Unassociated Document


    Exhibit 10.1

    
 

    THIRD
      AMENDMENT TO LEASE

    


    THIS
      THIRD AMENDMENT TO LEASE
      (this
“Amendment”) is made and entered into as of the 8th day of August, 2005, by and
      between SJ
      PLAZA, LLC, a Delaware limited liability company
      (“Landlord”), and HERITAGE
      COMMERCE CORP., a California corporation
      (“Tenant”).

    


    


    RECITALS

    


    
      	
              A.

            	
              Landlord
                (as successor in interest to JMB/San Jose Associates, an Illinois
                general
                partnership) and Tenant (as successor in interest to Heritage Bank
                of
                Commerce, a California corporation) are parties to that certain Office
                Lease, dated October 9, 1996, which lease has been previously amended
                by
                that certain First Lease Amendment and Assignment and Assumption
                of Lease,
                dated December 27, 2001, and that certain Second Lease Amendment
                (the
                “Second Amendment”), dated April 9, 2002 (as amended, the “Lease”).
                Pursuant to the Lease, Landlord has leased to Tenant space currently
                containing approximately 1,255
                rentable square feet (the “Premises”) described as Kiosk 110 in the
                building commonly known as 110 Park Center Plaza, San Jose, California
                (the “Building”).

            


    

    


    
      	
              B.

            	
              The
                Lease by its terms shall expire on February 28, 2010 (“Prior Termination
                Date”), and the parties desire to extend the Term of the Lease, all on
                the
                following terms and conditions.

            


    

    


    NOW,
      THEREFORE,
      in
      consideration of the mutual covenants and agreements herein contained and other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, Landlord and Tenant agree as follows:

    


    
      	
              1.

            	
              Extension.
                The Term of the Lease is hereby extended for a period of approximately
                sixty-three (63) months and shall expire on May 31, 2015 (“Extended
                Termination Date”), unless sooner terminated in accordance with the terms
                of the Lease. 

            


    

    


    
      	2.  	
              Base
                Rent.
                As
                of the date hereof, the schedule of Base Rent payable with respect
                to the
                Premises during the period beginning on August 1, 2005 and ending
                on the
                Extended Termination Date is the
                following:

            


    

    


    
      	
              Period

            	
              Monthly
                Rate

              Per
                Square Foot

            	
              Monthly

              Base
                Rent

            
	
              08/01/05
                - 07/31/06

            	
              $2.11

            	
              $2,648.05*

            
	
              08/01/06
                - 07/31/07

            	
              $2.17

            	
              $2,723.35

            
	
              08/01/07
                - 07/31/08

            	
              $2.24

            	
              $2,811.20

            
	
              08/01/08
                - 07/31/09

            	
              $2.29

            	
              $2,873.95

            
	
              08/01/09
                - 05/31/15

            	
              $4.20

            	
              $5,271.00

            


    

    *Monthly
      Base Rent is subject to abatement as provided below.

    


    All
      such
      Base Rent shall be payable by Tenant in accordance with the terms of the Lease,
      as amended hereby. Notwithstanding
      anything in this Amendment or the Lease to the contrary, so long as Tenant
      is
      not in default under the Lease, as amended hereby, Tenant shall be entitled
      to
      an abatement of Base Rent in the amount of $2,648.05 per month for the period
      beginning on August 1, 2005 and ending on November 30, 2005 (the "Base
      Rent
      Abatement Period"). The total amount of Base Rent abated during the Base Rent
      Abatement Period shall equal $10,592.20 (the "Abated Monthly Rent"). During
      the
      Base Rent Abatement Period, only Base Rent shall be abated, and all Tenant’s
      Prorata Share of Operating Expenses and Taxes and other charges specified in
      the
      Lease, as amended hereby, shall remain as due and payable pursuant to the
      provisions of the Lease, as amended hereby.
      In
      addition, Landlord acknowledges that, as of the date hereof, Tenant has paid
      to
      Landlord the Base Rent due with respect to the month of August, 2005 (the
“August Payment”), which amount reflects the rental rate in effect under the
      Lease (prior to the effectiveness of this Amendment). Landlord agrees that,
      following the date this Amendment is mutually executed and delivered by Landlord
      and Tenant, the August Payment shall be applied to the next Rent payments that
      become due under the Lease, as amended hereby.

