**Exhibit 10.22**

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**FULL SERVICELEASE**

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Date:        **March 22, 2004**

 

Lessor:     PSBusiness Parks, L.P., a California Limited Partnership

 

Lessee:    **Digimarc Corporation, a Delaware Corporation**

 

**1.**             LeaseTerms

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1.01         The Premises is the Buildingwhose address is **9405 SW Gemini Drive,Beaverton, OR 97008**.  ThePremises contains approximately **46,083**rentable square feet and is shown on Exhibit “A-1.”  “The Building contains approximately **46,083** rentable square feet and iishown on Exhibit “A-2”.  The Project isdepicted on Exhibit “A-3” and contains approximately **111,870**rentable square feet.  The Property isdepicted on Exhibit “A-4” and is commonly referred to as **Creekside Corporate Park** andcontains approximately **584,493**rentable square feet.

 

1.02         Lessee’s Notice Address:  Lessee’s Notice Address is the address of thepremises stated in Paragraph 1.01 above.

 

1.03         Lessor’s Notice Address:  **15455 NW GreenbrierParkway, Suite 245, Beaverton, OR 97006**.

 

1.04         Lessee’s Permitted Use:Lessee shall use the Premises and for no other purpose whatsoever:  General office uses.

 

1.05         Lease Term:  The Lease Term commences on **September 1, 2004** or suchother date as is determined by the provisions of this Lease (the “CommencementDate”) and ends on the final day of the **84th** fullcalendar month thereafter.

 

1.06         Base Rent:  Base Rent shall be paid monthly in the amountsspecified below:

 
| **$** | **0.00**   |   | Beginning **September 1, 2004** |   | Ending **February 28, 2005** |
|-------|------------|--------|---------------------------------|--------|------------------------------|
| **$** | **46,667** |   | Beginning **March 1, 2005**     |   | Ending **August 31, 2005**   |
| **$** | **63,287** |   | Beginning **September 1, 2005** |   | Ending **August 31, 2006**   |
| **$** | **65,169** |   | Beginning **September 1, 2006** |   | Ending **August 31, 2007**   |
| **$** | **67,128** |   | Beginning **September 1, 2007** |   | Ending **August 31, 2008**   |
| **$** | **69,125** |   | Beginning **September 1, 2008** |   | Ending **August 31, 2009**   |
| **$** | **71,237** |   | Beginning **September 1, 2009** |   | Ending **August 31, 2010**   |
| **$** | **73,349** |   | Beginning **September 1, 2010** |   | Ending **August 31, 2011**   |

 

1.07         Security Deposit:       **$  75,000.00**

 

1.08         Initial Monthly RentCharges:           Base Rent **$46,667.00**.

 

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1.09         Proportionate Share:Lessee’s Proportionate Share of t e Property, which represents the approximateProportionate Share of the Premises to the Property, is **7.8842%**.  Lessee’s Proportionate Share of the Project,which represents the approximate Proportionate Share of the Premises to theProject, is **39.0964%**.  Lessee’s Proportionate Share of the Buildingwithin which the Premises is located, which represents the approximateProportionate Share of the Premises to the building, is **100%**. Proportionate Share may be adjusted byLessor during the Lease Term if the size of he Project, Premises or Buildingchanges.

 

1.10         Expense Base Year:  **2005**.

 

1.11         Broker(s):  **Hume Myers Tenant Counsel L.L.C.for Lessee;  Grubb & Ellis for Lessor**.

 

1.12         Automatic Payments:Unless Lessor otherwise directs in writing, all payments of Base Rent and themonthly estimated payments of Lessee’s Proportionate Share of OperatingExpenses shall be made by electronic payment. Lessee shall execute such necessary and reasonable documents, provide suchnecessary and reasonable information, and follow such necessary and reasonableprocedures as are requested by Lessor from time to time to facilitate suchpayments.  If, by reason of insufficientfunds or other reason, any such payment is not fully made and received, such eventshall be deemed a failure of Lessee to make the required payment.  Payment shall be deemed made by Lessee on thedate funds are actually received by Lessor, provided, if Lessee is then indefault, Lessor shall have the right to return all or a part of any paymentreceived within ten (10) business days of receipt, in which event thereturned amount shall be deemed to have not been paid by Lessee or received byLessor.  Receipt of any funds pursuant tothis Paragraph shall not constitute a waiver by Lessor of any Default by Lesseewhether or not such Default is known to Lessor.

 

**2.**             Leaseof Premises

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2.01         Lessor leases to Lessee,and Lessee leases from Lessor, the Premises, upon the terms of this Lease.  The Premises are leased “AS IS” except onlyfor the improvements, if any, which are to be constructed by Lessor pursuant toExhibit “B.”  Any such improvementsto be constructed by Lessor pursuant to Exhibit “B” are herein referred toas “Lessor’s Work.”  Except as providedherein, Lessee acknowledges that neither Lessor nor any agent of Lessor has madeany representation or warranty regarding the Premises.  The square footages set forth in this Lease areapproximate and agreed.  Use of the terms“rentable” and “usable” is for convenience only and represents Lessor’sinterpretation of such terms.  Lessorwill deliver the Premises to Lessee with existing plumbing, electrical, firesprinkler, lighting, air conditioning, heating and mechanical systems locatedin the Premises, if any, in good working condition.

 

2.02         Lessor’s Work, if any,shall be installed by Lessor in compliance with all then applicable codes.  Lessee, at its sole expense, agrees to complywith all laws, codes, ordinances and other legal requirements (includingcovenants and restrictions) applicable to the Premises (herein “Laws”);provided, however, that Lessor, in conjunction with the Lessor’s work, shallaffect any repairs and improvements required under any Laws as of theCommencement Date.  Lessee agrees tocause the Premises to comply with all Laws, including by making any changes tothe Premises nessitated by any Lessee activity, including but not limited tochanges required

 

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by (a) any Lessee Improvements or Lessee Alterations (as definedbelow), or (b) any use of the Premises or Property by Lessee; provided,Lessor reserves the right to accomplish such changes itself at the expense ofLessee.  If any activity of Lesseenecessitates changes to the Project other than the Premises, then Lessor shallelect that Lessor accomplish the same at the expense of Lessee or that Lesseeaccomplish the same at its own expense.  Notwithstandinganything to the contrary herein, Lessee shall not be responsible for making anystructural modifications to the Premises except to the extent Lessee’s spaceplan requires structural modifications.

 

2.03         If for any reason Lessorcannot deliver possession of the Premises three (3) weeks prior to theestimated Commencement Date of the Lease Term, Lessor will not be subject toany liability nor will the validity of this Lease be affected in any manner.  Rather, the Commencement Date shall be delayeduntil three (3) weeks after delivery of possession to allow Lessee to fixturizethe Premises in which event the expiration date of the Lease Term shall beextended to include the same number of full calendar months as set forth inParagraph 1 above (plus any partial test month); provided, in the eventdelivery of possession is delayed by any act, omission or request of Lessee,then the Premises shall be deemed to have been delivered (and the CommencementDate shall occur) on the earlier of the actual date of delivery or the datedelivery would have occurred absent the number of days of such delayattributable to Lessee and the term shall then be for such number of fullcalendar months (plus any partial first month). If for any reason possession of the Premises is not delivered on thescheduled Commencement Date set forth in Paragraph 1 above, Lessee may a)receive two (2) days free rent for each day of delay beyond the scheduledcommencement date, and b) terminate this Lease by written notice given after aforty-five (45) day period beyond the scheduled commencement date but prior todelivery of possession; provided, such forty-five (45) day period shall beextended by (a) the number of days of delays attributable to Lessee(including but not limited to delays in approval of plans or cost estimates,delays related to changes in plans requested by Lessee whether or not approvedby Lessor, delays caused by Lessee installing any “Lessee Improvements,” delayscaused by other early entry or early occupancy by Lessee, and/or other delaysattributable to Lessee), plus (b) the number of days of delays caused byevents beyond the reasonable control of Lessor (including but not limited tofire, earthquake, other casualty, inclement weather, acts of God, shortages oflabor or material, lead times on ordered items, strike, acts or omissions ofgovernment, and/or delays in governmental permits, inspections or approvals).  Any such termination shall be withoutliability of Lessor to Lessee.  Any suchtermination by Lessee shall be Lessee’s sole remedy for delay in delivery ofpossession.

 

2.04         Upon expiration ortermination of this Lease, Lessee agrees to return the Premises to Lessor inthe same condition as received by Lessee, normal wear and tear excepted, withall removal, repair, and restoration duties of Lessee being fully performed.

 

2.05         Upon request made byLessor following the Commencement Date, Lessee shall execute and deliver anagreement setting forth the Commencement Date, the date upon which the LeaseTerm shall expire, and such other matters regarding the commencement of thisLease as Lessor shall request.  If Lessee,with Lessor’s prior written consent, occupies the Premises prior to theCommencement Date, Lessee’s occupancy of the Premises shall be subject to allthe provisions of the Lease.  Earlyoccupancy of the Premises shall not advance the expiration date of the Lease.

 

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**3.**             BaseRent

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On or before the first day of each calendarmonth of the Lease Term, Lessee will pay to Lessor the Base Rent for such month.  Base Rent for any first partial month and forthe first full calendar month of the Lease Term, is due and payable upon duedate called for in this Lease.  Securitydeposit is due and payable upon Lease execution.  Monthly rent for any partial calendar monthwill be prorated.  All sums payable byLessee to Lessor hereunder shall be deemed rent.  Base Rent and all other amounts required tobe paid by Lessee hereunder shall be paid without deduction or offset andwithout prior notice or demand.  All suchamounts shall be paid in lawful money of the United State of America and shallbe paid to Lessor at the address stated herein or to such other persons or to suchother places as Lessor may designate in writing from time to time.  Amounts payable hereunder shall be deemed paidwhen actually received by Lessor.

 

**4.**             AdditionalRent

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4.01         Unless otherwisespecifically stated in this Lease, any charge payable by Lessee under thisLease other than Base Rent is called “Additional Rent.”  The term “rent” whenever used in this Leasemeans Base Rent, Additional Rent and/or any other monies payable by Lesseeunder the terms of this Lease.

 

4.02         “Operating Expenses” asused herein shall include all costs and expenses related to the ownership,management, operation, maintenance, replacement, improvement and repair of thePremises, Building, Project and/or Property, or any part thereof, incurred byLessor including but not limited to: (1) Property supplies, materials,labor, equipment, and tools; (2) Lessor-incurred Utility and Service Costs(as further described in Paragraph 4.03B below), security, janitorial,trash removal, and all applicable service and maintenance agreements; (3) Propertyrelated legal, accounting and consulting fees, costs and expenses, includingbut not limited to the cost of contests of Real Property Taxes; (4) InsurancePremiums for all policies deemed reasonably necessary by Lessor and/or itslenders, and all deductible amounts under such policies (as further describedin Paragraph 4.03C below); (5) costs and expenses of operating,maintaining, and repairing the Property, including but not limited to allinterior areas and also driving, parking, loading, and other paved or unpavedareas (including but not limited to, resurfacing and striping and any snow andice removal Lessor elects to conduct), landscaped areas (including but notlimited to, tree trimming), building exteriors (including but not limited to,painting and roof work), signs and directories, and lighting; (6) capitalimprovements and replacements (including but not limited to, all financing costsand interest charges); (7) compensation (including but not limited to, anypayroll taxes, worker’s compensation for employees, and customary employeebenefits) of all persons, including independent contractors, who performduties, or render services on behalf of, or in connection with the Property, orany part thereof, including but not limited to, Property operations,maintenance, repair, and rehabilitation; (8) Property management fees notexceeding 5% of Annual Base Rent and the reasonable cost of providing spaceused by the Property manager; and (9) Real Property Taxes (as furtherdescribed in Paragraph 4.03A, below). All Operating Expenses other than Real Property Taxes, Utility andService Costs, and Insurance Premiums, are herein referred to as Common AreaExpenses (CAM).  Any increases in CAMexpenses shall be limited to a non-cumulative 5% per year.  In addition, in the event Lessor effects anycapital improvements or

 

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replacements, the cost of the same shall be amortized over the numberof years equal to the useful life of any such capital improvements orreplacements.

 

4.03A      “RealProperty Taxes” shall include any fee, license fee, tax, levy, charge, orassessment (hereinafter individually and/or collectively referred to as “Tax”)imposed by any authority having the direct or indirect power to tax and wheresuch Tax is imposed against the Property, or any part thereof, or Lessor inconnection with its ownership or operation of the Property, including but notlimited to: (1) any Tax on rent or Tax against Lessor’s business ofleasing the Property; (2) any Tax by any authority for services ormaintenance provided to the Property, or any part thereof, including but notlimited to, fire protection, streets, sidewalks, and utilities; (3) anyTax on real estate or personal property levied with respect to the Property, orany part thereof, and any fixtures and equipment and other property used inconnection with the Property; (4) any Tax based upon a reassessment of theProperty due to a change in ownership or transfer of all or part of Lessor’sinterest in the Property; and, (5) any Tax replacing, substituting for, orin addition to any Tax previously included in this definition.  Real Property Taxes do not include Lessor’sfederal or state net income taxes.

 

4.03B      “Utilityand Service Costs” shall include all Lessor incurred utility and service costsand expenses including but not limited to costs related to water and plumbing,electricity, gas, lighting, steam, sewer, waste disposal, and HVAC, and allcosts related to plumbing mechanical, electrical, elevator, HVAC, and othersystems.

 

4.03C      “InsurancePremiums” shall include all insurance premiums for all insurance policiesmaintained by Lessor from time to time related to the Property.

