** **

**Exhibit 10.2**

 

**OFFICE SPACE LEASE**

 

**BETWEEN**

 

**UTC PROPERTIES LLC**

 

**AND**

 

**INFOSONICS CORPORATION**

 

 

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**OFFICE SPACE LEASE**

** **

THISLEASE is made as of the10th day of September 2007, by and between **UTC PROPERTIES LLC**,a Delaware limited liability company, hereafter called “Landlord,” and **INFOSONICS CORPORATION**, a Maryland corporation, hereaftercalled “Tenant.”

 

**ARTICLE I. BASIC LEASE PROVISIONS**

 

Eachreference in this Lease to the “Basic Lease Provisions” shall mean and refer tothe following collective terms, the application of which shall be governed bythe provisions in the remaining Articles of this Lease.

 

1.       **Tenant’s Trade Name**:  N/A

 

2.       **Premises**: Suite No. 100 (the Premises are more particularly describedin Section 2.1).

 

**Address of Building**:  4350Executive Drive, San Diego, California, 92101

 

**Project Description**:  ParkPlaza

 

3.       **Use of Premises**:  General office and for no otheruse.

 

4.       **Estimated****Commencement Date**:  October 1, 2007

 

5.       **Lease Term**:   Theterm of this Lease shall expire sixty (60) months following the CommencementDate, plus any additional days as are necessary to cause this Lease to expireat the end of a calendar month.

 

6.       **Basic Rent**:   Twenty Thousand Three HundredSixty-One Dollars ($20,361.00) per month.

 

**Rental Adjustments**:

 

Commencingon October 1, 2008, the Basic Rent shall be Twenty Thousand Nine HundredNinety-Three Dollars ($20,993.00) per month.

 

CommencingOctober 1, 2009, the Basic Rent shall be Twenty-One Thousand Six HundredTwenty-Five Dollars ($21,625.00) per month.

 

CommencingOctober 1, 2010, the Basic Rent shall be Twenty-Two Thousand Two HundredFifty-Seven Dollars ($22,257.00) per month.

 

CommencingOctober 1, 2011, the Basic Rent shall be Twenty-Two Thousand Eight HundredEighty-Eight Dollars ($22,888.00) per month.

 

7.       **Property Tax Base**:  TheProperty Taxes per rentable square foot incurred by Landlord and attributableto the twelve month period ending June 30, 2008 (the “Base Year”).

 

**Building Cost Base**:  TheBuilding Costs per rentable square foot incurred by Landlord and attributableto the Base Year.

 

**Expense Recovery Period**:  Everytwelve month period during the Term (or portion thereof during the first andlast Lease years) ending June 30.

 

8.       **Floor Area of Premises**: approximately 7,021 rentable square feet

 

9.       **Security Deposit**:  Twenty-Five Thousand OneHundred Seventy-Seven Dollars ($25,177.00)

 

10.     **Broker(s)**: Irvine Realty Company (“Landlord’s Broker”) and Grubb & Ellis/BRECommercial (“Tenant’s Broker”)

 

11.     **Plan Approval Date**:  August 9, 2007

 

12.     **Parking**:  Twenty-Four (24) unreserved vehicle parkingspaces.

 

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13.     **Address for Payments and Notices**:

 
| **LANDLORD**                                                                                                                                                                                                                                                                                                                                                                                                                                           | **TENANT**                                                                                            |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|
| Payment  Address:

 

UTC  Properties LLC

Department  #6967

Los  Angeles, CA  90084-6967

 

Notice  Address:

 

UTC  Properties LLC

9255  Towne Centre Drive, Suite 800

San  Diego, CA  92121

Attn:  Property Manager

 

with  a copy of notices to:

 

THE  IRVINE COMPANY LLC

P.O.  Box 6370

Newport  Beach, CA 92658-6370

Attn:  Vice President, Operations,

Office  Properties/San Diego |  

 

Infosonics  Corporation

4350  Executive Drive, Suite 100

San  Diego, CA  92121 |

 

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**ARTICLE II. PREMISES**

 

**SECTION 2.1.****LEASED PREMISES**. Landlord leases to Tenant and Tenant rentsfrom Landlord the premises shown in Exhibit A (the “Premises”), containingapproximately the floor area set forth in Item 8 of the Basic Lease Provisionsand known by the suite number identified in Item 2 of the Basic LeaseProvisions. The Premises are located in the building identified in Item 2 ofthe Basic Lease Provisions (the “Building”), which is a portion of the projectdescribed in Item 2 (the “Project”). If, upon completion of the space plans forthe Premises, Landlord’s architect or space planner determines that therentable square footage of the Premises differs from that set forth in theBasic Lease Provisions, then Landlord shall so notify Tenant and the Basic Rent(as shown in Item 6 of the Basic Lease Provisions) shall be promptly adjustedin proportion to the change in square footage. Within five (5) days followingLandlord’s request, the parties shall memorialize the adjustments by executingan amendment to this Lease prepared by Landlord. The Premises has been measuredby Stevensons Systems, which uses a modified BOMA standard.

 

**SECTION 2.2. ACCEPTANCE OF PREMISES**. Tenant acknowledges that neither Landlordnor any representative of Landlord has made any representation or warranty withrespect to the Premises or the Building or the suitability or fitness of eitherfor any purpose, except as set forth in this Lease. The taking of possession oruse of the Premises by Tenant for any purpose other than construction shallconclusively establish that the Premises and the Building were in satisfactorycondition and in conformity with the provisions of this Lease in all respects,except for those matters which Tenant shall have brought to Landlord’sattention on a written punch list. The list shall be limited to any itemsrequired to be accomplished by Landlord under the Work Letter (if any) attachedas Exhibit X, and shall be delivered to Landlord within thirty (30) days afterthe term (“Term”) of this Lease commences as provided in Article III below. Ifthere is no Work Letter, or if no items are required of Landlord under the WorkLetter, by taking possession of the Premises Tenant accepts the improvements intheir existing condition, and waives any right or claim against Landlordarising out of the condition of the Premises. Nothing contained in this Sectionshall affect the commencement of the Term or the obligation of Tenant to payrent. Landlord shall diligently complete all punch list items of which it isnotified as provided above.

 

**SECTION 2.3. BUILDING NAME, ADDRESS AND DEPICTION**. Tenant shall not utilize any name selectedby Landlord from time to time for the Building and/or the Project as any partof Tenant’s corporate or trade name. Landlord shall have the right to changethe name, number or designation of the Building or Project without liability toTenant. Tenant shall not use any picture of the Building in its advertising,stationery or in any other manner.

 

**ARTICLE III. TERM**

 

**SECTION 3.1. GENERAL**. The Term shall be for the period shown inItem 5 of the Basic Lease Provisions. The Term shall commence (“CommencementDate”) on the earlier of (a) the date the Premises are deemed ready foroccupancy in accordance with Section 3.2, or (b) the date Tenant commences itsbusiness activities within the Premises. Promptly following request byLandlord, the parties shall memorialize on a form provided by Landlord (the “CommencementMemorandum”) the actual Commencement Date and the expiration date (“ExpirationDate”) of this Lease; should Tenant fail to execute and return the CommencementMemorandum to Landlord within five (5) business days (or provide specificwritten objections thereto within that period), then Landlord’s determinationof the Commencement and Expiration Dates as set forth in the CommencementMemorandum shall be conclusive.

 

**SECTION 3.2. DELAY IN POSSESSION**. If Landlord, for any reason whatsoever,cannot deliver possession of the Premises to Tenant on or before the EstimatedCommencement Date set forth in Item 4 of the Basic Lease Provisions, this Leaseshall not be void or voidable nor shall Landlord be liable to Tenant for anyresulting loss or damage. However, Tenant shall not be liable for any rent andthe Commencement Date shall not occur until Landlord delivers possession of thePremises and the Premises are in fact ready for occupancy as defined below,except that if Landlord’s failure to so deliver possession is attributable toany action or inaction by Tenant (including without limitation any Tenant Delaydescribed in the Work Letter, if any, attached to this Lease), then thePremises shall be deemed ready for occupancy, and Landlord shall be entitled tofull performance by Tenant (including the payment of rent), as of the dateLandlord would have been able to deliver the Premises to Tenant but for Tenant’sdelay(s). Subject to the foregoing, the Premises shall be deemed ready foroccupancy if and when Landlord, to the extent applicable, (a) has put intooperation all building services essential for the use of the Premises byTenant, (b) has provided reasonable access to the Premises for Tenant so thatthey may be used without unnecessary interference, (c) has substantiallycompleted all the work required to be done by Landlord in this Lease, and (d)has obtained requisite governmental approvals to Tenant’s occupancy.

 

**SECTION 3.4. TENANT’S RIGHT TO CANCEL FOR LATE DELIVERY.**If Landlord fails to deliver possession of thePremises, ready for occupancy, by the “Outside Date” as defined below, thenTenant shall have the right to terminate this lease by giving written noticethereof to Landlord after the 

 

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OutsideDate, but prior to Landlord’s delivery of the Premises ready for Tenant’soccupancy as aforesaid. If, from time to time prior to the Outside Date,Landlord determines that it will not be able to deliver possession of thePremises, ready for occupancy, by the Outside Date, Landlord shall deliver toTenant a written notice setting forth Landlord’s opinion as to the revisedoutside date by which it shall be able to deliver the Premises to Tenant, readyfor occupancy. Within five (5) business days following delivery of that notice,Tenant may elect by written notice to Landlord to terminate this Lease;otherwise, the Outside Date shall be deemed extended to the revised date setforth in Landlord’s notice. For purposes hereof, the “Outside Date” shall meanNovember 30, 2007; provided that the Outside Date shall be extended on aday-for-day basis for the period of any Tenant Delays and for any other delaysresulting from matters beyond Landlord’s control as set forth in Section 20.9.

 

**ARTICLE IV. RENT AND OPERATING EXPENSES**

 

**SECTION 4.1. BASIC RENT**. From and after the Commencement Date, Tenantshall pay to Landlord without deduction or offset a Basic Rent for the Premisesin the total amount shown (including subsequent adjustments, if any) in Item 6of the Basic Lease Provisions. If the Commencement Date is other than the firstday of a calendar month, any rental adjustment shown in Item 6 shall be deemedto occur on the first day of the next calendar month following the specifiedmonthly anniversary of the Commencement Date. The rent shall be due and payablein advance commencing on the Commencement Date and continuing thereafter on thefirst day of each successive calendar month of the Term, as prorated for anypartial month. No demand, notice or invoice shall be required. An installmentof rent in the amount of one (1) full month’s Basic Rent at the initial ratespecified in Item 6 of the Basic Lease Provisions shall be delivered toLandlord concurrently with Tenant’s execution of this Lease and shall beapplied against the Basic Rent first due hereunder; the next installment ofBasic Rent shall be due on the first day of the second calendar month of theTerm, which installment shall, if applicable, be appropriately prorated toreflect the amount prepaid for that calendar month.

 

**SECTION 4.2. OPERATING EXPENSE INCREASE**.

 

(a)        Tenant shall compensate Landlord, as additional rent, for Tenant’sproportionate shares of “Building Costs” and “Property Taxes,” as those termsare defined below, incurred by Landlord in the operation of the Building andProject. Property Taxes and Building Costs are mutually exclusive and may bebilled separately or in combination as determined by Landlord. Tenant’sproportionate share of Property Taxes shall equal the product of the rentablefloor area of the Premises multiplied by the difference of (i) Property Taxesper rentable square foot less (ii) the Property Tax Base set forth in Item 7 ofthe Basic Lease Provisions. Tenant’s proportionate share of Building Costsshall equal the product of the rentable floor area of the Premises multipliedby the difference of (i) Building Costs per rentable square foot less (ii) theBuilding Cost Base set forth in Item 7 of the Basic Lease Provisions. Tenant acknowledgesLandlord’s rights to make changes or additions to the Building and/or Projectfrom time to time pursuant to Section 6.5 below, in which event the totalrentable square footage within the Building and/or Project may be adjusted. Forconvenience of reference, Property Taxes and Building Costs may sometimes becollectively referred to as “Operating Expenses.”

 

(b)        Commencing prior to the start of the first full “Expense Recovery Period”of the Lease (as defined in Item 7 of the Basic Lease Provisions), and prior tothe start of each full or partial Expense Recovery Period thereafter, Landlordshall give Tenant a written estimate of the amount of Tenant’s proportionateshares of Building Costs and Property Taxes for the Expense Recovery Period orportion thereof. Tenant shall pay the estimated amounts to Landlord in equalmonthly installments, in advance, with Basic Rent. If Landlord has notfurnished its written estimate for any Expense Recovery Period by the time setforth above, Tenant shall continue to pay cost reimbursements at the ratesestablished for the prior Expense Recovery Period, if any; provided that whenthe new estimate is delivered to Tenant, Tenant shall, at the next monthlypayment date, pay any accrued cost reimbursements based upon the new estimate. Landlordmay from time to time change the Expense Recovery Period to reflect a calendaryear or a new fiscal year of Landlord, as applicable, in which event Tenant’sshare of Operating Expenses shall be equitably prorated for any partial year.

 

(c)        Within one hundred twenty (120) days after the end of each ExpenseRecovery Period, Landlord shall furnish to Tenant a statement setting forth theactual or prorated Property Taxes and Building Costs attributable to thatperiod, and the parties shall within thirty (30) days thereafter make anypayment or allowance necessary to adjust Tenant’s estimated payments, if any,to Tenant’s actual proportionate shares as shown by the annual statement. IfTenant has not made estimated payments during the Expense Recovery Period, anyamount owing by Tenant pursuant to subsection (a) above shall be paid toLandlord in accordance with Article XVI. If actual Property Taxes or BuildingCosts allocable to Tenant during any Expense Recovery Period are less than theProperty Tax Base or the Building Cost Base, respectively, Landlord shall notbe required to pay that differential to Tenant, although Landlord shall refundany applicable estimated payments collected from Tenant. Should Tenant fail toobject in writing to Landlord’s determination of actual Operating Expenseswithin one hundred twenty (120) days following delivery of Landlord’s expensestatement, Landlord’s 

 

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determinationof actual Operating Expenses for the applicable Expense Recovery Period shallbe conclusive and binding on Tenant.

 

(d)        Even though the Lease has terminated and the Tenant has vacated thePremises, when the final determination is made of Tenant’s share of PropertyTaxes and Building Costs for the Expense Recovery Period in which the Leaseterminates, Tenant shall upon notice pay the entire increase due over theestimated expenses paid; conversely, any overpayment made in the event expensesdecrease shall be rebated by Landlord to Tenant. However, in lieu thereof,Landlord may deliver a reasonable estimate of the anticipated reconciliationamount to Tenant prior to the expiration of the Term, in which event theappropriate party shall fund that amount by the termination date.

 

(e)        If, at any time during any Expense Recovery Period, any one or more ofthe Operating Expenses are increased to a rate(s) or amount(s) in excess of therate(s) or amount(s) used in calculating the estimated expenses for the year,then Tenant’s estimated share of Property Taxes or Building Costs, asapplicable, shall be increased for the month in which the increase becomeseffective and for all succeeding months by an amount equal to Tenant’sproportionate share of the increase. Landlord shall give Tenant written noticeof the amount or estimated amount of the increase, the month in which theincrease will become effective, Tenant’s monthly share thereof and the monthsfor which the payments are due. Tenant shall pay the increase to Landlord as apart of Tenant’s monthly payments of estimated expenses as provided inparagraph (b) above, commencing with the month in which effective.

 

(f)         The term “Building Costs” shall include all charges and expensespertaining to the operation, management, maintenance and repair of the Buildingand the Project, together with all appurtenant Common Areas (as defined inSection 6.2), and shall include the following charges by way of illustrationbut not limitation:  water and sewercharges; insurance premiums or reasonable premium equivalents should Landlordelect to self-insure any risk or deductible that Landlord is authorized toinsure hereunder; license, permit, and inspection fees; heat; light; power;janitorial services; the cost of equipping, staffing and operating an on-siteand/or off-site management office for the Building and Project; all labor andlabor-related costs for personnel applicable to the Building and Project,including both Landlord’s personnel and outside personnel; a commerciallyreasonable Landlord overhead/management fee; reasonable fees for consultingservices; access control/security costs, inclusive of the reasonable cost ofimprovements made to enhance access control systems and procedures; repairs;air conditioning; supplies; materials; equipment; tools; tenant services;programs instituted to comply with transportation management requirements; anyexpense incurred pursuant to Sections 6.1, 6.2, 6.4, 7.2, and 10.2 and ExhibitsB and C below; costs incurred (capital or otherwise) on a regular recurringbasis every three (3) or more years for normal maintenance projects (e.g.,parking lot slurry coat or replacement of lobby, corridor and elevator cabcarpets and coverings); and the amortized cost of capital improvements (asdistinguished from replacement parts or components installed in the ordinarycourse of business) which are intended to maintain the quality, appearance orsafety of the Building and/or Project, reduce other operating costs orincreases thereof, or upgrade Building and/or Project security, or which arerequired to bring the Building and/or Project into compliance with applicablelaws and building codes. Landlord shall amortize the cost of capitalimprovements on a straight-line basis over the lesser of the Payback Period (asdefined below) or the useful life of the capital improvement as reasonablydetermined by Landlord. Any amortized Building Cost item may include, atLandlord’s option, an actual or imputed interest rate that Landlord wouldreasonably be required to pay to finance the cost of the item, applied on theunamortized balance. “Payback Period” shall mean the reasonably estimatedperiod of time that it takes for the cost savings, if any, resulting from acapital improvement item to equal the total cost of the capital improvement. Itis understood that Building Costs shall include competitive charges for directservices provided by any subsidiary or division of Landlord. If any BuildingCost is applicable to one or more buildings or properties in addition to theBuilding, then that cost shall be equitably prorated and apportioned among theBuilding and such other buildings or properties. The term “Property Taxes” asused herein shall include the following: (i) all real estate taxes or personal property taxes, as such propertytaxes may be reassessed from time to time; and (ii) other taxes, charges andassessments which are levied with respect to this Lease or to the Buildingand/or the Project, and any improvements, fixtures and equipment and otherproperty of Landlord located in the Building and/or the Project, except thatgeneral net income and franchise taxes imposed against Landlord shall beexcluded; and (iii) any tax, surcharge or assessment which shall be levied inaddition to or in lieu of real estate or personal property taxes, other thantaxes covered by Article VIII; and (iv) costs and expenses incurred incontesting the amount or validity of any Property Tax by appropriateproceedings. A copy of Landlord’s unaudited statement of expenses shall be madeavailable to Tenant upon request. Property Taxes for the Base Year and allsubsequent years shall be calculated based upon a fully re-assessed taxliability (as reasonably and in good faith estimated by the Landlord, for thesale of the Building which occurred on April 2, 2007, with any necessaryadjustments to be made following the actual re-assessment). The Building Costs,inclusive of those for the Base Year, shall be extrapolated by Landlord toreflect at least ninety-five percent (95%) occupancy of the rentable area ofthe Building.