    


    
      	
              3.

            	
              Additional
                Security Deposit.
                No
                additional Security Deposit shall be required in connection with
                this
                Amendment.

            


    

    


    
      	
              4.

            	
              Operating
                Expenses and Taxes.
                For the period commencing on the date hereof and ending on the Extended
                Termination Date, Tenant shall pay for Tenant’s Prorata Share of Operating
                Expenses and Taxes in accordance with the terms of the Lease, provided,
                however, during such period, the Base Tax Year and the Base Expense
                Year
                for the computation of Tenant’s Prorata Share of Operating Expenses and
                Taxes is amended from 2002 to 2005, and provided
                further that the Taxes included in the Base Taxes shall be the Taxes
                that
                would have been payable for the Property for the 2004-2005 tax year
                if
                such Taxes had been computed on the fully assessed value of the Property
                as of the date the Property was acquired by Landlord (i.e., the fully
                assessed value of the Property following reassessment due to Landlord’s
                acquisition of the Property) plus the annual increases in the Taxes
                for
                the Property provided for under the Revenue and Taxation Code from
                the
                date of acquisition through the lien date for the 2004-2005 tax year,
                notwithstanding that the Taxes billed to Landlord by the county tax
                assessor for such period may be less than the Taxes that would be
                been
                paid on the fully assessed value of the
                Property.

            


    

    


    
      	
              5.

            	
              Improvements
                to Premises.

            


    

    


    
      	 	
              5.1

            	
              Condition
                of Premises.
                Tenant is in possession of the Premises and accepts the same “as is”
                without any agreements, representations, understandings or obligations
                on
                the part of Landlord to perform any alterations, repairs or improvements,
                except as may be expressly provided otherwise in this
                Amendment.

            


    

    


    
      	 	
              5.2

            	
              Responsibility
                for Improvements to Premises. Tenant
                may perform improvements to the Premises in accordance with Exhibit A
                attached hereto and Tenant shall be entitled to an improvement allowance
                in connection with such work as more fully described in Exhibit A.

            


    

    


    
      	
              6.

            	
              Other
                Pertinent Provisions.
                Landlord and Tenant agree that, effective as of the date of this
                Amendment
                (unless different effective date(s) is/are specifically referenced
                in this
                Section), the Lease shall be amended in the following additional
                respects:

            


    

    


    
      	6.1  	
              Renewal
                Option

            


    

    


    
      	 	
              (a)

            	
              Grant
                of Option; Conditions.
                Tenant shall have the right to extend the Term (the “Renewal
                Option”),
                for two (2) additional periods of five (5) years each
                (each, a
                “Renewal
                Term”),
                commencing on the day following the Extended Termination Date, or
                on the
                day following the last day of the prior Renewal Term, as applicable
                (the
                “Applicable
                Expiration Date”),
                and ending on the fifth (5th) anniversary of the Termination
                Date or
                on the last day of the prior Renewal Term, as applicable. Such Renewal
                Options shall be personal to Tenant and any transferees pursuant
                to a
                permitted transfer under Article 21, Section F of the
                Lease (a
                “Permitted Transfer”) and shall be exercisable
                if:

            


    

     

    
      	 	 	
              (i)

            	
              Landlord
                receives notice of exercise (a “Renewal
                Notice”)
                not less than six (6) full calendar months prior to the Applicable
                Expiration Date and not more than twelve (12) full calendar
                months
                prior to the Applicable Expiration Date;
                and

            


    

     

    
      	 	 	
              (ii)

            	
              Tenant
                is not in default under this Lease beyond any applicable cure periods
                at
                the time that Tenant delivers its Renewal Notice or at the time Tenant
                delivers its Binding Notice (as defined below);
                and

            


    

     

    
      	 	 	
              (iii)

            	
              Tenant
                is operating in the Premises and not more than twenty-five percent
                (25%)
                of the Premises is sublet at the time that Tenant delivers its Renewal
                Notice; and

            


    

     

    
      	 	 	
              (iv)

            	
              Lease
                has not been assigned (except in connection with a Permitted Transfer)
                prior to the date that Tenant delivers its Renewal Notice.
                