 

4.04         Throughout the Lease Termfollowing the Base Year, Lessee will pay as Additional Rent its ProportionateShare (of the Project and/or Building, as designated from time to time byLessor) of the amount by which total Operating Expenses in each calendar yearexceed total Operating Expenses for the Base Year, subject to the limitationset forth in Section 4.02 above.  Estimatedpayments shall be made monthly on or before the first day of each calendarmonth each in the amount of Lessor’s then current estimate as outlined below.  Lessee’s Proportionate Share will be proratedfor partial months.  All OperatingExpenses will be adjusted, at the election of Lessor, to reflect 100% occupancyduring any calendar year in which the Project is not fully occupied (in whichevent Operating Expenses for the Base Year shall also be so adjusted).

 

4.05         Lessee’s ProportionateShare of Operating Expenses shall be determined and paid as follows:

 

4.05A.     Lessee’sOperating Expense estimates:  On or aboutApril 1st of each calendar year, Lessor will provide Lessee with a statementof: (1) Lessee’s annual share of estimated Operating Expenses in excess ofBase Year Operating Expenses for the then current calendar year; (2) Lessee’smonthly Operating Expense estimate for the then current year; and, (3) Lessee’sretroactive estimate correction billing (for the period of January 1stthrough the date immediately prior to the commencement date of Lessee’s newmonthly Operating Expense estimate) for the difference between Lessee’s new andpreviously billed monthly Operating Expense estimates for the then currentyear.

 

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4.05B      Lessee’sProportionate Share of actual annual Operating Expenses: Each year, Lessor willprovide Lessee with a statement reflecting the total Operating Expenses for theprevious calendar year.  If the total ofLessee’s Operating Expense estimates billed for the previous calendar year areless than Lessee’s Proportionate Share of the actual Operating Expenses inexcess of Base Year Operating Expenses, the statement will indicate the paymentamount and date due.  If Lessee has paidmore than its Proportionate Share of excess Operating Expenses for thepreceding calendar year, Lessor will credit the overpayment toward Lessee’sfuture Operating Expense obligations.  MonthlyOperating Expense estimates are due on the 1st of each month andshall commence in the month specified by Lessor.  Lessee’s retroactive estimate correction, andactual annual Operating Expense charges, if any, shall be due, in full, on thedate(s) specified by Lessor.

 

4.06         Unless Lessor otherwiseelects, Lessee shall pay each Operating Expense in accordance with Lessee’sProportionate Share of the Building or Lessee’s Proportionate Share of theProject, whichever is designated by Lessor. Lessor shall have the right to make allocations (“Allocations”) toLessee of any one or more Operating Expenses on a different basis.  Lessor shall have the right to make any suchAllocations in any manner which Lessor deems reasonable (including use ofestimates).  For example, if Lessor deemsit reasonable to do so, Lessor shall have the right to elect at any time andfrom time to time (a) to make any Allocation of one or more OperatingExpenses based upon Lessee’s Proportionate Share of the Building and to makeother Allocations on Lessee’s Proportionate Share of the Project, (b) tomake Allocations of certain Operating Expense items among less than all lesseesand/or other than based upon the respective square footages of the lessees, (c) tomake different Allocations for different Operating Expenses, and/or (d) toalter an Allocation or the method of determining an Allocation from time totime.  In no event shall Lessor be liableto Lessee based upon any incorrect or disputed Allocation nor shall Lessee haveany right to terminate this Lease by reason of any such Allocation.

 

4.07         In the event Lesseewishes to audit any Operating Expense charge, such an audit shall be limited toan audit of the annual statement delivered under Paragraph 4.05B above.  Such audit shall be performed only if, at thetime of the audit request and at all times thereafter to and during the courseof the audit, Lessee has paid in full all Operating Expenses billed and is notin Default (as defined in Section 20.02 below).  Any audit shall be conducted at a time andlocation designated by Lessor.  Lessorand Lessee agree that any Lessee audit must be requested by Lessee by writtennotice given within six (6) months of the date that Lessor provides theapplicable annual statement under Paragraph 4.05B above, and must becompleted by Lessee within thirty (30) days of its written notice requestingthe audit; if Lessee does not give such written notice within the period oftime allowed, or fails to complete the audit within the time allowed, Lessee’sright to audit is waived, and the Operating Expenses, as billed, including allcalculations used as the basis for Lessor’s charges (including any “Allocations”and any applicable Expense Base Year or expense stop calculations), shall bedeemed conclusive and final for all purposes under this Lease.  All calculations by Lessor of OperatingExpenses for the Expense Base Year shall be conclusive and final, and Lesseeshall have no right to audit the same, except only Lessee may audit the same aspart of an audit of Operating Expenses for the first Expense Comparison Year.  Any audit shall be conducted only by Lesseeand the CPA then used by Lessee for the preparation of its tax returns andfinancial statements; no agent of Lessee employed in connection with the auditshall be employed on any contingent payment basis.

 

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Lessee shall maintain as strictly confidential, and shall cause itsauditor to execute in favor of Lessor a confidentiality agreement (in formprepared by Lessor) regarding, all financial information audited, the resultsof any such audit, and the resolution of any disputed issues arising inconnection with such audit.  Lessor shallnot be bound by the result of any such audit. If the parties do not agree upon the inclusion or amount of anyOperating Expense charged by Lessor, the sole remedy of Lessee shall be toconduct an audit within the time specified in this Lease and, if still indisagreement with Lessor, to submit the matter to arbitration pursuant to Section 27.17below within thirty (30) days after completion of the audit to request anadjustment to any disputed Operating Expense item to cause the same to notexceed the amount that Lessor has the right to collect hereunder for such item.  In no event will this Lease be terminable norshall Lessor be liable for damages based upon any disagreement regarding oradjustment of Operating Expenses.

 

**5.**             LateCharges

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If any sum payable by Lessee to Lessor is notreceived by Lessor within five (5) days after it becomes due, Lessee shall paya late charge equal to fifty dollars ($50.00) or five (5%) of the thendelinquent amount, whichever is greater. A fifty dollar ($50.00) handling fee will be paid to Lessor by Lesseefor each bank returned check, and Lessee will be required to make all futurepayments to Lessor by wire or electronic transfer or by cashier’s check.  The acceptance of late charges and returnedcheck charges by Lessor will not constitute a waiver of Lessee’s Default norany other rights or remedies of Lessor.  Lesseeshall not be in default of this Lease the first time in a twelve (12)consecutive month period that Lessee fails to pay rent when due so long asLessee pays such overdue rent within five (5) days of written notice fromLessor that such overdue amount is due.

 

**6.**             SecurityDeposit and Financial Reporting

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6.01         Upon Lessee’s executionof this Lease, Lessee will deposit with Lessor an initial Security Deposit inthe amount specified in Paragraph 1 as security for Lessee’s full andfaithful performance of every provision under this Lease.  Lessor will not be required to keep theSecurity Deposit separate from its general funds and has no obligation orliability for payment of interest thereon (except when required by law).  Lessee hereby grants to Lessor a securityinterest in the Security Deposit.  Lesseewill not have the right to apply any part of the Security Deposit to anyamounts payable under the terms of this Lease nor is it a measure or limitationof Lessor’s damages in event of a Default by Lessee.  If Lessee fails to pay any rent due herein,or otherwise is in Default of any provision of this Lease, Lessor may, withoutwaiver of the Default or of any other right or remedy, use, apply or retain allor any portion of the Security Deposit for the payment of any amount due Lessoror to compensate Lessor for any loss or damage suffered by Lessee’s Default.  Within five (5) days after written notificationby Lessor, Lessee will restore the Security Deposit to the full amount requiredunder this Lease.

 

6.02         Within ten (10) daysafter written request from Lessor but not more often than annually, Lesseeshall deliver to Lessor such financial statements as Lessor reasonably requestsregarding Lessee or any assignee, subtenant, or guarantor of Lessee.  Lessee represents and warrants to Lessor thateach financial statement is a true and accurate statement.  Lessor shall use such statements only for validbusiness purposes.  Lessor shall have theright to make such

 

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financial statements and the other contents of its files available tolaw enforcement or other governmental agencies upon request.

 

**7.**             Useof Premises

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7.01         The Premises will be usedand occupied only for Lessee’s Permitted Use. Lessee will, at its sole expense, comply with all conditions andcovenants of this Lease, and all Laws.  Lesseewill not use or permit the use of the Premises, the Property or any partthereof, in a manner that is unlawful, diminishes the appearance or aestheticquality of any part of the Property, creates waste or a nuisance, or causesdamage to the Property.  Lessee shall notpermit any objectionable or unpleasant odors, smoke, dust, gas, noise orvibrations to emanate from the Premises nor take or permit any other action inthe Premises that would endanger, annoy, or interfere with the operations of,Lessor or any other tenant of the Project. Lessee shall obtain, at its sole expense, any permit or othergovernmental authorization required to operate its business from the Premises.  Any animals, excepting guide dogs, on orabout the Property or any part thereof are expressly prohibited.

 

7.02         In the event of any excessivetrash in or outside the Premises, as determined by Lessor in its solediscretion, Lessor will have the right to remove such excess trash, charge allcosts and expenses attributable to its removal to Lessee.  Lessee will not cause, maintain or permit anyoutside storage on or about the Property without prior written consent byLessor.  In the event of any unauthorizedoutside storage by Lessee, Lessor will have the right, without notice, inaddition to such other rights and remedies it may have, to remove any suchstorage at the expense of Lessee.

 

**8.**             Parking

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All parking will comply with the terms andconditions of this Lease and the parking rules and regulations included in Exhibit “D.”  Lessee will have a non-exclusive privilege touse of one-hundred eighty (180) parking spaces designated by Lessor for publicparking and four (4) designated visitor parking spaces at the entry to thePremises.  Vehicles parked in publicparking areas will be no larger than full-sized passenger automobiles orstandard pick-up trucks.  Lessor reservesthe right, without notice to Lessee, to tow away at Lessee’s sole cost andexpense any vehicles parked in any parking area for any continuous period of 24hours or more, or earlier if Lessor, in its sole discretion, determines suchparking to be a hazard or inconvenience to other lessees or Lessor, or violatesany rules or regulations or posted notices related to parking.  Lessor shall not be responsible for enforcingLessee’s parking rights against third parties. From time to time, Lessor reserves the right, upon written notice toLessee, to change the location, the availability and nature of parking spaces,establish reasonable time limits on parking, and, on an equitable basis, toassign specific spaces with or without charge to Lessee as Additional Rent.  The parking privileges granted to Lessee arepersonal to Lessee; Lessee shall not assign or sublet parking privileges.

 

**9.**             Utilitiesand Services

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9.01         Subject to the otherprovisions of this Lease, the following services are provided.

 

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A.            Electricity,water, and elevator service (if elevators presently serve the Premises) areprovided.

 

B.            Heatingand air conditioning are provided 7:00 a.m. to 6:00 p.m. Mondaythrough Saturday, except holidays.  IfLessee desires such service during other hours, Lessee must prearrange the samewith Lessor and pay an additional charge for such service.

 

C.            Fivedays per week janitorial service, periodic window cleaning, supplies forBuilding operation, and other customary services.

 

If Lessee uses any utility or service inexcess of normal usage levels, as determined by Lessor in its sole discretion,Lessor shall have the right to charge Lessee for such excess use and to chargeLessee the cost to separately meter such use.

 

9.02         Lessor will not be liableor deemed in Lessor Default, nor will there be any abatement of rent or rightto terminate this Lease, for (a) any interruption or reduction ofutilities, utility services or telecommunication services not caused by Lessor,(b) any telecommunications or other company (whether selected by Lessor orLessee) failing to provide such utilities or services or providing the samedefectively, and/or (c) any utility interruption in the nature of blackouts,brownouts, or rolling interruptions.  Lesseeagrees to comply with any energy conservation programs required by law orimplemented by Lessor.  Lesseeacknowledges that utility and service costs and availability may fluctuatesignificantly, due to power shortages or other events and factors, and Lesseeaccepts the risks of such fluctuations.  Lessorreserves the right, in its reasonable discretion, to designate, at any time,the utility and service providers for Lessee’s use within the Property; no suchdesignation shall impose liability upon Lessor.

 

9.03         Lessee has satisfieditself as to the adequacy of any Lessor owned utility equipment and thequantity of telephone lines and other service connections to the Buildingavailable for Lessee’s use.

 

**10.**           LesseeImprovements; Lessee Alterations and Mechanic’s Liens

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10.01       Any improvements to beconstructed in the Premises by Lessee prior to Lessee initially commencing useof the Premises are referred to throughout this Lease as “Lessee Improvements.”  All Lessee Improvements will be performed inaccordance with the terms and conditions outlined in Exhibit “B” and alsoin accordance with the provisions set forth in this Paragraph 10 regardingLessee Alterations.

 

10.02       The following provisionsapply to “Lessee Alterations” which means and includes (a) any alterationsor improvements to the Premises undertaken by Lessee (other than nonstructuralinstallation of equipment or trade fixtures), (b) any utilityinstallations at the Premises undertaken by Lessee, and (c) any repair,restoration, replacement, or maintenance work at the Premises undertaken byLessee whether or not Lessee is required to undertake such work pursuant tothis Lease.  Lessee shall not commenceany Lessee Alteration without first obtaining the prior written consent ofLessor in each instance which consent may be withheld or conditioned in Lessor’sreasonable discretion.  Lessee shallsubmit such information regarding the intended Lessee Alteration as Lessor mayreasonably require, and no request for consent

 

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shall be deemed complete until such information is delivered.  The following provisions apply to all LesseeAlterations.

 

(a)           Lesseeshall hire a licensed general contractor who, in turn, shall hire only licensedsubcontractors.  All work shall beconducted expeditiously and be completed within a reasonable time.

 

(b)           Lesseeshall obtain all required permits and deliver a copy of the same to Lessor.  Lessee shall install all Lessee Alterationsin strict compliance with all permits, any plans approved by Lessor, and allconditions to Lessor’s approval.

