash or by credit) any unused Security Deposit heldby Lessor at the time of such transfer or assignment.  Except as provided in Paragraph 15.3, upon such transfer orassignment and delivery of the Security Deposit, as aforesaid, the prior Lessorshall be relieved of all liability with respect to the obligations and/orcovenants under this Lease thereafter to be performed by the Lessor.  Subject to the foregoing, the obligationsand/or covenants in this Lease to be performed by the Lessor shall be bindingonly upon the Lessor as hereinabove defined.

 

**18.****      Severability.  **The invalidity of any provision of thisLease, as determined by a court of competent jurisdiction, shall in no wayaffect the validity of any other provision hereof.

 

**19.****      Interest onPast-Due Obligations. **Any monetarypayment due Lessor hereunder, other than late charges, not received by Lessorwithin ten (10) days following the date on which it was due, shall bearinterest from the date due at the prime rate charged by the largest statechartered bank in the state in which the Premises are located plus four percent(4%) per annum, but not exceeding the maximum rate allowed by law, in additionto the potential late charge provided for in Paragraph 13.4.

 

**20.****      Time of Essence.**  Time is of the essence with respect to theperformance of all obligations to be performed or observed by the Parties underthis Lease.

 

**21.****      RentDefined. **All monetary obligationsof Lessee to Lessor under the terms of this Lease are deemed to be rent.

 

**22.****      No Prior orother Agreements; Broker Disclaimer. **ThisLease contains all agreements between the Parties with respect to any mattermentioned herein, and no other prior or contemporaneous agreement orunderstanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that ithas made, and is relying solely upon, its own investigation as to the nature,nature, quality, character and financial responsibility of the other Party tothis Lease and as to the nature, quality and character of the Premises.  Brokers have no responsibility with respectthereto or with respect to any default or breach hereof by either Party.  Each Broker shall be an intended third partybeneficiary of the provisions of this Paragraph 22.

 

**23.****      Notices.**

** **

23.1**         NoticeRequirements. **All noticesrequired or permitted by this Lease shall be in writing and may be delivered inperson (by hand or by messenger or courier service) or may be sent by regular,certified or registered mail or U.S. Postal Service Express Mail, with postageprepaid, or by facsimile transmission during normal business hours, and shallbe deemed sufficiently given if served in manner specified in this Paragraph23.  The addresses noted adjacent to aParty’s signature on this Lease shall be that Party’s address for delivery ormailing of notice purposes.  EitherParty may by written notice to the other specify a different address for noticepurposes, except that upon Lessee’s taking possession of the Premises, thePremises shall constitute Lessee’s address for the purpose of mailing ordelivering notices to Lessee.  A copy ofall notices required or permitted to be given to Lessor hereunder shall beconcurrently transmitted to such party or parties at such addresses as Lessormay from time to time hereafter designate by written notice to Lessee.

 

23.2**         Date ofNotice. **Any notice sent byregistered or certified mail, return receipt requested, shall be deemed givenon the date of delivery shown on the receipt card, or if no delivery date isshown, the postmark thereon.  If sent byregular mail, the notice shall be deemed given forty-eight (48) hours after thesame is addressed as required herein and mailed with postage prepaid.  Notices delivered by United States ExpressMail or overnight courier that guarantees next day

 

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delivery shall be deemed giventwenty-four (24) hours after delivery of the same to the United States PostalService or courier.  If any notice istransmitted by facsimile transmission or similar means, the same shall bedeemed served or delivered upon telephone or facsimile confirmation of receiptof the transmission thereof, provided a copy is also delivered via delivery ormail. If notice is received on a Saturday or a Sunday or a legal holiday, itshall be deemed received on the next business day.

 

**24.****      Waivers.**  No waiver by Lessor of the Default or Breachof any term, covenant or condition hereof by Lessee, shall be deemed a waiverof any other term, covenant or condition hereof, or of any subsequent Defaultor Breach by Lessee of the same or any other term, covenant or conditionhereof. Lessor’s consent to, or approval of, any such act shall not be deemedto render unnecessary the obtaining of Lessor’s consent to, or approval of, anysubsequent or similar act by Lessee, or be construed as the basis of anestoppel to enforce the provision or provisions of this Lease requiring suchconsent.  Regardless of Lessor’sknowledge of a Default or Breach at the time of accepting rent, the acceptanceof rent by Lessor shall not be a waiver of any Default or Breach by Lessee ofany provision hereof.  Any payment givenLessor by Lessee may be accepted by Lessor on account of moneys or damages dueLessor, notwithstanding any qualifying statements or conditions made by Lesseein connection therewith, which such statements and/or conditions shall be of noforce or effect whatsoever unless specifically agreed to in writing by Lessorat or before the time of deposit of such payment.

 

**25.****      Recording.**  Either Lessor or Lessee shall, upon requestof the other, execute, acknowledge and deliver to the other a short formmemorandum of this Lease for recording purposes.  The Party requesting recordation shall be responsible for paymentof any fees or taxes applicable thereto.

 

**26.****      No Right ToHoldover. **Lessee has no right toretain possession of the Premises or any part thereof beyond the expiration orearlier termination of this Lease.  Inthe event that Lessee holds over in violation of this Paragraph 26 then theBase Rent payable from and after the time of the expiration or earlier terminationof this Lease shall be increased to two hundred percent (200%) of the Base rentapplicable during the month immediately preceding such expiration or earliertermination.  Nothing contained hereinshall be construed as a consent by Lessor to any holding over by Lessee.

 

**27.****      Cumulative Remedies. **No remedy or election hereunder shall bedeemed exclusive but shall, wherever possible, be cumulative with all otherremedies at law or in equity.

 

**28.****      Covenants andConditions.**  All provisions of thisLease to be observed or performed by Lessee are both covenants and conditions.

 

**29.****      Binding Effect;Choice of Law. **This Lease shall bebinding upon the Parties, their personal representatives, successors andassigns and be governed by the laws of the State in which the Premises arelocated.  Any litigation between theParties hereto concerning this Lease shall be initiated in the country in whichthe Premises are located.

 

**30.****      Subordination;Attornment; Non-Disturbance.**

 

30.1**         Subordination. **This Lease and any Option grantedhereby shall be subject and subordinate to any ground lease, mortgage, deed oftrust, or other hypothecation or security device (collectively, **“Security Device”**), now or hereafter placedby Lessor upon the real property of which the Premises are a part, to any andall advances made on the security thereof, and to all renewals, modifications,consolidations, replacements and extensions thereof.  Lessee agrees that the Lenders holding any such Security Deviceshall have no duty, liability or obligation to perform any of the obligations ofLessor under this Lease, but that in the event of Lessor’s default with respectto any such obligation, Lessee will give any Lender whose name and address havebeen furnished Lessee in writing for such purpose notice of Lessor’s defaultpursuant to Paragraph 13.5.  If anyLender shall elect to have this Lease and/or any Option granted hereby superiorto the lien of its Security Device and shall give written notice thereof toLessee, this Lease and such Options shall be deemed prior to such SecurityDevice, notwithstanding the relative dates of the documentation or recordationthereof.