 

(g)        Notwithstanding theforegoing, Operating Expenses shall exclude the following:

 

(i)        Any ground lease rental;

 

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(ii)     Costs incurred by Landlordwith respect to goods and services other than parking (including utilities soldand supplied to tenants and occupants of the Building) to the extent thatLandlord is entitled to reimbursement for such costs other than through theOperating Expense pass-through provisions of such tenants’ lease;

 

(iii)    Costs incurred by Landlord forrepairs, replacements and/or restoration to or of the Building to the extentthat Landlord is reimbursed by insurance or condemnation proceeds or by tenants(other than through Operating Expense pass-throughs), warrantors or other thirdpersons;

 

(iv)    Costs, including permit,license and inspection costs, incurred with respect to the installation oftenant improvements made for other tenants in the Building or incurred inrenovating or otherwise improving, decorating, painting or redecorating vacantspace for tenants or other occupants of the Building;

 

(v)     Costs arising from Landlord’scharitable or political contributions;

 

(vi)    Attorneys’ fees and othercosts and expenses incurred in connection with negotiations or disputes with presentor prospective tenants or other occupants of the Building, except thoseattorneys’ fees and other costs and expenses incurred in connection withnegotiations, disputes or claims relating to items of Operating Expenses,enforcement of rules and regulations of the Building and such other mattersrelating to the maintenance of standards required of Landlord under this Lease;

 

(vii)   Capital expenditures asdetermined in accordance with generally accepted accounting principles,consistently applied, except as otherwise provided in subsection (f) above;

 

(viii)  Brokers commissions, finders’fees, attorneys’ fees, entertainment and travel expenses and other costsincurred by Landlord in leasing or attempting to lease space in the Building;

 

(ix)    Expenses in connection withservices or other benefits which are not offered to Tenant or for which Tenantis charged for directly but which are provided to another tenant or occupant ofthe Building;

 

(x)     Costs, fines or penaltiesincurred by Landlord due to the violation by Landlord of (i) any governmentalrule or regulation (provided that costs of complying with such governmentalrequirements may be included unless otherwise provided herein) or (ii) theterms and conditions of any lease of space in the Building;

 

(xi)    Overhead and profit incrementspaid to subsidiaries or affiliates of Landlord for services provided to theBuilding to the extent the same exceeds the costs that would generally becharged for such services if rendered on a competitive basis (based upon astandard of similar office buildings in the general market area of thePremises) by unaffiliated third parties capable of providing such service;

 

(xii)   Interest on debt oramortization on any mortgage or mortgages encumbering the Building;

 

(xiii)  Landlord’s general corporateoverhead, except as it relates to the specific management of the Building orProject;

 

(xiv)  Costs of installing the initiallandscaping and the initial sculpture, paintings and objects of art for theBuilding and Project; and

 

(xv)   Advertising expenditures.

 

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(h)        Provided Tenant is notthen in default hereunder, Tenant shall have the right to cause a certifiedpublic accountant, engaged on a non-contingency fee basis, to audit OperatingExpenses by inspecting Landlord’s general ledger of expenses not more than onceduring any Expense Recovery Period. However, to the extent that insurancepremiums or any other component of Operating Expenses is determined by Landlordon the basis of an internal allocation of costs utilizing information Landlordin good faith deems proprietary, such expense component shall not be subject toaudit so long as it does not exceed the amount per square foot typicallyimposed by landlords of other first class office projects in San Diego,California. Tenant shall give notice to Landlord of Tenant’s intent to auditwithin sixty (60) days after Tenant’s receipt of Landlord’s expense statementwhich sets forth Landlord’s actual Operating Expenses. Such audit shall beconducted at a mutually agreeable time during normal business hours at theoffice of Landlord or its management agent where such accounts are maintained. IfTenant’s audit determines that actual Operating Expenses have been overstatedby more than five percent (5%), then subject to Landlord’s right to reviewand/or contest the audit results, Landlord shall reimburse Tenant for thereasonable out-of-pocket costs of such audit. Tenant’s rent shall beappropriately adjusted to reflect any overstatement in Operating Expenses. Inaddition, if any component of Operating Expenses is determined to be eitherinappropriate or excessive during an Expense Recovery Period, and if theBuilding Cost Base or Property Tax Base also included such component, then theappropriate Base shall concurrently be adjusted if and to the extentappropriate. In the event of a dispute between Landlord and Tenant regardingsuch audit, either party may elect to submit the matter for binding arbitrationwith the American Arbitration Association under its Arbitration Rules for theReal Estate Industry, and judgment on the arbitration award may be entered inany court having jurisdiction thereof. All of the information obtained byTenant and/or its auditor in connection with such audit, as well as anycompromise, settlement, or adjustment reached between Landlord and Tenant as aresult thereof, shall be held in strict confidence and, except as may berequired pursuant to litigation, shall not be disclosed to any third party,directly or indirectly, by Tenant or its auditor or any of their officers,agents or employees. Landlord may require Tenant’s auditor to execute aseparate confidentiality agreement affirming the foregoing as a conditionprecedent to any audit. In the event of a violation of this confidentialitycovenant in connection with any audit, then in addition to any other legal orequitable remedy available to Landlord, Tenant shall forfeit its right to anyreconciliation or cost reimbursement payment from Landlord due to said audit(and any such payment theretofore made by Landlord shall be promptly returnedby Tenant), and Tenant shall have no further audit rights under this Lease. Notwithstandingthe foregoing, Tenant shall have no right of audit with respect to any ExpenseRecovery Period unless the total Operating Expenses per square foot for suchExpense Recovery Period, as set forth in Landlord’s annual expensereconciliation, exceed the total Operating Expenses per square foot during theBase Year, as increased by the percentage change in the United StatesDepartment of Labor, Bureau of Labor Statistics, Consumer Price Index for allUrban Consumers, Los Angeles - Riverside - Orange County Area Average, allitems (1982-84 = 100) (the “Index”), which change in the Index shall bemeasured by comparing the Index published for January of the Base Year with theIndex published for January of the applicable Expense Recovery Period.

 

**SECTION 4.3. SECURITY DEPOSIT**. Concurrently with Tenant’s delivery of thisLease, Tenant shall deposit with Landlord the sum, if any, stated in Item 9 ofthe Basic Lease Provisions (the “Security Deposit”), to be held by Landlord assecurity for the full and faithful performance of Tenant’s obligations underthis Lease to pay any rental sums, including without limitation such additionalrent as may be owing under any provision hereof, and to maintain the Premisesas required by Sections 7.1 and 15.3 or any other provision of this Lease. Forpurposes of the foregoing and notwithstanding any provision of Section 1950.7of the California Civil Code to the contrary, rental sums shall includeprospective rent that would have been payable by Tenant but for the earlytermination of this Lease due to Tenant’s default or insolvency. Upon anybreach of the foregoing obligations by Tenant, Landlord may apply all or partof the Security Deposit as full or partial compensation. If any portion of theSecurity Deposit is so applied, Tenant shall within five (5) days after writtendemand by Landlord deposit cash with Landlord in an amount sufficient torestore the Security Deposit to its original amount. Landlord shall not berequired to keep this Security Deposit separate from its general funds, andTenant shall not be entitled to interest on the Security Deposit. In no eventmay Tenant utilize all or any portion of the Security Deposit as a paymenttoward any rental sum due under this Lease. Any unapplied balance of theSecurity Deposit shall be returned to Tenant or, at Landlord’s option, to thelast assignee of Tenant’s interest in this Lease within thirty (30) daysfollowing the termination of this Lease and Tenant’s vacation of the Premises.

 

**ARTICLE V. USES**

 

**SECTION 5.1.****USE**. Tenant shall use the Premises only for thepurposes stated in Item 3 of the Basic Lease Provisions. The parties agree thatany contrary use shall be deemed to cause material and irreparable harm toLandlord and shall entitle Landlord to injunctive relief in addition to anyother available remedy. The uses prohibited under this Lease shall include, withoutlimitation, use of the Premises or a portion thereof for (i) offices of anyagency or bureau of the United States or any state or political subdivisionthereof; (ii) offices or agencies of any foreign governmental or politicalsubdivision thereof; (iii) offices of any health care professionals or serviceorganization; (iv) schools, temporary employment agencies or other trainingfacilities which are not ancillary to corporate, executive or professionaloffice use; (v) retail or restaurant uses; or (vi) communications firms such asradio and/or television stations. Tenant shall not do or permit anything to bedone in or about the Premises which 

 

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willin any way interfere with the rights or quiet enjoyment of other occupants ofthe Building or the Project, or use or allow the Premises to be used for anyunlawful purpose, nor shall Tenant permit any nuisance or commit any waste inthe Premises or the Project. Tenant shall not do or permit to be done anythingwhich will invalidate or increase the cost of any insurance policy(ies)covering the Building, the Project and/or their contents, and shall comply withall applicable insurance underwriters rules. Tenant shall comply at its expensewith all present and future laws, ordinances and requirements of allgovernmental authorities that pertain to Tenant or its use of the Premises,including without limitation all federal and state occupational health andsafety and handicap access requirements, whether or not Tenant’s compliancewill necessitate expenditures or interfere with its use and enjoyment of thePremises. Tenant shall not generate, handle, store or dispose of hazardous ortoxic materials (as such materials may be identified in any federal, state orlocal law or regulation) in the Premises or Project without the prior writtenconsent of Landlord; provided that the foregoing shall not be deemed toproscribe the use by Tenant of customary office supplies in normal quantitiesso long as such use comports with all applicable laws. Tenant agrees that itshall promptly complete and deliver to Landlord any disclosure form regardinghazardous or toxic materials that may be required by any governmental agency. Tenantshall also, from time to time upon request by Landlord, execute such affidavitsconcerning Tenant’s best knowledge and belief regarding the presence ofhazardous or toxic materials in the Premises. Landlord shall have the right atany time to perform an assessment of the environmental condition of the Premisesand of Tenant’s compliance with this Section. As part of any such assessment,Landlord shall have the right, upon reasonable prior notice to Tenant, to enterand inspect the Premises and to perform tests, provided those tests areperformed in a manner that minimizes disruption to Tenant. Tenant willcooperate with Landlord in connection with any assessment by, among otherthings, promptly responding to inquiries and providing relevant documentationand records. The reasonable cost of the assessment/testing shall be reimbursedby Tenant to Landlord if such assessment/testing determines that Tenant failedto comply with the requirements of this Section. In all events Tenant shallindemnify each of the “Indemnified Parties” (as defined in Section 10.3) inthe manner elsewhere provided in this Lease from any release of hazardous ortoxic materials caused by Tenant, its agents, employees, contractors,subtenants or licensees. The foregoing covenants shall survive the expirationor earlier termination of this Lease.

 

**SECTION 5.2. SIGNS**. Landlord shall affix and maintain a sign(restricted solely to Tenant’s name as set forth herein or such other name asLandlord may consent to in writing) adjacent to the entry door of the Premises,together with a directory listing of Tenant’s name as set forth herein in thelobby directory of the Building. Any subsequent changes to that initial signageshall be at Tenant’s sole expense. All signage shall conform to the criteriafor signs established by Landlord and shall be ordered through Landlord. Tenantshall not place or allow to be placed any other sign, decoration or advertisingmatter of any kind that is visible from the exterior of the Premises. Anyviolating sign or decoration may be immediately removed by Landlord at Tenant’sexpense without notice and without the removal constituting a breach of thisLease or entitling Tenant to claim damages.

 

**SECTION5.3. MONUMENT SIGNAGE**. Tenant shall have the right to installnon-exclusive signage on the top slot of the monument sign adjacent to theBuilding and facing Executive Drive, which signage shall consist only of thename “Infosonics Corporation.”  The type,location and design of such signage shall be subject to the prior writtenapproval of Landlord and the City of San Diego, and shall be consistent withLandlord’s signage criteria for the Project. Fabrication, installation,insurance, and maintenance of such signage shall be at Tenant’s sole cost andexpense. Commencing on the 13th month of the initial Term, Tenantshall pay a rental fee for signage rights in the amount of Two Hundred FiftyDollars ($250.00) per month. Tenant understands and agrees that it shall useLandlord’s designated contractor for installing the monument signage. ShouldTenant fail to have the monument signage installed by February 28, 2008, thenTenant’s right to install same thereafter shall be deemed null and void. Exceptfor the foregoing, no sign, advertisement or notice visible from the exteriorof the Premises shall be inscribed, painted or affixed by Tenant on any part ofthe Premises without prior consent of Landlord. Tenant’s signage right shallbelong solely to Tenant and may not be transferred or assigned (except inconnection with an assignment of this Lease to a Tenant Affiliate as describedin Section 9.1(f) hereof) without Landlord’s prior written consent, which maybe withheld by Landlord in Landlord’s sole discretion. In the event Tenant,exclusive of any subtenant(s), fails to occupy the entire Premises, then Tenantshall, within thirty (30) days following notice from Landlord, remove themonument signage at Tenant’s expense. Tenant shall also remove such signagepromptly following the expiration or earlier termination of the Lease. Any suchremoval shall be at Tenant’s sole expense, and Tenant shall bear the cost ofany resulting repairs to the monument that are reasonably necessary due to theremoval.

 

**ARTICLE VI. LANDLORD SERVICES**

 

**SECTION 6.1. UTILITIES AND SERVICES**. Landlord shall furnish to the Premises theutilities and services described in Exhibit B, subject to the conditions andpayment obligations and standards set forth in this Lease. Landlord shall notbe liable for any failure to furnish any services or utilities when the failureis the result of any accident or other cause beyond Landlord’s reasonablecontrol, nor shall Landlord be liable for damages resulting from power surgesor any breakdown in telecommunications facilities or services. Landlord’stemporary inability to furnish any services or 

 

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utilitiesshall not entitle Tenant to any damages, relieve Tenant of the obligation topay rent or constitute a constructive or other eviction of Tenant, except thatLandlord shall diligently attempt to restore the service or utility promptly. However,if the Premises, or a material portion of the Premises, are made untenantablefor a period in excess of 5 consecutive business days as a result of a serviceinterruption that is reasonably within the control of Landlord to correct, thenTenant, as its sole remedy, shall be entitled to receive an abatement of rentpayable hereunder during the period beginning on the 6th consecutivebusiness day of the service interruption and ending on the day the service hasbeen restored. If the entire Premises have not been rendered untenantable bythe service interruption, the amount of abatement shall be equitably prorated.****Tenant shallcomply with all rules and regulations which Landlord may reasonably establishfor the provision of services and utilities, and shall cooperate with allreasonable conservation practices established by Landlord. Landlord shall atall reasonable times have free access to all electrical and mechanicalinstallations of Landlord.

 

**SECTION 6.2. OPERATION AND MAINTENANCE OF COMMON AREAS**. During the Term, Landlord shall operate allCommon Areas within the Building and the Project. The term “Common Areas” shallmean all areas within the Building and other buildings in the Project which arenot held for exclusive use by persons entitled to occupy space, and all otherappurtenant areas and improvements provided by Landlord for the common use ofLandlord and tenants and their respective employees and invitees, includingwithout limitation parking areas and structures, driveways, sidewalks, loadingdocks, landscaped and planted areas, hallways and interior stairwells notlocated within the premises of any tenant, common entrances and lobbies,elevators, and restrooms not located within the premises of any tenant.