 

(c)           UnlessLessor elects otherwise in its applicable prior written consent, Lessee shallremove each Lessee Alteration at the end of this Lease or Lessee’s right ofpossession and restore the Premises to its prior condition, all at Lessee’sexpense.

 

(d)           Lesseeshall deliver to Lessor, within ten (10) days following installation of eachLessee Alteration, (w) accurate, reproducible as-built plans, (x) proofof final inspection and approval by all governmental authorities, (y) completelien waivers for all costs of the Lessee Alteration, and (z) a copy of arecorded notice of completion.

 

10.03       Lessor shall have the rightto inspect all Lessee Alterations.  Lesseeshall pay to Lessor a fee equal to 5% of total project cost up to $50,000 and2.5% thereafter, to compensate Lessor for review of plans, inspection of work,and other activities regarding any Lessee Alterations.  Approval of any plans or inspection of anywork is for the sole benefit of Lessor and is not a representation by Lessorthat any work is suitable or complies with applicable requirements.  Lessor’s approval of any Lessee Improvementsand Lessee Alterations and/or Lessor’s approval or designation of any generalcontractor, subcontractor, supplier or other project participant will notcreate any liability whatsoever on the part of Lessor.

 

10.04       Lessee shall pay all costsof Lessee Alterations as and when due.  Lesseeshall not allow any lien to be filed.  Lesseeshall obtain advance lien waivers and third-party beneficiary agreements fromall contractors, subcontractors, suppliers, and others providing equipment,labor, materials, or services, in the form required by Lessor.  If any lien is filed, then, without waiver ofany other right or remedy, Lessor shall have the right to cause such lien to beremoved by any means allowed by law, including bond, deposit, and/or payment ofthe underlying claim.  All sums expendedby Lessor in connection with such lien and/or its removal, including attorneyfees, shall be immediately due from Lessee to Lessor, together with interest atthe rate of 12%.

 

10.05       All Lessee Improvements andLessee Alterations are part of the realty and belong to Lessor.  Lessee shall be solely responsible to insureall Lessee Alterations and to restore the same following any casualty.  As a condition of Lessor consenting to anyLessee Improvements or Lessee Alterations, Lessor reserves the right, at anytime to elect to make Lessee the owner of all or any specified part of theLessee Improvements or Lessee Alterations and/or to require Lessee, upontermination of this Lease, to remove none, all, or part of the same at its solecost and expense.  The provisions of thisParagraph shall survive the termination of this Lease.

 

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10.06       Notwithstanding any otherprovision of this Lease, Lessee shall remove, at or prior to the expiration ortermination of this Lease, at its expense, all wiring and cabling installed atthe Premises which shall have been installed by Lessee or which Lessor shallhave installed pursuant to this Lease or at the request of Lessee.  Such wiring and cabling shall include but notbe limited to (a) wiring and cabling above the ceiling panels, behind orwithin walls, and under or within floors, (b) wiring and cabling forvoice, data, security or other purposes, (c) wiring and cabling installedpursuant to this Paragraph 10, pursuant to Exhibit B, or otherwise,and (d) all related installations, equipment and items whatsoever.

 

**11.**           Repairs

** **

11.01       Subject to Paragraph 11.02below, Lessee shall, at all times and at its sole cost and expense, keepall parts of the Premises (including Lessee Improvements and LesseeAlterations) in good order, and in a neat, clean and safe condition.  If Lessee does not perform requiredmaintenance, Lessor shall have the right, without waiver of Default nor of anyother right or remedy, to perform such obligations of Lessee on Lessee’sbehalf, and Lessee will reimburse Lessor for any costs incurred immediatelyupon demand.

 

11.02       Lessor shall perform allrepairs required in the Premises.  Allcosts incurred by Lessor in making such repairs shall be Operating Expenses;provided, Lessee shall reimburse Lessor for 100% of any such costs incurred byLessor (a) due to the act or omission of Lessee (including but not limitedto clogging of plumbing, stain removal, and repair of damage to the Premises),or (b) for repairs or maintenance in excess of or other than routineBuilding standard repairs and maintenance as determined by Lessor in itsreasonable discretion (for example, maintenance of any above standard dedicatedHVAC unit, repair of built-in appliances, or periodic replacing of above standardlight bulbs).

 

**12.**           Insurance

** **

12.01       Lessee will not do orpermit anything to be done within or about the Premises or the Property whichwill increase the existing rate of any insurance on any portion of the Propertyor cause the cancellation of any insurance policy covering any portion of theProperty.  Lessee will, at its sole costand expense, comply with any requirements of any insurer of Lessor.

 

12.02       Lessee agrees to maintainpolicies of insurance described in this Paragraph.  Lessor reserves the right, from time to time,to require additional coverage’s (including, for example, flood insurance, ifthe Premises is located in a flood hazard zone), and/or to require higheramounts of coverage’s.  Any additionaland/or higher must conform to reasonable industry standards.  No insurance policy of Lessee shall have adeductible greater than $50,000.

 
| (a)           Workers’  Compensation  Employer’s Liability |   | Statutory Requirements  Not less than $1,000,000.00 |
|------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
|                                                                                                                   |   |                                                |
| (b)           Commercial  General Liability                          |   | Not less than $1,000,000.00                         |
|                                                                                                                   |   |                                                |
| Combined single limit per  occurrence this location                                                                    |   | Not less than $2,000,000.00  aggregate              |

 

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The CommercialGeneral Liability policies shall insure on an occurrence and not a claims-madebasis and cover the Premises, Project and Property.  Such policies shall cover liability arisingfrom premises, operations, independent contractors, products-completedoperations, personal injury, advertising injury and liability assumed under aninsured contract (specifically insuring performance of the indemnityobligations of Lessee hereunder); such policies shall not be excess.

 
| (c)           Automobile  Liability single  limit including property damage                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | Not less than $300,000.00 combined |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                               |
| (d)           “Causes  of Loss — Special Form” coverage including endorsements for flood coverage,  earthquake sprinkler leak coverage, and such endorsements and supplemental as  Lessor may require from time to time.   This insurance coverage must be upon the Premises and all property owned  by Lessee, for which Lessee is legally liable, which Lessee is obligated to  repair and restore hereunder, and/or which was installed at the expense of or  at the request of Lessee, including but not limited to, any Lessee  Improvements, Lessee Alterations, furniture, fixtures, equipment,  installations and any other personal property of Lessee, in an amount not  less than their full replacement value.   All proceeds of this insurance shall only be used for the repair and  replacement of property so insured; Lessee hereby assigns to Lessor all its  rights to receive any proceeds of such insurance policies attributable to any  Lessee Improvements and Lessee Alterations if this Lease is terminated due to  damage or destruction. |

 

The limits ofthe insurance coverage required under this Lease will not limit the liabilityof Lessee nor relieve Lessee of any obligation hereunder.  All insurance to be carried by Lessee will beprimary to, and non-contributory with, Lessor’s insurance, and containcross-liability endorsements and will in addition to the above coveragespecifically insure Lessor against any damage or loss that may result eitherdirectly or indirectly from any default of Lessee under Paragraph 14(Hazardous Materials) herein.  Anysimilar insurance carried by Lessor will be considered excess insurance only.

 

12.03       Lessee will name Lessor(and, at Lessor’s request, any mortgagee) and Lessor’s agents as additionalinsured’s on all insurance policies required of Lessee under this Lease, otherthan Worker’s Compensation, Employer’s Liability, Automobile Liability, andFire and Extended coverage (except on Lessee Improvements or Lessee Alterationsto the Premises for which Lessor shall be named an additional insured) insuringLessor and such other additional insured’s regardless of any defenses theinsurer may have against Lessee and regardless of whether the subject claim isalso made against Lessee.  All insurancepolicies carried by Lessee will permit the insured, prior to any loss, to agreewith a third party to waive any claim it might have against said third partywithout invalidating the coverage under the insurance policy, and will releaseLessor (and Lessor’s affiliates and subsidiaries, and all officers, partners,directors, and employees of Lessor and/or of any such subsidiary or affiliate),from any claims for damage

 

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to any person, to the Property of which the Premises are a part, anyexisting improvements, Lessee Improvements and Lessee Alterations to thePremises, and to any furniture, fixtures, equipment, installations and anyother personal property of Lessee caused by or resulting from, risks which areto be insured against by Lessee under this Lease, regardless of cause.

 

12.04       Lessee will deliver toLessor (and, at Lessor’s request, to any mortgagee or to any other thirdparty), simultaneously with its execution of this Lease and thereafter at leastthirty (30) days prior to expiration, cancellation or change in insurance,certificates of insurance evidencing, at a minimum, the coverage specified in Paragraph 12.02.  All such certificates shall be in form andsubstance satisfactory to Lessor, shall affirmatively demonstrate all andrequirements set forth in this Lease, shall contain no disclaimers of coverage,and shall include a firm and unconditional obligation to give to Lessor atleast 10 days’ prior written notice prior to cancellation or change in anycoverage.  All insurance requiredhereunder will be with companies licensed and authorized to do business in thestate in which the Property is located and holding a “General PolicyholdersRating” of “A VIII” or better, as set forth in the most current Best’sInsurance Guide.

 

12.05       Lessor will secure andmaintain insurance coverage in such limits as Lessor may deem reasonable in itsreasonable judgment to afford Lessor adequate protection.  The premiums for such coverage are “InsurancePremiums” under Paragraph 4.03C above. Any proceeds of such insurance shall be the sole property of Lessor touse as Lessor determines.  Lessor makesno representation that the insurance policies and coverage amounts specified tobe carried by Lessee or Lessor under the terms of this Lease are adequate toprotect Lessee.  Lessee will provide, atits own expense, all insurance as Lessee deems adequate to protect itsinterests.

 

12.06       Without limiting the effectof any other waiver of or limitation on the liability of Lessor set forthherein, and except as provided in Paragraph 13 and/or Paragraph 14below, neither Lessor nor Lessee shall be liable to the other party or to anyinsurance company (by way of subrogation or otherwise) for any loss of ordamage to tangible property due to casualty regardless of negligence.  For purposes of this Paragraph 12.06, “Lessor”shall include Lessor’s affiliates and subsidiaries, and all officers, partners,directors, and employees of Lessor or of any such subsidiary or affiliate.

 

**13.**           Waiverof Claims and Indemnification

** **

Lessee waives all claims against Lessor forany damage to any property in or about the Property, for any loss of businessor income, and for injury to or death of any persons, regardless of the causeof any such loss or event or time of occurrence, except loss, injury or deathcaused by Lessor’s gross negligence or willful misconduct.  Lessee will indemnify, protect, defend andhold harmless Lessor from and against all claims, losses, damages, causes ofaction, costs, expenses and liabilities, including legal fees, arising out ofLessee’s occupancy of the Premises or presence on the Property, the conduct ofLessee’s business, any Default by Lessee, and/or any act, omission or neglectof Lessee, its agents, contractors, employees, suppliers, licensees or invitees.  For purposes of this Paragraph 13, “Lessor”shall include also Lessor’s affiliates and subsidiaries, and all officers,partners, directors, and employees of Lessor or of any such subsidiary oraffiliate.

 

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**14.**           HazardousMaterials

** **

14.01       “Hazardous Materials” willmean any substance commonly referred to, or defined in any Law, as a hazardousmaterial or hazardous substance (or other similar term), including but not belimited to, chemicals, solvents, petroleum products, flammable materials,explosives, asbestos, urea formaldehyde, PCB’s, chlorofluorocarbons, Freon orradioactive materials.  Lessee will notcause or permit any Hazardous Materials to be brought upon, kept, stored,discharged, released or used in, under or about any portion of the Property byLessee, or its agents without the prior written consent of Lessor, whichconsent may be withheld or conditioned in Lessor’s sole discretion; provided,Lessee may bring into the Premises small amounts of Hazardous Materials (suchas cleaning products and copy toner) which are readily available to Lessee byunregulated retail purchase if the same are necessary in Lessee’s normalbusiness operations.  If Lessee bringsany Hazardous Materials to the Premises or Property, with or without the priorwritten consent of Lessor (without waiver of the requirement of prior writtenconsent), Lessee shall: (1) use such Hazardous Material only as isreasonably necessary to Lessee’s business, in small, properly labeledquantities; (2) handle, use, keep, store, and dispose of such HazardousMaterial using the highest accepted industry standards and in compliance withall applicable Laws; (3) maintain at all times with Lessor a copy of themost current MSDS sheet for each such Hazardous Material; and (4) complywith such other rules and requirements Lessor may from time to time impose.  Upon expiration or earlier termination ofthis Lease, Lessee will, at Lessee’s sole cost and expense, cause all HazardousMaterials brought to the Premises or the Property by Lessee, its agents,contractors, employees, suppliers, licensees or invitees, to be removed fromthe Property in compliance with any and all applicable Laws.

 

14.02       If Lessee or its agentsviolate the provisions of this Paragraph 14, or performs any act oromission which contaminates or expands the scope of contamination of thePremises, the Property, or any part thereof, the underlying groundwater, or anyproperty adjacent to the Property, then Lessee will promptly, at Lessee’sexpense, take all investigatory and/or remedial action (collectively called “Remediation”)that is necessary to fully clean up, remove and dispose of such HazardousMaterials and any contamination so caused and shall do so in compliance withany applicable Laws.  Lessee will alsorepair any damage to the Premises and any other affected portion(s) of theProperty caused by such contamination and Remediation.

 

14.03       Lessee shall immediatelyprovide to Lessor written notice of any investigation or claim arising out ofthe use by Lessee of Hazardous Materials at the Property or the violation ofany provision of this Paragraph 14 and shall keep Lessor fully advisedregarding the same.  Lessee shall provideto Lessor all reports regarding the use of Hazardous Materials by Lessee at theProperty and any incidents regarding the same, regardless of whether any suchdocumentation is considered by Lessee to be confidential.  Lessor retains the right to participate inany legal actions affecting the Property involving Hazardous Materials.