 

30.2         **Attornment. **Subject to the non-disturbanceprovisions of Paragraph 30.3, Lessee agrees to attorn to a Lender or any otherparty who acquires ownership of the Premises by reason of a foreclosure of aSecurity Device, and that in the event of such foreclosure, such new ownershall not: (i) be liable for any act or omission of any prior lessor or withrespect to events occurring prior to acquisition of ownership, (ii) be subjectto any offsets or defenses which Lessee might have against any prior lessor, or(iii) be bound by prepayment of more than one month’s rent.

 

30.3**         Non-Disturbance. **With respect to Security Devicesentered into by Lessor after the execution of this lease, Lessee’ssubordination of this Lease shall be subject to receiving assurance (a“non-disturbance agreement”) from the Lender that Lessee’s possession and thisLease, including any options to extend the term hereof, will not be disturbedso long as Lessee is not in Breach hereof and attorns to the record owner ofthe Premises.

 

30.4**         Self-Executing. **The agreements contained in thisParagraph 30 shall be effective without the execution of any further documents;provided, however, that upon written request from Lessor or a Lender inconnection with sale, financing or refinancing of Premises, Lessee and Lessorshall execute such further writings as may be reasonably required to separatelydocument any such subordination or non-subordination, attornment and/ornon-disturbance agreement as is provided for herein.

 

**31.          Attorney’s Fees. **If any Party orBroker brings an action or proceeding to enforce the terms hereof or declarerights hereunder, the Prevailing Party (as hereafter defined) in any suchproceeding, action, or appeal thereon, shall be entitled to reasonableattorneys’ fees.  Such fees may beawarded in the same suit or recovered in a separate suit,  whether or not such action or proceeding ispursued to decision or judgment.  Theterms “**Prevailing Party”**shallinclude, without limitation, a Party or Broker who substantially obtains ordefeats the relief sought, as the case may be, whether by compromise,settlement, judgment, or the abandonment by the other Party or Broker of itsclaim or defense.  The attorneys' feeaward shall not be computed in accordance with any court fee schedule, butshall be such as to fully reimburse all attorneys' fees reasonablyincurred.  Lessor shall be entitled toattorneys’ fees, costs and expenses incurred in preparation and service ofnotices of Default and consultations in connection therewith, whether or not alegal action is subsequently commenced in connection with such Default orresulting Breach.  Broker(s) shall beintended third party beneficiaries of this Paragraph 31.

 

**32.          Lessor’s Access; Showing Premises;Repairs.**Lessor and Lessor’s agents shall have theright to enter the Premises at any time, in the case of an emergency, andotherwise at reasonable times for the purpose of showing the same toprospective purchasers, lenders, or lessees, and making such alterations,repairs, improvements or additions to the Premises or to the Building, asLessor may reasonably deem necessary. Lessor may at any time place on or about the Premises or Building anyordinary “For Sale” signs and Lessor may at any time during the last onehundred eighty (180) days of the term hereof place on or about the Premises anyordinary “For Lease” signs.  All suchactivities of Lessor shall be without abatement of rent or liability to Lessee.

 

**33.          Auctions.**Lessee****shall not conduct, nor permit to beconducted, either voluntarily or involuntarily, any auction upon the Premiseswithout first having obtained Lessor’s prior written consent.  Notwithstanding anything to the contrary inthis Lease, Lessor shall not be obligated to exercise any standard ofreasonableness in determining whether to grant such consent.

 

**34.          Signs.**Lesseeshall not place any sign upon the exterior of the Premises or the Building,except that Lessee may, with Lessor’s prior written consent, install (but noton the roof) such signs as are reasonably required to advertise Lessee’s ownbusiness so long as such signs are in a location designated by Lessor andcomply with Applicable Requirements and the signage criteria established forthe Industrial Center by Lessor.  Theinstallation of any sign on the Premises by or for Lessee shall be subject tothe provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,Trade Fixtures and Alterations).  Unlessotherwise expressly agreed herein, Lessor reserves all rights to the use of theroof of the Building, and the right to install advertising signs on theBuilding, including the roof, which do not unreasonably interfere with theconduct of Lessee’s business; Lessor shall be entitled to all revenues fromsuch advertising signs.

 

**35.          Termination; Merger. **Unless specificallystated otherwise in writing by Lessor, the voluntary or other surrender of thisLease by Lessee, the mutual termination or cancellation hereof, or a terminationhereof by Lessor for Breach by Lessee, shall automatically terminate anysublease or lesser estate in the Premises; provided, however, Lessor shall, inthe event of any such surrender, termination or cancellation, have the optionto continue any one or all of any existing subtenancies.  Lessor’s failure within ten (10) daysfollowing any such event to make a written election to the contrary by writtennotice to the holder of any such lesser interest, shall constitute Lessor’selection to have such event constitute the termination of such interest.

 

**36.          Consents.**

 

(a)           Except for Paragraph 33 hereof(Auctions) or as otherwise provided herein, wherever in this Lease the consentof a Party is required to an act by or for the other Party, such consent shallnot be unreasonably withheld or delayed. Lessor’s actual reasonable costs and expenses (including but not limitedto architects’, attorneys’, engineers’, and other consultants’ fees) incurredin the consideration of, or response to, a request by Lessee for any Lessorconsent pertaining to this Lease or the Premises, including but not limited toconsents to an assignment a subletting or the presence or use of a HazardousSubstance, shall be paid by Lessee to Lessor upon receipt of an invoice and supportingdocumentation therefor.  In addition tothe deposit described in Paragraph 12.2(e), Lessor may, as a condition toconsidering any such request by Lessee, require that Lessee deposit with Lessoran amount of money (in addition to the Security Deposit held under Paragraph 5)reasonably calculated by Lessor to represent the cost Lessor will incur inconsidering and responding to Lessee’s request.  Any unused portion of said deposit shall be refunded to Lesseewithout interest.  Lessor’s consent toany act, assignment of this Lease or subletting of the Premises by Lessee shallnot constitute an acknowledgement that no Default or Breach by Lessee of thisLease exists, nor shall such consent be deemed a waiver of any then existingDefault or Breach, except as may be otherwise specifically stated in writing byLessor at the time of such consent.

