exv10w6



 





Exhibit 10.6



NET LEASE AGREEMENT

(Single Tenant)



For and in consideration of the rentals, covenants, and conditions hereinafter
set forth, Landlord hereby leases to Tenant, and Tenant hereby rents from
Landlord, the following described Premises for the term, at the rental and
subject to and upon all of the terms, covenants and agreements set forth in
this Net Lease Agreement, including Landlord’s right to recover the Premises
pursuant to Paragraph 24 below (“Lease”):






	 	1.	 	Summary of Lease Provisions
	 
	 	1.1	 	Tenant: Laserscope, a California corporation (“Tenant”).
	 
	 	1.2	 	Landlord: Realtec Properties I, L.P., a
California limited partnership (“Landlord”).
	 
	 	1.3	 	Date of Lease, for reference purposes only:
October 5, 2004.
	 
	 	1.4	 	Premises: Those certain two (2) buildings located
in the City of San Jose, County of Santa Clara, State of
California, shown cross-hatched on the site plan attached
hereto as Exhibit A (a) and Exhibit A (b), and commonly
referred to as 3070 Orchard Drive (“Building A”) and 3052
Orchard Drive (“Building B”), San Jose, CA.
	 
	 	 	 	The portion of the Premises located at 3070 Orchard Drive
contains approximately 31,020 rentable square feet. The
portion of the Premises located at 3052 Orchard Drive
contains approximately 37,624 rentable square feet.
	 
	 	1.5	 	Term: Eight (8) years (Paragraph 3)
	 
	 	1.6	 	Commencement Date: November 1, 2004, subject to
the provisions of Paragraph 3 below. (Paragraph 3)
	 
	 	1.7	 	Ending Date: October 31, 2012, unless sooner
terminated pursuant to the terms of this Lease. (Paragraph 3)
	 
	 	1.8	 	Rent:





	 	 	 
	Months 01 to 12:

	 	$58,347.40 per month
	Months 13 to 24:

	 	$59,514.35 per month
	Months 25 to 36:

	 	$60,704.64 per month
	Months 37 to 48:

	 	$61,918.73 per month
	Months 49 to 60:

	 	$63,157.10 per month
	Months 61 to 72:

	 	$64,420.24 per month
	Months 73 to 84:

	 	$65,708.65 per month
	Months 85 to 96:

	 	$67,022.82 per month








(Paragraph 4)




Receipt of the first month’s Rent is hereby acknowledged by
Landlord.



 









 







	 	1.9	 	Use of Premises: General Office Use,
Manufacturing, Storage, and Research and Development, and
other legal related uses.
	 
	 	 	 	(Paragraph 6)
	 
	 	1.10	 	Security Deposit: Fifty-Eight Thousand Three
Hundred Forty-Seven and 40/100 Dollars ($58,347.40).
	 
	 	 	 	(Paragraph 5)
	 
	 	1.11	 	Addresses for Notices:





	 	 	 	 	 
	

	 	To Landlord:
	 	Realtec Properties I, L.P.

3880 South Bascom Avenue, Suite 210

San Jose, CA 95124
	 
	 	 	 	 
	

	 	To Tenant:
	 	To the Premises, with a courtesy copy to:
	 
	 	 	 	 
	

	 	 	 	Legal Department

Laserscope

3070 Orchard Drive

San Jose, CA 95134









	 	1.12	 	Nonexclusive Right to Use No More Than: one
hundred thirteen (113) parking spaces within that portion of
the Common Area associated with Building A; and one hundred
thirty-eight (138) parking spaces within that portion of the
Common Area associated with Building B. (Paragraph 2.1)





          1.13 Summary Provisions in General. Parenthetical references in this
Paragraph 1 to other paragraphs in this Lease are for convenience of reference,
and designate some of the other Lease paragraphs where applicable provisions
are set forth. All of the terms and conditions of each such referenced
paragraph shall be construed to be incorporated within and made a part of each
of the above referring Summary of Lease Provisions. In the event of any
conflict between any Summary of Lease Provision as set forth above and the
balance of the Lease, the latter shall control.



     2. Property Leased



          2.1 Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, upon the terms and conditions herein set forth, those certain
buildings (“Premises”) referred to in Paragraph 1.4 above, shown cross-hatched
on the site plan attached hereto as Exhibit A (a) and Exhibit A (b). In
addition, Tenant shall have the following rights with respect to the real
property more particularly described in the legal descriptions attached as
Exhibits B (a) and B (b) attached hereto (if applicable) and outlined in red on
Exhibit A (a) and Exhibit A (b) (“Common Area”): (i) the non exclusive right to
use no more than the number of parking spaces set forth in Paragraph 1.12
above, as shown on Exhibit A (a) and Exhibit A (b), for the respective
Buildings the location of which may be redesignated from time to time by
Landlord; (ii) the nonexclusive right to use any other parking spaces within
the Common Area not allocated for the exclusive use of another tenant of
Landlord; and (iii) such other rights as are necessary and convenient to
Tenant’s possession of the Premises or performance of Tenant’s obligations
under this Lease. (Notwithstanding the number of parking spaces designated for
Tenant’s exclusive use, in the event by reason of any rule, regulation, order,
law, statute, ordinance or other requirement of any governmental or
quasi-governmental authority now or hereafter in effect (collectively, “Laws”)
relating to or affecting parking on the Common Area, or any other cause beyond
Landlord’s reasonable control, Landlord is required to reduce the number of
parking spaces on the Common Area, Landlord shall have the right to
proportionately reduce the number of parking spaces designated herein for
Tenant’s exclusive use.) In addition, Landlord grants to Tenant a
non-exclusive easement for vehicular ingress and