 

14.04       Lessee will indemnify,protect, defend and forever hold Lessor, its lenders and ground lessor, if any,and the Premises, the Property, or any portion thereof, harmless from any andall damages, causes of action, fines, losses, liabilities, judgments,penalties, claims, and other costs arising out of any failure of Lessee toobserve any covenants of this Paragraph 14 of this Lease.  All provisions of this Paragraph 14shall survive the expiration of this Lease and any termination of this Lease orof Lessee’s right of possession.  For purposesof this

 

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Paragraph 14.04, “Lessor” shall include also Lessor’s affiliatesand subsidiaries, and all officers, partners, directors, and employees ofLessor or of any such subsidiary or affiliate.

 

**15.**           Lessor’sAccess

 

Lessor, its agents, contractors, consultants,servants and employees, will have the right to enter the Premises at any timein the case of an emergency, and otherwise at reasonable times upon reasonablenotice to examine the Premises, perform work in the Premises, show thePremises, exercise any right or remedy, or for any other purpose.  For each of these purposes, Lessor will atall times have and retain any necessary keys. Lessee will not alter any lock or install new or additional locks orbolts on any door in or about the Premises without obtaining Lessor’s priorwritten approval and will, in each event, furnish Lessor with a new key.  Access by Lessor will not give Lessee theright to terminate this Lease, and will be without abatement of rent orliability on the part of Lessor.

 

**16.**           Damageor Destruction

** **

16.01       If the Premises is damagedor destroyed by fire or other casualty, Lessee will immediately give writtennotice to Lessor of the casualty.  Lessorwill have the right to terminate this Lease following a casualty if any of thefollowing occur by giving notice to Lessee within sixty (60) days of thecasualty: (i) insurance proceeds actually paid to Lessor and available foruse are not sufficient to pay the full cost to fully repair the damage; (ii) Lessordetermines that the Premises or the Building cannot be fully repaired within180 days; (iii) the Premises are damaged or destroyed within the lasttwelve (12) months of the Lease Term; (iv) Lessee is in Default of thisLease at the time of the casualty; (v) Lessor would be required under thisLease to abate or reduce Lessee’s rent for a period in excess of six (6) monthsif the repairs were undertaken; or (vi) the Project, or the Building inwhich the Premises is located, is damaged such that the cost of repair of thesame would exceed 10% of the replacement cost of the same.  If Lessor elects to terminate this Lease,Lessor will be entitled to retain all applicable Lessee insurance proceedsexcepting those attributable to Lessee’s furniture, fixtures, equipment, andany other personal property.

 

16.02       If this Lease is notterminated pursuant to Paragraph 16.01, Lessor will repair the Premisesand this Lease shall continue.  Therepair obligation of Lessor shall be limited to repair of the Premisesexcluding any Lessee Improvements, Lessee Alterations, and any personalproperty and trade fixtures of Lessee.  Duringthe period of repair, rent will be abated or reduced in proportion to thedegree to which Lessee’s use of the Premises is impaired, as determined byLessor, not to exceed the total amount of rent loss insurance proceeds,directly attributable to Lessee’s Premises, Lessor has received.  However, rent will not be abated if Lessee orany of its agents is the cause of the casualty.

 

**17.**           Transfer(Assignment/Subletting)

** **

17.01       Lessee will not,voluntarily or by operation of law, assign, sell, convey, sublet or otherwisetransfer all or any part of Lessee’s right or interest in this Lease, or allowany other person or entity to occupy or use all or any part of the Premises(collectively called “Transfer”) without first obtaining the written consent ofLessor which may be withheld or conditioned by

 

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Lessor in its reasonable discretion. Any Transfer without the prior written consent of Lessor shall be void.  Without limiting the generality of thedefinition of “Transfer,” it is agreed that each of the following shall bedeemed a “Transfer” for purposes of this Paragraph: (a) an entity otherthan Lessee becoming the tenant hereunder by merger, consolidation, or otherreorganization; and (b) a transfer of any ownership interest in Lessee(unless Lessee is an entity whose stock is publicly traded).  Lessee shall provide to Lessor all informationrequested by Lessor concerning a Transfer. If Lessor has not granted consent in writing to a Transfer within thirty(30) days of Lessee’s request hereunder and delivery of all such information,Lessor will be deemed to have rejected Lessee’s request.  In no event shall Lessee mortgage, encumber,pledge or assign for security purposes all or any part of its interest in thisLease.  Notwithstanding the foregoing,Lessee may assign this Lease or sublease the Premises, in whole or in part,without the express written consent of Lessor to: (i) any corporation intowhich or with which Lessee has merged or consolidated; (ii) any parent,subsidiary, successor, or affiliated corporation of Lessee; (iii) anycorporation which acquires all or substantially all of the assets or issued andoutstanding shares of capital stock of Lessee; (iv) any partnership, themajority interest of which shall be owned by the parent of Lessee; provided theresulting entity from such merger or consolidation or the transferee, otherthan a parent, subsidiary or affiliated corporation of Lessee, from any suchacquisition, shall have a net worth not less than Lessee’s prior to the merger,consolidation, or acquisition; and provided further any such assignee orsuccessor shall agree in writing to assume and perform all of the terms andconditions of this Lease on Lessee’s part to be performed from and after theeffective date of such assignment or subletting, so long as the resultingentity’s use of the Premises does not violate any provision of this Lease orany applicable governmental law, rule or regulation.

 

17.02       In the event Lessorconsents to a Transfer, the Transfer will not be effective until Lessorreceives a fully executed agreement regarding the Transfer, in a form and of substanceacceptable to Lessor, any documents or information required by such agreement(including any estoppel certificate and any subordination agreement required byany lender of Lessor), an amount equal to all attorneys fees and other expensesof Lessor incurred in connection with the Transfer, and a Transfer fee in anamount determined by Lessor (a minimum fee of $250 is payable).  Lessee agrees to pay to Lessor an amountequal to all attorneys’ fees and other expenses incurred by Lessor related to arequest for consent to Transfer regardless of whether such consent is grantedand regardless of whether the Transfer is consummated.

 

17.03       Fifty percent (50%) of anyconsideration paid to Lessee solely for assignment of this Lease, less anyreasonable brokerage commission and reasonable tenant improvements paid byLessee with respect to such assignment, shall be immediately paid to Lessor.  In the event of a sublease of all or aportion of the Premises, fifty percent (50%) of all rents payable by thesubtenant in excess of rents payable hereunder (allocated on a per square footbasis in the event of a partial sublease) shall be immediately due and payableto Lessor; provided, excess rental shall be calculated taking into accountstraight-line amortization, without interest, of any reasonable brokeragecommission less any reasonable tenant improvements paid by Lessee in connectionwith the subject sublease transaction.

 

17.04       Lessor may, within thirty(30) days after submission of Lessee’s written request for Lessor’s consent toa Transfer, terminate this Lease (or, as to a partial subletting, terminatethis Lease as to the portion of the Premises proposed to be sublet) as of thedate the proposed

 

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Transfer was to be effective.  IfLessor terminates this Lease as to only a portion of the Premises, then (a) thisLease shall cease as to such portion of the Premises, (b) Lessee shall payto Lessor all Base Rent and other amounts accrued through the termination daterelating to the portion of the Premises covered by the proposed Transfer(allocated on an equitable basis determined by Lessor), and (c) Lesseeshall execute, upon request of Lessor, an amendment hereto setting forthmatters related to such partial termination. Lessor may physically separate the recaptured portion of the Premisesand lease such portion of the Premises to the prospective transferee (or to anyother person) without liability to Lessee.

 

17.05       Regardless of whetherconsent by Lessor is granted in connection with any Transfer, no Transfer shallrelease Lessee from any obligation or liability hereunder, Lessee shall remainprimarily liable to pay all rent and other sums due hereunder to Lessor and toperform all other obligations hereunder. Similarly, no Transfer, with or without the consent of Lessor, shallrelease any guarantor from its obligations under its guaranty.  Upon any assignment or sublease, any rights,options or opportunities granted to Lessee hereunder to extend or renew theLease Term, to shorten the Lease Term, or to lease additional space shall benull and void.

 

**18.**           Default

** **

Time is of the essence in the performance ofall covenants of Lessee.  Lessee will bein Default if any of the following events occurs:

 

18.01       Lessee fails to make withinfive (5) days of when due, any payment of Base Rent, Additional Rent, or anyother monetary payment required to be made by Lessee herein and Lessee does notcure such failure within three (3) days after Lessor gives written notice ofsuch failure to Lessee; provided, if Lessor has given such a written noticewith respect to two (2) payments due in any calendar year, then the failure byLessee to pay any other payment due in such calendar year, on or before thedate when first due, shall be a Default hereunder without any written noticefrom Lessor and without any grace or cure period.  Notwithstanding the foregoing, Lessee shallnot be in default of this Lease the first time in a twelve (12) month periodthat Lessee fails to pay rent when due so long as Lessee pays such overdue rentwithin five (5) days of written notice from Lessor that such overdue amount isdue.

 

18.02       Lessor discovers that anyrepresentation or warranty made by Lessee or any guarantor was materially falsewhen made or that any financial statement of Lessee or of any guarantor of thisLease given to Lessor was materially false.

 

18.03       Lessee makes any generalarrangement or assignment for the benefit of creditors, becomes a “debtor” in abankruptcy proceeding, is unable to pay its debts or obligations as they occur,or has an attachment, execution or other seizure of substantially all of itsassets located at the Property or its interest in this Lease.

 

18.04       Lessee fails to observe,perform or comply with any of the non-monetary terms, covenants, conditions,provisions or rules and regulations applicable to Lessee under this Lease otherthan as specified above in this Paragraph 18; provided, if such failure isa curable failure, then such failure shall not be a “Default” unless Lesseedoes not cure such failure as soon as practicable possible but in no eventlater than thirty (30) days following written notice of such

 

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failure from Lessor; provided, however, that if said default cannot becured within said thirty (30) day period using reasonable diligence, no Defaultshall be deemed to have occurred if Lessee commences action to cure the Defaultwithin said thirty (30) day period and diligently pursues a cure thereafter.

 

18.05       Any guarantor becomesinsolvent, becomes a “debtor” in a bankruptcy proceeding, fails to perform anyobligation under its guaranty, or attempts to revoke its guaranty.

 

**19.**           Remediesof Lessor

** **

19.01       If Lessee fails to performany duty or obligation of Lessee under this Lease, Lessor may at its option,without waiver of Default nor any other right or remedy, perform any such dutyor obligation on Lessee’s behalf.  Thecosts and expenses of any such performance by Lessor will be immediately dueand payable by Lessee upon receipt from Lessor of the reimbursement amountrequired.

 

19.02       Upon a Default, with orwithout notice or demand, and without limiting any other of Lessor’s rights orremedies, Lessor may:

 

(a)           Terminatethis Lease and/or terminate Lessee’s right to possession of the Premises.  Upon any such termination, Lessee willimmediately surrender possession of the Premises to Lessor.  On termination of this Lease or Lessee’sright of possession, Lessor will 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 the termination; (ii) the worth at the time of the award of theamount by which the unpaid rents which would have been earned after terminationuntil the time of award exceeds the amount of such rental loss that Lesseeproves could have been avoided; (iii) the worth at the time of the awardof the amount by which the unpaid rents for the balance of the Lease Term afterthe time of award exceeds the amount of such rental loss for such period thatLessee proves could be reasonably avoided; and (iv) the worth at the timeof the award of any other amount necessary to compensate Lessor for all thedamage proximately caused by Lessee’s failure to perform its obligations under thisLease, including specifically the unamortized portion of all brokeragecommissions paid in connection with this Lease and all costs of Lessor’s Work(amortized without interest on a straight line basis over the initial LeaseTerm), and reimbursement of any free rent, deferred rent or other Leaseexecution inducement.  The expiration ortermination of this Lease, and/or the termination of Lessee’s right topossession, will not release Lessee from any liability under this Lease.

 

(b)           Continuethe Lease and Lessee’s right to possession and recover rent as it becomes due.  Acts of maintenance or preservation, effortsto relet the Premises, removal or storage of Lessee’s personal property or theappointment of a receiver to protect Lessor’s interest under this Lease, willnot constitute a termination of Lessee’s right to possession.

 

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(c)           Pursueany other remedy now or hereafter available to Lessor under the laws orjudicial decisions of the state wherein the Premises are located.

 

19.03       The “worth at the time ofaward” referred to in Paragraph 19.02(a)(i), 19.02(a)(ii), and19.02(a)(iv) will additionally include interest computed by allowing interestat the rate of 12% per annum (or, if lower, at the maximum rate allowed by law).  The “worth at the time of award” referred toin Paragraph 19.02(a)(iii) will be computed by discounting the amount atthe discount rate of the Federal Reserve Bank of San Francisco in effect at thetime of award, plus one percent (1%).

 

19.04       No right or remedyconferred upon or reserved to Lessor in this Lease is intended to be exclusiveof any right or remedy granted to Lessor by statute or common law, and each andevery such right and remedy will be cumulative.

 

**20.**           Condemnation

** **

If any portion of the Premises or any portionof the Building in which the Premises is located, or any portion of theProperty which would substantially interfere with Lessor’s ownership, or Lessor’sor Lessee’s ability to conduct business is taken for any public or quasi-publicpurpose by any governmental authority, including but not limited to, byexercise of the right of appropriation, inverse condemnation, condemnation oreminent domain, or sold in lieu of such taking, Lessor, at its option, mayterminate this Lease without recourse by Lessee.  If this Lease is not terminated, Lessor willpromptly proceed to restore the Premises and/or any portion of the Propertyused in common by all lessees to substantially the same condition as prior tosuch taking allowing for any reasonable effects of such taking.  Should a portion of the Premises be taken ina case where Lessor does not exercise its right to terminate this Lease, Lessorwill abate the rent corresponding to the term during which, and to the part ofthe Premises which, Lessee is deprived on account of such taking.  Any award for any taking or payment made inlieu of exercise of such power will be the property of Lessor, whether suchaward be made as compensation for diminution of value of the leasehold or forthe taking of the fee, or as severance damages; however, Lessee will beentitled to any compensation, separately awarded to Lessee for Lessee’srelocation expenses.