 

(b)           All conditions to Lessor’s consentauthorized by this Lease are acknowledged by Lessee as being reasonable.  The failure to specify herein any particularcondition to Lessor’s consent shall not preclude the impositions by Lessor atthe time of consent of such further or other conditions as are then reasonablewith reference to the particular matter for which consent is being given.

 

**37.          Guarantor.**

 

37.1**     Form of Guaranty. **If there are to be any Guarantors ofthis Lease per Paragraph 1.11, the form of the guaranty to be executed by eachsuch Guarantor shall be in the form most recently published by the AmericanIndustrial Real Estate Association, and each such Guarantor shall have the sameobligations as Lessee under this lease, including but not limited to theobligation to provide the Tenancy Statement and information required inParagraph 16.

 

37.2**     AdditionalObligations of Guarantor. **It shallconstitute a Default of the Lessee under this Lease if any such Guarantor failsor refuses, upon reasonable request by Lessor to give: (a) evidence of the dueexecution of the guaranty called for by this Lease, including the authority ofthe Guarantor (and of the party signing on Guarantor’s behalf) to obligate suchGuarantor on said guaranty, and resolution of its board of directorsauthorizing the making of such guaranty, together with a certificate ofincumbency showing the signatures of the persons authorized to sign on itsbehalf, (b) current financial statements of Guarantor as may from time to timebe requested by Lessor, (c) a Tenancy Statement, or (d) written confirmationthat the guaranty is still in effect.

 

**38.****      QuietPossession. **Upon payment by Lesseeof the rent for the Premises and the performance of all of the covenants,conditions and provisions on Lessee’s part to be observed and performed underthis Lease, Lessee shall have quiet possession of the Premises for the entireterm hereof subject to all of the provisions of this Lease.

 

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**39.****      Options.**

 

39.1     **Definition.**  As used inthis Lease, the word “**Option**” hasthe following meaning: (a) the right to extend the term of this Lease or torenew this Lease or to extend or renew any lease that Lessee has on otherproperty of Lessor; (b) the right of first refusal to lease the Premises or theright of first offer to lease the Premises or the right of first refusal tolease other property of Lessor or the right of first offer to lease otherproperty of Lessor; (c) the right to purchase the Premises, or the right offirst refusal to purchase the Premises, or the right of first offer to purchasethe Premises, or the right to purchase other property of Lessor, or the right offirst refusal to purchase other property of Lessor, or the right of first offerto purchase other property of Lessor.

 

39.2     **Options Personal to Original Lessee.**  Each Option granted to Lessee in this Lease is personal to theoriginal Lessee named in Paragraph 1.1 hereof, and cannot be voluntarily orinvoluntarily assigned or exercised by any person or entity other than saidoriginal Lessee while the original Lessee is in full and actual possession ofthe Premises and without the intention of thereafter assigning orsubletting.  The Options, if any, hereingranted to Lessee are not assignable, either as a part of an assignment of thisLease or separately or apart therefrom, and no Option may be separated fromthis Lease in any manner, by reservation or otherwise.

 

39.3     **Multiple Options. **Inthe event that Lessee has any multiple Options to extend or renew this Lease, alater option cannot be exercised unless the prior Options to extend or renewthis Lease have been validly exercised.

 

39.4     **Effect of Default on Options.**

 

(a)           Lessee shall have no right toexercise an Option, notwithstanding any provision in the grant of Option to thecontrary: (i) during the period commencing with the giving of any notice ofDefault under Paragraph 13.1 and continuing until the noticed Default is cured,or (ii) during the period of time any monetary obligation due Lessor fromLessee is unpaid (without regard to whether notice thereof is given Lessee), or(iii) during the time Lessee is in Breach of this Lease, or (iv) in the eventthat Lessor has given to lessee three (3) or more notices of separate Defaultsunder Paragraph 13.1 during the twelve (12) month period immediately precedingthe exercise of the Option, whether or not the Defaults are cured.

 

(b)           The period of time within which anOption may be exercised shall not be extended or enlarged by reason of Lessee’sinability to exercise an Option because of the provisions of Paragraph 39.4(a).

 

(c)           All rights of Lessee under theprovisions of an Option shall terminate and be of no further force or effect,notwithstanding Lessee’s due and timely exercise of the Option, if, after suchexercise and during the term of this Lease, (i) Lessee fails to pay to Lessor amonetary obligation of Lessee for a period of thirty (30) days after suchobligation becomes due (without any necessity of Lessor to give notice thereofto Lessee), or (ii) Lessor gives to Lessee three (3) or more notices ofseparate Defaults under Paragraph 13.1 during any twelve (12) month period,whether or not the Defaults are cured, or (iii) if Lessee commits a Breach ofthis Lease.

 

**40.**          **Rulesand Regulations. **Lesseeagrees that it will abide by, and keep and observe all reasonable rules andregulations (“Rules and Regulations”) which Lessor may make from time to timefor the management, safety, care, and cleanliness of the grounds, the parkingand unloading of vehicles and the preservation of good order, as well as forthe convenience of other occupants or tenants of the Building and theIndustrial Center and their invitees.

 

**41.**          **SecurityMeasures.**  Lessee herebyacknowledges that the rental payable to Lessor hereunder does not include thecost of guard service or other security measures, and that Lessor shall have noobligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises,Lessee, its agents and invitees and their property from the acts of thirdparties.

 

**42.**          **Reservations.**  Lessor reserves the right, from time totime, to grant, without the consent or joinder of Lessee, such easements,rights of way, utility raceways, and dedications that Lessor deems necessary,and to cause the recordation of parcel maps and restrictions, so long as sucheasements, rights of way, utility raceways, dedications, maps and restrictionsdo not reasonably interfere with the use of the Premises by Lessee.  Lessee agrees to sign any documentsreasonably requested by Lessor to effectuate any such easement rights,dedication, map or restrictions.

 

**43.**          **PerformanceUnder Protest.**  If at anytime a dispute shall arise as to any amount or sum of money to be paid by oneParty to the other under the provisions hereof, the Party against whom theobligation to pay the money is asserted shall have the right to make payment“under protest” and such payment shall not be regarded as a voluntary paymentand there shall survive the right on the part of said Party to institute suitfor recovery of such sum.  If it shallbe adjudged that there was no legal obligation on the part of said Party to paysuch sum or any part thereof, said Party shall be entitled to recover such sumor so much thereof as it was not legally required to pay under the provisionsof this Lease.

 

**44.**          **Authority. **If either Party hereto is acorporation, trust, or general or limited partnership, each individualexecuting this Lease on behalf of such entity represents and warrants that heor she is duly authorized to execute and deliver this Lease on its behalf.  If Lessee is a corporation, trust or partnership,Lessee shall, within thirty (30) days after request by Lessor, deliver toLessor evidence satisfactory to Lessor of such authority.