 









 




egress in and over the paved roadways in the Common Area and pedestrian ingress
and egress in and over the Common Area.




     Landlord reserves the right to grant to tenants of the buildings or
improvements which now exist or may hereafter be constructed upon the Common
Area or upon real property owned by Landlord adjacent to the Common Area, and
to the agents, employees, servants, invitees, contractors, guests, employees,
servants, invitees, contractors, guests, customers and representatives of such
tenants or to any other user authorized by Landlord, the non-exclusive right to
use the Common Area for pedestrian and vehicular ingress and egress and
vehicular parking and the exclusive right to use parking spaces on the Common
Area (excluding only that portion of the Common Area designated herein for
Tenant’s exclusive use for vehicular parking).



          2.2 Improvements. Landlord shall contribute up to Four Hundred Eleven
Thousand Six Hundred Eighty-Four Dollars ($411,684.00) (the “Improvement
Allowance”) toward the cost of the tenant improvements in the Premises.
Landlord shall also contribute an additional Sixty-five Thousand Dollars
($65,000) (the “Additional Allowance”) to be used by Tenant in accordance with
the provisions of this Section. The balance, if any, of the cost of the tenant
improvements in the Premises (“Additional Cost”), including, but not limited
to, usual markups for overhead, supervision and profit, shall be paid by
Tenant. Tenant shall pay Landlord 50% of the Additional Cost based upon the
final cost estimate prior to the commencement of construction of the tenant
improvements in the Premises. The balance of the actual Additional Cost shall
be paid to Landlord as construction of the tenant improvements in the Premises
progresses, based upon the percentage of completion of such improvements,
within ten (10) days after receipt of Landlord’s invoice therefore. Landlord
will use reasonable care in preparing the cost estimates, but they are
estimates only and do not limit Tenant’s obligation to pay for the actual
Additional Cost of the tenant improvements, whether or not it exceeds the
estimated amounts.


At least one-half (1/2) of the Improvement Allowance shall be used for costs
associated with the design, space planning and construction of the tenant
improvements in the Premises in accordance with construction plans mutually
approved by Landlord and Tenant. Tenant may use the remaining portion of the
Improvement Allowance, not to exceed one-half (1/2) of the Improvement
Allowance, for fixturization and/or waiver of Rent, provided that if Tenant
elects to use such portion of the Improvement Allowance for waiver of Rent
Tenant must notify Landlord of such waiver at least five (5) days prior to the
Commencement Date. Any such waiver of Rent under the immediately preceding
sentence shall be applied against Rent as it comes due following the
Commencement Date, and continuing until any unused portion of the Improvement
Allowance is used up.



Tenant may use the Additional Allowance for construction of tenant improvements
in the Premises, for moving expenses and/or for consulting fees.



Landlord shall, at Landlord’s sole cost and expense, install up to six (6)
skylights in the roof of 3052 Orchard Drive, at a cost not to exceed Ten
Thousand Dollars ($10,000) in accordance with plans mutually agreed to by
Landlord and Tenant. Tenant shall not be required to remove such skylights at
the expiration or termination of this Lease.



Landlord shall construct tenant improvements using a general contractor
selected by Landlord. For all major subcontracting work Landlord shall require
the general contractor to obtain bids from at least two (2) subcontractors. In
connection with the construction of tenant improvements in the Premises
Landlord shall not charge a construction management fee for any supervision of
the contractor and subcontractors.



Landlord shall construct all tenant improvements in the Premises in accordance
with construction plans prepared by a licensed architect mutually approved by
Landlord and Tenant. Such construction plans shall be subject to approval by
Landlord and Tenant prior to Landlord’s construction contractor commencing
construction of any tenant improvements.




 









 




The improvements to be constructed by Landlord for Tenant’s use in the Premises
are set forth in detail on the attached Exhibit C. The work described in
Exhibit C includes any additional improvements to the Premises and/or the
Common Area that may be required pursuant to Title 24 and Title III of the
Americans with Disabilities Act of 1990, 42 U.S.C. section 12101 et. seq., and
the regulations promulgated thereunder (the “ADA”) by reason of the
construction of the improvements in the Premises (including entry doors).
Tenant shall be responsible for the costs to comply with ADA inside the
Premises, and for ADA compliance outside the Premises directly caused by any
Tenant’s exterior improvements or modifications requested or undertaken by
Tenant. Landlord shall be responsible for all other costs to comply with ADA
in the Common Areas, at Landlord’s sole cost and expense, which compliance
costs shall not be included as a part of Operating Costs, notwithstanding any
other provision of this Lease to the contrary.