 

**21.**           EstoppelCertificate

** **

Lessee will execute and deliver to Lessor,within ten (10) days after written request from Lessor, a written EstoppelCertificate in form prepared by Lessor certifying: (i) that this Lease isunmodified and in full force and effect (or, if modified, specifying each suchmodification); (ii) the Commencement Date and expiration of the LeaseTerm; (iii) the absence or status of any rights of Lessee to renew,extend, or otherwise alter the Lease Term or to lease additional space or alterthe definition of the Premises; (iv) the date to which rent and any othercharges are paid in advance, if any; (v) that there are not, to Lessee’sknowledge, any uncured Defaults on the part of Lessor, or stating the nature ofany uncured Defaults; (vi) the current Base Rent amount and the amount andform of the Security Deposit on deposit with Lessor; (vii) that Lessor hascompleted any promised improvements to the Premises and paid any promisedimprovement allowance (or detailing any work to be performed or allowance to bepaid); and (viii) any other information requested, including but notlimited to, any requested information regarding

 

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Hazardous Materials.  Any suchEstoppel Certificate may be relied upon by Lessor, and also by any actual orprospective buyer or lender of the Property and any other third partydesignated by Lessor (the “Beneficiaries”). If Lessee fails to execute and deliver such Estoppel Certificate withinsuch ten (10) day period, then without waiver of Default or of any other rightor remedy of Lessor, Lessor shall have the right to deliver to theBeneficiaries a completed Substitute Estoppel Certificate regarding this Leasecertifying the matters which Lessee was requested to certify in the EstoppelCertificate.  A notice enclosing a copyof the Substitute Estoppel Certificate shall be simultaneously sent to Lessee.  Each statement in the Substitute EstoppelCertificate shall be deemed true, and shall be binding upon Lessee, unlessLessee provides, within five (5) days of the receipt of Lessor’s notice,written notice addressed to Lessor and the Beneficiaries disagreeing with suchstatement on specific grounds.  Lesseeshall defend and indemnify Lessor regarding any claim that a statement in theSubstitute Estoppel Certificate to which Lessee did not so disagree isinaccurate.

 

**22.**           Notices

** **

All communications and notices required underthis Lease shall be in writing and shall be addressed to the respective addressof the receiving party set forth in Paragraph 1 above.  All notices to Lessee shall be given by reputableovernight courier, U. S. mail (First Class, postage prepaid), or hand delivery,and shall be deemed received (i) if mailed, on the earlier of actualreceipt or three (3) days after such mailing, (ii) one business dayfollowing delivery by Lessor to such an overnight courier, or (iii) uponhand delivery.  Any notice to Lessee mayalso be given by posting at the Premises and shall be effective upon suchposting.  Notices to Lessor shall be sentto Lessor by U. S. mail, postage prepaid, registered or certified mail withreturn receipt requested to the address indicated in Paragraph 1 and shallbe deemed received five (5) days after such mailing.  At any time during the Lease Term, Lessor orLessee may specify a different Notice Address by providing written notificationto the other.

 

**23.**           Holdover

** **

If Lessee remains in possession of all or anypart of the Premises with Lessor’s prior written consent after the expirationor termination of this Lease or of Lessee’s right to possession, suchpossession will constitute a month-to-month tenancy which may be terminated byeither Lessor or Lessee upon thirty (30) days written notice and will notconstitute a renewal or extension of the Lease Term.  If Lessee remains in possession after suchexpiration or termination without Lessor’s prior written permission, suchpossession will constitute a tenancy-at-will terminable upon forty-eight (48)hours’ notice by Lessor and will not constitute a month-to-month tenancy nor arenewal or extension of the Lease Term.  Inthe event of a month-to-month tenancy or tenancy-at-will under this Paragraph,Lessee’s Base Rent will be two hundred percent (200%) of the Base Rent payableduring the last month of the Lease Term, any other sums due under this Leasewill be payable in the amounts and at the times specified in this Lease, andall options, rights of refusal, expansions and/or renewals shall be null andvoid.  Any tenancy under this Paragraph willbe subject to every other term, condition and covenant contained in this Lease.  Lessee agrees to defend, indemnify and holdLessor harmless from any claim or cause of action arising out of related to thefailure of Lessee to surrender possession of the Premises to Lessor upon theexpiration of this Lease or upon any such termination.  Notwithstanding the foregoing, Lessee shallhave the option to holdover for a period of up to

 

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three (3) months following the expiration of the lease term at 115% ofthe last rent due under the terms of the lease. Lessee shall be required to provide Lessor one-hundred eighty (180) daysnotice prior to lease the lease expiration date.

 

**24.**           Defaultby Lessor; Limitation of Liability; Real Estate Investment Trust

** **

24.01       In the event Lessor failsto perform any obligation required to be performed under this Lease, Lesseewill notify Lessor in writing of such failure. Lessor shall not be deemed in Lessor Default hereunder unless and untilsuch notice is actually received by Lessor and Lessor fails within thirty (30)days of receipt of such notice to commence to make a good faith effort to curethe failure or thereafter ceases to pursue such cure to completion.

 

24.02       The obligations of Lessorunder this Lease shall be binding only on the undersigned Lessor and not uponany of its subsidiaries or affiliates nor upon any partners, investors,trustees, directors, officers, employees, agents, shareholders, advisors ormanagers of Lessor in their individual capacities.  With respect to any obligations of Lessor toLessee under this Lease and with respect to any liabilities arising at theProperty, Lessee’s sole and exclusive remedy shall be a claim against theundersigned Lessor.

 

24.03       In consideration of thebenefits accruing hereunder, Lessee on behalf of itself and all of itsTransferees covenants and agrees that, in the event of any actual or allegedLessor Default of this Lease or in the event of any other claim or cause ofaction by Lessee, Lessee’s recourse against Lessor for any monetary damages(over and above damages actually paid by available insurance, if any) will belimited to Lessor’s interest in the amount of equity Lessor would have in theProperty if the Property were encumbered by debt in an amount equal to fiftypercent (50%) of the value of the Property; calculations of equity shall bemade as of the initial date Lessee notifies Lessor of the actual or allegedDefault or other claim the Property.  Anyjudgment against Lessor shall be satisfied only out of an offset against Rentsand out of the Property; no other assets of Lessor shall be subject to levy,execution or other enforcement procedure for the satisfaction of any judgmentby Lessee against Lessor.  Any claims byLessee against Lessor will be limited to actual damages only and will not,under any circumstances, include lost profits or consequential damages.

 

24.04       If Lessor is a real estateinvestment trust, and if Lessor in good faith determines that its status as areal estate investment trust under the applicable provisions of the Internal RevenueCode of 1986, as heretofore or hereafter amended, will be jeopardized becauseof any provision of this Lease, Lessor may require reasonable amendments tothis Lease and Lessee shall not unreasonably withhold or delay its consentthereto, provided that such modifications do not in any way, (i) increasethe obligations of Lessee under this Lease or (ii) adversely affect anyrights or benefits to Lessee under this Lease. Lessor shall pay all reasonable costs incurred by Lessee, includingwithout limitation, legal fees incurred for reviewing any such proposedmodifications.

 

24.05       Lessee represents that, toits knowledge, no person or entity who is a significant indirect owner ofLessor, owns actually or constructively a 10% or more interest in Lessee.  Lessee will promptly notify Lessor if itlearns that any such ownership interest exists.

 

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Significant owners of Lessor at this time include Public Storage, Inc.and New York Common Retirement Fund.

 

24.06       Lessor and any successorLessor have the right to sell the Property or any portion of it, or to assignits interest in this Lease, at any time and from time to time.  Upon the sale or any other conveyance byLessor of the Property, or a portion thereof which includes the Premises,Lessor will be released from all obligations and liability under this Leasearising out of any act, event, occurrence or omission occurring or existingafter the date of such conveyance.

 

**25.**           Subordination

** **

Without the necessity of any additionaldocument being executed by Lessee for the purposes of effecting asubordination, and at the election of Lessor or any mortgagee or any groundlessor with respect to the land of which the Premises are a part, this Leasewill be subject and subordinate at all times to: (i) all ground leases orunderlying leases which may now exist or hereafter be executed affecting theProperty, and (ii) the lien of any mortgage or deed of trust which may nowexist or hereafter be executed in any amount for which the Property, groundleases or underlying leases, or Lessor’s interest or estate in any of saiditems is specified as security.  Lessoror any mortgagee or ground lessor will have the right, at its election, tosubordinate or cause to be subordinated any ground lessee or underlying leasesor any such liens to this Lease.  IfLessor’s interest in the Premises is acquired by any ground lessor ormortgagee, or in the event any proceedings are brought for the foreclosure of,or in the event of exercise of power of sale under, any mortgage or deed oftrust made by Lessor covering the Premises, or in the event a conveyance inlieu of foreclosure is made for any reason, Lessee will, notwithstanding anysubordination and upon the request of such successor in interest to Lessor,attorn to and become the Lessee of the successor in interest to Lessor andrecognize such successor in interest as the Lessor under this Lease, providedLessee’s interests hereunder shall not be disturbed so long as Lessee is not inDefault hereunder.  Lessee acknowledgesthat although this Paragraph is self-executing, Lessee covenants and agrees toexecute and deliver, upon demand by Lessor and in the form requested by Lessor,or any other mortgagee or ground lessor, any additional documents evidencingthe priority or subordination of this Lease with respect to any such groundleases or underlying leases or the lien of any such mortgage or deed of trust,provided Lessee’s interests hereunder shall not be disturbed so long as Lesseeis not in Default hereunder.  Lesseeagrees that any person or entity who acquires title to the Premises pursuant toa foreclosure of a deed of trust or mortgage, or deed in lieu thereof, or thetermination of an underlying ground lease or master lease (a “Foreclosing Party”),even if such Foreclosing Party elects to have Lessee attorn to the ForeclosingParty under this Lease, shall not be (i) liable for any act or omission ofany prior lessor or with respect to events occurring prior to its acquisitionof ownership, (ii) subject to any offsets or defenses which Lessee mighthave against any prior lessor, (iii) bound by prepayment of more than onemonth’s rent, (iv) liable for any security deposit not actually receivedby such person or entity, (v) bound by any amendment or modification tothis Lease not consented to in writing by the holder of the mortgage, deed oftrust, ground lease or master lease or the Foreclosing Party, or (vi) liablefor any obligation or liability accruing under this Lease after the ForeclosingParty assigns its interest under this Lease to a third party.  Any such Foreclosing Party is expressly madea third party beneficiary of the foregoing provisions, and all other provisionsof this Lease which are for the benefit of a Foreclosing Party, which rightsshall survive a foreclosure of the deed of trust or mortgage.

 

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**26.**           ForceMajeure

** **

Lessor will not be deemed in Lessor Defaultor have liability to Lessee, nor will Lessee have any right to terminate thisLease or abate rent or assert a claim of partial or constructive eviction,because of Lessor’s failure to perform any of its obligations under this Leaseif the failure is due in part or in full to reasons beyond Lessor’s reasonablecontrol.  If this Lease specifies a timeperiod for performance of an obligation by Lessor, that time period will beextended by the period of any delay in Lessor’s performance caused by suchevents as described herein.

 

**27.**           MiscellaneousProvisions

** **

27.01       Whenever the context ofthis Lease requires, the word “person” shall include any entity, and thesingular shall include the plural and the plural shall include the singular.  If more than one person or entity is Lessee,the obligations of each such person or entity under this Lease will be jointand several.  Without diminishing theprovisions of Paragraph 17, the terms, conditions and provisions of thisLease will apply to and bind the heirs, successors, executors, administratorsand assigns of Lessor and Lessee.

 

27.02       The captions and headingsof this Lease are used for the purpose of convenience only and shall not beconstrued to interpret, limit or extend the meaning of any part of this Lease.  This Lease contains all of the agreements andconditions made between Lessor and Lessee and may not be modified in any mannerother than by a written agreement signed by both Lessor and Lessee.  Any statements, promises, agreements,warranties or representations, whether oral or written, not expressly containedherein will in no way bind Lessor and Lessee expressly waives all claims fordamages by reason of any statements, promises, agreements, warranties orrepresentations, if any, not contained in this Lease.  No provision of this Lease shall be deemed tohave been waived by Lessor unless such waiver is in writing signed by aregional vice president or higher of Lessor or of Lessor’s management company,and no custom or practice which may develop between the parties during theLease Term shall waive or diminish the Lessor’s right to enforce strictperformance by Lessee of any terms of the Lease.  No waiver by Lessor of a Default by Lessee ofany term, covenant or condition of this Lease will be deemed a waiver of anyother term, covenant or condition of this Lease, or of any subsequent Defaultby Lessee of the same or any other term, covenant or condition of this Lease.  No delay or omission by Lessor to seek aremedy for any Lessee Default of this Lease shall be deemed a waiver by Lessorof its remedies or rights with respect to such Default.  Additionally, regardless of Lessor’sknowledge of a Default at the time of such acceptance, the acceptance of rentor any other payment by Lessor will not constitute a waiver by Lessor of anyDefault by Lessee.  The duties and warrantiesof Lessor are limited to those expressly stated in this Lease and do not andshall not include any implied duties or implied warranties, now or in thefuture.  No representations or warrantieshave been made by Lessor other than those contained in this Lease.  This Lease is governed and construed inaccordance with the laws of the state in which the Premises are located, andvenue of any legal action will be in the county where the Premises are located.