 

**SECTION 6.3. USE OF COMMON AREAS**. The occupancy by Tenant of the Premisesshall include the use of the Common Areas in common with Landlord and with allothers for whose convenience and use the Common Areas may be provided byLandlord, subject, however, to compliance with all rules and regulations as areprescribed from time to time by Landlord. Landlord shall at all times duringthe Term have exclusive control of the Common Areas, and may restrain or permitany use or occupancy, except as otherwise provided in this Lease or in Landlord’srules and regulations. Tenant shall keep the Common Areas clear of anyobstruction or unauthorized use related to Tenant’s operations. Landlord maytemporarily close any portion of the Common Areas for repairs, remodelingand/or alterations, to prevent a public dedication or the accrual ofprescriptive rights, or for any other reasonable purpose.

 

**SECTION 6.4. PARKING**. Parking shall be provided in accordance withthe provisions set forth in Exhibit C to this Lease.

 

**SECTION 6.5. CHANGES AND ADDITIONS BY LANDLORD**. Landlord reserves the right to makealterations or additions to the Building or the Project, or to the attendantfixtures, equipment and Common Areas. No change shall entitle Tenant to anyabatement of rent or other claim against Landlord, provided that the changedoes not deprive Tenant of reasonable access to or use of the Premises.

 

**ARTICLE VII. MAINTAINING THE PREMISES**

 

**SECTION 7.1. TENANT’S MAINTENANCE AND REPAIR**. Subject to Article XI, Tenant at its soleexpense shall make all repairs necessary to keep the Premises and allimprovements and fixtures therein in the condition as existed on theCommencement Date (or on any later date that the applicable improvements mayhave been installed), excepting ordinary wear and tear. Notwithstanding Section7.2 below, Tenant’s maintenance obligation shall include without limitation allappliances, non-building standard lighting/electrical systems, and plumbingfixtures and installations located within the Premises, together with anysupplemental HVAC equipment servicing only the Premises. All repairs shall beat least equal in quality to the original work, shall be made only by alicensed, bonded contractor approved in writing in advance by Landlord andshall be made only at the time or times approved by Landlord. Any contractorutilized by Tenant shall be subject to Landlord’s standard requirements forcontractors, as modified from time to time. Landlord may impose reasonablerestrictions and requirements with respect to repairs, as provided in Section7.3, and the provisions of Section 7.4 shall apply to all repairs. Alternatively,should Landlord or its management agent agree to make a repair on behalf ofTenant and at Tenant’s request, Tenant shall promptly reimburse Landlord asadditional rent for all costs incurred (including the standard coordination feeof Landlord’s management agent) upon submission of an invoice.

 

**SECTION 7.2. LANDLORD’S MAINTENANCE AND REPAIR**. Subject to Article XI, Landlord shallprovide service, maintenance and repair with respect to the heating,ventilating and air conditioning (“HVAC”) equipment of the Building (exclusiveof any supplemental HVAC equipment servicing only the Premises) and shallmaintain in good repair the Common Areas, roof, foundations, footings, theexterior surfaces of the exterior walls of the Building, and the structural,electrical, mechanical and plumbing systems of the Building except as providedin Section 7.1 above. Landlord shall have the right to employ or designate anyreputable person or firm, including any employee or agent of Landlord or any ofLandlord’s affiliates or divisions, to perform any service, repair or 

 

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maintenancefunction. Landlord need not make any other improvements or repairs except asspecifically required under this Lease, and nothing contained in this Sectionshall limit Landlord’s right to reimbursement from Tenant for maintenance,repair costs and replacement costs as provided elsewhere in this Lease. Tenantunderstands that it shall not make repairs at Landlord’s expense or by rentaloffset. Except as provided in Sections 11.1 and 12.1 below, there shall be noabatement of rent and no liability of Landlord by reason of any injury to orinterference with Tenant’s business arising from the making of any repairs,alterations or improvements to any portion of the Building, including repairsto the Premises, nor shall any related activity by Landlord constitute anactual or constructive eviction; provided, however, that in making repairs,alterations or improvements, Landlord shall interfere as little as reasonablypracticable with the conduct of Tenant’s business in the Premises.

 

**SECTION 7.3. ALTERATIONS**. Tenant shall make no alterations, additionsor improvements to the Premises without the prior written consent of Landlord. Landlord’sconsent shall not be unreasonably withheld as long as the proposed changes donot affect the structural, electrical or mechanical components or systems ofthe Building, are not visible from the exterior of the Premises, and utilizeonly building standard materials. Landlord may impose, as a condition to itsconsent, any requirements that Landlord in its discretion may deem reasonableor desirable, including but not limited to a requirement that all work becovered by a lien and completion bond satisfactory to Landlord and requirementsas to the manner, time, and contractor for performance of the work. Withoutlimiting the generality of the foregoing, Tenant shall use Landlord’sdesignated mechanical and electrical contractors for all work affecting themechanical or electrical systems of the Building. Should Tenant perform anywork that would necessitate any ancillary Building modification or otherexpenditure by Landlord, then Tenant shall promptly fund the cost thereof toLandlord. Tenant shall obtain all required permits for the work and shallperform the work in compliance with all applicable laws, regulations andordinances, and Landlord shall be entitled to a supervision fee in the amountof five percent (5%) of the cost of the work. Under no circumstances shallTenant make any improvement which incorporates asbestos-containing constructionmaterials into the Premises. In no event shall Tenant prosecute any alterationwork that results in picketing or labor demonstrations in or about the Buildingor Project. Any request for Landlord’s consent shall be made in writing andshall contain architectural plans describing the work in detail reasonablysatisfactory to Landlord. Landlord may elect to cause its architect to reviewTenant’s architectural plans, and the reasonable cost of that review shall bereimbursed by Tenant. Should the work proposed by Tenant modify the internalconfiguration of the Premises, then Tenant shall, at its expense, furnishLandlord with as-built drawings and CAD disks compatible with Landlord’ssystems. Unless Landlord otherwise agrees in writing, all alterations,additions or improvements affixed to the Premises (excluding moveable tradefixtures and furniture) shall become the property of Landlord and shall besurrendered with the Premises at the end of the Term, except that Landlord may,by notice to Tenant given at the time of Landlord’s consent to the alterationor improvement, require Tenant to remove by the Expiration Date, or soonertermination date of this Lease, all or any alterations, decorations, fixtures,additions, improvements and the like installed either by Tenant or by Landlordat Tenant’s request. Tenant shall repair any damage to the Premises arising fromthat removal and restore the affected area to its pre-existing condition,reasonable wear and tear excepted. Landlord may require Tenant to remove animprovement provided as part of the initial build-out pursuant to Exhibit X, ifany, if and only if the improvement is a non-building standard item and Tenantis notified of the requirement prior to the build-out. Except as otherwiseprovided in this Lease or in any Exhibit to this Lease, should Landlord makeany alteration or improvement to the Premises at the request of Tenant,Landlord shall be entitled to prompt payment from Tenant of the cost thereof,inclusive of the standard coordination fee of Landlord’s management agent.

 

**SECTION 7.4. MECHANIC’S LIENS**. Tenant shall keep the Premises free from anyliens arising out of any work performed, materials furnished, or obligationsincurred by or for Tenant. Upon request by Landlord, Tenant shall promptlycause any such lien to be released by posting a bond in accordance withCalifornia Civil Code Section 3143 or any successor statute. In the event thatTenant shall not, within thirty (30) days following the imposition of any lien,cause the lien to be released of record by payment or posting of a proper bond,Landlord shall have, in addition to all other available remedies, the right tocause the lien to be released by any means it deems proper, including paymentof or defense against the claim giving rise to the lien. All expenses soincurred by Landlord, including Landlord’s attorneys’ fees, shall be reimbursedby Tenant promptly following Landlord’s demand, together with interest from thedate of payment by Landlord at the maximum rate permitted by law until paid. Tenantshall give Landlord no less than twenty (20) days’ prior notice in writingbefore commencing construction of any kind on the Premises so that Landlord maypost and maintain notices of nonresponsibility on the Premises.

 

**SECTION 7.5. ENTRY AND INSPECTION**. Landlord shall at all reasonable times havethe right to enter the Premises to inspect them, to supply services inaccordance with this Lease, to protect the interests of Landlord in thePremises, to make repairs and renovations as reasonably deemed necessary byLandlord, and to submit the Premises to prospective or actual purchasers or encumbranceholders (or, during the final twelve months of the Term or when an uncuredTenant default exists, to prospective tenants), all without being deemed tohave caused an eviction of Tenant and without abatement of rent except asprovided elsewhere in this Lease. Landlord shall at all times have and retain akey which unlocks all of the doors in the Premises, excluding Tenant’s vaultsand safes, and Landlord shall have the right to use any and all means whichLandlord may deem proper to open the doors in an emergency in order to obtainentry to the Premises, and any entry to the 

 

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Premisesobtained by Landlord shall not under any circumstances be deemed to be aforcible or unlawful entry into, or a detainer of, the Premises, or anyeviction of Tenant from the Premises.

 

**SECTION 7.6.SPACE PLANNING AND SUBSTITUTION.**Landlord shall have the right, upon providing not less thanforty-five (45) days written notice, to move Tenant to other space ofcomparable size in the Building or in the Project. The new space must containsimilar finishes as the Premises, and approximately the same rentable squarefootage as the Premises and the same number of work stations, offices,breakrooms and reception areas as are contained in the Premises as of the dateTenant receives Landlord’s notice of relocation.The total monthly Basic Rentfor the new space shall in no event exceed the total monthly Basic Rent for thePremises prior to the relocation, and Tenant’s proportionate share for the newspace shall in no event exceed Tenant’s proportionate share for the Premisesprior to the relocation. Landlord shall pay the reasonable out-of-pocket coststo relocate and reconnect Tenant’s personal property and equipment within thenew space; provided that Landlord may elect to cause such work to be done byits contractors. Landlord shall also reimburse Tenant for such other reasonableout-of-pocket costs that Tenant may incur in connection with the relocation,including without limitation necessary stationery revisions, provided that areasonable estimate thereof is given to Landlord within twenty (20) daysfollowing Landlord’s notice. In no event, however, shall Landlord be obligatedto incur or fund total relocation costs, exclusive of tenant improvementexpenditures, in an amount in excess of two (2) months of Basic Rent at therate then payable hereunder. Landlord shall also reimburse Tenant for thereasonable cost to install and connect telecommunication and data cabling inthe new space in the manner and to the extent such cabling existed in thePremises prior to the relocation. Within ten (10) days following request byLandlord, Tenant shall execute an amendment to this Lease prepared by Landlordto memorialize the relocation. Should Tenant fail timely to execute and deliverthe amendment to Landlord, or should Tenant thereafter fail to comply with theterms thereof, then Landlord may at its option elect to terminate this Leaseupon not less than sixty (60) days prior written notice to Tenant. Upon theeffective date of any termination of this Lease, Tenant shall vacate thePremises in accordance with Section 15.3.

 

**ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT’SPROPERTY**

 

Tenantshall be liable for and shall pay before delinquency, all taxes and assessmentslevied against all personal property of Tenant located in the Premises. Whenpossible Tenant shall cause its personal property to be assessed and billedseparately from the real property of which the Premises form a part. If anytaxes on Tenant’s personal property are levied against Landlord or Landlord’sproperty and if Landlord pays the same, or if the assessed value of Landlord’sproperty is increased by the inclusion of a value placed upon the personalproperty of Tenant and if Landlord pays the taxes based upon the increasedassessment, Tenant shall pay to Landlord the taxes so levied against Landlordor the proportion of the taxes resulting from the increase in the assessment.

 

**ARTICLE IX. ASSIGNMENT AND SUBLETTING**

 

**SECTION 9.1. RIGHTS OF PARTIES**.

 

(a)        Except as otherwise specifically provided herein, Tenant may not, eithervoluntarily or by operation of law, assign, sublet, encumber, or otherwisetransfer all or any part of Tenant’s interest in this Lease, or permit thePremises to be occupied by anyone other than Tenant, without Landlord’s priorwritten consent, which consent shall not unreasonably be withheld in accordancewith the provisions of Section 9.1(c). For purposes of this Lease, referencesto any subletting, sublease or variation thereof shall be deemed to apply notonly to a sublease effected directly by Tenant, but also to a sub-subletting oran assignment of subtenancy by a subtenant at any level. No assignment (whethervoluntary, involuntary or by operation of law) and no subletting shall be validor effective without Landlord’s prior written consent and, at Landlord’selection, shall constitute a material default of this Lease. Landlord shall notbe deemed to have given its consent to any assignment or subletting by anyother course of action, including its acceptance of any name for listing in theBuilding directory. To the extent not prohibited by provisions of theBankruptcy Code, 11 U.S.C. Section 101 et seq. (the “Bankruptcy Code”),including Section 365(f)(1), Tenant on behalf of itself and its creditors,administrators and assigns waives the applicability of Section 365(e) of theBankruptcy Code unless the proposed assignee of the Trustee for the estate ofthe bankrupt meets Landlord’s standard for consent as set forth in Section9.1(c) of this Lease. If this Lease is assigned to any person or entitypursuant to the provisions of the Bankruptcy Code, any and all monies or otherconsiderations to be delivered in connection with the assignment shall bedelivered to Landlord, shall be and remain the exclusive property of Landlordand shall not constitute property of Tenant or of the estate of Tenant withinthe meaning of the Bankruptcy Code. Any person or entity to which this Lease isassigned pursuant to the provisions of the Bankruptcy Code shall be deemed tohave assumed all of the obligations arising under this Lease on and after thedate of the assignment, and shall upon demand execute and deliver to Landlordan instrument confirming that assumption.

 

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(b)        The sale of all or substantially all of the assets of Tenant (other thanbulk sales in the ordinary course of business) shall be deemed an assignmentwithin the meaning and provisions of this Article.

 

(c)        Except as otherwise specifically provided herein, if Tenant or anysubtenant hereunder desires to transfer an interest in this Lease, Tenant shallfirst notify Landlord and request in writing Landlord’s consent to the transfer.Tenant shall also submit in writing to Landlord:  (i) the name and address of the proposedtransferee; (ii) the nature of any proposed subtenant’s or assignee’s businessto be carried on in the Premises; (iii) the terms and provisions of anyproposed sublease or assignment (including without limitation the rent andother economic provisions, term, improvement obligations and commencementdate); (iv) evidence that the proposed assignee or subtenant will comply withthe requirements of Exhibit D to this Lease; and (v) any other information requestedby Landlord and reasonably related to the transfer. Except as provided inSubsection (d) of this Section, Landlord shall not unreasonably withhold itsconsent, provided:  (1) the use of thePremises will be consistent with the provisions of this Lease and with Landlord’scommitment to other tenants of the Building and Project; (2) any proposedsubtenant or assignee demonstrates that it is financially responsible bysubmission to Landlord of all reasonable information as Landlord may requestconcerning the proposed subtenant or assignee, including, but not limited to, abalance sheet of the proposed subtenant or assignee as of a date within ninety(90) days of the request for Landlord’s consent and statements of income orprofit and loss of the proposed subtenant or assignee for the two-year periodpreceding the request for Landlord’s consent; (3) the proposed subtenant orassignee is, in Landlord’s good faith determination, appropriate for tenancy ina first class office project; (4) the proposed assignee or subtenant is neitheran existing tenant or occupant of the Building or Project nor a prospectivetenant with whom Landlord has been actively negotiating; and (5) the proposedtransferee is not an SDN (as defined below) and will not impose additionalburdens or security risks on Landlord. If Landlord consents to the proposedtransfer, then the transfer may be effected within ninety (90) days after thedate of the consent upon the terms described in the information furnished toLandlord; provided that any material change in the terms shall be subject toLandlord’s consent as set forth in this Section. Landlord shall approve ordisapprove any requested transfer within thirty (30) days following receipt ofTenant’s written notice and the information set forth above. Tenant shall payto Landlord a transfer fee of Five Hundred Dollars ($500.00) if and when anytransfer request submitted by Tenant is approved.

 

(d)        Notwithstanding the provisions of Subsection (c) above, in lieu ofconsenting to a proposed assignment or subletting, Landlord may elect to (i)sublease the Premises (or the portion proposed to be subleased), or take anassignment of Tenant’s interest in this Lease, upon the same terms as offeredto the proposed subtenant or assignee (excluding terms relating to the purchaseof personal property, the use of Tenant’s name or the continuation of Tenant’sbusiness), or (ii) terminate this Lease as to the portion of the Premisesproposed to be subleased or assigned with a proportionate abatement in the rentpayable under this Lease, effective on the date that the proposed sublease orassignment would have commenced. Landlord may thereafter, at its option, assignor re-let any space so recaptured to any third party, including withoutlimitation the proposed transferee identified by Tenant.

 

(e)        Should any assignment or subletting occur, Tenant shall promptly pay orcause to be paid to Landlord, as additional rent, fifty percent (50%) of anyamounts paid by the assignee or subtenant, however described and whether fundedduring or after the Lease Term, to the extent such amounts are in excess of thesum of (i) the scheduled rental sums payable by Tenant hereunder (or, in theevent of a subletting of only a portion of the Premises, the rent allocable tosuch portion as reasonably determined by Landlord) and (ii) the directout-of-pocket costs, as evidenced by third party invoices provided to Landlord,incurred by Tenant to effect the transfer, which costs shall be amortized overthe remaining Term of this Lease or, if shorter, over the term of the sublease.Upon request by Landlord, Tenant and all other parties to the transfer shallmemorialize in writing the amounts to be paid pursuant to this paragraph.