     In the event of changes to any of the work set forth in Exhibit C (whether
such changes are required by any public agency, or by reason of any error or
omission in plans because of information provided to Landlord by Tenant, or
because requested in writing by Tenant and accepted in writing by Landlord),
Tenant shall pay to Landlord Landlord’s costs related to such changes before
work in regard to such changes is commenced; provided, however, in no event
shall Landlord’s failure to demand such payment before commencement of work in
regard to such changes, or Tenant’s failure to pay for the same before
commencement of work in regard to such changes be deemed to be a waiver of
Landlord’s right to require or enforce collection of such payment for changes
at any time thereafter. Landlord’s costs related to the changes shall include,
without limitation, all architectural, contractor, and engineering expenses,
and the cost of all building and other permits and inspection fees. Tenant
acknowledges that Landlord or a person or entity related to Landlord and/or
controlled by Landlord may serve as Landlord’s architect, engineer and/or
contractor in regard to the above-described work and in the event of any
changes, Landlord’s costs shall be deemed to include architect, engineering
and/or contractor expenses at the rates charged to third parties by Landlord
and/or such related person or entity for such services, unless otherwise
expressly provided in this Lease.


Tenant and its representatives shall not interfere with Landlord or Landlord’s
contractor in completing any construction in or at the Premises, including
construction of any tenant improvements.



During the term of this Lease, including any extension of the term, Tenant
shall have the right to use, at Tenant’s election and at no additional cost,
any existing cubicle stations, office and conference room furniture, chairs,
data wiring, telephone and any security system (collectively, the “Personal
Property”) located at 3052 Orchard Drive. A list of such Personal Property is
contained in Exhibit B attached hereto and made a part hereof. Tenant agrees
that Landlord owns the Personal Property. At the expiration or termination of
this Lease Tenant shall return the Personal Property to Landlord in reasonably
good condition, normal wear and tear excepted.




          2.3 Acceptance of Premises. By taking possession of the Premises, Tenant
shall be deemed to have accepted the Premises as being in good and sanitary
order, condition and repair and to have accepted the Premises in their
condition existing as of the date Tenant takes possession of the Premises,
subject to all applicable laws, covenants, conditions, restrictions, easements
and other matters of public record and the reasonable rules and regulations
from time to time promulgated by Landlord (and non-discriminatorily applied)
governing the use of the Premises and Common Area, and Landlord completing the
tenant improvements in accordance with the plans and specifications for such
improvements, subject only to completion of items on Landlord’s punch list.
Tenant acknowledges that neither Landlord nor Landlord’s agents have made any
representation or warranty as to the suitability of the Premises for the
conduct of Tenant’s business, the condition of the Premises, or the use or
occupancy which may be made thereof and Tenant has independently investigated
and is satisfied that the Premises are suitable for Tenant’s intended use and
that the Premises meets all governmental requirements for such intended use.



     Notwithstanding anything to the contrary contained in this Lease, Tenant’s
acceptance of the Premises or submission of a “punch list” shall not be deemed
a waiver of Tenant’s right to have defects in the improvements constructed by
Landlord pursuant to Paragraph 2.2 or in the Premises corrected at no cost to
Tenant. Tenant shall give notice to Landlord whenever any such defect becomes
reasonably apparent, and Landlord shall correct the defect as soon as
practicable. Landlord also hereby assigns to Tenant all warranties with
respect to the Premises, including warranties that would reduce Tenant’s
maintenance obligations under this Lease, and shall cooperate with Tenant to
enforce such warranties. Finally, notwithstanding anything to the contrary
contained in this Lease, as of the Commencement Date, the



 









 




roof (including roof screens and membrane), plumbing, electrical (including all
outlets), heating and air conditioning systems in the Premises shall be in good
working order and repair.




     3. Term



          3.1 Commencement Date. The term of this Lease (“Lease Term”) shall be for
the period specified in Paragraph 1.5 above, commencing on the date set forth
in Paragraph 1.6 (“Commencement Date”).



          3.2 Delay of Commencement Date. Landlord shall not be liable for any
damage or loss incurred by Tenant for Landlord’s failure for whatever cause to
deliver possession of the Premises by any particular date (including the
Commencement Date), nor shall this Lease be void or voidable on account of such
failure to deliver possession of the Premises; provided that if Landlord does
not deliver possession of the Premises to Tenant by the date which is one
hundred eighty (180) days from the date this Lease is executed by both parties,
Tenant shall have the right to terminate this Lease by written notice delivered
to Landlord within five (5) days thereafter, and Landlord and Tenant shall be
relieved of their respective obligations hereunder; provided further that said
one hundred eighty (180) day period shall be extended by the number of days
work on the Premises is delayed due to fault or neglect of Tenant, acts of
Tenant or Tenant’s agents, or due to acts of God, labor disputes, strikes,
fires, rainy or stormy weather, acts or failures to act of public agencies,
inability to obtain labor or materials, earthquake, war, insurrection, riots
and other causes beyond Landlord’s reasonable control, excluding, however,
delays caused solely by Landlord, its agents, employees, contractors or
invitees.