 

27.03       Time is of the essence forthe performance of each term, condition and covenant of this Lease.

 

23

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27.04       This Lease has been fullyreviewed by both parties and shall not be strictly or adversely construedagainst the drafter.  If any provisioncontained herein is determined to be invalid, illegal or unenforceable in anyrespect, then (a) such provision shall be enforced to the fullest extentallowed, and (b) such invalidity, illegality, or unenforceability will notaffect any other provision of this Lease.

 

27.05       Lessee hereby agrees not todisclose any terms of this Lease without the prior written consent of Lessor.  Lessee shall not record this Lease or anyshort form memorandum hereof.

 

27.06       The rights and obligationsof the parties under this Lease shall survive the expiration of this Lease andthe termination of this Lease and/or of Lessee’s right of possession.

 

27.07       Lessor and Lessee eachwarrant to the other that it has not dealt with any broker or agent inconnection with this Lease, other than the person(s) listed in Paragraph 1above.  Lessor and Lessee each agree toindemnify the other against all costs, expenses, legal fees and other liabilityfor commissions or other compensation claimed by any other broker or agent byreason of the act or agreement of the indemnifying party.

 

27.08       Lessee shall not permit orallow any activity in the Premises which will have an adverse effect on indoorair quality, including smoking and any remodeling activity or introduction ofmaterials which would have such an effect. Lessor shall have the right, but not the obligation, to monitor indoorair quality within the Project.  Lesseeshall take such steps to protect and to improve indoor air quality as Lessormay request from time to time.

 

27.09       Lessor has no duty toprovide security for any portion of the Project.  To the extent Lessor elects to provide anysecurity, Lessor is not warranting the effectiveness of any security personnel,services, procedures or equipment and Lessee shall not rely on any such personnel,services, procedures or equipment.  Lessorshall not be liable for failure of any such security personnel, services,procedures or equipment to prevent or control, or to apprehend anyone suspectedof, personal injury or property damage in, on or around the Project.

 

27.10       The grant of any consent orapproval required from Lessor under this Lease shall be proved only by proof ofa written document signed and delivered by Lessor expressly setting forth suchconsent or approval.  Unless otherwise specifiedherein, any such consent or approval may be withheld in Lessor’s solediscretion.  Any consent may be issuedsubject to conditions determined by Lessor, in its sole discretion.  Notwithstanding any other provision of thisLease, the sole and exclusive remedy of Lessee for any alleged or actualimproper withholding, delaying or conditioning of any consent or approval byLessor shall be the right to specifically enforce any right of Lessee torequire issuance of such consent or approval on conditions allowed by thisLease; in no event shall Lessee have the right to terminate this Lease, tocollect monetary damages, or to pursue any other remedy for any actual oralleged improper withholding, delaying or conditioning of any consent orapproval, regardless of whether this Lease requires that such consent orapproval not be unreasonably withheld, conditioned or delayed.

 

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27.11       Lessee agrees to abide by,keep and observe all Rules and Regulations set forth in Exhibit “D” andall additions and amendments to the same of which Lessor provides writtennotice to Lessee.  Lessor will not beresponsible to Lessee for any nonperformance by any other lessee, occupant orinvitee of the Property of any said Rules and Regulations.

 

27.12       Lessee will not place anysignage on or about the Property, or on any part thereof, without the priorwritten consent of Lessor which Lessor may withhold or condition in its solediscretion.  All Lessee signage willcomply with the terms and conditions of this Lease, the sign criteria set forthin Exhibit “C” and Exhibit “D,” or other criteria which Lessor mayestablish from time to time.

 

27.13       Lessee will not vacate orabandon the Premises, or permit the Premises to remain unoccupied for anyperiod longer than fifteen (15) consecutive days any time during the Lease Term.  If Lessee abandons, vacates, or surrendersthe Premises, or is dispossessed by process of law, or otherwise, any personalproperty belonging to Lessee left in or about the Premises will, at the optionof Lessor, be deemed abandoned and may be disposed of by Lessor at the expenseand risk of Lessee.

 

27.14       In the event any party tothis Lease initiates litigation to enforce the terms of this Lease or todeclare rights under this Lease, the prevailing party will be entitled tocollect its reasonable attorneys fees shall include all attorneys fees incurredat and in preparation for discovery, arbitration, trial, appeal and review,including deposition attorney’s fees.  Thisattorney’s fee provision shall also apply to all litigation and otherproceedings in Bankruptcy Court.

 

27.15       Submission of this documentfor examination and signature by Lessee is not an offer to lease and does notcreate a reservation or option to lease. This document will become effective and binding only upon full executionand delivery by both Lessee and Lessor.

 

27.16       OPTION TO RENEW LEASE

 

Provided Lessee is not in Default of theLease at the time it exercises this option and has not been in Default duringany other period of the Lease Term that has not been cured, Lessee is herebygranted one option to renew this Lease for an additional five (5) years at theBase Rent rate then in effect for comparable space in the market at theeffective date of the commencement of such renewal term, but not less than thelast monthly rental amount payable by Lessee prior to commencement of suchrenewal term.  Such leasing for therenewal term shall be, at the election of Lessor, on the same terms andconditions as set forth in this Lease or on the terms and conditions of thestandard lease form then used by Lessor with respect to the Project.  The within option shall be exercised byLessee, if at all, by written notice given no sooner than twelve (12) fullcalendar months and no later than eight (8) full calendar months prior to theexpiration of the Lease Term; Lessee shall include with such notice a completeset of current financial statements of Lessee and all guarantors.

 

In the event Lessor and Lessee are unable toagree as to the Base Rent rate applicable to such renewed term within thirty(30) days of Lessee’s exercise of its option to renew, both parties agree tomediate their disagreement.  If mediationdoes not resolve the disagreement in

 

25

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fair market value, Lessee shall have the option to refer the matter toan MAI certified appraisal procedure to determine the Base Rent rate.  Lessor and Lessee shall appoint an MAIcertified appraiser, such appraiser shall determine the current market rent (tobe not less than the minimum rent set forth above in this Section) and suchdetermination shall be binding upon Lessor and Lessee.  Lessor and Lessee shall each pay one-half ofthe fees and costs of such appraiser.

 

Upon determination of the Base Rent rate,Lessor shall deliver to Lessee either an amendment to this Lease renewing theLease Term, or a new lease for the renewal term based upon the form of thestandard lease then used by Lessor with respect to the Project.  Lessee shall execute and deliver thesubmitted document to Lessor within ten (10) days accompanied by payment of theamount of money which, when added to any existing Security Deposit, shallincrease the Security Deposit amount to a sum which bears the same relationshipto the renewal Base Rent as the original Security Deposit bears to the BaseRent with respect to the initial Lease Term.

 

Notwithstanding any provision hereof, duringthe thirty (30) day period allowed for the parties to agree upon the renewalBase Rent rate, Lessor shall have the right to rescind the exercise of therenewal option by written notice in the event Lessor determines, in itsreasonable discretion, that the financial statements delivered by Lessee withthe renewal notice are not satisfactory to Lessor.

 

The rights of Lessee under this Paragraph arenot assignable separately from this Lease. Such rights of Lessee shall terminate upon: (a) any assignment,sublease, or other Transfer, and/or (b) any monetary default and/or (c) anytermination of this Lease or of Lessee’s right of possession hereunder;provided, however, in the event Lessee shall have exercised this renewal optionand Lessor subsequently terminates this Lease or Lessee’s right of possessionhereunder for Default, the damages to which Lessor shall be entitled shallinclude damages with respect to the renewal term.

 

27.17       **MediationFirst**

 

Any disputes under the Lease, after firstattempting to be resolved through mediation, including with respect to thedetermination of Additional Rent and/or Fair Market Rent, shall be resolved bybinding arbitration under the rules of the Arbitration Service of Portland, orsuch other procedures as shall be mutually agreed upon between Lessor andLessee, as set for the in the lease.  Pendingthe final determination of any dispute, Lessee shall pay the last Base Rentamount due under the Initial Term and make up any shortfall immediately afterfinal determination of Fair Market Rent.

 

27.18       The following Exhibits areattached to this Lease and by this reference made a part hereof:  “A-1”, “A-2”, “A-3”, “A-4”, “B”, “C”, and “D”.

 

IN WITNESS WHEREOF, Lessor and Lessee haveexecuted this Lease as of the Lease Execution Date.

 

THIS LEASE, WHETHER OR NOT EXECUTED BYLESSEE, IS SUBJECT TO ACCEPTANCE BY LESSOR, ACTING BY ITSELF OR BY ITS AGENT BYTHE

 

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SIGNATURE ON THIS LEASE OF ITS SENIOR VICE PRESIDENT, VICE PRESIDENT,REGIONAL MANAGER OR DIRECTOR OF LEASING.

 
| LESSOR:                                 |        | LESSEE:                                            |
|-----------------------------------------|-------------|----------------------------------------------------|
|                                    |        |                                               |
| **PS  Business Parks, L.P.**            |        | **Digimarc  Corporation**                          |
| **A  California Limited Partnership**   |        | **A  Delaware Corporation**                        |
| **By PS  Business Parks, Inc.**         |        |                                               |
| **Its  General Partner**                |        |                                               |
| ** **                              |        | ** **                                         |
| **/s/Coby  A. Holley**                  | ** **  | ** **                                         | **/s/ Paul  R. Gifford** | ** ** |
| **By: Coby  A. Holley, Vice President** | ** **  | **By: Paul  R. Gifford, President & COO** |
| ** **                              | ** **  | ** **                                         |
| **Date:**                               | **3-24-04** | ** **                                         | **Date:** | **3-22-04** |
| ** **                              | ** **  | ** **                                         |
| **Lease  Execution Date**               | ** **  | ** **                                         |
|                                         |             |                                                    |  |  |  |  |

 

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** **

**PREMISES “A-1” FIRST FLOOR**

** **

** **

**[map of premises]**

 

A-1

----

 

**PREMISES “A-1” SECOND FLOOR**

** **

** **

**[map of premises]**

 

A-1

----

 

**BUILDING “A-2”**

** **

**Creekside Corporate Park**

 

**SW Nimbus Avenue and Hall Boulevard,Beaverton, Oregon**

 

**[map of premises location]**

 

A-2

----

 

**PROJECT “A-3”**

** **

**Creekside Corporate Park**

 

**SW Nimbus Avenue and Hall Boulevard,Beaverton, Oregon**

** **

**[map of premises location]**

 

A-3

----

 

**PROPERTY “A-4”**

** **

**Creekside Corporate Park**

 

**SW Nimbus Avenue and Hall Boulevard,Beaverton, Oregon**

** **

**[map of premises location]**

 

A-4

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**EXHIBIT B**

** **

**WORK LETTER**

** **

1.             **Lessor’s Work.**

 

1.1.          **Plans and Costs.**

 

If Lessor hasagreed to alter or improve the Premises prior to delivery of possession toLessee, then this box is checked:þ. All such alterations and improvementsshall be described on plans and specifications to be approved by the parties asdescribed below (the “Plans”).

 

(a)           **Approval of Plans**.  Lessorshall have Plans prepared and shall submit the same to Lessee for review,comment, and approval.  The parties shallagree upon the final Plans and a related estimate of the “Costs of Lessor’sWork” by **May 1, 2004** (the “PlanApproval Date”).  If Lessee does notapprove plans by the plan Approval Date, the number of days of delay in suchapproval beyond the Plan Approval Date shall be deemed days of delayattributable to and caused by Lessee.

 

(b)           **Lessor’s Work Defined**. The work to be performed by Lessor as shown on the Plans, as the samemay be modified by change order as discussed below, is referred to as “Lessor’sWork.”

 

(c)           **Costs**.  The “Costs ofLessor’s Work” shall include all costs incurred by Lessor in connection withLessor’s Work including but not limited to all design costs (architectural,engineering, mechanical and other design costs), all hard and soft constructioncosts, and all costs of materials, general conditions, permits and inspectionfees.  In addition, Lessee may use aportion of the Work Allowance for moving costs, cabling, furniture, fixturesand equipment.  Lessee understands andagrees that (i) the actual Costs of Lessors Work can only be determinedafter all Lessor’s Work is completed, (ii) the actual Costs of Lessor’sWork may exceed the estimate and also any other estimate communicated to Lesseeprior to or during the course of completing Lessor’s Work, and (iii) theactual Costs of Lessor’s Work may increase for reasons, including but notlimited to, Change Orders, increased costs resulting from any act or omissionof Lessee, unforeseen or hidden conditions discovered during the course ofconstruction, or additional costs or delays caused by any governmentalauthority or agency requirement.  TheCosts of Lessor’s Work shall include a reasonable fee as compensation to Lessorfor coordination and supervision of Lessor’s Work and any Lessee Improvements.

 

(d)           **Payment**.  Lessor shallpay the Costs of Lessor’s Work up to $1,555,301 ($33.75 per square foot) (the “Lessor’sWork Allowance”).  In the event theinitial estimate of the Costs of Lessor’s Work approved pursuant to the aboveprovisions exceeds the Lessor’s Work Allowance, Lessee shall pay the excess toLessor upon approval of the Plans and such initial estimate.  Seventy-five (75%) percent shall be due priorto commencement of construction and twenty-five (25%) percent shall be due atSubstantial Completion.

 

(e)           **Payment Delays**.  IfLessee fails to pay to Lessor any amount required by this Work Letter, as andwhen due, then, without waiver of default or of other rights

 

B-1

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and remedies, Lessor shall havethe right to suspend Lessor’s Work until payment is received; the number ofdays by which any such suspension delays substantial completion shall be deemeddays of delay attributable to and caused by Lessee.