 

**45.**          **Conflict.**  Any conflict between the printed provisionsof this Lease and the typewritten or handwritten provisions shall be controlledby the typewritten or handwritten provisions.

 

**46.**          **Offer. **Preparation of this Lease byeither Lessor or Lessee or Lessor’s agent or Lessee’s agent and submission ofsame to Lessee or Lessor shall not be deemed an offer to lease.  This Lease is not intended to be binding untilexecuted and delivered by all Parties hereto.

 

**47.**          **Amendments.**  This Lease may be modified only in writing,signed by the parties in interest at the time of the modification.  The Parties shall amend this Lease from timeto time to reflect any adjustments that are made to the Base Rent or other rentpayable under this Lease.  As long asthey do not materially change Lessee’s obligations hereunder, Lessee agrees tomake such reasonable non-monetary modifications to this Lease as may bereasonably required by an institutional insurance company or pension planLender in connection with the obtaining of normal financing or refinancing ofthe property of which the Premises are a part.

 

**48.**          **MultipleParties.**  Except as otherwiseexpressly provided herein, if more than one person or entity is named herein aseither Lessor or Lessee, the obligations of such multiple parties shall be thejoint and several responsibility of all persons or entities named herein assuch Lessor or Lessee.

 

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LESSOR AND LESSEE HAVECAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINEDHEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARYCONSENT THERETO.  THE PARTIES HEREBY AGREETHAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARECOMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR ANDLESSEE WITH RESPECT TO THE PREMISES.

 

IF THIS LEASEHAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY’S REVIEW ANDAPPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE CONDITION OF THEPROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS ORHAZARDOUS SUBSTANCES.  NO REPRESENTATIONOR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION ORBY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THELEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THETRANSACTION TO WHICH IT RELATES;  THEPARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGALAND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHERTHAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATEDSHOULD BE CONSULTED.

 

The parties hereto haveexecuted this Lease at the place and on the dates specified above theirrespective signatures.

 
| Executed at:                           | Carmel, CA                        |                            | Executed at:                     | Monterey, CA                |   |
|----------------------------------------|-----------------------------------|---------------------------------|----------------------------------|-----------------------------|--------|
|                                   |                              |                            |                             |                        |   |
| on:                                    |                              |                            | on:                              |                        |   |
|                                   |                              |
|                                   |                              |
| By LESSOR:                             | By LESSEE:                        |
|                                   |                              |
|                                   |                              | Monterey  County Bank           |                             |
|                                   |                              |
|                                   |                              | /s/ Charles  T. Chrietzberg Jr. |                             |
|                                   |                              |
| By:                                    | /s/  Jacqueline M. Clampett Jones |                            | By:                              | Charles T.  Chrietzberg Jr. |   |
|                                   |                              |
| Name  Printed:                         | Jacqueline  M. Clampett Jones     |                            | Name  Printed:                   | Charles T.  Chrietzberg Jr. |   |
|                                   |                              |
| Title:                                 | Owner of  Building                |                            | Title:                           | President  & CEO        |   |
|                                   |                              |
| By:                                    |                              |                            | By:                              |                        |   |
|                                   |                              |
| Name  Printed:                         |                              |                            | Name  Printed:                   |                        |   |
|                                   |                              |
| Title:                                 |                              |                            | Title:                           |
|                                   |                              |
| Address:                               | P.O. Box  3523                    |                            | Address:                         | 601 Munras  Ave.            |   |
|                                   |                              |
|                                   | Carmel, CA  93921                 |                            |                             | Monterey, CA  93940         |   |
|                                   |                              |
| Telephone:(831)                        | 625-3595                          |                            | Telephone:  (831)                |  649-4600              |   |
|                                   |                              |
| Facsimile:  (831)                      | 625-3594                          |                            | Facsimile:  (831)                |  642-6075              |   |
|                                   |                              |
| BROKER:                                |                              | BROKER:                         |                             |
|                                   |                              |                            |                             |
| Executed at:                           |                              |                            | Executed at:                     |                        |   |
|                                   |                              |                            |                             |
| on:                                    |                              |                            | on:                              |                        |   |
|                                   |                              |                            |                             |
| By:                                    |                              |                            | By:                              |                        |   |
|                                   |                              |
| Name  Printed:                         |                              |                            | Name  Printed:                   |                        |   |
|                                   |                              |
| Title:                                 |                              |                            | Title:                           |                        |   |
|                                   |                              |
| Address:                               |                              |                            | Address:                         |                        |   |
|                                   |                              |                            |                             |                        |   |
|                                   |                              |                            |                             |                        |   |
|                                   |                              |                            |                             |
| Telephone:  (    ) |                              |                            | Telephone:(   )   |                        |   |
|                                   |                              |                            |                             |                        |   |
| Facsimile:  (    ) |                              |                            | Facsimile:  (   ) |                        |   |
|                                        |                                   |                                 |                                  |                             |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

NOTE:            Theseforms are often modified to meet changing requirements of law and needs of theindustry.  Always write or call to makesure you are utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATEASSOCIATION, 345 So, Flgueroa St., M-1, Los Angeles, CA 90071 (213)687-8777.

 

© 1993 by American IndustrialReal Estate Association.  All RightsReserved.  No part of these words may bereproduced in any form without permission in writing.

 

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**ADDENDUM #1 TO:**

 

**THE LEASE BETWEEN JACQUELINE M. CLAMPETTJONES**

**(“LESSOR”) AND MONTEREY COUNTY BANK(“LESSEE”) FOR**

**PROPERTY ON THE WEST SIDE OF DOLORES SOUTH OF7TH**

 

**PARAGRAPH1.6(b):** Lessee shall commence paying its share ofCommon Area Operating Costs on July 1, 2002.

 

**PARAGRAPH4.2(a):** The following sub-paragraphs are modified asfollows:

(i) (aa)  Maintenance of exterior walls, roof andfoundations are not to be included in the Common Area Operating expenses.

(v) RealProperty Taxes:  During the initial 5year term and the first 5 year option Lessee shall not be liable for anyincreases in Real Estate Taxes resulting from an Increased assessment based ona transfer of ownership of the property. Beginning with the second optionperiod and throughout the balance of Lessee’s occupancy its obligation forincreases in taxes resulting from an increased assessment based on a transferof the property shall be limited to $.15 per square foot per month.  The agreed rentable area of Lessee’s spaceis 2704 square feet.

 

**PARAGRAPH7.2:** The costsfor maintenance of foundations, exterior walls, structural condition ofinterior bearing walls and are not to be included in the operating expenseswhich Lessee is responsible for reimbursing.