          3.3 Early Occupancy. If Tenant takes possession of the Premises prior to
the Commencement Date, Tenant shall do so subject to all of the terms and
conditions hereof except for the obligation to pay the Rentals (as defined in
Section 4.3 below) provided for herein prior to the Commencement Date.



          3.4 Tenant’s Physical Occupany of the Premises. The date of Tenant’s
physical occupancy of the Premises shall in no event extend the Commencement
Date, the Lease Termination date or the date the payment of Rentals hereunder
commences.



          3.5 Termination of Existing Leases.



               (a) 3070 Orchard Drive Lease. Tenant has been leasing the 3070 Orchard
Drive portion of the Premises pursuant to a Net Lease dated June 20, 2002 (the
“3070 Lease”) between Landlord and Tenant. On the Commencement Date of this
Lease the 3070 Lease shall terminate without any penalty or fee. Upon such
termination of the 3070 Lease Landlord and Tenant shall have no further
obligations accruing after such termination of the 3070 Lease; provided, that
Landlord and Tenant shall remain liable for those obligations which survive any
termination of the 3070 Lease and are not inconsistent with this Lease.



               (b) 3075 N. First Street Lease. Tenant has been leasing space located at
3075 N. First Street (the “3075 N. First Premises”) pursuant to a Net Lease
dated October 18, 2000 (the “3075 N. First Lease”) between Landlord and Tenant.
On the Commencement Date of this Lease the 3075 N. First Street Lease shall
terminate without any penalty or fee; provided that Tenant shall have the right
to extend such termination of the 3075 N. First Lease for up to sixty (60) days
(the “Temporary Extension”) by giving Landlord written notice on or before
October 22, 2004 exercising such extension. During such Temporary Extension
Tenant shall not be obligated to pay the Rent called for in Section 1.8 of the
3075 N. First Lease, but during the Temporary Extension Tenant shall remain
liable for all other costs and expenses payable under the 3075 N. First Lease.
If Tenant holds over in the 3075 N. First Premises beyond the expiration of the
Temporary Extension, Tenant shall pay Rent at the applicable rate called for in
Section 1.8 of the 3075 N. First Lease commencing on the day following the end
of the Temporary Extension, and continuing until Tenant vacates the 3075 N.
First Premises. Upon the later to occur of (i) the termination of the 3075 N.
First Lease (whether at the Commencement Date of this Lease, or at the
expiration of the Temporary Extension, whichever occurs first) or (ii)



 









 




the date Tenant vacates the 3075 N. First Premises, Tenant shall have no
further obligations accruing after such termination of the 3075 N. First Lease;
provided that Landlord and Tenant shall remain liable for those obligations
which survive any termination of the 3075 N. First Lease and are not
inconsistent with this Lease. Notwithstanding any provision contained in the
3075 N. First Lease to the contrary, Tenant shall not be obligated to remove
tenant improvements from the 3075 N. First Premises, but Tenant shall remain
liable for any damage to the 3075 N. First Premises caused by Tenant’s removal
of Tenant’s property from the 3075 N. First Premises.




               (c) Concurrent with the termination of the Existing Leases and payment of
Security Deposits under this Lease, Landlord shall refund all existing security
deposits and promptly notify Lessee’s bank of the release of all obligations
relating to the Existing Leases which may be guaranteed by any standby letters
of credit.



          3.6 Right of First Offer.



               (a) Provided that Laserscope has not assigned this Lease or sublet any or
all of the Premises (it being intended that all rights pursuant to this
provision are and shall be personal to the original Tenant under this Lease and
shall not be transferable or exercisable for the benefit of any transferee),
and provided Tenant is not in default under this Lease at the time of the
exercise of any such right or at any time thereafter until delivery of
possession of the space to Tenant, and subject to any and all rights of other
tenants in the Project with respect to such space (including renewal and
extension rights and rights of first offer, first negotiation, first refusal or
other expansion rights) existing as of the date of this Lease, then during the
initial Term Tenant shall have a continuous right of first offer to lease the
3075 N. First Premises (as defined above, and for the purposes of this Section
called the “ROFO Space”). Tenant shall not have such right of first offer
during any Extension Period (as defined in Section 3.7 below).