 

(f)            **Architects/Space Planning**. Lessor has engaged LRS Architects to complete space plan and designdevelopment drawings.  If Lessee isdissatisfied with the space plan, Lessee shall have the option at their cost toselect their own architect, subject to the reasonable approval of Lessor.  Such costs can be included in the cost ofLessor’s Work.

 

1.2.          **Construction**.  Theconstruction obligation of Lessor is to substantially complete Lessor’s Worksubstantially in accordance with the Plans. Lessor shall use reasonable efforts to substantially complete Lessor’sWork three weeks prior to the scheduled Commencement Date set forth in Section 1of the Lease; provided the consequences of delay in substantial completion ofLessor’s Work are those set forth in the Lease. Both the initial Tenant improvement work, as well as any subsequentmajor work in the premises shall be performed by Lessor.  Lessee shall have the benefit of competitivebidding for work to be performed by Lessor’s contractor.  Any fees for overhead or supervision ofLessor’s work in the premises shall be consistent with reasonable industrystandards and all costs for work to be performed in the premises shall besubject to Lessor and Lessee prior approvals.

 

1.3.          **Changes in the Plans**.

 

(a)           A“Change Order” is a Lessor required or Lessee requested change to the Plan.

 

(b)           Lessorshall have the right to require a Change Order based on applicable codes,actual site conditions, and/or ambiguities or inconsistencies in the Plans.

 

(c)           Lesseemay request from time to time a Change Order. If Lessee wishes to request a Change Order, Lessee will submit inwriting to Lessor a detailed request of the change.  Lessor is not obligated to approve any Lesseerequested change.  If Lessor does approvethe same, Lessor will deliver to Lessee a written statement, hereinafterreferred to as “Lessor’s Change Order Statement”, of the estimated costs andexpenses of the change with a reasonable estimate, if applicable, of theadditional time required for substantial completion of Lessor’s Work.

 

(d)           Withinthree (3) business days following receipt by Lessee of Lessor’s Change OrderStatement, Lessee will provide Lessor its written authorization to proceed withthe change.  If the change increases theCosts of Lessor’s Work and the total Costs of Lessor’s Work exceed theAllowance, Lessee shall pay the amount required at the time of providingauthorization to proceed.  If Lessee doesnot provide such written authorization to Lessor’s Change Order Statementaccompanied by payment of such required amount within this time period, Lessee’srequest for a Change Order shall be deemed cancelled.  All delays attributable to Lessee requestedchanges, whether or not approved by Lessor and whether or not cancelled byLessee, shall be deemed delays caused by Lessee.  Lessee shall pay to Lessor any costs incurredby Lessor regarding a Lessee requested change that is cancelled.

 

B-2

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1.4.          **Completion and Delivery.**  Possession of the Premises shall be deliveredto Lessee when Lessor’s Work is substantially completed in accordance with thePlans, as reasonably determined by Lessor or on such earlier date, if any, asis determined pursuant to the operation of Section 2.03 of the Lease.  Within three (3) days of written request byLessor, Lessee shall execute and deliver to Lessor a confirmation letterprepared by Lessor affirming substantial completion of Lessor’s Work, the dateof Lessor’s delivery of the Premises, and such other matters as Lessor mayreasonably request.

 

1.5           **Punch list Work.**  Lessor’sWork shall be deemed substantially completed even if minor items of work whichdo not materially adversely affect Lessee’s ability to conduct its businessremain to be completed or corrected (hereinafter referred to as “Punch listItems”).  Lessee shall notify Lessor ofany Punch list Items by written notice given within ten (10) days followingreceipt of Lessor’s written notification of substantial completion of Lessor’sWork.  Lessee shall be deemed to haveapproved Lessor’s Work if Lessee does not deliver such a list to Lessor withinsuch time period and to have approved all of Lessor’s Work except only properlyand timely listed Punch list Items.  Theobligation of Lessor regarding Punch list Items shall be to complete the sameto industry standard.  Lessor shall havecomplete access to the Premises for the purpose of performing punch list work.  Any dispute as to Punch list Items shall beresolved by an architect or other qualified professional designated by Lessor,but such dispute shall not delay the date upon which Lessor’s Work is deemedsubstantially complete.

 

2.             **Lessee Improvements.**  Anywork of improvement Lessee proposes to undertake which is within the definitionof “Lessee Improvements” set forth in Section 10.01 of the Lease shall besubject to the following provisions (and also subject to the provisions of Section 10of the Lease).  If no such LesseeImprovements are to be undertaken by Lessee, then the provisions of Paragraph 2of this Work Letter shall be disregarded.

 

2.1.          **Lessee Plans.**  Lesseemust obtain the prior written approval of Lessor regarding complete plans andspecifications for the Lessee Improvements. If such plans and specifications are already approved, the approvedplans and specifications (or a list of the same) are attached as Schedule 2;otherwise, Lessee shall submit plans and specifications for the approval ofLessor pursuant to Paragraph 10 of the Lease.

 

2.2.          **Scheduling; Avoidance of Inconvenience.**  Following completion of Lessor’s Work, subjectto a punch list, Lessor shall deliver a C.O. or temporary C.O. to Lessee andgrant a period of three (3) weeks prior occupancy to move-in to the Premiseswhich will include installation of FF&E, telecommunications and computercabling.  In the event Lessor separatelygives written permission to Lessee allowing any portion of Lessee Improvementsto be installed or materials to be delivered prior to substantial completion ofLessor’s Work, then (a) Lessee waives any claims for delays in its workand shall instruct its contractor to follow the directives and orders of Lessor’scontractor, and (b) Lessee shall schedule its work such that union andnon-union workers will not be working side by side at the Premises, and (c) anydamage to Lessor’s Work shall be deemed to have been caused by Lessee and itscontractor unless conclusively proved otherwise by Lessee.  Lessee shall have the right to retain its ownspecialty contractors to perform any portion of the work necessary to constructand outfit the Premises (which will not be part of the general contractor’sscope of work nor shall a mark-up be added). The Lessee’s contractors’ work shall include, but not be limited to,data cabling,

 

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telephone and data equipment,security, audio/visual equipment, and furniture systems.  Lessee’s contractor(s) and Lessor’s contractor(s)shall work in harmony during the period of Lessee fit-up.  Lessee and Lessee’s contractors shall havereasonable access to the Premises during the construction (to be coordinatedwith the General Contractor to install cabling and for the purpose ofinspecting the work in progress).

 

2.3.          **Inspection.**  Lessorand Lessor’s agents shall have the right, but not the obligation, to inspectthe construction of Lessee Improvements from time to time.  If Lessor shall give Lessee written notice offaulty construction or any other deviation from the approved plans, Lesseeshall promptly make the necessary corrections to Lessor’s reasonablesatisfaction.  However, neither the rightherein granted to Lessor to make such inspections, nor the making of such inspectionsby Lessor, shall operate as a waiver of any rights of Lessor to require goodand workmanlike performance of all Lessee Improvements in strict accordancewith plans approved by Lessor.  Notwithstandingany inspection by Lessor, Lessee acknowledges that Lessors sole interest indoing so is to protect the Building and Lessor’s interests.  Accordingly, Lessee shall not rely uponLessor’s inspections or approvals, and agrees that Lessor shall not be theguarantor of, nor responsible for, the quality of any of Lessee Improvements orthe conformity of any Lessee Improvements with approved plans or with anyapplicable legal requirements.  Lesseeshall be solely responsible for, and shall remedy, at Lessee’s sole expense,any and all defects and nonconformities in Lessee Improvements that may appearduring or after the completion thereof.

 

2.4.          **Ownership of Lessee Improvements.**  Unless otherwise specified by Lessor,ownership of and responsibility for all Lessee Improvements shall be governedby the provisions of the Lease.

 

2.5.          **Delays.**  The partiesexpressly acknowledge and agree that none of Lessee’s obligations under theLease (including Lessee’s obligation to pay rent) shall be delayed, terminatedor otherwise affected on account of any delay in completion of the LesseeImprovements from any cause other than the fault of Lessor.

 

2.6.          **Compliance.**  Access tothe Premises for Lessee to install Lessee Improvements is granted, whenauthorized under Section 2.2 above, subject to all provisions of the Leaseand this Work Letter and Lessee shall be bound by and comply with all suchprovisions.

 

2.7.          **Costs.**  Lessee shallpay all costs and expenses related to Lessee Improvements as and when due incompliance with Paragraph 10 of the Lessee.

 

2.8.          **Lessee Allowance.**  Lessoragrees to reimburse Lessee for the costs of Lessee’s Work paid by Lessee fromthe Lessor’s Work Allowance.  The Lessor’sWork Allowance can only be used to reimburse hard and soft costs ofimprovements to the Premises including design costs or the purchase offurniture or equipment.  Lessor shall payto Lessee within forty-five (45) days after the date that Lessee requests thesame; any such request shall be made only after (a) Lessee submits toLessor satisfactory evidence of qualified expenditures, final completion of andfull payment for all Lessee Improvements and expenses, and compliance with allrequirements of the Lease and this Work Letter regarding the LesseeImprovements,

 

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(b) Lessee accepts thePremises and Lessor’s Work and takes full occupancy of the Premises, and (c) GeneralContractor and all other service providers are paid in full.  Lessor shall have no obligation to pay the TIAllowance at any time that a Lessee Default occurs and is outstanding, at anytime following termination of the Lease or of Lessee’s right of possession, orif proper request for the same is not made on or before ninety (90) daysfollowing the Commencement Date.

 

3.             **Default.**  Any failureby Lessee under the terms of this Work Letter shall constitute a Default underthe Lease in accordance with the provisions of the Lease, and shall entitleLessor to exercise all remedies set forth in the Lease.

 

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**EXHIBIT “C”**

** **

**SIGN CRITERIA**

** **

Conformity byLessee to the following Sign Criteria requirements shall be strictly enforcedand are terms and conditions of the Lease.

 

1.             GENERALREQUIREMENTS

 

1A.          Theterm “Signage” as used herein and elsewhere within the Lease shall include, butnot be limited to, any signs, placards, banners, pennants, lettering,insignias, trademarks, marquees, art work, and any and all other display andadvertising materials.

 

1B.          Lesseeshall not install or display any Signage anywhere on the Premises, Project orProperty without Lessor’s prior written consent, such consent not to beunreasonably withheld, delayed or conditioned. Such Signage approval by Lessor, shall include, but not be limited to,Lessee Signage installed or displayed on or attached to any glass areas, doors,roofs, walls, landscaped areas, walkways, vehicles, machinery or otherapparatus, whether permanently affixed to or from time to time on or about theProperty.  Lessor hereby consents toLessee’s installation of signage on the Building’s roof, eyebrow and at Projectmonuments.

 

1C.          Lessorreserves the right to designate the location and quantity of all LesseeSignage.

 

1D.          Thesize, design, content, color and other physical aspects of Lessee Signage, aswell as the materials, fabrication and installation methods to be employed,must be approved by Lessor, in writing, prior to commencement of any Signagefabrication or installation.  No exposedconduit, tubing, “J” box or raceway is permitted on any Lessee Signage.  Flashing, moving or audible Lessee Signage isprohibited.  The composition, size,style, height, color, etc. of Lessor approved signage is attached hereto.

 

1E.           AllLessee Signage must comply with any and all governing laws, codes, regulations,covenants and restrictions.  No labelswill be permitted on the exposed surface of any Lessee Signage, except thoselabels required by any governing authority.

 

1F.           TheLease Section 27.12 shall control with respect to the allocation of thecost and expense related to signage.

 

1G.          ShouldLessee fail to maintain its Signage at a standard to be determined by Lessor inits reasonable discretion, then Lessor may, without any recourse by Lessee orliability by Lessor to Lessee, remove or restore such sub-standard Signage.  Any Lessee Signage removed or restored onbehalf of Lessee by Lessor, shall be at Lessee’s sole cost and expense, payableimmediately upon demand by Lessor.

 

1H.          Lessorreserves the right to require Lessee to have Signage and, if so required,Lessee Signage must be completed and installed within GO days after Lessee’sLease Term commences.  Lessor reservesthe right to require Lessee to utilize vendors preapproved or designated byLessor for all Lessee Signage and Signage related matters.  In the event Lessor

 

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designates, refers or approves a specificsign vendor, Lessor shall not be responsible or liable in any way for anydisputes between such vendor and Lessee.

 

1I.            AllLessee Signage shall only contain Lessee’s choice of either its legal name orits Trade Name as it appears in the Lease. No Lessee Signage or Lessee Signage content shall create any claim,expressed or implied, of a Transfer as defined in the Lease.

 

1J.           Uponexpiration or earlier termination of the Lease, or if Lessee installs ordisplays Signage which does not comply with the terms and conditions of thisSign Criteria, Lessor, in addition to any other remedy, reserves the right torequire Lessee to remove its Signage, or any part thereof, and to requireLessee to repair and restore all areas and surfaces of the Property affected bysuch removal.  Such restoration andrepair work shall include, but not be limited to, removal of any associatedelectrical wiring, patching of damaged areas and painting to match surroundingsurfaces.  Should Lessee, after demand byLessor, fail to remove any Signage designated for removal by Lessor or fail torepair and restore any affected areas, Lessor shall have the right to do so atLessee’s sole cost and expense.

 

1K.          Subjectto the other terms hereof, Lessee will have the right to display Lessee’ssignage on the sign monument to be located outside the Building, as well as onthe walls of elevator lobbies of the floors of the Premises adjacent to entrydoors and on the lobby directory for the Premises.  All interior signs shall be provided at thesole cost of Lessor, with any and all costs and expenses incurred in connectionwith the monument sign for Lessee to be included as part of the Costs of Lessor’sWork and deducted from the Lessor’s Total Work Allowance.  Section 27.12 of the Lease shall governwith respect to the requirement of Lessor’s approval for Lessee’s signage.