 

(f)         Notwithstanding the foregoing, provided Tenant is not then in defaulthereunder, Tenant may, without Landlord’s prior consent but with prior writtennotice to Landlord and subject to the provisions of Section 9.2, assign ortransfer its right, title and interest in this Lease or sublease the Premisesto any of the following: (i) any entity resulting from a merger orconsolidation with Tenant; (ii) any entity succeeding to the business andassets of Tenant; or (iii) any entity controlling, controlled by, or undercommon control with, Tenant (collectively, “Tenant Affiliate”). Promptlyfollowing the effectiveness of any such transfer, Tenant shall provide toLandlord copies of all pertinent transfer documents and such other informationpertaining thereto as Landlord may reasonably request.

 

**SECTION 9.2. EFFECT OF TRANSFER**. No subletting or assignment, even with theconsent of Landlord, shall relieve Tenant, or any successor-in-interest toTenant hereunder, of its obligation to pay rent and to perform all its otherobligations under this Lease. Moreover, Tenant shall indemnify and holdLandlord harmless, as provided in Section 10.3, for any act or omission by anassignee or subtenant. Each assignee, other than Landlord, shall be deemed toassume all obligations of Tenant under this Lease and shall be liable jointlyand severally with Tenant for the payment of all rent, and for the dueperformance of all of Tenant’s obligations, under this Lease. Such joint andseveral liability shall not be discharged or impaired by any subsequentmodification or extension of this Lease. No transfer shall be binding onLandlord unless any document memorializing the transfer is delivered toLandlord, both the assignee/subtenant and Tenant deliver to Landlord anexecuted consent to transfer 

 

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instrumentprepared by Landlord and consistent with the requirements of this Article, andthe assignee/subtenant independently complies with all of the insurancerequirements of Tenant as set forth in Exhibit D and evidence thereof isdelivered to Landlord. The acceptance by Landlord of any payment due under thisLease from any other person shall not be deemed to be a waiver by Landlord ofany provision of this Lease or to be a consent to any transfer. Consent byLandlord to one or more transfers shall not operate as a waiver or estoppel tothe future enforcement by Landlord of its rights under this Lease. In additionto the foregoing, no change in the status of Tenant or any party jointly andseverally liable with Tenant as aforesaid (e.g., by conversion to a limitedliability company or partnership) shall serve to abrogate the liability of anyperson or entity for the obligations of Tenant, including any obligations thatmay be incurred by Tenant after the status change by exercise of a pre-existingright in this Lease.

 

**SECTION 9.3. SUBLEASE REQUIREMENTS**. The following terms and conditions shallapply to any subletting by Tenant of all or any part of the Premises and shallbe included in each sublease:

 

(a)        Tenant hereby irrevocably assigns to Landlord all of Tenant’s interestin all rentals and income arising from any sublease of the Premises, andLandlord may collect such rent and income and apply same toward Tenant’sobligations under this Lease; provided, however, that until a default occurs inthe performance of Tenant’s obligations under this Lease, Tenant shall have theright to receive and collect the sublease rentals. Landlord shall not, byreason of this assignment or the collection of sublease rentals, be deemedliable to the subtenant for the performance of any of Tenant’s obligationsunder the sublease. Tenant hereby irrevocably authorizes and directs anysubtenant, upon receipt of a written notice from Landlord stating that anuncured default exists in the performance of Tenant’s obligations under thisLease, to pay to Landlord all sums then and thereafter due under the sublease. Tenantagrees that the subtenant may rely on that notice without any duty of furtherinquiry and notwithstanding any notice or claim by Tenant to the contrary. Tenantshall have no right or claim against the subtenant or Landlord for any rentalsso paid to Landlord. In the event Landlord collects amounts from subtenantsthat exceed the total amount then due from Tenant hereunder, Landlord shallpromptly remit the excess to Tenant.

 

(b)        In the event of the termination of this Lease, Landlord may, at its soleoption, take over Tenant’s entire interest in any sublease and, upon noticefrom Landlord, the subtenant shall attorn to Landlord. In no event, however,shall Landlord be liable for any previous act or omission by Tenant under thesublease or for the return of any advance rental payments or deposits under thesublease that have not been actually delivered to Landlord, nor shall Landlordbe bound by any sublease modification executed without Landlord’s consent orfor any advance rental payment by the subtenant in excess of one month’s rent. Thegeneral provisions of this Lease, including without limitation those pertainingto insurance and indemnification, shall be deemed incorporated by referenceinto the sublease despite the termination of this Lease.

 

(c)        Tenant agrees that Landlord may, at its sole option, authorize asubtenant of the Premises to cure a default by Tenant under this Lease. ShouldLandlord accept such cure, the subtenant shall have a right of reimbursementand offset from and against Tenant under the applicable sublease.

 

**ARTICLE X. INSURANCE AND INDEMNITY**

 

**SECTION 10.1. TENANT’S INSURANCE**. Tenant, at its sole cost and expense, shallprovide and maintain in effect the insurance described in Exhibit D. Evidenceof that insurance must be delivered to Landlord prior to the Commencement Date.

 

**SECTION 10.2. LANDLORD’S INSURANCE**. Landlord may, at its election, provide anyor all of the following types of insurance, with or without deductible and inamounts and coverages as may be determined by Landlord in its discretion:  property insurance, subject to standardexclusions, covering the Building or Project, and such other risks as Landlordor its mortgagees may from time to time deem appropriate, and commercialgeneral liability coverage. Landlord shall not be required to carry insuranceof any kind on any tenant improvements or alterations in the Premises installedby Tenant or its contractors or otherwise removable by Tenant (collectively, “TenantInstallations”), as well as any trade fixtures, furnishings, equipment,interior plate glass, signs and all items of personal property in the Premises,and Landlord shall not be obligated to repair or replace any of the foregoingitems should damage occur. All proceeds of insurance maintained by Landlordupon the Building and Project shall be the property of Landlord, whether or notLandlord is obligated to or elects to make any repairs.

 

**SECTION 10.3. TENANT’S INDEMNITY**. To the fullest extent permitted by law, butsubject to Section 10.5 below, Tenant shall defend, indemnify and hold harmlessLandlord, its agents, lenders, and any and all affiliates of Landlord(collectively, the “Indemnified Parties”), from and against any and all claims,liabilities, costs or expenses arising either before or after the CommencementDate from Tenant’s use or occupancy of the Premises, the Building or the CommonAreas, or from the conduct of its business, or from any activity, work, orthing done, permitted or suffered by Tenant or its agents, employees,subtenants, vendors, contractors, invitees or licensees in or about thePremises, the 

 

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Buildingor the Common Areas, or from any default in the performance of any obligationon Tenant’s part to be performed under this Lease, or from any act ornegligence of Tenant or its agents, employees, subtenants, vendors,contractors, invitees or licensees. Landlord may, at its option, require Tenantto assume Landlord’s defense in any action covered by this Section throughcounsel reasonably satisfactory to Landlord.

 

**SECTION 10.4. LANDLORD’S NONLIABILITY**. Landlord shall not be liable to Tenant, itsemployees, agents and invitees, and Tenant hereby waives all claims againstLandlord, its employees and agents for loss of or damage to any property, orany injury to any person, or loss or interruption of business or income,resulting from any condition including, but not limited to, fire, explosion,falling plaster, steam, gas, electricity, water or rain which may leak or flowfrom or into any part of the Premises or from the breakage, leakage,obstruction or other defects of the pipes, sprinklers, wires, appliances,plumbing, air conditioning, electrical works or other fixtures in the Building,whether the damage or injury results from conditions arising in the Premises orin other portions of the Building. It is understood that any such condition mayrequire the temporary evacuation or closure of all or a portion of the Building.Should Tenant elect to receive any service from a concessionaire, licensee orthird party tenant of Landlord, Tenant shall not seek recourse against Landlordfor any breach or liability of that service provider. Neither Landlord nor itsagents shall be liable for interference with light or other similar intangibleinterests. Tenant shall immediately notify Landlord in case of fire or accidentin the Premises, the Building or the Project and of defects in any improvementsor equipment.

 

**SECTION10.5. WAIVER OF SUBROGATION**. Landlord and Tenant each herebywaives all rights of recovery against the other on account of loss and damageoccasioned to the property of such waiving party to the extent that the waivingparty is entitled to proceeds for such loss and damage under any propertyinsurance policies carried or otherwise required to be carried by this Lease. Bythis waiver it is the intent of the parties that neither Landlord nor Tenantshall be liable to any insurance company (by way of subrogation or otherwise)insuring the other party for any loss or damage insured against under anyproperty insurance policies, even though such loss or damage might beoccasioned by the negligence of such party, its agents, employees, contractorsor invitees. The foregoing waiver by Tenant shall also inure to the benefit ofLandlord’s management agent for the Building.

 

**ARTICLE XI. DAMAGE OR DESTRUCTION**

 

**SECTION 11.1. RESTORATION**.

 

(a)        If the Building of which the Premises are a part is damaged as theresult of an event of casualty, then subject to the provisions below, Landlordshall repair that damage as soon as reasonably possible unless:  (i) Landlord reasonably determines that thecost of repair would exceed ten percent (10%) of the full replacement cost ofthe Building (“Replacement Cost”) and the damage is not covered by Landlord’sfire and extended coverage insurance (or by a normal extended coverage policyshould Landlord fail to carry that insurance); or (ii) Landlord reasonably determinesthat the cost of repair would exceed twenty-five percent (25%) of theReplacement Cost; or (iii) Landlord reasonably determines that the cost ofrepair would exceed ten percent (10%) of the Replacement Cost and the damageoccurs during the final twelve (12) months of the Term. Should Landlord electnot to repair the damage for one of the preceding reasons, Landlord shall sonotify Tenant in the “Casualty Notice” (as defined below), and this Lease shallterminate as of the date of delivery of that notice.

 

(b)        As soon as reasonably practicable following the casualty event but notlater than sixty (60) days thereafter, Landlord shall notify Tenant in writing(“Casualty Notice”) of Landlord’s election, if applicable, to terminate thisLease. If this Lease is not so terminated, the Casualty Notice shall set forththe anticipated period for repairing the casualty damage. If the anticipatedrepair period exceeds two hundred seventy (270) days and if the damage is soextensive as to reasonably prevent Tenant’s substantial use and enjoyment ofthe Premises, then Tenant may elect to terminate this Lease by written noticeto Landlord within ten (10) days following delivery of the Casualty Notice.

 

(c)        To the extent and for the period that Landlord is entitled toreimbursement from the proceeds of rental interruption insurance carried byLandlord as part of Operating Expenses, the rental to be paid under this Leaseshall be abated in the same proportion that the floor area of the Premises thatis rendered unusable by the damage from time to time bears to the total floorarea of the Premises.

 

(d)        Notwithstanding the provisions of subsections (a), (b) and (c) of thisSection, but subject to Section 10.5, the cost of any repairs shall be borne byTenant, and Tenant shall not be entitled to rental abatement or terminationrights, if the damage is due to the fault or neglect of Tenant or itsemployees, subtenants, contractors, invitees or representatives. In addition,the provisions of this Section shall not be deemed to require Landlord torepair any Tenant Installations, fixtures and other items that Tenant isobligated to insure pursuant to Exhibit D or any other provision of this Lease.

 

**SECTION 11.2. LEASE GOVERNS**. Tenant agrees that the provisions of thisLease, including without limitation Section 11.1, shall govern any damage ordestruction and shall accordingly supersede any contrary statute or rule oflaw.

 

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**ARTICLE XII. EMINENT DOMAIN**

 

**SECTION 12.1. TOTAL OR PARTIAL TAKING**. If all or a material portion of the Premisesis taken by any lawful authority by exercise of the right of eminent domain, orsold to prevent a taking, either Tenant or Landlord may terminate this Leaseeffective as of the date possession is required to be surrendered to theauthority. In the event title to a portion of the Building or Project, otherthan the Premises, is taken or sold in lieu of taking, and if Landlord electsto restore the Building in such a way as to alter the Premises materially,either party may terminate this Lease, by written notice to the other party,effective on the date of vesting of title. In the event neither party haselected to terminate this Lease as provided above, then Landlord shallpromptly, after receipt of a sufficient condemnation award, proceed to restorethe Premises to substantially their condition prior to the taking, and aproportionate allowance shall be made to Tenant for the rent corresponding tothe time during which, and to the part of the Premises of which, Tenant isdeprived on account of the taking and restoration. In the event of a taking,Landlord shall be entitled to the entire amount of the condemnation awardwithout deduction for any estate or interest of Tenant; provided that nothingin this Section shall be deemed to give Landlord any interest in, or preventTenant from seeking any award against the taking authority for, the taking ofpersonal property and fixtures belonging to Tenant or for relocation orbusiness interruption expenses recoverable from the taking authority.

 

**SECTION 12.2. TEMPORARY TAKING**. No temporary taking of the Premises shallterminate this Lease or give Tenant any right to abatement of rent, and anyaward specifically attributable to a temporary taking of the Premises shallbelong entirely to Tenant. A temporary taking shall be deemed to be a taking ofthe use or occupancy of the Premises for a period of not to exceed ninety (90)days.

 

**SECTION 12.3. TAKING OF PARKING AREA**. In the event there shall be a taking of theparking area such that Landlord can no longer provide sufficient parking tocomply with this Lease, Landlord may substitute reasonably equivalent parkingin a location reasonably close to the Building; provided that if Landlord failsto make that substitution within ninety (90) days following the taking and ifthe taking materially impairs Tenant’s use and enjoyment of the Premises,Tenant may, at its option, terminate this Lease by written notice to Landlord. Ifthis Lease is not so terminated by Tenant, there shall be no abatement of rentand this Lease shall continue in effect.

 

**ARTICLE XIII. SUBORDINATION;ESTOPPEL CERTIFICATE**

 

**SECTION 13.1. SUBORDINATION**. At the option of Landlord or any of itsmortgagees/deed of trust beneficiaries, this Lease shall be either superior orsubordinate to all ground or underlying leases, mortgages and deeds of trust,if any, which may hereafter affect the Building, and to all renewals,modifications, consolidations, replacements and extensions thereof; provided,that so long as Tenant is not in default under this Lease, this Lease shall notbe terminated or Tenant’s quiet enjoyment of the Premises disturbed in theevent of termination of any such ground or underlying lease, or the foreclosureof any such mortgage or deed of trust, to which this Lease has beensubordinated pursuant to this Section. In the event of a termination orforeclosure, Tenant shall become a tenant of and attorn to thesuccessor-in-interest to Landlord upon the same terms and conditions as arecontained in this Lease, and shall promptly execute any instrument reasonablyrequired by Landlord’s successor for that purpose. Tenant shall also, withinten (10) days following written request of Landlord (or the beneficiary underany deed of trust encumbering the Building), execute and deliver allinstruments as may be required from time to time by Landlord or suchbeneficiary (including without limitation any subordination, nondisturbance andattornment agreement in the form customarily required by such beneficiary) tosubordinate this Lease and the rights of Tenant under this Lease to any groundor underlying lease or to the lien of any mortgage or deed of trust; provided,however, that any such beneficiary may, by written notice to Tenant given atany time, subordinate the lien of its deed of trust to this Lease. Tenant shallagree that any purchaser at a foreclosure sale or lender taking title under adeed in lieu of foreclosure shall not be responsible for any act or omission ofa prior landlord, shall not be subject to any offsets or defenses Tenant mayhave against a prior landlord, and shall not be liable for the return of anysecurity deposit not actually recovered by such purchaser or bound by any rentpaid in advance of the calendar month in which the transfer of title occurred;provided that the foregoing shall not release the applicable prior landlordfrom any liability for those obligations. Tenant acknowledges that Landlord’smortgagees and successors-in-interest and all beneficiaries under deeds of trustencumbering the Building are intended third party beneficiaries of thisSection.

 

**SECTION 13.2. ESTOPPEL CERTIFICATE**. Tenant shall, within ten (10) days followingwritten notice from Landlord, execute, acknowledge and deliver to Landlord, inany form that Landlord may reasonably require, a statement in writing in favorof Landlord and/or any prospective purchaser or encumbrancer of the Building(i) certifying that this Lease is unmodified and in full force and effect (or,if modified, stating the nature of the modification and certifying that thisLease, as modified, is in full force and effect) and the dates to which therental, additional rent and other charges have been paid in advance, if any,and (ii) acknowledging that, to Tenant’s knowledge, there are no uncureddefaults on 

 

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thepart of Landlord, or specifying each default if any are claimed, and (iii)setting forth all further information that Landlord may reasonably require. Tenant’sstatement may be relied upon by any prospective purchaser or encumbrancer ofall or any portion of the Building or Project. In addition to Landlord’s otherrights and remedies, Tenant’s failure to deliver any estoppel statement withinthe provided time shall be conclusive upon Tenant that (i) this Lease is infull force and effect, without modification except as may be represented byLandlord, (ii) there are no uncured defaults in Landlord’s performance, and(iii) not more than one month’s rental has been paid in advance.

 

**ARTICLE XIV. DEFAULTS AND REMEDIES**

 

**SECTION 14.1. TENANT’S DEFAULTS**. In addition to any other event of defaultset forth in this Lease, the occurrence of any one or more of the followingevents shall constitute a default by Tenant:

 

(a)        The failure by Tenant to make any payment of rent required to be made byTenant, as and when due, where the failure continues for a period of three (3)days after written notice from Landlord to Tenant; provided, however, that anysuch notice shall be in lieu of, and not in addition to, any notice requiredunder California Code of Civil Procedure Section 1161 as amended. For purposesof these default and remedies provisions, the term “additional rent” shall bedeemed to include all amounts of any type whatsoever other than Basic Rent tobe paid by Tenant pursuant to the terms of this Lease.