               (b) Such right of first offer (i) may only be exercised with respect to
vacant space or space which has been previously leased and as to which an
existing tenant in has elected not to extend its lease or re-lease such space
and (ii) may only be exercised with respect to all of the space being offered
by Landlord. If the ROFO Space becomes available to lease, Landlord shall
offer to lease such space to Tenant at the same rent and on the same terms that
Landlord intends to offer to other prospective tenants. Tenant shall have five
(5) Business Days following receipt of Landlord’s offer with respect to the
ROFO Space within which to notify Landlord in writing of its intention to lease
the ROFO Space, and such notice, if given by Tenant, shall constitute an
acceptance of Landlord’s terms for the lease of the ROFO Space. If Tenant
exercises such right of first offer, the space to be leased by Tenant shall be
leased on the same terms and conditions as are contained in this Lease except
for the economic and other terms specifically set forth in Landlord’s notice,
and the parties shall execute an amendment to this Lease to include such space
in the Premises and otherwise to provide for the leasing of such space on such
terms; provided, however, such amendment shall also take into account that the
ROFO Space is contained in a multi-tenant building whereas the Premises
consists of two (2) single tenant buildings. If Tenant fails so to exercise
Tenant’s right of first offer within such five (5) Business Day period,
Landlord may thereafter lease the ROFO Space to other prospective tenants;
provided, however, that if Landlord proposes to lease such space at an
effective rent that is less than ninety percent (90%) of the effective rent
proposed to Tenant, or upon other terms which are substantially more favorable
to the prospective tenant, Landlord shall first re-offer such space to Tenant
at such lower rent and/or more favorable terms in accordance with the
provisions of this paragraph.



          3.7 Extension Option. In consideration for Tenant not having been in
default under this Lease more than twice within any one (1) year period during
the



 









 




Lease Term, Landlord hereby grants to Tenant one (1) option to extend the Lease
Term for a period of five (5) years (“Extended Term”), on the following terms
and conditions:




               (a) Tenant must give Landlord notice in writing of its exercise of the
option to extend the Lease Term no earlier than twelve (12) months nor later
than nine (9) months before the date the Lease Term would end but for said
exercise. Time is of the essence.



               (b) Tenant may not extend the Lease Term pursuant to the option granted
by this Section 3.7 if Tenant has been in default in the performance of any of
the terms and conditions of the Lease more than twice within any one (1) year
period during the Lease Term, or if Tenant shall have assigned or otherwise
transferred its interest in this Lease and/or the Premises whether or not
Landlord’s consent to such assignment or transfer has been given. If Tenant is
in default under this Lease on the date that the Extended Term is to commence,
then Landlord may elect to terminate this Lease, notwithstanding any notice
given by Tenant of an exercise of its option to extend.



               (c) All terms and conditions of this Lease shall apply during the
Extended Term, except that the Rent for the Extended Term shall be determined
in accordance with this Section 3.7, below.



               (d) Once Tenant delivers notice of its exercise of the option to extend
the Lease Term, Tenant may not withdraw such exercise and, subject to the
provisions of this Section 3.7, such notice shall operate to extend the Lease
Term. Upon the extension of the Lease Term, the term “Lease Term” as used in
this Lease shall thereafter include the Extended Term and the Lease Termination
date shall be the expiration date of the Extended Term.



               (e) Rent During the Extended Term. If Tenant elects to extend the Lease
Term pursuant to this Section 3.7, the annual Rent for the Extended Term shall
be an amount equal to the fair market value of the Premises (together with
any applicable cost of living or other rental adjustments) in relation to
market conditions at the time of the extension (including, but not limited to,
rental rates for comparable space with comparable tenant improvements and
taking into consideration any adjustments to rent based upon direct costs
(operating expenses) and taxes, load factors, financing charges, and/or cost of
living or other rental adjustments; the relative strength of the tenants; the
size of the space; and any other factors which affect market rental values at
the time of extension); and provided further, that the annual Rent for the
Extended Term shall in no event be lower than the Rent for the last Lease Year
of the original term. Tenant acknowledges that Landlord shall not be obligated
or requested to pay any leasing commissions during or for the Extended Term.
The Rent for the Extended Term shall be determined as follows:



               (f) Mutual Agreement. After timely receipt by Landlord of Tenant’s
notice of exercise of the option to extend the Lease Term, Landlord and Tenant
shall have a period of thirty (30) days in which to agree on the Rent for the
Extended Term. If Landlord and Tenant agree on said Rent during that period,
they shall immediately execute an amendment to this Lease stating the Rent for
the Extended Term. If Landlord and Tenant are unable to agree on the Rent for
the Extended Term as aforesaid, Tenant shall have the right to withdraw its
election to extend the Lease Term by written notice to Landlord given five (5)
days after the expiration of said thirty (30) day period, in which event the
Lease shall terminate on the expiration date of the Lease Term.