 

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**EXHIBIT “D”**

** **

**RULES AND REGULATIONS**

** **

1.01         Thefollowing Rules and Regulations now in effect govern Lessee’s use of thePremises and any part of the Project or Property used in common by Lessee.  Lessee will be bound by such Rules andRegulations and agrees to use its reasonable efforts to cause Lessee’semployees, agents, contractors, suppliers, invitees and licensees to observethe same.

 

1.02         WhereverLessor provides standard window coverings, such coverings shall not be altered,removed or replaced by Lessee.  WhereverLessor does not provide standard window coverings, selection and installationof window coverings by Lessee shall be subject to Lessor’s prior writtenapproval, such approval not to be unreasonably withheld, delayed or conditioned.  If Lessor objects to any item attached to, orused in connection with or on any window, other glass area, or interior orexterior wall, Lessee will immediately upon notification remove suchobjectionable item or discontinue such use. Further, Lessee agrees not to place anything in close proximity to anywindow or glass area of the Premises that may appear from the outside of thePremises.

 

1.03         Lesseewill not use any sidewalks, hallways, entrances, elevators, stairways, exits,lobbies or any other areas used in common by lessees of the Property other thanfor normal ingress or egress; Lessee shall not obstruct use of any such area.  Lessor will in all cases retain the right tocontrol and prevent access to such areas by all persons whose presence in thereasonable judgment of Lessor would be prejudicial to the safety, character,reputation and/or interest of the Property and/or its lessees.  Neither Lessee nor its employees, agents,contractors, suppliers, invitees or licensees shall go on any roof or ladder,in any mechanical rooms, or climb on any exterior structures of any nature onthe Property without Lessor’s prior written consent, such consent not to beunreasonably withheld, delayed or conditioned.

 

1.04         Lessorreserves the right, exercisable without notice and without liability to Lessee,to change the name, street and/or address of any part of the Property.  With the exception of Lessee’s address,Lessee shall not use the name of the Property or any part thereof in connectionwith promoting or advertising Lessee’s business.  Lessor will have the right to prohibitpublicity by Lessee, which in Lessor’s reasonable opinion impairs thereputation or marketability of the Property or any part thereof.

 

1.05         Lesseeshall not keep or allow to be used any foul or noxious gas or substance in orabout the Premises.  Nor shall Lesseeoccupy or use the Premises in any manner that is objectionable or offensive toother lessees or Lessor by reason of odor, noise, vibration or interference inany way.  Any equipment or device ofLessee which causes noise or vibration that may be transmitted to anystructural portion of the Property or to any part therein to such a degree asto be objectionable to any lessee or Lessor must be approved in writing byLessor prior to its installation and be placed and maintained by Lessee, atLessee’s expense, on vibration eliminators or other devices sufficient toeliminate such noise or vibration.  Lesseeshall keep the Premises free of rodents, insects and other vermin.

 

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1.06         Lesseewill not use or keep in the Premises, or on or about the Property, anykerosene, gasoline or flammable or combustible fluid or material other thanthose limited quantities necessary for the operation or maintenance of generaloffice equipment.

 

1.07         Lessorreserves the right to exclude or expel from the Property any person who, inLessor’s reasonable judgment, is intoxicated or under the influence of liquoror drugs or who is in violation of any of the rules and regulations of theProperty.

 

1.08         Lesseeshall not alter or re-key any lock or bolt or install any new or additionallocks or bolts on any doors of the Premises without prior written consent fromLessor, such consent not to be unreasonably withheld, delayed or conditioned.  Upon the termination of its tenancy, Lesseewill provide Lessor with all keys, whether furnished or otherwise procured, andshall be responsible for the cost of replacing any keys that are lost.

 

1.09         ThePremises will not be used for lodging or for any improper, immoral or objectionablepurpose.  No cooking will be done orpermitted on the Premises (except in the kitchen area) or elsewhere on theProperty without Lessor’s consent, except that the preparation of coffee, tea,hot chocolate and similar beverages and employee use of a microwave oven willbe permitted, provided that such equipment and use is in accordance with allapplicable federal, state, county and city laws, codes, ordinances and anymanufacturer’s guidelines and recommendations. Tenant will be allowed to barbeque on a deck or on the parking areabehind the Premises.

 

1.10         Lesseewill not solicit business from other lessees of the Property.  Canvassing, soliciting, peddling anddistribution of handbills or any other written material is prohibited, andLessee will cooperate with Lessor to prevent such activities.

 

1.11         Lesseeagrees to comply with and not to restrict or impair in any way, all safety,fire protection and evacuation procedures and regulations established by Lessoror any governmental agency.  Lessee shallnot do or permit any act or bring anything on the Property or any part thereofwhich shall obstruct or unreasonably interfere with the rights of otherlessees.

 

1.12         Exceptfor the ordinary hanging of pictures and wall decorations, Lessee will not mark,drive nails, screw, cut or drill into the partitions, woodwork, ceilings orplaster, or in any way deface, mar, paint or penetrate the Premises or any partof the Property, except in accordance with the Lessee Alteration provision ofthe Lease.  Additionally, Lessee will notaffix any floor covering to the floor of the Premises in any manner except asapproved by Lessor.

 

1.13         Noelectrical wiring, outlets or apparatus shall be installed or altered byLessee, except in accordance with the Lessee Alteration provisions of the Lease.  Lessor reserves the right to direct where andhow telephone and other telecommunication wires are to be introduced to thePremises.  Lessee may not alter oroverburden the designed capacity of any existing electrical outlets.

 

1.14         Lesseeshall not place or affix any radio or television antennas, satellite dishes,loudspeakers or other similar devices, awnings, outside furniture, etc. on theroof, exterior walls or outside of any building or on any other part of theProperty without Lessor’s prior written approval, such approval not to beunreasonably withheld, delayed or conditioned. Additionally

 

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Lessee will not place any signs, advertising,billboards, lighting, or any other devices or means of advertising oridentification on property adjacent to the Property that in Lessor’s opinionobstructs, impairs, restricts or in any way, in Lessor’s reasonable opinion,negatively affects the Property or would not be permitted by the terms of thisLease or these Rules and Regulations if such action were taken on the Property.

 

1.15         Lessorreserves the right to prescribe the weight, size and position of all equipment,materials, furniture or other property brought on to the Property.  Such Lessor approved items shall be moved inor about the Property under the direction of Lessor and in a manner and at suchtimes that will not inconvenience any lessee. Lessor reserves the right to prohibit or impose conditions upon theinstallation of objects which may overload any floor.

 

1.16         Subjectto the terms of Paragraph 8 of this Lease, all parking facilities of theProperty shall be regulated by Lessor and may be modified or amended as Lessordeems necessary.  Lessee shall not permitor allow any vehicles that belong to or that are controlled by Lessee or Lessee’semployees, customers or invitees to be loaded, unloaded or parked in areasother than those designated by Lessor for such activities.  Users of the parking areas will obey allposted signs and not impede the flow of traffic.  For sale signs for vehicles must be on thevehicle.  Washing, waxing, cleaning orservicing of any vehicle is prohibited.  Nocampers, recreational vehicles or trailers are permitted and all disabledvehicles must be removed within 24 hours. No vehicles shall be brought into or kept in the Premises.  Lessor reserves the right to tow, withoutcost or liability to Lessor, any vehicle: 1) parked in an unauthorized orillegal parking area or; 2) whose audio theft alarm system remains engaged foran unreasonable period; and 3) belonging to any violator of any of Lessor’sparking rules and regulations.  Further,in addition to all of its other rights and remedies, Lessor reserves the rightto refuse to permit any person to park within the Property who violates any ofthese or any other rules or regulations which Lessor may establish.

 

1.17         Lesseeshall not do any act that will create any additional costs to maintain theappearance or cleanliness of any part of the Property.  No dirt or other substances shall be disposedof anywhere on the Property, including but not limited to in any hallways,stairways, elevators or lobbies or on any parking areas, landscaping, walkwaysor in any other areas used in common with other lessees.

 

1.18         Lesseeassumes any and all responsibility for protecting its Premises from theft,robbery and pilferage, which includes keeping Premises doors locked and alldoors into common areas such as doors into entrances, public corridors,lobbies, etc., closed, except for normal ingress and egress.

 

1.19         Nosignage, notices or advertisements may be placed by Lessee anywhere outside ofits Premises and all signage must comply with the Sign Criteria exhibitattached to and made a part of this Lease and any other terms and conditions ofthese Rules and Regulations and the Lease.

 

1.20         Lesseeshall not use any method of heating or air conditioning other than as providedby Lessor without Lessor’s prior written consent, such consent not to beunreasonably withheld, delayed or conditioned.

 

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1.21         Lessormay prohibit smoking within Lessee’s Premises, the Project, or any partthereof, and may require Lessee and any of its agents, employees, suppliers,customers, guests and invitees who desire to smoke, to smoke withinspecifically designated smoking areas which Lessor may change from time to time.  It will be Lessee’s sole responsibility toascertain from Lessor the specific smoking program in effect at the Property atthe time of its lease commencement.  Anysmoking program implemented by Lessor will be strictly enforced.

 

1.22         Restroom partitions, mirrors, wash basins and other plumbing fixtures shall not beused for any purpose other than that for which they were constructed and nosweepings, trash or other substances shall be disposed of therein.  Any damage or injuries caused by Lessee, itsemployees, agents, contractors, suppliers, invitees or licensees shall be bornedirectly by Lessee.

 

1.23         Noheavy items may be transported by elevator if such item or items exceed theload capacity of the elevator.  Lessee’sinitial move in and subsequent deliveries of bulky items, such as furniture,equipment, supplies, merchandise, safes and similar items will be subject toreasonable scheduling and approval of persons moving such items by Lessor.  Deliveries during normal office hours shallbe limited to normal office supplies and other small items.  Lessee shall be responsible for protectingelevator interior and exterior finishes and flooring whenever items aretransported in them on Lessee’s behalf.

 

1.24         Lesseewill not waste electricity, water or air conditioning and agrees to cooperatefully with Lessor in this regard and to comply with any Lessor or governmentalenergy-saving rules, laws and regulations.

 

1.25         Lesseeunderstands that air conditioning and heating systems supply cool air and heatto large zones regulated by zonal thermostats. Lessor shall determine the locations of, make any modifications to, andhave exclusive control over all such thermostats, their settings, the zones andall parts of the system.  Lessee agreesto cooperate with other parties within its zone(s) to maximize the comfortlevel of all parties and shall not touch, adjust, tamper with, or otherwiseaffect any thermostat or any part of the heating/cooling systems.  Lessee will direct all problems related toheating/cooling systems directly to Lessor.

 

1.26         Subjectto the terms of Paragraph 9 of this Lease, Lessor shall be under noobligation to provide heating or air conditioning services to the buildingduring off-hours (between 6:00 p.m. and 7:00 a.m., Monday throughFriday and on non-business days).  Lesseemay request additional heating or air conditioning during off hours and, shouldLessor agree to supply such service, Lessee will reimburse Lessor for all costsand expenses incurred, as determined by Lessor in its sole discretion.

 

1.27         Lessorand its agents reserve the right to exclude from the building any unknownperson, or any person otherwise improperly identified.  Lessor shall in no case be liable for anydamages for any error with regard to the admission to or exclusion from thebuilding of any person.  In the case ofinvasion, mob, riot, public excitement or any other circumstance which Lessor,in its sole discretion, believes will place lessees and/or the Property injeopardy, Lessor reserves the right to prevent access to the building duringthe continuance of same by such action as Lessor may deem appropriate.

 

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1.28         Lessee’sdesignated representative shall notify Lessor promptly of any requiredmaintenance items for which Lessor is responsible.  Employees of Lessor will not perform any workor do anything outside of their regular duties unless under special instructionby Lessor.

 

1.29         NoLessee shall employ any person or persons other than the janitor of Lessor forthe purpose of cleaning its Premises unless otherwise agreed to by Lessor inwriting.  No Lessee shall cause any unnecessarylabor by reason of Lessee’s carelessness or indifference in the preservation ofgood order and cleanliness.  Lessor shallnot be responsible to any lessee for any loss of property on the Premises or onor about the Property, however occurring, or for any damage done to any effectsof any lessee by the janitor or any other employee or any other person.

 

1.30         NeitherLessee nor any of its employees, agents, contractors, suppliers, invitees orlicensees may use on any portion of the Premises, Project or Property any handtruck except those equipped with rubber tires and side guards or such othermaterial-handling equipment as Lessor may approve or require.

 

1.31         TheseRules and Regulations impose obligations upon Lessee which are in addition tothe obligations of Lessee set forth in the Lease.  Nothing in these Rules and Regulations willbe construed in any way to diminish or to waive, in whole or in part, theterms, covenants, agreements and conditions of the Lease.  In the event that provisions of both theseRules and Regulations and also of the Lease regulate the same subject matter,Lessee shall comply with all such provisions; if any such provisions are indirect conflict, the provisions of the Lease shall control.  Lessor shall enforce these Rules andRegulations in a nondiscriminatory manner as against all tenants of theBuilding and Project subject to reasonable variances granted by Lessor.

 

1.32         Lessorreserves the right to adopt such additional reasonable and nondiscriminatoryRules and Regulations (whether similar or dissimilar to these Rules andRegulations), and/or such amendments to any Rule or Regulation, as, in itsjudgment, may from time to time be appropriate and Lessee agrees to abide byall such additional Rules and Regulations and amendments which may be adopted.

 

1.33         Notwithstandinganything to the contrary contained in the Lease, Lessee shall have the right,on a first come-first served, reservation basis to use the common conferencerooms located on the Property.

 

1.34         Landlordagrees to allow Tenant to place a bike rack outside the Premises.

 

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