 

**PARAGRAPH7.4 (b): **Notwithstandingthe provisions of this paragraph in the body of the lease, Lessor agrees thatLessee’s obligation to remove the vault (but not the vault door) shall bereduced by 4% of the actual demolition cost (or cost estimate agreed to by bothparties) for each year that Lessee occupies the premises.

 

**PARAGRAPH10.1: **Thefollowing language shall be added to this paragraph: During the initial 5 yearterm and the first 5 year option Lessee shall not be liable for any increasesin Real Estate Taxes resulting from an increased assessment based on a transferof ownership of the property. Beginning with the second option period andthroughout the balance of Lessee’s occupancy its obligation for increases intaxes resulting from an increased assessment based on a transfer of theproperty shall be limited to $.15 per square foot per month.

 

**PARAGRAPH12.4 PARTIAL SUBLETTING:** Notwithstanding the provisions in the prior sections of Paragraph12, Lessor acknowledges that Lessee intends to sublease up to 50% of thepremises to another tenant and Lessor agrees that Lessee may do so with theprior consent of Lessor, which shall not be unreasonably withheld.

 

**PARAGRAPH49 LESSEE’S CANCELLATION RIGHT:** Lessee shall have aone-time right to cancel this lease prior to July 1, 2002 if Lessee is unableto obtain approvals from the State of California Department of FinancialInstitutions and the City of Carmel-by-the-Sea to open a branch office in thespace.

 

**OPTIONTO EXTEND ADDENDUM:** Notwithstanding the provisions of this Addendum regarding rentaladjustments, the parties hereby agree that the rent for the first option periodshall be adjusted (both at the beginning of the option and each 12 monthsthereafter) in accordance with the Cost of Living Adjustment provisions ofParagraph A(iv)(1)(a) of this Addendum.

 

[SEAL]

 

12

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**RENT ADJUSTMENTS(S)**

 

**ADDENDUM TO #2**

**STANDARD LEASE**

 
| **Dated** March 20, 2002                                  |
|-----------------------------------------------------------|
| **By and Between (Lessor)** Jacqueline M.  Clampett Jones |
| **(Lessee)**Monterey  County Bank                         |
| **Property Address:** W.S. Dolores, S. of 7th             |

Paragraph  53

 

**A.            RENTADJUSTMENTS:**

 

The monthlyrent for each month of adjustment period(s) specified below shall be increasedusing the method(s) indicated below:

 

(Check Method(s) to be Used andFill in Appropriately)

 

**o            I.              Costof Living Adjustment(s) (COL)**

 

(a)           On (Fill in COL AdjustmentDate(s):                                                                                                                                                         the monthly rent payable under paragraph 1.5 (“Base Rent”) of the attachedLease shall be adjusted by the change, if any, from the Base Month specifiedbelow, in the Consumer Price Index of the Bureau of Labor Statistics of theU.S. Department of Labor for (select one): oCPIW (Urban Wage Earners and Clerical Workers) of oCPIU (All Urban Consumers), for (Fill in Urban Area):                                                        .  All items (1982-1984 = 100), herein referredto as “C.P.I.”

 

(b)           Themonthly rent payable in accordance with paragraph AI (a) of this Addendum shallbe calculated as follows: the Base Rent set forth in paragraph 1.5 of theattached Lease, shall be multiplied by a fraction the numerator of which shallbe the C.P.I. of the calendar month 2 (two) months prior to the month(s)specified in paragraph AI(a) above during which the adjustment is to takeeffect, and the denominator of which shall be the C.P.I. of the calendar monthwhich is two (2) months prior to (select one): othe first month of the term of this Lease as set forth in paragraph 1.3 (“BaseMonth”) or o (Fill in Other “Base Month”):                          .The sum so calculated shall constitute the new monthly rent hereunder, but inno event, shall any such new monthly rent be less than the rent payable for themonth immediately preceding the date for rent adjustment.

 

(c)           In the event the compilation and/orpublication of the C.P.I. shall be transferred to any other governmentaldepartment or bureau or agency or shall be discontinued, then the index mostnearly the same as the C.P.I. shall be used to make such calculation.  In the event that Lessor and Lessee cannotagree on such alternative index, then the matter shall be submitted fordecision to the American Arbitration Association in accordance with the thenrules of said association and the decision of the arbitrators shall be bindingupon the parties. The cost of said Arbitrators shall be paid equally by Lessorand Lessee.

 

**o            II.            MarketRental Value Adjustment(s) (MRV)**

 

(a)           On (Fill in MRV Adjustment Date(s):                                                                                                                                                                                  themonthly rent payable under paragraph 1.5 (“Base Rent”) of the attached Leaseshall be adjusted to the “Market Rental Value” of the property as follows:

 

1)             Four months prior to the MarketRental Value (MRV) Adjustment Date(s) described above, Lessor and Lessee shallmeet to establish an agreed upon new MRV for the specified term. If agreementcannot be reached, then:

 

i)              Lessor and Lessee shallimmediately appoint a mutually acceptable appraiser or broker to establish thenew MRV within the next 30 days. Any associated costs will be split equallybetween the parties, or

 

ii)             Both Lessor and Lessee shall eachimmediately select and pay the appraiser or broker of their choice to establisha MRV within the next 30 days. If, for any reason, either one of the appraisalsis not completed within the next 30 days, as stipulated, then the appraisalthat is completed at that time shall automatically become the new MRV. If bothappraisals are completed and the two appraisers/brokers cannot agree on areasonable average MRV then they shall immediately select a third mutuallyacceptable appraiser/broker to establish a third MRV within the next 30 days.The average of the two appraisals closest in value shall then become the newMRV. The costs of the third appraisal will be split equally between the parties.

 
| Initials: |   |   |   | Initials: | /s/ CTC  |   |
|-----------|--------|--------|--------|-----------|----------|--------|
|      |   |   |   |      | /s/ JMCJ |   |

 

**RENT ADJUSTMENT(S)**

** **

**NOTICE:**                                             Theseforms are often modified to meet changing requirements of law and industryneeds.  Always write or call to makesure you are utilizing the most current form: American Industrial Real EstateAssociation, 345 South. Flgueroa Street, Suite M-1, Los Angeles, CA 90071. (213) 687-8777. Fax No. (213) 687-8616.

 

**©1991 American Industrial Real Estate Association**

 

13

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2)             In any event, thenew MRV shall not be less than the rent payable for the month immediatelypreceding the date for rent adjustment.