            


    

     

    (b) Terms
      Applicable to Premises During Renewal Term.

     

    
      	 	 	
              (i)

            	
              The
                initial Base Rent rate per rentable square foot for the Premises
                during
                the Renewal Term shall be equal to ninety-five percent (95%) of the
                Prevailing Market (hereinafter defined) rate per rentable square
                foot for
                the Premises, with the Prevailing Market rate being subject to adjustment
                during the Renewal Term, in accordance with the determination of
                the
                Prevailing Market rate described in Section 6.1(c) below.
                Base Rent
                during the Renewal Term shall increase, if at all, in accordance
                with the
                increases assumed in the determination of Prevailing Market rate.
                Base
                Rent attributable to the Premises shall be payable in monthly installments
                in accordance with the terms and conditions of Article 2 of
                the
                Lease, as amended hereby. 

            


    

     

    
      	 	 	
              (ii)

            	
              Tenant
                shall pay additional rent for the Premises during the Renewal Term
                in
                accordance with Article 3 of the Lease, as amended hereby,
                and the
                manner and method in which Tenant reimburses Landlord for Tenant’s share
                of Operating Expenses and Taxes, as well as the applicable base year
                for
                calculating Tenant’s Prorata Share of Operating Expenses and Taxes, shall
                be some of the factors considered in determining the Prevailing Market
                rate for the Renewal Term; provided, however, that during the Renewal
                Term, the Base Tax Year and the Base Expense Year for the computation
                of
                Tenant’s Prorata Share of Operating Expenses and Taxes
                shall be the calendar year in which the Renewal Term
                commences.

            


    

     

    
      	 	
              (c)

            	
              Procedure
                for Determining Prevailing Market.
                Within thirty (30) days after receipt of Tenant’s Renewal Notice,
                Landlord shall advise Tenant of the applicable Base Rent rate for
                the
                Premises for the Renewal Term. Tenant, within thirty (30)
                days after
                the date on which Landlord advises Tenant of the applicable Base
                Rent rate
                for the Renewal Term, shall either (i) give Landlord final
                binding
                written notice (“Binding
                Notice”)
                of Tenant’s exercise of its Renewal Option, or (ii) if Tenant
                disagrees with Landlord’s determination, provide Landlord with written
                notice of rejection (the “Rejection
                Notice”).
                If Tenant fails to provide Landlord with either a Binding Notice
                or
                Rejection Notice within such thirty (30) day period, Tenant’s Renewal
                Option shall be null and void and of no further force and effect.
                If
                Tenant provides Landlord with a Binding Notice, Landlord and Tenant
                shall
                enter into the Renewal Amendment (as defined below) upon the terms
                and
                conditions set forth herein. If Tenant provides Landlord with a Rejection
                Notice, Landlord and Tenant shall work together in good faith to
                agree
                upon the Prevailing Market rate for the Premises during the Renewal
                Term.
                When Landlord and Tenant have agreed upon the Prevailing Market rate
                for
                the Premises, such agreement shall be reflected in a written agreement
                between Landlord and Tenant, whether in a letter or otherwise, and
                Landlord and Tenant shall enter into the Renewal Amendment in accordance
                with the terms and conditions hereof. Notwithstanding the foregoing,
                if
                Landlord and Tenant are unable to agree upon the Prevailing Market
                rate
                for the Premises within thirty (30) days after the date Tenant
                provides Landlord with the Rejection Notice, then
                Landlord and Tenant shall each, within five (5) business days following
                the expiration of such 30-day period, appoint a qualified MAI appraiser
                who has had at least 5 years experience within the previous 10 years
                as a
                real estate appraiser working in the area, in turn those two independent
                MAI appraisers shall appoint a third MAI appraiser satisfying the
                same
                criteria and the majority shall decide upon the Prevailing Market
                rate for
                the Premises for the Renewal Term. If either Landlord or Tenant fails
                to
                appoint an appraiser within the 5-day period referred to above, the
                appraiser appointed by the other party shall be the sole appraiser
                for the
                purposes hereof. Landlord and Tenant shall equally share in the expense
                of
                this appraisal except that in the event the Prevailing Market rate
                for the
                Premises is found to be within five percent (5%) of the original
                rate
                quoted by Landlord, then Tenant shall bear the full cost of all the
                appraisal process, and in the event the Prevailing Market rate for
                the
                Premises is found to be more than five percent (5%) less than the
                original
                rate quoted by Landlord, then Landlord shall bear the full cost of
                all the
                appraisal process. 