 

(b)        The assignment, sublease, encumbrance or other transfer of the Lease byTenant, either voluntarily or by operation of law, whether by judgment,execution, transfer by intestacy or testacy, or other means, without the priorwritten consent of Landlord unless otherwise authorized herein.

 

(c)        The discovery by Landlord that any financial statement provided byTenant, or by any affiliate, successor or guarantor of Tenant, was materiallyfalse.

 

(d)        The failure or inability by Tenant to observe or perform any of thecovenants or provisions of this Lease to be observed or performed by Tenant,other than as specified in any other subsection of this Section, where thefailure continues for a period of thirty (30) days after written notice fromLandlord to Tenant; provided, however, that any such notice shall be in lieuof, and not in addition to, any notice required under California Code of CivilProcedure Section 1161 as amended. However, if the nature of the failure issuch that more than thirty (30) days are reasonably required for its cure, thenTenant shall not be deemed to be in default if Tenant commences the cure withinthirty (30) days, and thereafter diligently pursues the cure to completion.

 

(e)        (i)  The making by Tenant of anygeneral assignment for the benefit of creditors; (ii) the filing by or againstTenant of a petition to have Tenant adjudged a Chapter 7 debtor under theBankruptcy Code or to have debts discharged or a petition for reorganization orarrangement under any law relating to bankruptcy (unless, in the case of apetition filed against Tenant, the same is dismissed within sixty (60) days);(iii) the appointment of a trustee or receiver to take possession of substantiallyall of Tenant’s assets located at the Premises or of Tenant’s interest in thisLease, if possession is not restored to Tenant within thirty (30) days; (iv)the attachment, execution or other judicial seizure of substantially all ofTenant’s assets located at the Premises or of Tenant’s interest in this Lease,where the seizure is not discharged within thirty (30) days; or (v) Tenant’sconvening of a meeting of its creditors for the purpose of effecting amoratorium upon or composition of its debts. Landlord shall not be deemed tohave knowledge of any event described in this subsection unless notification inwriting is received by Landlord, nor shall there be any presumptionattributable to Landlord of Tenant’s insolvency. In the event that any provisionof this subsection is contrary to applicable law, the provision shall be of noforce or effect.

 

**SECTION 14.2. LANDLORD’S REMEDIES**.

 

(a)            In the event of any default by Tenant, then inaddition to any other remedies available to Landlord, Landlord may exercise thefollowing remedies:

 

(i)            Landlord may terminate Tenant’s right topossession of the Premises by any lawful means, in which case this Lease shallterminate and Tenant shall immediately surrender possession of the Premises toLandlord. Such termination shall not affect any accrued obligations of Tenantunder this Lease. Upon termination, Landlord shall have the right to reenterthe Premises and remove all persons and property. Landlord shall also beentitled to recover from Tenant:

 

(1)     The worth at the time of award of the unpaid rent and additional rentwhich had been earned at the time of termination;

 

(2)     The worth at the time of award of the amount by which the unpaid rentand additional rent which would have been earned after termination until thetime of award exceeds the amount of such loss that Tenant proves could havebeen reasonably avoided;

 

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(3)     The worth at the time of award of theamount by which the unpaid rent and additional rent for the balance of the Termafter the time of award exceeds the amount of such loss that Tenant provescould be reasonably avoided;

 

(4)     Any other amount necessary to compensateLandlord for all the detriment proximately caused by Tenant’s failure toperform its obligations under this Lease or which in the ordinary course ofthings would be likely to result from Tenant’s default, including, but notlimited to, the cost of recovering possession of the Premises, commissions andother expenses of reletting, including necessary repair, renovation,improvement and alteration of the Premises for a new tenant, reasonableattorneys’ fees, and any other reasonable costs; and

 

(5)     At Landlord’s election, all other amountsin addition to or in lieu of the foregoing as may be permitted by law. The term“rent” as used in this Lease shall be deemed to mean the Basic Rent and allother sums required to be paid by Tenant to Landlord pursuant to the terms ofthis Lease, including without limitation any sums that may be owing from Tenantpursuant to Section 4.3 of this Lease. Any sum, other than Basic Rent, shall becomputed on the basis of the average monthly amount accruing during thetwenty-four (24) month period immediately prior to default, except that if itbecomes necessary to compute such rental before the twenty-four (24) monthperiod has occurred, then the computation shall be on the basis of the averagemonthly amount during the shorter period. As used in subparagraphs (1) and (2)above, the “worth at the time of award” shall be computed by allowing interestat the rate of ten percent (10%) per annum. As used in subparagraph (3) above,the “worth at the time of award” shall be computed by discounting the amount atthe discount rate of the Federal Reserve Bank of San Francisco at the time ofaward plus one percent (1%).

 

(ii)    Landlord may elect not to terminate Tenant’sright to possession of the Premises, in which event Landlord may continue toenforce all of its rights and remedies under this Lease, including the right tocollect all rent as it becomes due. Efforts by the Landlord to maintain,preserve or relet the Premises, or the appointment of a receiver to protect theLandlord’s interests under this Lease, shall not constitute a termination ofthe Tenant’s right to possession of the Premises. In the event that Landlordelects to avail itself of the remedy provided by this subsection (ii), Landlordshall not unreasonably withhold its consent to an assignment or subletting ofthe Premises subject to the reasonable standards for Landlord’s consent as arecontained in this Lease.

 

(b)          The various rights and remediesreserved to Landlord in this Lease or otherwise shall be cumulative and, exceptas otherwise provided by California law, Landlord may pursue any or all of itsrights and remedies at the same time. No delay or omission of Landlord toexercise any right or remedy shall be construed as a waiver of the right orremedy or of any breach or default by Tenant. The acceptance by Landlord ofrent shall not be a (i) waiver of any preceding breach or default by Tenant ofany provision of this Lease, other than the failure of Tenant to pay theparticular rent accepted, regardless of Landlord’s knowledge of the precedingbreach or default at the time of acceptance of rent, or (ii) a waiver ofLandlord’s right to exercise any remedy available to Landlord by virtue of thebreach or default. The acceptance of any payment from a debtor in possession, atrustee, a receiver or any other person acting on behalf of Tenant or Tenant’sestate shall not waive or cure a default under Section 14.1. No payment byTenant or receipt by Landlord of a lesser amount than the rent required by thisLease shall be deemed to be other than a partial payment on account of theearliest due stipulated rent, nor shall any endorsement or statement on anycheck or letter be deemed an accord and satisfaction and Landlord shall acceptthe check or payment without prejudice to Landlord’s right to recover thebalance of the rent or pursue any other remedy available to it. Tenant herebywaives any right of redemption or relief from forfeiture under California Codeof Civil Procedure Section 1174 or 1179, or under any other present or futurelaw, in the event this Lease is terminated by reason of any default by Tenant. Noact or thing done by Landlord or Landlord’s agents during the Term shall bedeemed an acceptance of a surrender of the Premises, and no agreement to accepta surrender shall be valid unless in writing and signed by Landlord. Noemployee of Landlord or of Landlord’s agents shall have any power to accept thekeys to the Premises prior to the termination of this Lease, and the deliveryof the keys to any employee shall not operate as a termination of the Lease ora surrender of the Premises.

 

**SECTION 14.3. LATE PAYMENTS**.

 

(a)        Any rent due under this Lease that isnot paid to Landlord within five (5) days of the date when due shall bearinterest at the maximum rate permitted by law from the date due until fullypaid. The payment of interest shall not cure any default by Tenant under thisLease. In addition, Tenant acknowledges that the late payment by Tenant toLandlord of rent will cause Landlord to incur costs not contemplated by thisLease, the exact amount of which will be extremely difficult and impracticableto ascertain. Those costs may include, but are not limited to, administrative,processing and accounting charges, and late charges which may be imposed onLandlord by the terms of any ground lease, mortgage or trust deed covering thePremises. Accordingly, if any rent due from Tenant shall not be received byLandlord or Landlord’s designee within five (5) days after the date due, thenTenant shall pay to Landlord, in addition to the interest provided above, alate charge for each delinquent payment equal to the greater of (i) fivepercent (5%) of that delinquent payment or (ii) One Hundred Dollars ($100.00). Acceptanceof a late charge by Landlord shall not constitute a waiver of 

 

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Tenant’sdefault with respect to the overdue amount, nor shall it prevent Landlord fromexercising any of its other rights and remedies.

 

(b)        Following each second consecutiveinstallment of Basic Rent that is not paid within five (5) days followingnotice of nonpayment from Landlord, Landlord shall have the option (i) torequire that beginning with the first payment of Basic Rent next due, BasicRent shall no longer be paid in monthly installments but shall be payablequarterly three (3) months in advance and/or (ii) to require that Tenantincrease the amount, if any, of the Security Deposit by one hundred percent(100%). Should Tenant deliver to Landlord, at any time during the Term, two (2)or more insufficient checks, the Landlord may require that all monies then andthereafter due from Tenant be paid to Landlord by cashier’s check.

 

**SECTION 14.4. RIGHT OF LANDLORD TO PERFORM**. All covenants and agreements to be performedby Tenant under this Lease shall be performed at Tenant’s sole cost and expenseand without any abatement of rent or right of set-off. If Tenant fails to payany sum of money, or fails to perform any other act on its part to be performedunder this Lease, and the failure continues beyond any applicable grace periodset forth in Section 14.1, then in addition to any other available remedies,Landlord may, at its election, make the payment or perform the other act onTenant’s part. Landlord’s election to make the payment or perform the act onTenant’s part shall not give rise to any responsibility of Landlord to continuemaking the same or similar payments or performing the same or similar acts. Tenantshall, promptly upon demand by Landlord, reimburse Landlord for all sums paidby Landlord and all necessary incidental costs, together with interest at themaximum rate permitted by law from the date of the payment by Landlord.

 

**SECTION 14.5. DEFAULT BY LANDLORD**. Landlord shall not be deemed to be indefault in the performance of any obligation under this Lease unless and untilit has failed to perform the obligation within thirty (30) days after writtennotice by Tenant to Landlord specifying in reasonable detail the nature andextent of the failure; provided, however, that if the nature of Landlord’sobligation is such that more than thirty (30) days are required for itsperformance, then Landlord shall not be deemed to be in default if it commencesperformance within the thirty (30) day period and thereafter diligently pursuesthe cure to completion.

 

**SECTION 14.6. EXPENSES AND LEGAL FEES**. Should either Landlord or Tenant bring anyaction in connection with this Lease, the prevailing party shall be entitled torecover as a part of the action its reasonable attorneys’ fees, and all othercosts. The prevailing party for the purpose of this paragraph shall bedetermined by the trier of the facts.

 

**SECTION 14.7. WAIVER OF JURY TRIAL/JUDICIAL REFERENCE**.

 

**(a)        LANDLORDAND TENANT EACH ACKNOWLEDGES THAT IT IS AWARE OF AND HAS HAD THE ADVICE OFCOUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHT TO TRIAL BY JURY, AND EACHPARTY DOES HEREBY EXPRESSLY AND KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TOTRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTYHERETO AGAINST THE OTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES,AGENTS, OR SUBSIDIARY OR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISINGOUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, TENANT’S USE OR OCCUPANCY OFTHE PREMISES, AND/OR ANY CLAIM OF INJURY OR DAMAGE.**

 

**(b)        INTHE EVENT THAT THE JURY WAIVER PROVISIONS OF SECTION 14.7(a) ARE NOTENFORCEABLE UNDER CALIFORNIA LAW, THEN THE PROVISIONS OF THIS SECTION 14.7(b)SHALL APPLY. IT IS THE DESIRE AND INTENTION OF THE PARTIES TO AGREE UPON AMECHANISM AND PROCEDURE UNDER WHICH CONTROVERSIES AND DISPUTES ARISING OUT OFTHIS LEASE OR RELATED TO THE PREMISES WILL BE RESOLVED IN A PROMPT ANDEXPEDITIOUS MANNER. ACCORDINGLY, EXCEPT WITH RESPECT TO ACTIONS FOR UNLAWFUL ORFORCIBLE DETAINER OR WITH RESPECT TO THE PREJUDGMENT REMEDY OF ATTACHMENT, ANYACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THEOTHER (AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR SUBSIDIARYOR AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAYCONNECTED WITH THIS LEASE, TENANT’S USE OR OCCUPANCY OF THE PREMISES AND/OR ANYCLAIM OF INJURY OR DAMAGE, SHALL BE HEARD AND RESOLVED BY A REFEREE UNDER THEPROVISIONS OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, SECTIONS 638 – 645.1,INCLUSIVE (AS SAME MAY BE AMENDED, OR ANY SUCCESSOR STATUTE(S) THERETO) (THE “REFEREESECTIONS”). ANY FEE TO INITIATE THE JUDICIAL REFERENCE PROCEEDINGS SHALL BEPAID BY THE PARTY INITIATING SUCH PROCEDURE; PROVIDED HOWEVER, THAT THE COSTSAND FEES, INCLUDING ANY INITIATION FEE, OF SUCH PROCEEDING SHALL ULTIMATELY BEBORNE IN ACCORDANCE WITH SECTION 14.6 ABOVE. THE VENUE OF THE PROCEEDINGS SHALLBE IN THE COUNTY IN WHICH THE PREMISES ARE LOCATED. WITHIN TEN (10) DAYS OFRECEIPT BY ANY PARTY OF A WRITTEN REQUEST TO RESOLVE ANY DISPUTE OR CONTROVERSYPURSUANT TO THIS SECTION 14.7(b), THE PARTIES SHALL AGREE UPON A SINGLE REFEREEWHO SHALL TRY ALL ISSUES, WHETHER OF FACT OR LAW, AND REPORT A FINDING ANDJUDGMENT ON SUCH ISSUES AS REQUIRED BY THE REFEREE SECTIONS.**

 

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**IF THEPARTIES ARE UNABLE TO AGREE UPON A REFEREE WITHIN SUCH TEN (10) DAY PERIOD,THEN ANY PARTY MAY THEREAFTER FILE A LAWSUIT IN THE COUNTY IN WHICH THEPREMISES ARE LOCATED FOR THE PURPOSE OF APPOINTMENT OF A REFEREE UNDERCALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 AND 640, AS SAME MAY BE AMENDEDOR ANY SUCCESSOR STATUTE(S) THERETO. IF THE REFEREE IS APPOINTED BY THE COURT,THE REFEREE SHALL BE A NEUTRAL AND IMPARTIAL RETIRED JUDGE WITH SUBSTANTIALEXPERIENCE IN THE RELEVANT MATTERS TO BE DETERMINED, FROM JAMS/ENDISPUTE, INC.,THE AMERICAN ARBITRATION ASSOCIATION OR SIMILAR MEDIATION/ARBITRATION ENTITY. THEPROPOSED REFEREE MAY BE CHALLENGED BY ANY PARTY FOR ANY OF THE GROUNDS LISTEDIN SECTION 641 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, AS SAME MAY BEAMENDED OR ANY SUCCESSOR STATUTE(S) THERETO. THE REFEREE SHALL HAVE THE POWERTO DECIDE ALL ISSUES OF FACT AND LAW AND REPORT HIS OR HER DECISION ON SUCHISSUES, AND TO ISSUE ALL RECOGNIZED REMEDIES AVAILABLE AT LAW OR IN EQUITY FORANY CAUSE OF ACTION THAT IS BEFORE THE REFEREE, INCLUDING AN AWARD OF ATTORNEYS’FEES AND COSTS IN ACCORDANCE WITH CALIFORNIA LAW. THE REFEREE SHALL NOT,HOWEVER, HAVE THE POWER TO AWARD PUNITIVE DAMAGES, AND THE PARTIES HEREBY WAIVEANY RIGHT TO RECOVER ANY SUCH DAMAGES. THE REFEREE SHALL OVERSEE DISCOVERY ANDMAY ENFORCE ALL DISCOVERY ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE,WITH RIGHTS TO REGULATE DISCOVERY AND TO ISSUE AND ENFORCE SUBPOENAS,PROTECTIVE ORDERS AND OTHER LIMITATIONS ON DISCOVERY AVAILABLE UNDER CALIFORNIALAW; PROVIDED, HOWEVER, THAT THE REFEREE SHALL LIMIT DISCOVERY TO THAT WHICH ISESSENTIAL TO THE EFFECTIVE PROSECUTION OR DEFENSE OF THE ACTION, AND IN NOEVENT SHALL DISCOVERY BY EITHER PARTY INCLUDE MORE THAN ONE NON-EXPERT WITNESSDEPOSITION UNLESS BOTH PARTIES OTHERWISE AGREE. THE REFERENCE PROCEEDING SHALLBE CONDUCTED IN ACCORDANCE WITH CALIFORNIA LAW (INCLUDING THE RULES OFEVIDENCE), AND IN ALL REGARDS, THE REFEREE SHALL FOLLOW CALIFORNIA LAWAPPLICABLE AT THE TIME OF THE REFERENCE PROCEEDING. IN ACCORDANCE WITH SECTION644 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, THE DECISION OF THE REFEREE UPONTHE WHOLE ISSUE MUST STAND AS THE DECISION OF THE COURT, AND UPON THE FILING OFTHE STATEMENT OF DECISION WITH THE CLERK OF THE COURT, OR WITH THE JUDGE IFTHERE IS NO CLERK, JUDGMENT MAY BE ENTERED THEREON IN THE SAME MANNER AS IF THEACTION HAD BEEN TRIED BY THE COURT. THE PARTIES SHALL PROMPTLY AND DILIGENTLYCOOPERATE WITH ONE ANOTHER AND THE REFEREE, AND SHALL PERFORM SUCH ACTS AS MAYBE NECESSARY TO OBTAIN A PROMPT AND EXPEDITIOUS RESOLUTION OF THE DISPUTE ORCONTROVERSY IN ACCORDANCE WITH THE TERMS OF THIS SECTION 14.7(b). TO THE EXTENTTHAT NO PENDING LAWSUIT HAS BEEN FILED TO OBTAIN THE APPOINTMENT OF A REFEREE,ANY PARTY, AFTER THE ISSUANCE OF THE DECISION OF THE REFEREE, MAY APPLY TO THECOURT OF THE COUNTY IN WHICH THE PREMISES ARE LOCATED FOR CONFIRMATION BY THECOURT OF THE DECISION OF THE REFEREE IN THE SAME MANNER AS A PETITION FORCONFIRMATION OF AN ARBITRATION AWARD PURSUANT TO CODE OF CIVIL PROCEDURESECTION 1285 ET SEQ. (AS SAME MAY BE AMENDED OR ANY SUCCESSOR STATUTE(S)THERETO)****.**