               (g) Appraisal. If Tenant does not withdraw its election to extend the
Lease Term within five (5) days after the expiration of the thirty (30) day
period described in Section 3.7 (g) above, each party, at its cost and by
giving notice to the other party, shall appoint an M.A.I. real estate
appraiser, with at least five (5) years full-time commercial appraisal
experience in the area in which the Premises are located to appraise and set
the fair market rental value of the Premises. If a party does not appoint an
appraiser within five (5) days after the other party has given notice of the
name of its appraiser, the single appraiser appointed shall be the sole
appraiser and shall set the fair market rental value. The cost of such
appraiser shall be borne equally by the parties. If two appraisers are
appointed by the parties as provided in this paragraph, the two appraisers
shall meet promptly and attempt to set the fair market value rental value. If
they are unable to agree within twenty (20) days after the last appraiser has
been appointed, then the two appraisers shall attempt to select a third
appraiser meeting the qualifications stated in Paragraph 44(b) above within ten
(10) working days after the last day the two appraisers are given to set the
fair



 









 




market rental value. If they are unable to agree on the third appraiser,
either of the parties to this Lease, by giving ten (10) days notice to the
other party, may apply to the presiding judge of the Superior Court of Santa
Clara County for a selection of a third appraiser who meets the qualifications
stated above. Each of the parties shall bear one-half (1/2) of the cost of
appointing the third appraiser’s fee. The third appraiser, however selected,
shall be a person who has not previously acted in any capacity for either
party. Within twenty (20) days after the selection of the third appraiser, the
majority of the appraisers shall set the fair market rental value. If the
majority of the appraisers are unable to set the fair market rental value
within said twenty (20) day period, the three appraisals shall be added
together and the total divided by three; the resulting quotient shall be the
fair market rental value and shall be deemed incorporated herein, provided,
however, that if any appraisal differs from the median appraisal by amount
equal to more than ten percent (10%) of such median appraisal, that appraisal
shall be disregarded, and the average of the remaining appraisals (or the
remaining appraisal) shall be the fair market rental value. In establishing
the fair market rental value, the appraiser or appraisers shall consider the
reasonable market rental value for the highest and best use of the Premises
(including, but not limited to, rental rates for comparable space with
comparable tenant improvements and any adjustments to rent based upon direct
costs (operating expenses) and taxes, load factors, financing charges, and/or
cost of living or other rental adjustments; the relative strength of the
tenants; and of size of the space); without regard to the existence of this
Lease but taking into consideration the absolute nature of this Lease.




     4. Rent



          4.1 Rent. Tenant shall pay to Landlord as rent for the Premises
(“Rent”), in advance, on the first day of each calendar month, commencing on
the date specified in Paragraph 1.6 and continuing throughout the Lease Term
the Rent set forth in Paragraph 1.8 above. Rent shall be prorated, based on
thirty (30) days per month, for any partial month during the Lease Term. Rent
shall be payable without deduction, offset, prior notice or demand in lawful
money of the United States to Landlord at the address herein specified for
purposes of notice or to such other persons or such other places as Landlord
may designate in writing.



          4.2 Late Charge. Tenant hereby acknowledges that late payment by Tenant
to Landlord of Rent will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Landlord by the terms of any mortgage
or deed of trust covering the Premises. Accordingly, Tenant shall pay to
Landlord, as Additional Rent (as defined in Paragraph 4.3 below), without the
necessity of prior notice or demand, a late charge equal to ten percent (10%)
of any installment of Rent which is not received by Landlord within ten (10)
days after the due date for such installment. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of late payment by Tenant. In no event shall
this provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any installment of Rent or prevent
Landlord from exercising any right or remedy available to Landlord upon
Tenant’s failure to pay such installment of Rent when due, including without
limitation the right to terminate this Lease. In the event any installment of
Rent is not received by Landlord by the thirtieth (30th) day after the due date
for such installment, such installment shall bear interest at the annual rate
set forth in Paragraph 34 below, commencing on the thirty-first (31st) day
after the due date for such installment and continuing until such installment
is paid in full.



          4.3 Additional Rent. All taxes, charges, costs and expenses and other
sums which Tenant is required to pay hereunder (together with all interest and
charges that may accrue thereon in the event of Tenant’s failure to pay the
same), and all damages, costs and reasonable expenses which Landlord may incur
by reason of any Default by Tenant shall be deemed to be additional rent
hereunder (“Additional Rent”). Additional Rent shall accrue commencing on the
Commencement Date. In the event of nonpayment by Tenant of any Additional
Rent, Landlord shall have all the rights and remedies with respect thereto as
Landlord has for the nonpayment of Rent. The term “Rentals” as used in this
Lease shall mean Rent and Additional Rent.



     5. Security Deposit. Concurrently with Tenant’s execution of this Lease,
Tenant shall deposit with Landlord a security deposit (“Security Deposit”) in
the amount set forth in Paragraph 1.10 above. The Security Deposit shall be
held by Landlord as security for the faithful performance by Tenant of each and
every term,



 