            


    

     

    If
      the
      Prevailing Market rate has not been determined by commencement of the Renewal
      Term, Tenant shall pay Base Rent upon the terms and conditions in effect under
      the Lease during the month preceding the commencement of the Renewal Term until
      such time as the Prevailing Market rate has been determined. Upon such
      determination, the Base Rent shall be retroactively adjusted to the commencement
      of the Renewal Term. If such adjustment results in an underpayment of Base
      Rent
      by Tenant, Tenant shall pay Landlord the amount of such underpayment within
      thirty (30) days after the determination thereof. If such adjustment results
      in
      an overpayment of Base Rent by Tenant, Landlord shall credit such overpayment
      against the next installment of Base Rent due under the Lease and, to the extent
      necessary, any subsequent installments, until the entire amount of such
      overpayment has been credited against Base Rent.

     

    
      	 	
              (d)

            	
              Renewal
                Amendment.
                If Tenant is entitled to and properly exercises its Renewal Option,
                Landlord shall prepare an amendment (the “Renewal
                Amendment”)
                to reflect changes in the Base Rent, Term, Expiration Date and other
                appropriate terms. The Renewal Amendment shall be sent to Tenant
                within a
                reasonable time after Landlord’s receipt of the Binding Notice or other
                written agreement by Landlord and Tenant regarding the Prevailing
                Market
                rate, and Tenant shall execute and return the Renewal Amendment to
                Landlord within fifteen (15) days after Tenant’s receipt of same,
                but, upon final determination of the Prevailing Market rate applicable
                during the Renewal Term as described herein, an otherwise valid exercise
                of the Renewal Option shall be fully effective whether or not the
                Renewal
                Amendment is executed. 

            


    

     

    
      	 	
              (e)

            	
              Definition
                of Prevailing Market.
                As used herein, “Prevailing
                Market”
                shall mean the arm’s length fair market annual rental rate per rentable
                square foot under leases entered into on or about the date on which
                the
                Prevailing Market is being determined hereunder for space comparable
                to
                the Premises in the Building or Comparable Buildings (as defined
                below)
                for a comparable term. The determination of Prevailing Market shall
                take
                into account the existence and quality of improvements within the
                space
                and any material economic differences between the terms of this Lease
                and
                any comparison lease, such as rent abatements, construction costs,
                improvement allowances, and other concessions and the manner, if
                any, in
                which the landlord under any such lease is reimbursed for operating
                expenses and taxes; provided, however, that the determination of
                Prevailing Market shall not take into account the market value of
                Tenant’s
                rights to any Building top signage. The determination of Prevailing
                Market
                shall also take into consideration any reasonably anticipated changes
                in
                the Prevailing Market rate from the time such Prevailing Market rate
                is
                being determined to the time such Prevailing Market rate will become
                effective under this Lease. As used herein, “Comparable
                Buildings”
                shall mean class “A” office buildings, other than the Building, that are
                of comparable size and quality as the Building and are located in
                the
                downtown San Jose, California area.