 

(b)           Upon the establishment of each New Market RentalValue as described in paragraph AII:

 

1)  the monthly rental sum so calculated for each term asspecified in paragraph AII(a) will become the new “Base Rent” for the purpose of calculating any further Cost of LivingAdjustments as specified in paragraph AI (a) above and

2)  the first month of each Market Rental Value term as specifiedin paragraph AII(a) shall become the new “Base Month” for the purpose ofcalculating any further Cost of Living Adjustments as specified in paragraphAI(b).

 

ý            III.           **FixedRental Adjustment(s) (FRA)**

 

Themonthly rent payable under paragraph 1.5 (“Base Rent”) of the attached Leaseshall be increased to the following amounts on the dates set forth below:

 
| On (Fill in FRA Adjustment Date(s)): |   | The New Base  Rental shall be: |
|--------------------------------------|--------|-------------------------------------|
|                                 |   |                                |
| October 1,  2003                     |   | $                                   | 7140 |   |
| October 1,  2005                     |   | $                                   | 7283 |   |
|                                 |   | $                                   |   |   |
|                                 |   | $                                   |   |   |

 

B.            **NOTICE:**  Unless specified otherwise herein, notice ofany escalations other than Fixed Rental Adjustment(s) shall be made asspecified in paragraph 23 of the attached Lease.

 
| Initials: |   |   |   | Initials: | /s/ CTC  |   |
|-----------|--------|--------|--------|-----------|----------|--------|
|      |   |   |   |      | /s/ JMCJ |   |

 

**RENT ADJUSTMENT(S)**

 

14

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**OPTION(S) TO EXTEND**

** **

**ADDENDUM TO  #3**

**STANDARD LEASE**

 

 

 
| **Dated **March  20, 2002                                 |
|----------------------------------------------------------------|
| **By and Between (Lessor) **Jacqueline  M. Clampett Jones |
| **(Lessee) **Monterey County Bank                         |
| **Property address:** W. S. Dolores, S. of 7th                 |

 

 

Paragraph54

 

A.            **OPTION(S)TO EXTEND:**

 

Lessor hereby grants to Lessee the option to extend the term of thisLease for 4 additional 60 month period(s) commencing when the prior termexpires upon each and all of the following terms and conditions:

 

(i)      Lessee gives to Lessor,and Lessor actually receives on a date which is prior to the date that theoption period would commence (if exercised) by at least 6 and not more than 12months, a written notice of the exercise of the option(s) to extend this Leasefor said additional term(s), time being of essence. If said notification of theexercise of said option(s) is (are) not so given and received, the option(s)shall automatically expire; said option(s) may (if more than one) only beexercised consecutively;

 

(ii)     The provisions ofparagraph 39, including the provision relating to default of Lessee set forthin paragraph 39.4 of this Lease are conditions of this Option;

 

(iii)    All of the terms andconditions of this Lease except where specifically modified by this optionshall apply;

 

(iv)    The monthly rent for eachmonth of the option period shall be calculated as follows, using the method(s)indicated below:

 

(CheckMethod(s) to be Used and Fill in Appropriately)

 

ý            I.              **Costof Living Adjustment(s) (COL)**

 

(a)           On (Fill in COLAdjustment Date(s): 12 months following commencement of each option period andeach 12 months thereafter the monthly rent payable under paragraph 1.5 (“BaseRent”) of the attached Lease shall be adjusted by the change, if any, from theBase Month specified below, in the Consumer Price Index of the Bureau of LaborStatistics of the U.S. Department of Labor for (select one): o CPI W (Urban Wage Earners and Clerical Workers) or ý CPI U (All Urban Consumers), for (Fill in Urban Area): SanFrancisco/Oakland/San Jose, All items (1982-1984 = 100), herein referred to as“C.P.I.”

 

(b)           The monthly rentpayable in accordance with paragraph AI(a) of this Addendum shall be calculatedas follows:  the Base Rent set forth inparagraph 1.5 of the attached Lease, shall be multiplied by a fraction thenumerator of which shall be the C.P.I. of the calendar month 2 (two) monthsprior to the month(s) specified in paragraph AI(a) above during which theadjustment is to take effect, and the denominator of which shall be the C.P.I.of the calendar month which is two (2) months prior to (select one):  o the first month of the term of this Lease as set forth in paragraph 1.3(“Base Month”) or o (Fill in Other “Base Month”):                .  The sum so calculated shall constitute thenew monthly rent hereunder, but in no event, shall any such new monthly rent beless than the rent payable for the month immediately preceding the date forrent adjustment.

 

(c)           In the event thecompilation and/or publication of the C.P.I. shall be transferred to any othergovernmental department or bureau or agency or shall be discontinued, then theIndex most nearly the same as the C.P.I. shall be used to make suchcalculation. In the event that Lessor and Lessee cannot agree on suchalternative index, then the matter shall be submitted for decision to theAmerican Arbitration Association in accordance with the then rules of saidassociation and the decision of the arbitrators shall be binding upon theparties.  The cost of said Arbitratorsshall be paid equally by Lessor and Lessee.

 

ý            II.            **MarketRental Value Adjustment(s) (MRV)**

 

(a)           On (Fill in MRVAdjustment Date(s): The commencement of each option period the monthly rentpayable under paragraph 1.5 (“Base Rent”) of the attached Lease shall be adjustedto the “Market Rental Value” of the property as follows:

 

1)             Four months priorto the Market Rental Value (MRV) Adjustment Date(s) described above, Lessor andLessee shall meet to establish an agreed upon new MRV for the specifiedterm.  If agreement cannot be reached,then:

 
| Initials: |   |   |   | Initials: | /s/ CTC  |   |
|-----------|--------|--------|--------|-----------|----------|--------|
|      |   |   |   |      | /s/ JMCJ |   |

 

**OPTION(S) TO EXTEND**

 

15

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i)              Lessor and Lessee shallimmediately appoint a mutually acceptable appraiser or broker to establish thenew MRV within the next 30 days. Any associated costs will be split equallybetween the parties, or

ii)             Both Lessor and Lessee shall eachimmediately select and pay the appraiser or broker of their choice to establisha MRV within the next 30 days. If, for any reason, either one of the appraisalsis not completed within the next 30 days, as stipulated, then the appraisalthat is completed at that time shall automatically become the new MRV. If bothappraisals are completed and the two appraisers/brokers cannot agree on areasonable average MRV then they shall immediately select a third mutuallyacceptable appraiser/broker to establish a third MRV within the next 30 days.The average of the two appraisals closest in value shall then become the newMRV. The costs of the third appraisal will be split equally between theparties.

 

2)             In any event, the new MRV shall notbe less than the rent payable for the month immediately proceeding the date forrent adjustment.