 

**ARTICLE XV. END OF TERM**

 

**SECTION 15.1. HOLDING OVER**. This Lease shall terminate without furthernotice upon the expiration of the Term, and any holding over by Tenant afterthe expiration shall not constitute a renewal or extension of this Lease, orgive Tenant any rights under this Lease, except when in writing signed by bothparties. If Tenant holds over for any period after the expiration (or earliertermination) of the Term, Landlord may, at its option, treat Tenant as a tenantat sufferance only, commencing on the first (1st) day following thetermination of this Lease. However, should Landlord accept the payment ofmonthly hold-over rent by Tenant, then a month-to-month tenancy shall be deemedeffected and neither party shall terminate this Lease without thirty (30) daysprior written notice to the other party. Any hold-over by Tenant shall besubject to all of the terms of this Lease, except that the monthly rental shallbe one hundred fifty percent (150%) of the total monthly rental for the monthimmediately preceding the date of termination, subject to Landlord’s right tomodify same upon thirty (30) days notice to Tenant. The acceptance by Landlordof monthly hold-over rental in a lesser amount shall not constitute a waiver ofLandlord’s right to recover the full amount due unless otherwise agreed inwriting by Landlord. If Tenant fails to surrender the Premises upon theexpiration of this Lease despite demand to do so by Landlord, Tenant shallindemnify and hold Landlord harmless from all loss or liability, includingwithout limitation, any claims made by any succeeding tenant relating to suchfailure to surrender. The foregoing provisions of this Section are in additionto and do not affect Landlord’s right of re-entry or any other rights ofLandlord under this Lease or at law.

 

**SECTION 15.2. MERGER ON TERMINATION**. The voluntary or other surrender of thisLease by Tenant, or a mutual termination of this Lease, shall terminate any orall existing subleases unless Landlord, at its option, elects in writing totreat the surrender or termination as an assignment to it of any or allsubleases affecting the Premises.

 

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**SECTION 15.3. SURRENDER OF PREMISES;  REMOVAL OF PROPERTY**. Upon the Expiration Date or upon any earliertermination of this Lease, Tenant shall quit and surrender possession of thePremises to Landlord in as good order, condition and repair as when received oras hereafter may be improved by Landlord or Tenant, reasonable wear and tearand repairs which are Landlord’s obligation excepted, and shall remove or fundto Landlord the cost of removing all wallpapering and voice and/or datatransmission cabling installed by or for Tenant, together with all personalproperty and debris, except for any items that Landlord may by writtenauthorization allow to remain. Tenant shall repair all damage to the Premisesresulting from the removal and restore the affected area to its pre-existingcondition, reasonable wear and tear excepted, provided that Landlord mayinstead elect to repair any structural damage at Tenant’s expense. If Tenantshall fail to comply with the provisions of this Section, Landlord may effectthe removal and/or make any repairs, and the cost to Landlord shall beadditional rent payable by Tenant upon demand. If requested by Landlord, Tenantshall execute, acknowledge and deliver to Landlord an instrument in writingreleasing and quitclaiming to Landlord all right, title and interest of Tenantin the Premises.

 

**ARTICLE XVI. PAYMENTS AND NOTICES**

 

Allsums payable by Tenant to Landlord shall be paid, without deduction or offset,in lawful money of the United States to Landlord at its address set forth inItem 13 of the Basic Lease Provisions, or at any other place as Landlord maydesignate in writing. Unless this Lease expressly provides otherwise, as forexample in the payment of rent pursuant to Section 4.1, all payments shall bedue and payable within five (5) days after demand. All payments requiringproration shall be prorated on the basis of the number of days in the pertinentcalendar month or year, as applicable. Any notice, election, demand, consent,approval or other communication to be given or other document to be deliveredby either party to the other may be delivered to the other party, at theaddress set forth in Item 13 of the Basic Lease Provisions, by personal serviceor electronic facsimile transmission, or by any courier or “overnight” expressmailing service, or may be deposited in the United States mail, postage prepaid.Either party may, by written notice to the other, served in the manner providedin this Article, designate a different address. If any notice or other documentis sent by mail, it shall be deemed served or delivered three (3) business daysafter mailing or, if sooner, upon actual receipt. The refusal to acceptdelivery of a notice, or the inability to deliver the notice (whether due to achange of address for which notice was not duly given or other good reason),shall be deemed delivery and receipt of the notice as of the date of attempteddelivery. If more than one person or entity is named as Tenant under thisLease, service of any notice upon any one of them shall be deemed as serviceupon all of them.

 

**ARTICLE XVII. RULES AND REGULATIONS**

 

Tenantagrees to comply with the Rules and Regulations attached as Exhibit E, and anyreasonable and nondiscriminatory amendments, modifications and/or additions asmay be adopted and published by written notice to tenants by Landlord for thesafety, care, security, good order, or cleanliness of the Premises, Building,Project and/or Common Areas. Landlord shall not be liable to Tenant for anyviolation of the Rules and Regulations or the breach of any covenant orcondition in any lease or any other act or conduct by any other tenant, and thesame shall not constitute a constructive eviction hereunder. One or morewaivers by Landlord of any breach of the Rules and Regulations by Tenant or byany other tenant(s) shall not be a waiver of any subsequent breach of that ruleor any other. Tenant’s failure to keep and observe the Rules and Regulationsshall constitute a default under this Lease. In the case of any conflictbetween the Rules and Regulations and this Lease, this Lease shall becontrolling.

 

**ARTICLE XVIII. BROKER’S COMMISSION**

 

Theparties recognize as the broker(s) who negotiated this Lease the firm(s) whosename(s) is (are) stated in Item 10 of the Basic Lease Provisions, and agreethat Landlord shall be responsible for the payment of brokerage commissions tothose broker(s) unless otherwise provided in this Lease. It is understood thatLandlord’s Broker represents only Landlord in this transaction and Tenant’sBroker (if any) represents only Tenant. Each party warrants that it has had nodealings with any other real estate broker or agent in connection with thenegotiation of this Lease, and agrees to indemnify and hold the other partyharmless from any cost, expense or liability (including reasonable attorneys’fees) for any compensation, commissions or charges claimed by any other realestate broker or agent employed or claiming to represent or to have beenemployed by the indemnifying party in connection with the negotiation of thisLease. The foregoing agreement shall survive the termination of this Lease.

 

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**ARTICLE XIX. TRANSFER OF LANDLORD’S INTEREST**

 

Inthe event of any transfer of Landlord’s interest in the Premises, thetransferor shall be automatically relieved of all obligations on the part ofLandlord accruing under this Lease from and after the date of the transfer,provided that Tenant is duly notified of the transfer. Any funds held by thetransferor in which Tenant has an interest shall be turned over, subject tothat interest, to the transferee. No holder of a mortgage and/or deed of trustto which this Lease is or may be subordinate shall be responsible in connectionwith the Security Deposit unless the mortgagee or holder of the deed of trustactually receives the Security Deposit. It is intended that the covenants andobligations contained in this Lease on the part of Landlord shall, subject tothe foregoing, be binding on Landlord, its successors and assigns, only duringand in respect to their respective successive periods of ownership.

 

**ARTICLE XX. INTERPRETATION**

 

**SECTION 20.1. GENDER AND NUMBER**. Whenever the context of this Lease requires,the words “Landlord” and “Tenant” shall include the plural as well as thesingular, and words used in neuter, masculine or feminine genders shall includethe others.

 

**SECTION 20.2. HEADINGS**. The captions and headings of the articlesand sections of this Lease are for convenience only, are not a part of thisLease and shall have no effect upon its construction or interpretation.

 

**SECTION 20.3. JOINT AND SEVERAL LIABILITY**. If more than one person or entity is namedas Tenant, the obligations imposed upon each shall be joint and several and theact of or notice from, or notice or refund to, or the signature of, any one ormore of them shall be binding on all of them with respect to the tenancy ofthis Lease, including, but not limited to, any renewal, extension, terminationor modification of this Lease.

 

**SECTION 20.4. SUCCESSORS**. Subject to Articles IX and XIX, all rightsand liabilities given to or imposed upon Landlord and Tenant shall extend toand bind their respective heirs, executors, administrators, successors andassigns. Nothing contained in this Section is intended, or shall be construed,to grant to any person other than Landlord and Tenant and their successors andassigns any rights or remedies under this Lease.

 

**SECTION 20.5. TIME OF ESSENCE**. Time is of the essence with respect to theperformance of every provision of this Lease in which time of performance is afactor.

 

**SECTION 20.6. CONTROLLING LAW/VENUE**. This Lease shall be governed by andinterpreted in accordance with the laws of the State of California. Should anylitigation be commenced between the parties in connection with this Lease, suchaction shall be prosecuted in the applicable State Court of California in thecounty in which the Building is located.

 

**SECTION 20.7. SEVERABILITY**. If any term or provision of this Lease, thedeletion of which would not adversely affect the receipt of any materialbenefit by either party or the deletion of which is consented to by the partyadversely affected, shall be held invalid or unenforceable to any extent, theremainder of this Lease shall not be affected and each term and provision ofthis Lease shall be valid and enforceable to the fullest extent permitted bylaw.

 

**SECTION 20.8. WAIVER**. One or more waivers by Landlord or Tenant ofany breach of any term, covenant or condition contained in this Lease shall notbe a waiver of any subsequent breach of the same or any other term, covenant orcondition. Consent to any act by one of the parties shall not be deemed torender unnecessary the obtaining of that party’s consent to any subsequent act.No breach of this Lease shall be deemed to have been waived unless the waiveris in a writing signed by the waiving party.

 

**SECTION 20.9. INABILITY TO PERFORM**. In the event that either party shall be delayedor hindered in or prevented from the performance of any work or in performingany act required under this Lease by reason of any cause beyond the reasonablecontrol of that party, then the performance of the work or the doing of the actshall be excused for the period of the delay and the time for performance shallbe extended for a period equivalent to the period of the delay. The provisionsof this Section shall not operate to excuse Tenant from the prompt payment ofrent.

 

**SECTION 20.10. ENTIRE AGREEMENT**. This Lease and its exhibits and otherattachments cover in full each and every agreement of every kind between theparties concerning the Premises, the Building, and the Project, and allpreliminary negotiations, oral agreements, understandings and/or practices,except those contained in this Lease, are superseded and of no further effect. Tenantwaives its rights to rely on any representations or promises made by Landlordor others which are not contained in this Lease. No verbal agreement or impliedcovenant shall be held to modify the provisions of this Lease, any statute,law, or custom to the contrary notwithstanding.

 

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**SECTION 20.11. QUIET ENJOYMENT**. Upon the observance and performance of allthe covenants, terms and conditions on Tenant’s part to be observed andperformed, and subject to the other provisions of this Lease, Tenant shall havethe right of quiet enjoyment and use of the Premises for the Term withouthindrance or interruption by Landlord or any other person claiming by orthrough Landlord.

 

**SECTION 20.12. SURVIVAL**. All covenants of Landlord or Tenant whichreasonably would be intended to survive the expiration or sooner termination ofthis Lease, including without limitation any warranty or indemnity hereunder,shall so survive and continue to be binding upon and inure to the benefit ofthe respective parties and their successors and assigns.

 

**ARTICLE XXI. EXECUTION AND RECORDING**

 

**SECTION 21.1. COUNTERPARTS**. This Lease may be executed in one or morecounterparts, each of which shall constitute an original and all of which shallbe one and the same agreement.

 

**SECTION 21.2. CORPORATE AND PARTNERSHIP AUTHORITY**. If Tenant is a corporation, limitedliability company or partnership, each individual executing this Lease onbehalf of the entity represents and warrants that he is duly authorized toexecute and deliver this Lease and that this Lease is binding upon thecorporation, limited liability company or partnership in accordance with itsterms. Tenant shall, at Landlord’s request, deliver a certified copy of itsorganizational documents or an appropriate certificate authorizing orevidencing the execution of this Lease.

 

**SECTION 21.3. EXECUTION OF LEASE; NO OPTION OR OFFER**. The submission of this Lease to Tenant shallbe for examination purposes only, and shall not constitute an offer to oroption for Tenant to lease the Premises. Execution of this Lease by Tenant andits return to Landlord shall not be binding upon Landlord, notwithstanding anytime interval, until Landlord has in fact executed and delivered this Lease toTenant, it being intended that this Lease shall only become effective uponexecution by Landlord and delivery of a fully executed counterpart to Tenant.

 

**SECTION 21.4. RECORDING**. Tenant shall not record this Lease withoutthe prior written consent of Landlord. Tenant, upon the request of Landlord,shall execute and acknowledge a “short form” memorandum of this Lease forrecording purposes.

 

**SECTION 21.5. AMENDMENTS**. No amendment or mutual termination of thisLease shall be effective unless in writing signed by authorized signatories ofTenant and Landlord, or by their respective successors in interest. No actions,policies, oral or informal arrangements, business dealings or other course ofconduct by or between the parties shall be deemed to modify this Lease in anyrespect.

 

**ARTICLE XXII.****MISCELLANEOUS**

 

**SECTION 22.1. NONDISCLOSURE OF LEASE TERMS**. Tenant acknowledges and agrees that theterms of this Lease are confidential and constitute proprietary information ofLandlord. Disclosure of the terms could adversely affect the ability ofLandlord to negotiate other leases and impair Landlord’s relationship withother tenants. Accordingly, Tenant agrees that it, and its partners, officers,directors, employees and attorneys, shall not intentionally and voluntarilydisclose the terms and conditions of this Lease to any other tenant or apparentprospective tenant of the Building or Project, either directly or indirectly,without the prior written consent of Landlord, provided, however, that Tenantmay disclose the terms to prospective subtenants or assignees under this Leaseor pursuant to any legal requirement.

 

**SECTION 22.2. REPRESENTATIONS BY TENANT**. The application, financial statements andtax returns, if any, submitted and certified to by Tenant as an accuraterepresentation of its financial condition have been prepared, certified andsubmitted to Landlord as an inducement and consideration to Landlord to enterinto this Lease. The application and statements are represented and warrantedby Tenant to be correct and to accurately and fully reflect Tenant’s truefinancial condition as of the date of execution of this Lease by Tenant. Tenantshall during the Term promptly furnish Landlord with current annual financialstatements accurately reflecting Tenant’s financial condition upon writtenrequest from Landlord.

 

**SECTION 22.3. CHANGES REQUESTED BY LENDER**. If, in connection with obtaining financingfor the Building, the lender shall request reasonable modifications in thisLease as a condition to the financing, Tenant will not unreasonably withhold ordelay its consent, provided that the modifications do not materially increasethe obligations of Tenant or materially and adversely affect the leaseholdinterest created by this Lease.

 

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**SECTION 22.4. MORTGAGEE PROTECTION**. No act or failure to act on the part ofLandlord which would otherwise entitle Tenant to be relieved of its obligationshereunder or to terminate this Lease shall result in such a release ortermination unless (a) Tenant has given notice by registered or certified mailto any beneficiary of a deed of trust or mortgage covering the Building whoseaddress has been furnished to Tenant and (b) such beneficiary is afforded areasonable opportunity to cure the default by Landlord, including, if necessaryto effect the cure, time to obtain possession of the Building by power of saleor judicial foreclosure provided that such foreclosure remedy is diligentlypursued.

 

**SECTION 22.5. SDN LIST**. Tenant hereby represents and warrants thatneither Tenant nor any officer, director, employee, partner, member or otherprincipal of Tenant (collectively, “Tenant Parties”) is listed as a SpeciallyDesignated National and Blocked Person (“SDN”) on the list of such persons andentities issued by the U.S. Treasury Office of Foreign Assets Control (OFAC). Inthe event Tenant or any Tenant Party is or becomes listed as an SDN, Tenantshall be deemed in breach of this Lease and Landlord shall have the right toterminate this Lease immediately upon written notice to Tenant.