            


    

     

    
      	 	
              6.2

            	
              Destruction.
                Article 10 of the Lease is hereby amended to provide that,
                notwithstanding the provisions of such paragraph which permit Landlord
                to
                terminate the Lease if there is material damage to the Premises or
                the
                Building during the last twelve (12) months of the Term of the Lease,
                Landlord shall not have the right to terminate the Lease if during
                such
                twelve (12) month period, Tenant has properly exercised its Renewal
                Option
                pursuant to Section 6.1 of this Amendment. Furthermore, if at the
                time of
                such damage Tenant has a Renewal Option that has not yet been exercised
                and the time for exercise of the Renewal Option has not then expired,
                then
                Tenant shall have a period of thirty (30) days from the date of the
                casualty to elect to exercise its Renewal Option by delivery of written
                notice to Landlord. If Tenant has previously exercised its Renewal
                Option
                or Tenant exercises its Renewal Option during such thirty (30) day
                period,
                and provided Landlord is otherwise obligated to, or elects to repair
                such
                damage under the provisions of Article 10 of the Lease, Landlord
                shall, at
                Landlord’s expense, repair such damage in accordance with Article 10 of
                the Lease, and this Lease shall continue in full force and effect.
                If
                Tenant fails to exercise its Renewal Option during such thirty (30)
                day
                period, then Landlord may, at Landlord’s option, terminate the Lease
                effective as of the date of the casualty, by delivering notice to
                Tenant
                of Landlord’s election to do so within ten (10) days after the expiration
                of such thirty (30) day
                period.

            


    

     

    
      	 	
              6.3

            	
              Subordination,
                Nondisturbance and Attornment. Landlord
                shall use commercially reasonable efforts to obtain a non-disturbance,
                subordination and attornment agreement from Landlord's current mortgagee
                on such mortgagee's then current standard form of agreement. "Reasonable
                efforts" of Landlord shall not require Landlord to incur any cost,
                expense
                or liability to obtain such agreement, it being agreed that Tenant
                shall
                be responsible for any fee or review costs charged by the mortgagee.
                Upon
                request of Landlord, Tenant shall execute the mortgagee’s form of
                non-disturbance, subordination and attornment agreement, with such
                modifications (if any) as may be requested by Tenant and agreed to
                by the
                mortgagee, and return the same to Landlord for execution by the mortgagee.
                Such non-disturbance, subordination, and attornment agreement in
                favor of
                Tenant shall provide that, so long as Tenant is paying the Rent due
                under
                the Lease and is not otherwise in default under the Lease beyond
                any
                applicable cure period, its right to possession and the other terms
                of the
                Lease shall remain in full force and effect. Such non-disturbance,
                subordination, and attornment agreement may include other commercially
                reasonable provisions in favor of the mortgagee, including, without
                limitation, additional time on behalf of the mortgagee to cure defaults
                of
                the Landlord and provide that (a) neither mortgagee nor any
                successor-in-interest shall be bound by (i) any payment of
                the Base
                Rent, Additional Rent, or other sum due under the Lease, as amended
                hereby, for more than 1 month in advance or (ii) any amendment
                or
                modification of the Lease made without the express written consent
                of
                mortgagee or any successor-in-interest; (b) neither mortgagee
                nor any
                successor-in-interest will be liable for (i) any act or omission
                or
                warranties of any prior landlord (including Landlord), (ii) the
                breach of any warranties or obligations relating to construction
                of
                improvements on the property or any tenant finish work performed
                or to
                have been performed by any prior landlord (including Landlord), or
                (iii) the return of any security deposit, except to the extent
                such
                deposits have been received by mortgagee; and (c) neither
                mortgagee
                nor any successor-in-interest shall be subject to any offsets or
                defenses
                which Tenant might have against any prior landlord (including Landlord).
                Landlord's failure to obtain a non-disturbance, subordination and
                attornment agreement for Tenant shall have no effect on the rights,
                obligations and liabilities of Landlord and Tenant or be considered
                to be
                a default by Landlord hereunder; provided, however that if Landlord
                is
                unable to obtain a non-disturbance agreement from any mortgagee,
                then
                Tenant shall not be required to execute any other documents that
                may be
                required by such mortgagee. 

            


    

     

    
      	 	
              6.4

            	
              Deletion
                (Substituted Premises). Paragraph 5
                of the Second Amendment is hereby deleted in it entirety.
                

            


    

     

    
      	
              7.

            	
              Miscellaneous. 

            


    

    


    
      	 	
              7.1

            	
              This
                Amendment, including Exhibit A (Tenant Alterations) attached hereto,
                sets
                forth the entire agreement between the parties with respect to the
                matters
                set forth herein. There have been no additional oral or written
                representations or agreements. Under no circumstances shall Tenant
                be
                entitled to any rent abatement, improvement allowance, leasehold
                improvements, or other work to the Premises, or any similar economic
                incentives that may have been provided Tenant in connection with
                entering
                into the Lease, unless specifically set forth in this
                Amendment.