 




covenant and condition of this Lease applicable to Tenant, and not as
prepayment of Rent. If Tenant shall at any time fail to keep or perform any
term, covenant or condition of this Lease applicable to Tenant, including,
without limitation, the payment of Rentals or those provisions requiring Tenant
to repair damage to the Premises caused by Tenant or to surrender the Premises
in the condition required pursuant to Paragraph 35 below, Landlord may, but
shall not be obligated to and without waiving or releasing Tenant from any
obligation under this Lease, use, apply or retain the whole or any part of the
Security Deposit reasonably necessary for the payment of any amount which
Landlord may spend by reason of Tenant’s default or as necessary to compensate
Landlord for any loss or damage which Landlord may suffer by reason of Tenant’s
default. In the event Landlord uses or applies any portion of the Security
Deposit, Tenant shall, within five (5) business days after written demand by
Landlord, remit to Landlord sufficient funds to restore the Security Deposit to
its original sum. Failure by Tenant to so remit funds shall be a Default by
Tenant. Should Tenant comply with all of the terms, covenants and conditions
of this Lease applicable to Tenant, the balance of the Security Deposit shall
be returned to Tenant within fourteen (14) days after Lease Termination and
surrender of the Premises by Tenant; provided, however, if any portion of the
Security Deposit is to be applied to repair damages to the Premises caused by
Tenant or Tenant’s agents, to clean the Premises, or to remove alterations and
restore the Premises pursuant to Paragraph 13.2 below, then the balance of the
Security Deposit shall be returned to Tenant no later than thirty (30) days
after the date Landlord receives possession of the Premises.




     6. Use of Premises.



          6.1 Permitted Uses. Tenant shall use the Premises and the Common Area
only in conformance with applicable Laws for the purposes set forth in
Paragraph 1.9 above, and for no other purpose without the prior written consent
of Landlord, which consent shall not be unreasonably withheld or delayed,
provided that such other use is in conformance with applicable Laws. Any
change in use of the Premises or the Common Area without the prior written
consent of Landlord shall be a Default by Tenant. Tenant and Tenant’s agents
shall comply with the provisions of any Declaration of Covenants, Conditions,
and Restrictions affecting the Premises and the Common Area.



          6.2 Tenant to Comply with Legal Requirements. Tenant shall, at its sole
cost, promptly comply with all Laws relating to or affecting Tenant’s
particular use or occupancy of the Premises or the Common Area, now in force,
or which may hereafter be in force, including without limitation those relating
to utility usage and load or number of permissible occupants or users of the
Premises, whether or not the same are now contemplated by the parties; with the
provisions of all recorded documents affecting the Premises or the Common Area
insofar as the same relate to or affect Tenant’s particular use or occupancy of
the Premises or use of the Common Area; and with the requirements of any board
of fire underwriters (or similar body now or hereafter constituted) relating to
or affecting Tenant’s particular use or occupancy of the Premises or use of the
Common Area. Tenant’s obligations pursuant to this Paragraph 6.2 shall
include, without limitation, maintaining or restoring the Premises and the
Common Area and making structural and non-structural alterations and additions
in compliance and conformity with all Laws and recorded documents (including,
without limitation, alterations or additions to the Premises and/or Common Area
that are required pursuant to the ADA), each relating to Tenant’s particular
use or occupancy of the Premises during the Lease Term or alterations made to
the Premises by Tenant. Any alterations or additions undertaken by Tenant
pursuant to this Paragraph 6.2 shall be subject to the requirements of
Paragraph 13.1 below. At Landlord’s option, Landlord may make the required
alteration, addition or change upon prior notification to Tenant, and Tenant
shall pay the cost thereof as Additional Rent. The foregoing notwithstanding,
Landlord shall make any alteration or addition required to bring the Premises
or the Common Area into compliance with legal requirements in effect at the
time the Premises, any improvements installed therein by Landlord, or the
Common Area, respectively, were originally constructed. The cost of any
structural alterations as may be hereafter required due to a change in laws and
unrelated to Tenant’s specific use of the Premises shall be the responsibility
of Landlord.



     Tenant shall obtain prior to taking possession of the Premises any
permits, licenses or other authorizations required for the lawful operation of
its business at the Premises. The judgment of any court of competent
jurisdiction or the admission of Tenant in any action or proceeding against
Tenant, regardless of whether Landlord is a party thereto or not, that Tenant
has violated such Law or recorded document relating to Tenant’s particular use
or occupancy of the Premises or use of the Common Area shall be conclusive of
the fact of such violation by Tenant.



 









 