 

 

| **LANDLORD:**       | ** **                      | **TENANT:**                      |
|---------------------|---------------------------------|----------------------------------|
|                |                            |                             |
| UTC  PROPERTIES LLC |                            | INFOSONICS  CORPORATION          |
|                |                            |                             |
|                |                            | By                               | /S/  Joseph Ram |   |
| By                  | /s/  Steven M. Case             |                             |   |   |
|                | Steven  M. Case                 |                             | Printed  Name Joseph Ram |
|                | Senior  Vice President, Leasing |                             |   |
|                |                            | Title  CEO                       |
|                |                            |                             |
| By                  | /s/  Michael T. Bennett         |                             |   | By | /s/  Joshua Haims |   |
|                | Michael  T. Bennett             |                             |   |
|                | Vice  President, Operations     |                             | Printed  Name Joshua Haims |
|                |                            |                             |
|                |                            | Title  VP Finance and Operations |
|                |                            |                             |
|                     |                                 |                                  |  |  |  |  |  |  |  |

 

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**4350 Executive Drive, Suite 100**

 

 

 

**Exhibit****A**

 

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**EXHIBIT B**

 

**UTILITIES AND SERVICES**

 

Thefollowing standards for utilities and services shall be in effect at theBuilding. Landlord reserves the right to adopt nondiscriminatory modificationsand additions to these standards. In the case of any conflict between thesestandards and the Lease, the Lease shall be controlling. Subject to all of theprovisions of the Lease, including but not limited to the restrictionscontained in Section 6.1, the following shall apply:

 

1.Landlord shall make available to the Premises during the hours of 8:00 a.m. to6:00 p.m., Monday through Friday, and if requested by Tenant, from 9:00 a.m. to1:00 p.m. on Saturdays (“Building Hours”), generally recognized nationalholidays excepted, reasonable HVAC services. Subject to the provisions setforth below, Landlord shall also furnish the Building with elevator service (ifapplicable), reasonable amounts of electric current for normal lighting byLandlord’s standard overhead fluorescent and incandescent fixtures and for theoperation of office equipment consistent in type and quantity with thatutilized by typical office tenants of the Building and Project, and water forlavatory purposes. Tenant will not, without the prior written consent ofLandlord, connect any apparatus, machine or device with water pipes or electriccurrent (except through existing electrical outlets in the Premises) for thepurpose of using electric current or water. Because the Building systems havebeen designed for normal occupancy of approximately four persons per onethousand usable square feet, Tenant understands that excess occupancy of thePremises may result in excessive use of power and other services and mayinhibit the efficient cooling of the Premises. This paragraph shall at alltimes be subject to applicable governmental regulations.

 

2.Upon written request from Tenant delivered to Landlord at least 24 hours priorto the period for which service is requested, but during normal business hours,Landlord will provide any of the foregoing building services to Tenant at suchtimes when such services are not otherwise available. Tenant agrees to payLandlord for those after-hour services at rates that Landlord may establishfrom time to time. As of the date hereof, Landlord’s after-hours HVAC is$35.00, per hour, per zone, subject to change from time to time. If Tenantrequires electric current in excess of that which Landlord is obligated tofurnish under this Exhibit B, Tenant shall first obtain the consent ofLandlord, and Landlord may cause an electric current meter to be installed inthe Premises to measure the amount of electric current consumed. The cost ofinstallation, maintenance and repair of the meter shall be paid for by Tenant,and Tenant shall reimburse Landlord promptly upon demand for all electriccurrent consumed for any special power use as shown by the meter. Thereimbursement shall be at the rates charged for electrical power by the localpublic utility furnishing the current, plus any additional expense incurred inkeeping account of the electric current consumed.

 

3.Landlord shall furnish water for drinking, personal hygiene and lavatorypurposes only. If Tenant requires or uses water for any purposes in addition toordinary drinking, cleaning and lavatory purposes, Landlord may, in itsdiscretion, install a water meter to measure Tenant’s water consumption. Tenantshall pay Landlord for the cost of the meter and the cost of its installation,and for consumption throughout the duration of Tenant’s occupancy. Tenant shallkeep the meter and installed equipment in good working order and repair atTenant’s own cost and expense, in default of which Landlord may cause the meterto be replaced or repaired at Tenant’s expense. Tenant agrees to pay for waterconsumed, as shown on the meter and when bills are rendered, and on Tenant’sdefault in making that payment Landlord may pay the charges on behalf of Tenant.Any costs or expenses or payments made by Landlord for any of the reasons orpurposes stated above shall be deemed to be additional rent payable by Tenantto Landlord upon demand.

 

4.In the event that any utility service to the Premises is separately metered orbilled to Tenant, Tenant shall pay all charges for that utility service to thePremises and the cost of furnishing the utility to tenant suites shall beexcluded from the Operating Expenses as to which reimbursement from Tenant isrequired in the Lease. If any utility charges are not paid when due Landlordmay pay them, and any amounts paid by Landlord shall immediately become due toLandlord from Tenant as additional rent. If Landlord elects to furnish anyutility service to the Premises, Tenant shall purchase its requirements of thatutility from Landlord as long as the rates charged by Landlord do not exceedthose which Tenant would be required to pay if the utility service werefurnished it directly by a public utility.

 

5.Landlord shall provide janitorial services five days per week, equivalent tothat furnished in comparable buildings, and window washing as reasonablyrequired; provided, however, that Tenant shall pay for any additional orunusual janitorial services required by reason of any nonstandard improvementsin the Premises, including without limitation wall coverings and floorcoverings installed by or for Tenant, or by reason of any use of Premises otherthan exclusively as offices. The cleaning services provided by Landlord shallalso exclude refrigerators, eating utensils (plates, drinking containers andsilverware), and interior glass partitions. Tenant shall pay to Landlord thecost of removal of any of Tenant’s refuse and rubbish, to the extent that theyexceed the refuse and rubbish usually attendant with general office usage.

 

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6.Tenant shall have access to the Building 24 hours per day, 7 days per week, 52weeks per year; provided that Landlord may install access control systems as itdeems advisable for the Building. Such systems may, but need not, include fullor part-time lobby supervision, the use of a sign-in sign-out log, a cardidentification access system, building parking and access pass system, closinghours procedures, access control stations, fire stairwell exit door alarmsystem, electronic guard system, mobile paging system, elevator control systemor any other access controls. In the event that Landlord elects to provide anyor all of those services, Landlord may discontinue providing them at any timewith or without notice. Landlord may impose a reasonable charge for accesscontrol cards and/or keys issued to Tenant. Landlord shall have no liability toTenant for the provision by Landlord of improper access control services, forany breakdown in service, or for the failure by Landlord to provide accesscontrol services. Tenant further acknowledges that Landlord’s access systemsmay be temporarily inoperative during building emergency and system repairperiods. Tenant agrees to assume responsibility for compliance by its employeeswith any regulations established by Landlord with respect to any card keyaccess or any other system of building access as Landlord may establish. Tenantshall be liable to Landlord for any loss or damage resulting from its or itsemployees use of any access system.

 

7.The costs of operating, maintaining and repairing any supplemental airconditioning unit serving only the Premises shall be borne solely by Tenant. Suchcosts shall include all metered electrical charges as described above in thisExhibit, together with the cost, as reasonably estimated by Landlord, to supplycooling water or other means of heat dissipation for the unit. Should Tenantdesire to install such a unit, the plans and specifications must be submittedin advance to Landlord and approved in writing by Landlord. Such installationshall be at Tenant’s sole expense and shall include installation of a separatemeter for the operation of the unit. Landlord may require Tenant to remove atLease expiration any such unit installed by or for Tenant and to repair anyresulting damage to the Premises or Building.

 

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**EXHIBIT C**

 

**PARKING**

 

Thefollowing parking regulations shall be in effect at the Building. Landlordreserves the right to adopt reasonable, nondiscriminatory modifications andadditions to the regulations by written notice to Tenant. In the case of anyconflict between these regulations and the Lease, the Lease shall becontrolling.

 

1.Landlord agrees to maintain, or cause to be maintained, an automobile parkingarea (“Parking Area”) in reasonable proximity to the Building for the benefitand use of the visitors and patrons and, except as otherwise provided,employees of Tenant, and other tenants and occupants of the Building. TheParking Area shall include, whether in a surface parking area or a parkingstructure, the automobile parking stalls, driveways, entrances, exits,sidewalks and attendant pedestrian passageways and other areas designated forparking. Landlord shall have the right and privilege of determining the natureand extent of the automobile Parking Area, whether it shall be surface,underground or other structure, and of making such changes to the Parking Areafrom time to time which in its opinion are desirable and for the best interestsof all persons using the Parking Area. Landlord shall keep the Parking Area ina neat, clean and orderly condition, and shall repair any damage to itsfacilities. Landlord shall not be liable for any damage to motor vehicles ofvisitors or employees, for any loss of property from within those motorvehicles, or for any injury to Tenant, its visitors or employees, unlessultimately determined to be caused by the sole active negligence or willfulmisconduct of Landlord. Unless otherwise instructed by Landlord, every parkershall park and lock his or her own motor vehicle. Landlord shall also have theright to establish, and from time to time amend, and to enforce against allusers of the Parking Area all reasonable rules and regulations (including thedesignation of areas for employee parking) as Landlord may deem necessary andadvisable for the proper and efficient operation and maintenance of the ParkingArea. Garage managers or attendants are not authorized to make or allow anyexceptions to these regulations.

 

2.Landlord may, if it deems advisable in its sole discretion, charge for parkingand may establish for the Parking Area a system or systems of permit parkingfor Tenant, its employees and its visitors, which may include, but not belimited to, a system of charges against nonvalidated parking, verification ofusers, a set of regulations governing different parking locations, and anallotment of reserved or nonreserved parking spaces based upon the charges paidand the identity of users. In no event shall Tenant or its employees park inreserved stalls leased to other tenants or in stalls within designated visitorparking zones, nor shall Tenant or its employees utilize more than the number ofparking stalls allotted in this Lease to Tenant. It is understood that Landlordshall not have any obligation to cite improperly parked vehicles or otherwiseattempt to enforce reserved parking rules during hours when parking attendantsare not present at the Parking Area. Tenant shall comply with such system inits use (and in the use of its visitors, patrons and employees) of the ParkingArea, provided, however, that the system and rules and regulations shall applyto all persons entitled to the use of the Parking Area, and all charges toTenant for use of the Parking Area shall be no greater than Landlord’s thencurrent scheduled charge for parking.

 

3.Tenant shall, upon request of Landlord from time to time, furnish Landlord witha list of its employees’ names and of Tenant’s and its employees’ vehiclelicense numbers. Tenant agrees to acquaint its employees with these regulationsand assumes responsibility for compliance by its employees with these parkingprovisions, and shall be liable to Landlord for all unpaid parking chargesincurred by its employees. Any amount due from Tenant shall be deemedadditional rent. Tenant authorizes Landlord to tow away from the Building anyvehicle belonging to Tenant or Tenant’s employees parked in violation of theseprovisions, and/or to attach violation stickers or notices to those vehicles. Inthe event Landlord elects or is required to limit or control parking bytenants, employees, visitors or invitees of the Building, whether by validationof parking tickets, parking meters or any other method of assessment, Tenantagrees to participate in the validation or assessment program under reasonablerules and regulations as are established by Landlord and/or any applicablegovernmental agency.

 

4.Landlord may establish an identification system for vehicles of Tenant and itsemployees which may consist of stickers, magnetic parking cards or otherparking access devices supplied by Landlord. All such parking access devicesshall remain the property of Landlord, shall be displayed as required byLandlord or upon request and may not be mutilated or obliterated in any manner.Those devices shall not be transferable and any such device in the possessionof an unauthorized holder shall be void and may be confiscated. Landlord mayimpose a reasonable fee for access devices and a replacement charge for deviceswhich are lost or stolen. Each access device shall be returned to Landlordpromptly following the Expiration Date or sooner termination of this Lease. Lossor theft of parking access devices shall be reported to Landlord or its ParkingArea operator immediately and a written report of the loss filed if requestedby Landlord or its Parking Area operator.

 

5. Persons using theParking Area shall observe all directional signs and arrows and any postedspeed limits. Unless otherwise posted, in no event shall the speed limit of 5miles per hour be exceeded. All vehicles shall be parked entirely withinpainted stalls, and no vehicles shall be 

 

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parked in areas whichare posted or marked as “no parking” or on or in ramps, driveways and aisles. Onlyone vehicle may be parked in a parking space. In no event shall Tenantinterfere with the use and enjoyment of the Parking Area by other tenants ofthe Building or their employees or invitees.

 

6.Parking Areas shall be used only for parking vehicles. Washing, waxing,cleaning or servicing of vehicles, or the parking of any vehicle on anovernight basis, in the Parking Area (other than emergency services) by anyparker or his or her agents or employees is prohibited unless otherwiseauthorized by Landlord. Tenant shall have no right to install any fixtures,equipment or personal property (other than vehicles) in the Parking Area, norshall Tenant make any alteration to the Parking Area.

 

7. It is understood that the employees of Tenant andthe other tenants of Landlord within the Building and Project shall not bepermitted to park their automobiles in the portions of the Parking Area which mayfrom time to time be designated for patrons of the Building and/or Project andthat Landlord shall at all times have the right to establish rules andregulations for employee parking. Landlord shall lease to Tenant, and Tenantshall be obligated to lease from Landlord for the Term of this Lease, the totalnumber of vehicle parking spaces set forth in Item 12 of the Basic LeaseProvisions (the “Allotted Stalls”). During the initial Term, Tenant shall notbe obligated to pay a parking charge for the Allotted Stalls. After the initialTerm, Tenant shall pay to Landlord for the lease of the Allotted Stalls themonthly amounts as Landlord shall from time to time determine. Should anymonthly parking charge, if any, not be paid within five (5) days following thedate due, then a late charge shall be payable by Tenant equal to the greater of(i) five percent (5%) of the delinquent installment or (ii) One Hundred Dollars($100.00), which late charge shall be separate and in addition to any latecharge that may be assessed pursuant to Section 14.3 of the Lease for otherthan delinquent monthly parking charges. Landlord may authorize persons otherthan those described above, including occupants of other buildings, to utilizethe Parking Area. In the event of the use of the Parking Area by other persons,those persons shall pay for that use in accordance with the terms establishedabove; provided, however, Landlord may allow those persons to use the ParkingArea on weekends, holidays, and at other non-office hours without payment.

 

8.Notwithstanding the foregoing paragraphs 1 through 7, Landlord shall beentitled to pass on to Tenant its proportionate share of any charges or parkingsurcharge or transportation management costs levied by any governmental agency.The foregoing parking provisions are further subject to any governmentalregulations which limit parking or otherwise seek to encourage the use ofcarpools, public transit or other alternative transportation forms or trafficreduction programs. Tenant agrees that it will use its best efforts tocooperate, including registration and attendance, in programs which may beundertaken to reduce traffic. Tenant acknowledges that as a part of thoseprograms, it may be required to distribute employee transportation information,participate in employee transportation surveys, allow employees to participatein commuter activities, designate a liaison for commuter transportationactivities, distribute commuter information to all employees, and otherwiseparticipate in other programs or services initiated under a transportationmanagement program.

 

9.Should any parking spaces be allotted by Landlord to Tenant, either on areserved or nonreserved basis, Tenant shall not assign or sublet any of thosespaces, either voluntarily or by operation of law, without the prior writtenconsent of Landlord, except in connection with an authorized assignment of thisLease or subletting of the Premises.

 

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**EXHIBITD**

 

**TENANT’SINSURANCE**

 

Thefollowing requirements for Tenant’s insurance shall be in effect at theBuilding, and Tenant shall also cause any subtenant to comply with therequirements. Landlord reserves the right to adopt reasonable nondiscriminatorymodifications and additions to these requirements. Tenant agrees to obtain andpresent evidence to Landlord that it has fully complied with the insurancerequirements.

 

1.Tenant shall, at its sole cost and expense, commencing on the date Tenant isgiven access to the Premises for any purpose and during the entire Term,procure, pay for and keep in full force and effect:  (i) commercial general liability insurancewith respect to the Premises and the operations of or on behalf of Tenant in,on or about the Premises, including but not limited to coverage for personalinjury, contractual liability, independent contractors, broad form propertydamage, fire legal liability, products liability (if a product is sold from thePremises), and liquor law liability (if alcoholic beverages are sold, served orconsumed within the Premises), which policy(ies) shall be written on an “occurrence”basis and for not less than $2,000,000 combined single limit (with a $50,000minimum limit on fire legal liability) per occurrence for bodily injury, death,and property damage liability, or the current limit of liability carried byTenant, whichever is greater, and subject to such increases in amounts asLandlord may determine from time to time; (ii) workers’ compensation insurancecoverage as required by law, together with employers’ liability insurancecoverage of at least $1,000,000; (iii) with respect to improvements,alterations, and the like required or permitted to be made by Tenant under thisLease, builder’s risk insurance, in an amount equal to the replacement cost ofthe work; (iv) insurance against fire, vandalism, malicious mischief and suchother additional perils as may be included in a standard “special form” policy,insuring all Tenant Installations, trade fixtures, furnishings, equipment anditems of personal property in the Premises, in an amount equal to not less thanninety percent (90%) of their actual replacement cost (with replacement costendorsement), which policy shall also include business interruption coverage inan amount sufficient to cover one (1) year of loss. In no event shall thelimits of any policy be considered as limiting the liability of Tenant underthis Lease.