 

(b)           Upon the establishment of each NewMarket Rental Value as described in paragraph Aii:

 

1)             the monthly rental sum socalculated for each term as specified in paragraph AII(a) will become the new“Base Rent” for the purpose of calculating any further Cost of LivingAdjustments as specified in paragraph AI(a) above and

2)             the first month of each MarketRental Value term as specified in paragraph AII(a) shall become the new “BaseMonth” for the purpose of calculating any further Cost of Living Adjustments asspecified in paragraph AI(b).

 

o            III.           **FixedRental Adjustment(s) (FRA)**

 

The monthly rent payable underparagraph 1.5 (“Base Rent”) of the attached Lease shall be increased to thefollowing amounts on the dates set forth below:

 

 
| On (Fill in FRA Adjustment Date(s)): |   | The New Base  Rental shall be: |
|--------------------------------------|--------|-------------------------------------|
|                                 |   |                                |
|                                 |   | $                                   |   |   |
|                                 |   | $                                   |   |   |
|                                 |   | $                                   |   |   |
|                                 |   | $                                   |   |   |

 

**B.            NOTICE:**Unless specified otherwise herein, notice of any escalations other than FixedRental Adjustments shall be made as specified in paragraph 23 of the attachedLease.

 

 
| Initials: |   |   |   | Initials: | /s/ CTC  |   |
|-----------|--------|--------|--------|-----------|----------|--------|
|      |   |   |   |      | /s/ JMCJ |   |

 

**OPTION(S) TO EXTEND**

 

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**Rules and Regulations**

 

EXHIBIT A.

 

1.                                       Sidewalks,halls, passages, exits, entrances, elevators, escalators and stairways shallnot be obstructed by Tenants or used by them for any purpose other than foringress to and egress from their respective premises. The halls, passages,exits, entrances, elevators and stairways are not for the use of the generalpublic and Landlord shall in all cases retain the right to control and preventaccess thereto by all persons whose presence, in the judgment of Landlord,shall be prejudicial to the safety, character, reputation and interests of theBuilding and its Tenants, provided that nothing herein contained shall beconstrued to prevent such access to persons with whom any Tenant normally dealsin the ordinary course of such Tenant’s business unless such persons areengaged in illegal activities. No Tenant, and no employees or invitees of anyTenant, shall go upon the roof of the Building, except as authorized byLandlord.

 

2.                                       Nosign, placard, picture, name, advertisement or notice, visible from theexterior of leased premises shall be inscribed, painted, affixed, installed orotherwise displayed by any Tenant either on its premises or any part of theBuilding without the prior written consent of Landlord, and Landlord shall havethe right to remove any such sign, placard, picture, name, advertisement, ornotice without notice to and at the expense of the Tenant.

 

If Landlord shall have given such consent to any Tenant at any time,whether before or after the execution of the lease, such consent shall in noway operate as a waiver or release of any of the provisions hereof or of suchlease, and shall be deemed to relate only to the particular sign, placard,picture, name, advertisement or notice so consented to by Landlord and shallnot be construed as dispensing with the necessity of obtaining the specificwritten consent of Landlord with respect to any other such sign, placard,picture, name, advertisement or notice.

 

All approved signs or lettering on doors and walls shall be printed,painted, affixed or inscribed at the expense of the Tenant by a person approvedby Landlord.

 

4.                                       Nocurtains, draperies, blinds, shutters, shades, screens or other coverings,awnings, hangings or decorations shall be attached to, hung or placed in, orused in connection with, any window or door on any premises without the priorwritten consent of Landlord. In any event with the prior written consent ofLandlord, all such items shall be installed inboard of Landlord’s standardwindow covering and shall in no way be visible from the exterior of theBuilding.  No articles shall be placedor kept on the window sills so as to be visible from the exterior of theBuilding.  No articles shall be placedagainst glass partitions or doors which might appear unsightly from outsideTenant’s Premises.

 

5.                                       Landlordreserves the right to exclude from the Building between the hours of 6 pm and 8am and at all hours on Saturdays, Sundays and holidays all persons who are notTenants or their accompanied guests in the Building.  Each Tenant shall be responsible for all persons for whom itallows to enter the building and shall be liable to Landlord for all acts ofsuch persons.

 

Landlord shall in no case be liable for damages for error with regardto the admission to or exclusion from the Building of any person.

 

During the continuance of any invasion, mob, riot, public excitement orother circumstance rendering such action advisable in Landlord’s opinion,Landlord reserves the right to prevent access to the Building by closing thedoors, or otherwise, for the safety of Tenants and protection of the Buildingand property in the Building.

 

8.                                       EachTenant shall see that all doors of its premises are closed and securely lockedand must observe strict care and caution that all water faucets or waterapparatus are entirely shut off before the Tenant or its employees leave suchpremises, and that all utilities shall likewise be carefully shut off, so as toprevent  waste or damage, and for anydefault or carelessness the Tenant shall make good all injuries sustained byother Tenants or occupants of the Building or Landlord. On multiple-tenancyfloors, all Tenants shall keep the door or doors to the Building corridorsclosed at all times except for ingress or egress.

 

9.                                       Asmore specifically provided in the Tenant’s Lease of the Premises, Tenant shallnot waste electricity, water or air-conditioning and agrees to cooperate fullywith Landlord to assure the most effective operation of the Building's heatingand air-conditioning, and shall refrain from attempting to adjust any controlsother than room thermostats installed for Tenant’s use.

 

10.                                 NoTenant shall alter any lock or access device or install a new additional lockor access device or any bolt on any door of its premises without the priorwritten consent of Landlord. If Landlord shall give its consent, the Tenantshall in each case furnish Landlord with a key for any such lock.

 

11.                                 NoTenant shall make or have made additional copies of any keys or access devicesprovided by Landlord. Each Tenant, upon the termination of the Tenancy, shalldeliver to Landlord all the keys or access devices for the Building, offices,rooms and toilet rooms which shall have been furnished the Tenant or which theTenant shall have had made. In the event of the loss of any keys or accessdevices so furnished by Landlord, Tenant shall pay Landlord therefor.

 

12.                                 Thetoilet rooms; toilets, urinals, wash bowls and other apparatus shall not beused for any purpose other than that for which they were constructed and noforeign substance of any kind whatsoever shall be thrown therein, and theexpense of any breakage, stoppage or damage resulting from the violation of thisrule shall be borne by the Tenant who, or whose employees or invitees, shallhave caused it.

 

13.                                 NoTenant shall use or keep in its premises or the Building any kerosene, gasolineor inflammable or combustible fluid or material other than limited quantitiesnecessary for the operation or maintenance of office or office equipment.  No Tenant shall use any method of heating orair-conditioning other than that supplied by Landlord.