            


    

    


    
      	 	
              7.2

            	
              Except
                as herein modified or amended, the provisions, conditions and terms
                of the
                Lease shall remain unchanged and in full force and
                effect.

            


    

    


    
      	 	
              7.3

            	
              In
                the case of any inconsistency between the provisions of the Lease
                and this
                Amendment, the provisions of this Amendment shall govern and
                control.

            


    

    


    
      	 	
              7.4

            	
              Submission
                of this Amendment by Landlord is not an offer to enter into this
                Amendment
                but rather is a solicitation for such an offer by Tenant. Landlord
                shall
                not be bound by this Amendment until Landlord has executed and delivered
                the same to Tenant.

            


    

    


    
      	 	
              7.5

            	
              The
                capitalized terms used in this Amendment shall have the same definitions
                as set forth in the Lease to the extent that such capitalized terms
                are
                defined therein and not redefined in this
                Amendment.

            


    

    


    
      	 	
              7.6

            	
              Tenant
                hereby represents to Landlord that Tenant has dealt with no broker,
                other
                than Cornish & Carey, in connection with this Amendment. Tenant agrees
                to indemnify and hold Landlord, its members, principals, beneficiaries,
                partners, officers, directors, employees, mortgagee(s) and agents,
                and the
                respective principals and members of any such agents (collectively,
                the
                “Landlord Related Parties”) harmless from all claims of any other brokers
                claiming to have represented Tenant in connection with this Amendment.
                Landlord hereby represents to Tenant that Landlord has dealt with
                no
                broker, other than Cornish & Carey, in connection with this Amendment.
                Landlord agrees to indemnify and hold Tenant, its members, principals,
                beneficiaries, partners, officers, directors, employees, and agents,
                and
                the respective principals and members of any such agents (collectively,
                the “Tenant Related Parties”) harmless from all claims of any other
                brokers claiming to have represented Landlord in connection with
                this
                Amendment.

            


    

    


    
      	 	
              7.7

            	
              Each
                signatory of this Amendment represents hereby that he or she has
                the
                authority to execute and deliver the same on behalf of the party
                hereto
                for which such signatory is acting.

            


    

     

    
      	 	
              7.8

            	
              Redress
                for any claim against Landlord under the Lease and this Amendment
                shall be
                limited to and enforceable only against and to the extent of Landlord’s
                interest in the Building (as defined in the Lease). The obligations
                of
                Landlord under the Lease are not intended to and shall not be personally
                binding on, nor shall any resort be had to the private properties
                of, any
                of its trustees or board of directors and officers, as the case may
                be,
                its investment manager, the general partners thereof, or any
                beneficiaries, stockholders, employees, or agents of Landlord or
                the
                investment manager.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, Landlord and Tenant have entered into and executed this
      Amendment as of the date first written above.

     

    
      	
              LANDLORD:

            	
              TENANT:

            
	 	 
	
              SJ
                PLAZA, LLC,

              a
                Delaware limited liability company

               

              By: Divco
                West Group, LLC

              a
                Delaware limited liability company

              Its
                Agent

               

              By: _______________________

              Name: _______________________

              Its: _______________________

            	
              HERITAGE
                COMMERCE CORP.,

              a
                California corporation

               

              By: _______________________

              Name: ______________________

              Its: ______________________

            


    

     

    
      
        
          


        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    



    EXHIBIT
      A - TENANT ALTERATIONS

    


    attached
      to and made a part of the Amendment bearing the

    date
      of
      August 8, 2005, between SJ
      PLAZA, LLC,
      as
      Landlord and 

    HERITAGE
      COMMERCE CORP.,
      as
      Tenant

    