 

2.All policies of insurance required to be carried by Tenant pursuant to thisExhibit shall be written by responsible insurance companies authorized to dobusiness in the State of California and with a general policyholder rating ofnot less than “A-” and financial rating of not less than “VIII” in the mostcurrent Best’s Insurance Report. The deductible or other retained limit underany policy carried by Tenant shall be commercially reasonable, and Tenant shallbe responsible for payment of such retained limit with full waiver ofsubrogation in favor of Landlord. Any insurance required of Tenant may befurnished by Tenant under any blanket policy carried by it or under a separatepolicy. A certificate of insurance, certifying that the policy has been issued,provides the coverage required by this Exhibit and contains the requiredprovisions, together with endorsements acceptable to Landlord evidencing thewaiver of subrogation and additional insured provisions required below, shallbe delivered to Landlord prior to the date Tenant is given the right ofpossession of the Premises. Proper evidence of the renewal of any insurancecoverage shall also be delivered to Landlord not less than thirty (30) daysprior to the expiration of the coverage. In the event of a loss covered by anypolicy under which Landlord is an additional insured, Landlord shall beentitled to review a copy of such policy.

 

3.Each policy evidencing insurance required to be carried by Tenant pursuant tothis Exhibit shall contain the following provisions and/or clauses satisfactoryto Landlord:  (i) with respect to Tenant’scommercial general liability insurance, a provision that the policy and thecoverage provided shall be primary and that any coverage carried by Landlordshall be excess of and noncontributory with any policies carried by Tenant,together with a provision including Landlord, The Irvine Company LLC, and anyother parties in interest designated by Landlord as additional insureds;  (ii) except with respect to Tenant’scommercial general liability insurance, a waiver by the insurer of any right tosubrogation against Landlord, its agents, employees, contractors andrepresentatives which arises or might arise by reason of any payment under thepolicy or by reason of any act or omission of Landlord, its agents, employees,contractors or representatives; and (iii) a provision that the insurer will notcancel or change the coverage provided by the policy without first givingLandlord thirty (30) days prior written notice. Tenant shall also name Landlordas an additional insured on any excess or umbrella liability insurance policycarried by Tenant.

 

4.In the event that Tenant fails to procure, maintain and/or pay for, at thetimes and for the durations specified in this Exhibit, any insurance requiredby this Exhibit, or fails to carry insurance required by any governmentalauthority, Landlord may at its election procure that insurance and pay thepremiums, in which event Tenant shall repay Landlord all sums paid by Landlord,together with interest at the maximum rate permitted by law and any relatedcosts or expenses incurred by Landlord, within ten (10) days following Landlord’swritten demand to Tenant.

 

**NOTICE TO TENANT:  INACCORDANCE WITH THE TERMS OF THIS LEASE, TENANT MUST PROVIDE EVIDENCE OF THEREQUIRED INSURANCE TO LANDLORD’S MANAGEMENT AGENT PRIOR TO BEING AFFORDEDACCESS TO THE PREMISES.**

 

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**EXHIBIT E**

 

**RULES AND REGULATIONS**

 

Thefollowing Rules and Regulations shall be in effect at the Building. Landlordreserves the right to adopt reasonable nondiscriminatory modifications andadditions at any time. In the case of any conflict between these regulationsand the Lease, the Lease shall be controlling.

 

1.Except with the prior written consent of Landlord, or unless otherwisespecifically authorized in this Lease, Tenant shall not sell or permit theretail sale of goods or services in or from the Premises, nor shall Tenantallow the Premises to be utilized for any manufacturing or medical practice.

 

2.The sidewalks, halls, passages, elevators, stairways, and other common areasshall not be obstructed by Tenant or used by it for storage, for depositingitems, or for any purpose other than for ingress to and egress from thePremises. The halls, passages, entrances, elevators, stairways, balconies androof are not for the use of the general public, and Landlord shall in all casesretain the right to control and prevent access to those areas of all personswhose presence, in the judgment of Landlord, shall be prejudicial to thesafety, character, reputation and interests of the Building and its tenants. ShouldTenant have access to any balcony or patio area, Tenant shall not place anyfurniture or other personal property in such area without the prior writtenapproval of Landlord. Nothing contained in this Lease shall be construed toprevent access to persons with whom Tenant normally deals only for the purposeof conducting its business on the Premises (such as clients, customers, officesuppliers and equipment vendors and the like) unless those persons are engagedin illegal activities. Neither Tenant nor any employee or contractor of Tenantshall go upon the roof of the Building without the prior written consent ofLandlord.

 

3.The sashes, sash doors, windows, glass lights, solar film and/or screen, andany lights or skylights that reflect or admit light into the halls or otherplaces of the Building shall not be covered or obstructed. The toilet rooms,water and wash closets and other water apparatus shall not be used for anypurpose other than that for which they were constructed, and no foreign substanceof any kind shall be thrown in those facilities, and the expense of anybreakage, stoppage or damage resulting from the violation of this rule shall beborne by Tenant.

 

4.No sign, advertisement or notice visible from the exterior of the Premises shallbe inscribed, painted or affixed by Tenant on any part of the Building or thePremises without the prior written consent of Landlord. If Landlord shall havegiven its consent at any time, whether before or after the execution of thisLease, that consent shall in no way operate as a waiver or release of any ofthe provisions of this Lease, and shall be deemed to relate only to theparticular sign, advertisement or notice so consented to by Landlord and shallnot be construed as dispensing with the necessity of obtaining the specificwritten consent of Landlord with respect to any subsequent sign, advertisementor notice. If Landlord, by a notice in writing to Tenant, shall object to anycurtain, blind, tinting, shade or screen attached to, or hung in, or used inconnection with, any window or door of the Premises, the use of that curtain,blind, tinting, shade or screen shall be immediately discontinued and removedby Tenant. No awnings shall be permitted on any part of the Premises. Noantenna or satellite dish shall be installed by Tenant that is either locatedor visible from outside the Premises without the prior written agreement ofLandlord.

 

5.Tenant shall not do or permit anything to be done in the Premises, or bring orkeep anything in the Premises, which shall in any way increase the rate of fireinsurance on the Building, or on the property kept in the Building, or obstructor interfere with the rights of other tenants, or in any way injure or annoythem, or conflict with the regulations of the Fire Department or the fire laws,or with any insurance policy upon the Building, or any portion of the Buildingor its contents, or with any rules and ordinances established by the Board ofHealth or other governmental authority.

 

6.The installation and location of any unusually heavy equipment in the Premises,including without limitation file storage units, safes and electronic dataprocessing equipment, shall require the prior written approval of Landlord. Landlordmay restrict the weight and position of any equipment that may exceed theweight load limits for the structure of the Building, and may further require,at Tenant’s expense, the reinforcement of any flooring on which such equipmentmay be placed and/or an engineering study to be performed to determine whetherthe equipment may safely be installed in the Building and the necessity of anyreinforcement. The moving of large or heavy objects shall occur only betweenthose hours as may be designated by, and only upon previous written notice to,Landlord, and the persons employed to move those objects in or out of theBuilding must be reasonably acceptable to Landlord. Without limiting thegenerality of the foregoing, no freight, furniture or bulky matter of anydescription shall be received into or moved out of the lobby of the Building orcarried in any elevator other than the freight elevator designated by Landlordunless approved in writing by Landlord.

 

7.Landlord shall clean the Premises as provided in the Lease, and except with thewritten consent of Landlord, no person or persons other than those approved byLandlord will be permitted to enter the Building for that purpose. Tenant shallnot cause unnecessary labor by reason of 

 

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Tenant’scarelessness and indifference in the preservation of good order and cleanliness.Landlord shall not be responsible to Tenant or its employees for loss or damageto property in connection with the provision of janitorial services by thirdparty contractors.

 

8.Tenant shall not sweep or throw, or permit to be swept or thrown, from thePremises any dirt or other substance into any of the corridors or halls orelevators, or out of the doors or windows or stairways of the Building, andTenant shall not use, keep or permit to be used or kept any foul or noxious gasor substance in the Premises, or permit or suffer the Premises to be occupiedor used in a manner offensive or objectionable to Landlord or other occupantsof the Building by reason of noise, odors and/or vibrations, or interfere inany way with other tenants or those having business with other tenants, norshall any animals or birds be kept by Tenant in or about the Building. Smokingor carrying of lighted cigars, cigarettes, pipes or similar products anywherewithin the Premises or Building is strictly prohibited, and Landlord mayenforce such prohibition pursuant to Landlord’s leasehold remedies. Smoking ispermitted outside the Building and within the project only in areas designatedby Landlord.

 

9.No cooking shall be done or permitted by Tenant on the Premises, exceptpursuant to the normal use of a U.L. approved microwave oven and coffee makerfor the benefit of Tenant’s employees and invitees, nor shall the Premises beused for the storage of merchandise or for lodging. Any pipes or tubing used byTenant to transmit water to an appliance or device in the Premises must be madeof copper or stainless steel, and in no event shall plastic tubing be used forthat purpose.

 

10.Tenant shall not use or keep in the Building any kerosene, gasoline, orinflammable fluid or any other illuminating material, or use any method ofheating other than that supplied by Landlord.

 

11.If Tenant desires telephone, telegraph, burglar alarm or similar connections,Landlord will direct electricians as to where and how the wires are to beintroduced. No boring or cutting for wires or otherwise shall be made withoutdirections from Landlord.

 

12.Upon the termination of its tenancy, Tenant shall deliver to Landlord all thekeys to offices, rooms and toilet rooms and all access cards which shall havebeen furnished to Tenant or which Tenant shall have had made.

 

13.Tenant shall not mark, drive nails, screw or drill into the partitions,woodwork or plaster or in any way deface the Premises, except to install normalwall hangings. Tenant shall not affix any floor covering to the floor of thePremises in any manner except by a paste, or other material which may easily beremoved with water, the use of cement or other similar adhesive materials beingexpressly prohibited. The method of affixing any floor covering shall besubject to approval by Landlord. The expense of repairing any damage resultingfrom a violation of this rule shall be borne by Tenant.

 

14.On Saturdays, Sundays and legal holidays, and on other days between the hoursof 6:00 p.m. and 8:00 a.m., access to the Building, or to the halls, corridors,elevators or stairways in the Building, or to the Premises, may be refusedunless the person seeking access complies with any access control system thatLandlord may establish. Landlord shall in no case be liable for damages for theadmission to or exclusion from the Building of any person whom Landlord has theright to exclude under Rules 2 or 18 of this Exhibit. In case of invasion, mob,riot, public excitement, or other commotion, or in the event of any othersituation reasonably requiring the evacuation of the Building, Landlordreserves the right at its election and without liability to Tenant to preventaccess to the Building by closing the doors or otherwise, for the safety of thetenants and protection of property in the Building.

 

15.Tenant shall be responsible for protecting the Premises from theft, whichincludes keeping doors and other means of entry closed and securely locked. Tenantshall cause all water faucets or water apparatus to be shut off before Tenantor Tenant’s employees leave the Building, and that all electricity, gas or airshall likewise be shut off, so as to prevent waste or damage, and for any defaultor carelessness Tenant shall make good all injuries sustained by other tenantsor occupants of the Building or Landlord.

 

16.Tenant shall not alter any lock or install a new or additional lock or any bolton any door of the Premises without the prior written consent of Landlord. IfLandlord gives its consent, Tenant shall in each case promptly furnish Landlordwith a key for any new or altered lock.

 

17.Tenant shall not install equipment, such as but not limited to electronictabulating or computer equipment, requiring electrical or air conditioningservice in excess of that to be provided by Landlord under the Lease except inaccordance with Exhibit B.

 

18.Landlord shall have full and absolute authority to regulate or prohibit theentrance to the Premises of any vendor, supplier, purveyor, petitioner,proselytizer or other similar person if, in the good faith judgment ofLandlord, such person will be involved in general solicitation activities, orthe proselytizing, petitioning, or disturbance of other tenants or theircustomers or invitees, or engaged or likely to engage in conduct which may inLandlord’s opinion distract from the use of the Premises for 

 

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itsintended purpose. Notwithstanding the foregoing, Landlord reserves the absoluteright and discretion to limit or prevent access to the Buildings by any food orbeverage vendor, whether or not invited by Tenant, and Landlord may conditionsuch access upon the vendor’s execution of an entry permit agreement which maycontain provisions for insurance coverage and/or the payment of a fee toLandlord.

 

19.Tenant shall, at its expense, be required to utilize the third party contractordesignated by Landlord for the Building to provide any telephone wiringservices from the minimum point of entry of the telephone cable in the Buildingto the Premises.

 

20.Tenant shall, upon request by Landlord, supply Landlord with the names andtelephone numbers of personnel designated by Tenant to be contacted on an after-hoursbasis should circumstances warrant.

 

21.Tenant shall cause its employees and agents, and shall endeavor to instruct itsinvitees, to wear attire suitable for a first class office project while suchpersons are in the Building or Project.

 

22.Landlord may from time to time grant tenants individual and temporary variancesfrom these Rules, provided that any variance does not have a material adverseeffect on the use and enjoyment of the Premises by Tenant.

 

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**EXHIBITX**

 

**WORKLETTER/BUILD TO SUIT**

 

Landlord shall causeits contractor to construct the tenant improvements for the Premises as shownin the space plan (the “Plan”) prepared by Gensler Architects and dated August9, 2007, exclusive of Alternates A, C, and D, and the cost estimate (the “CostEstimate”) prepared by Bycor and dated August 15, 2007. Any additional costresulting from changes requested by Tenant shall be borne solely by Tenant andpaid to Landlord prior to the commencement of construction. Unless otherwisespecified in the Plan or Cost Estimate or hereafter agreed in writing byLandlord, all materials and finishes utilized in constructing the tenantimprovements shall be Landlord’s building standard. Should Landlord submit anyadditional plans, equipment specification sheets, or other matters to Tenantfor approval or completion, Tenant shall respond in writing, as appropriate,within five (5) business days unless a shorter period is provided herein. Tenantshall not unreasonably withhold its approval of any matter, and any disapprovalshall be limited to items not previously approved by Tenant in the Plan orotherwise.

 

In the event that Tenantrequests in writing a revision in the Plan or in any other plans hereafterapproved by Tenant, then provided such change request is acceptable toLandlord, Landlord shall advise Tenant by written change order of anyadditional cost and/or Tenant Delay (as defined below) such change would cause.Tenant shall approve or disapprove such change order in writing within two (2)business days following its receipt. Tenant’s approval of a change order shallnot be effective unless accompanied by payment in full of the additional costof the tenant improvement work resulting from the change order. It is understoodthat Landlord shall have no obligation to interrupt or modify the tenantimprovement work pending Tenant’s approval of a change order.

 

Notwithstanding anyprovision in the Lease to the contrary, if Tenant fails to comply with any ofthe time periods specified in this Work Letter, requests any changes to thework, fails to make timely payment of any sum due hereunder, furnishesinaccurate or erroneous specifications or other information, or otherwisedelays in any manner the completion of the tenant improvements or the issuanceof an occupancy certificate (any of the foregoing being referred to in thisLease as a “Tenant Delay”), then Tenant shall bear any resulting additionalconstruction cost or other expenses and the delivery date shall be deemed tohave occurred for all purposes as of the date Landlord reasonably determinesthat it would have been able to deliver the Premises to Tenant but for thecollective Tenant Delays.

 

Landlord shall permitTenant and its agents to enter the Premises prior to the delivery date of theLease in order that Tenant may perform any work to be performed by Tenanthereunder through its own contractors, subject to Landlord’s prior writtenapproval, and in a manner and upon terms and conditions and at times satisfactoryto Landlord’s representative. The foregoing license to enter the Premises priorto the delivery date is, however, conditioned upon Tenant’s contractors andtheir subcontractors and employees working in harmony and not interfering withthe work being performed by Landlord. If at any time that entry shall causedisharmony or interfere with the work being performed by Landlord, this licensemay be withdrawn by Landlord upon twenty-four (24) hours written notice toTenant. That license is further conditioned upon the compliance by Tenant’scontractors with all requirements imposed by Landlord on third partycontractors, including without limitation the maintenance by Tenant and itscontractors and subcontractors of workers’ compensation and public liability andproperty damage insurance in amounts and with companies and on formssatisfactory to Landlord, with certificates of such insurance being furnishedto Landlord prior to proceeding with any such entry. The entry shall be deemedto be under all of the provisions of the Lease except as to the covenants topay rent. Landlord shall not be liable in any way for any injury, loss ordamage which may occur to any such work being performed by Tenant, the samebeing solely at Tenant’s risk. In no event shall the failure of Tenant’scontractors to complete any work in the Premises extend the delivery datebeyond the date that Landlord has substantially completed its tenantimprovement work and tendered the Premises to Tenant.

 

Tenant hereby designatesJeff Klausner, Telephone No. (760) 431-7949, as its representative, agent andattorney-in-fact for the purpose of receiving notices, approving submittals andissuing requests for changes, and Landlord shall be entitled to rely uponauthorizations and directives of such person(s) as if given by Tenant. Tenantmay amend the designation of its construction representative(s) at any timeupon delivery of written notice to Landlord.

 

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