 

14.                                 NoTenant shall use, keep or permit to be used or kept in its premises any foul ornoxious gas or substance or permit or suffer such premises to be occupied orused in a manner offensive or objectionable to Landlord or other occupants ofthe Building by reason of noise, odors and/or vibrations or interfere in anyway with other Tenants or those having business therein, nor shall any animalsor birds be brought or kept in or about any premises of the Building.

 

15.                                 Nocooking shall be done or permitted by any Tenant on its premises (except thatuse by the Tenant of Underwriters' Laboratory approved equipment for thepreparation of coffee, tea, hot chocolate and similar beverages for Tenants andtheir employees shall be permitted, provided that such equipment and use is inaccordance with all applicable federal, state and city laws, codes, ordinances,rules and regulations), nor shall premises be used for lodging.

 

17

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17.                                 IfTenant requires telegraphic, telephonic, burglar alarm or similar services, itshall first obtain, and comply with, Landlord’s instructions in theirinstallation.

 

18.                                 Landlordwill direct electricians as to where and how telephone, telegraph andelectrical wires are to be introduced or installed.  No boring or cutting for wires will be allowed without the prior writtenconsent of Landlord.  The location ofburglar alarms, telephones, call boxes and other office equipment affixed toall premises shall be subject to the written approval of Landlord.

 

19.                                 NoTenant shall install any radio or television antenna, loudspeaker or any otherdevice on the exterior walls or the roof of the Building.  Tenant shall not interfere with radio ortelevision broadcasting or reception from or in the Building or elsewhere.

 

20.                                 NoTenant shall lay linoleum, tile, carpet or any other floor covering so that thesame shall be affixed to the floor of its premises in any manner except asapproved in writing by Landlord.  Theexpense of repairing any damage resulting from a violation of this rule or theremoval of any floor covering shall be borne by the Tenant by whom, or by whosecontractors, employees or invitees, the damage shall have been caused.

 

21.                                 Nofurniture, freight, equipment, materials, supplies, packages, merchandise orother property will be received in the Building or carried up or down theelevators except between such hours and in such elevators as shall bedesignated by Landlord.

 

Landlord shall have the right to prescribethe weight, size and position of all safes, furniture or other heavy equipmentbrought into the Building.  Safes orother heavy objects shall, if considered necessary by Landlord, stand on woodstrips of such thickness as determined by Landlord to be necessary to properlydistribute the weight thereof.  Landlordwill not be responsible for loss of or damage to any such safe, equipment orproperty from any cause, and all damage done to the Building by moving ormaintaining any such safe, equipment or other property shall be repaired at theexpense of Tenant.

 

Business machines and mechanical equipmentbelonging to Tenant which cause noise or vibration that may be transmitted tothe structure of the Building or to any space therein to such a degree as to beobjectionable to Landlord or to any tenants in the Building shall be placed andmaintained by Tenant, at Tenant’s expense, on vibration eliminators or otherdevices sufficient to eliminate noise or vibration.  The persons employed to move such equipment in or out of theBuilding must be acceptable to Landlord.

 

22.                                 NoTenant shall place a load upon any floor of the premises which exceeds the loadper square foot which such floor was designed to carry and which is allowed bylaw.

 

24.                                 Thereshall not be used in any space, or in the public areas of the Building, eitherby any Tenant or others, any hand trucks except those equipped with rubbertires and side guards or such other material-handling equipment as Landlord mayapprove.  No other vehicles of any kindshall be brought by any Tenant into or kept in or about the premises.

 

25.                                 EachTenant shall store all its trash and garbage within the interior of itspremises.  No material shall be placedin the trash boxes or receptacles if such material is of such nature that itmay not be disposed of in the ordinary and customary manner of removing anddisposing of trash and garbage in the city without violation of any law orordinance governing such disposal.  Alltrash, garbage and refuse disposal shall be made only through entryways andelevators provided for such purposes and at such times as Landlord shall designate.

 

26.                                 Canvassing,soliciting, distribution of handbills or any other written material, andpeddling in the Building are prohibited and each Tenant shall cooperate toprevent the same.  No Tenant shall makeroom-to-room solicitation of business from other tenants in the building.

 

27.                                 Landlordshall have the right, exercisable without notice and without liability to anyTenant, to change the name and address of the Building.

 

28.                                 Landlordreserves the right to exclude or expel from the Building any person who, inLandlord’s judgment is intoxicated or under the influence of liquor or drugs orwho is in violation of any of the rules and regulations of the Building.

 

29.                                 Withoutthe prior written consent of Landlord, Tenant shall not use the name of the Buildingin connection with or in promoting or advertising the business of Tenant exceptas Tenant’s address.

 

30.                                 Tenantshall comply with all safety, fire protection and evacuation procedures andregulations established by Landlord or any governmental agency.

 

31.                                 Tenantassumes any and all responsibility for protecting its Premises from theft,robbery and pilferage, which includes keeping doors locked and other means ofentry to the Premises closed.

 

32.                                 Therequirements to Tenants will be attended to only upon application at the officeof the Building by an authorized individual. Employees of Landlord shall not perform any work or do anything outsideof their regular duties unless under special instructions from Landlord, and noemployees will admit any person (Tenant or otherwise) to any office withoutspecific instructions from Landlord.

 

33.                                 Landlordmay waive any one or more of these Rules and Regulations for the benefit of anyparticular Tenant or Tenants, but no such waiver by Landlord shall be construedas a waiver of such Rules and Regulations in favor of any other Tenant orTenants, nor prevent Landlord from thereafter enforcing any such Rules andRegulations against any or all Tenants of the Building.

 

34.                                 Landlordreserves the right to make such other and reasonable rules and regulations asin its judgment may from time to time be needed for safety and security, forcare and cleanliness of the Building and for the preservation of good ordertherein.  Tenant agrees to abide by allsuch Rules and Regulations hereinabove stated and any additional rules andregulations which are adopted.

 

35.                                 Landlordreserves the right to designate the use of the parking spaces on the premises.

 

36.                                 Tenantshall use carpet protectors under all desk chairs.

 

40.                                 Tenantshall be responsible for the observance of all of the foregoing Rules andRegulations by Tenant’s employees, agents, clients, customers, invitees andguests.

 

41.                                 TheRules and Regulations are in addition to, and shall not be construed to in anyway modify, alter or amend, in whole or in part, the terms, covenants,agreements and conditions of any Lease of Premises in the Building.  The word “Building” as used herein means thebuilding of which the premises are part.

 

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**EXHIBIT B**

** **

 

Map of Office Space:

 

LEASE SPACE D

1302 LEASEABLE

 

LEASE SPACE E

1294 LEASEABLE

 

LEASE SPACE F

1410 LEASEABLE

 

LEASE SPACE G

1175 LEASEABLE

 

 

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