    1.0     Tenant,
      following the full and final execution and delivery of the Amendment to which
      this Work Letter is attached and any prepaid rental and security deposits
      required under such agreement, shall have the right to perform alterations
      and
      improvements in the Premises (the “Initial Alterations”). Notwithstanding the
      foregoing, Tenant and its contractors shall not have the right to perform
      Initial Alterations in the Premises unless and until Tenant has complied with
      all of the terms and conditions of Article 8 of the Lease, including,
      without limitation, approval by Landlord of the final plans for the Initial
      Alterations and the contractors to be retained by Tenant to perform such Initial
      Alterations. Tenant shall be responsible for all elements of the design of
      Tenant’s plans (including, without limitation, compliance with law,
      functionality of design, the structural integrity of the design, the
      configuration of the premises and the placement of Tenant’s furniture,
      appliances and equipment), and Landlord’s approval of Tenant’s plans shall in no
      event relieve Tenant of the responsibility for such design. Landlord’s approval
      of the contractors to perform the Initial Alterations shall not be unreasonably
      withheld. The parties agree that Landlord’s approval of the general contractor
      to perform the Initial Alterations shall not be considered to be unreasonably
      withheld if any such general contractor (i) does not have trade references
      reasonably acceptable to Landlord, (ii) does not maintain insurance
      as
      required pursuant to the terms of this Lease, (iii) does not have the
      ability to be bonded for the work in an amount of no less than 150% of the
      total
      estimated cost of the Initial Alterations, (iv) does not provide current
      financial statements reasonably acceptable to Landlord, or (v) is not
      licensed as a contractor in the state/municipality in which the Premises is
      located. Tenant acknowledges the foregoing is not intended to be an exclusive
      list of the reasons why Landlord may reasonably withhold its consent to a
      general contractor.

    


    2.0     Provided
      Tenant is not in default, Landlord
      agrees to contribute the sum of Six Thousand Two Hundred Seventy-Five Dollars
      ($6,275.00) (the "Allowance") toward the cost of performing the Initial
      Alterations. The
      Allowance may be
      used
      for the
      cost
      of preparing design and construction documents and mechanical and electrical
      plans for the Initial Alterations and for
      all
      hard
      costs incurred
      by Tenant in
      connection with the Initial Alterations,
      including preliminary and final plans and specifications, permits, plan check
      fees, engineering, and construction of the Initial Alterations.
      The
      Allowance shall be paid to Tenant or, at Landlord's option, to the order of
      the
      general contractor that performed the Initial Alterations, within thirty (30)
      days following receipt by Landlord of (1) receipted bills covering all
      labor and materials expended and used in the Initial Alterations; (2) a
      sworn contractor's affidavit from the general contractor and a request to
      disburse from Tenant containing an approval by Tenant of the work done;
      (3) full and final waivers of lien; (4) as-built plans of the
      Initial
      Alterations; and (5) the certification of Tenant’s general contractor that
      the Initial Alterations have been installed in a good and workmanlike manner
      in
      accordance with the approved plans, and in accordance with applicable laws,
      codes and ordinances. The Allowance shall be disbursed in the amount reflected
      on the receipted bills meeting the requirements above. Notwithstanding anything
      herein to the contrary, Landlord shall not be obligated to disburse any portion
      of the Allowance during the continuance of an uncured default under the Lease,
      and Landlord's obligation to disburse shall only resume when and if such default
      is cured.

    


    3.0     In
      no
      event shall the Allowance be used for the purchase of equipment, furniture
      or
      other items of personal property of Tenant. Tenant shall be responsible for
      all
      applicable state sales or use taxes, if any, payable in connection with the
      Initial Alterations and/or Allowance.
      

    


    4.0     Tenant
      agrees
      to accept the Premises in its "as-is" condition and configuration, it being
      agreed that Landlord shall not be required to perform any work or, except as
      provided above with respect to the Allowance, incur any costs in connection
      with
      the construction or demolition of any improvements in the Premises.

    


    5.0     This
      Work
      Letter shall not be deemed applicable to any additional space added to the
      Premises at any time or from time to time, whether by any options under the
      Lease or otherwise, or to any portion of the original Premises or any additions
      to the Premises in the event of a renewal or extension of the original Term
      of
      the Lease, whether by any options under the Lease or otherwise, unless expressly
      so provided in the Lease or any amendment or supplement to the
      Lease.