          6.3 Prohibited Uses. Tenant and Tenant’s agents shall not commit or
suffer to be committed any waste upon the Premises. Tenant and Tenant’s agents
shall not do or permit anything to be done in or about the Premises or Common
Area which will in any way obstruct or interfere with the rights of any
authorized users of the Common Area or occupants of neighboring property, or
injure or annoy them. Tenant shall not conduct or permit any auction or sale
open to the public to be held or conducted on or about the Premises or Common
Area. Tenant and Tenant’s agents shall not use or allow the Premises to be
used for any unlawful, immoral or hazardous purpose or any purpose not
permitted by this Lease, nor shall Tenant or Tenant’s agents cause, maintain,
or permit any nuisance in, on or about the Premises. Tenant and Tenant’s
agents shall not do or permit anything to be done in or about the Premises or
Common Area nor bring or keep anything in the Premises or Common Area which
will in any way increase the rate of any insurance upon the Premises or Common
Area or any part thereof or any of its contents, or cause a cancellation of any
insurance policy covering the Premises or Common Area or any part thereof or
any of its contents, nor shall Tenant or Tenant’s agents keep, use or sell or
permit to be kept, used or sold in or about the Premises any articles which may
be prohibited by a standard form policy of fire insurance. In the event the
rate of any insurance upon the Premises or Common Area or any part thereof or
any of its contents is increased because of Tenant’s particular use of the
Premises or that of Tenant’s agents, Tenant shall pay, as Additional Rent, the
full cost of such increase; provided however this provision shall in no event
be deemed to constitute a waiver of Landlord’s right to declare a default
hereunder by reason of the act or conduct of Tenant or Tenant’s agents causing
such increase or of any other rights or remedies of Landlord in connection
therewith. Tenant and Tenant’s agents shall not place any loads upon the
floor, walls or ceiling of the Premises which would endanger the Premises or
the structural elements thereof, nor place any harmful liquids in the drainage
system of the Premises. No waste materials or refuse shall be dumped upon or
permitted to remain upon any part of the Premises or Common Area except in
enclosed trash containers designated for that purpose by Landlord. No
materials, supplies, equipment, finished products (or semi-finished products),
raw materials, or other articles of any nature shall be stored upon, or be
permitted to remain on, any portion of the Common Area.



          6.4 Hazardous Materials. Neither Tenant nor Tenant’s agents shall
permit the introduction, placement, use, storage, manufacture, transportation,
release or disposition (collectively “Release”) of any Hazardous Material(s)
(defined below) on or about any portion of the Premises or Common Area without
the prior written consent of Landlord, which consent may be withheld in the
sole and absolute discretion of Landlord without any requirement of
reasonableness in the exercise of that discretion. Notwithstanding the
immediately preceding sentence to the contrary, Tenant may use de minimis
quantities of the types of materials which are technically classified as
Hazardous Materials but commonly used in domestic or office use to the extent
not in an amount, which, either individually or cumulatively, would be a
“reportable quantity” under any applicable Law. Furthermore, Tenant may use
those hazardous materials attached in Exhibit G which are necessary in Tenant’s
business operations in accordance with all legal and governmental regulations
and guidelines. Tenant covenants that, at its sole cost and expense, Tenant
will comply with all applicable Laws with respect to the Release by Tenant, its
agents, employees, contractors or invitees of such permitted Hazardous
Materials. Any Release beyond the scope allowed in this paragraph shall be
subject to Landlord’s prior consent, which may be withheld in Landlord’s sole
and absolute discretion, and shall require an amendment to the Lease in the
event Landlord does consent which shall set forth the materials, scope of use,
indemnification and any other matter required by Landlord in Landlord’s sole
and absolute discretion. Tenant shall indemnify, defend and hold Landlord and
Landlord’s agents harmless from and against any and all claims, losses,
damages, liabilities, or expenses arising in connection with the Release of
Hazardous Materials in violation of Hazardous Materials Laws by Tenant,
Tenant’s agents or any other person using the Premises with Tenant’s knowledge
and consent or authorization. Tenant’s obligation to defend, hold harmless and
indemnify pursuant to this Paragraph 6.4 shall survive Lease Termination.



     The foregoing indemnity shall not apply to, and Tenant shall not be
responsible for, the presence of Hazardous Materials on, under, or about the
Premises or Common Area to the extent caused by any third parties or by
Landlord or Landlord’s employees, agents, contractors or invitees.



     Notwithstanding anything to the contrary contained in this Lease, Landlord
hereby represents and warrants to Tenant that, to the best of Landlord’s
knowledge, (i) the Premises and the Common Area are in compliance with all laws
regarding Hazardous Materials (“Hazardous Materials Laws”); (ii) no
asbestos-containing materials exist in or on the



 









 




Premises or the Common Area; and (iii) any handling, transportation, storage or
use of Hazardous Materials that occurred in the Premises or the Common Area
prior to the Commencement Date is now in compliance with all Hazardous
Materials Laws. Landlord further represents and warrants that, to the best of
Landlord’s knowledge, no litigation has been brought or threatened, nor any
settlements reached with any governmental or private party, concerning the
actual or alleged presence of Hazardous Materials on or about the Premises or
the Common Area, nor has Landlord received any notice of any violation, or
alleged violation, of any Hazardous Materials Laws, pending claims or pending
investigations with respect to the presence of Hazardous Materials on or about
the Premises or the Common Area. Landlord’s representations and warranties set
forth in this paragraph shall survive termination of this Lease.




     As used in this Lease, the term “Hazardous Materials” means any chemical,
substance, waste or material which has been or is hereafter determined by any
federal, state or local governmental authority to be capable of posing risk of
injury to health or safety, including without limitation, those substances
included within the definitions of “hazardous substances,” “hazardous
materials,” “toxic substances,” or “solid waste” under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Hazardous Materials
Transportation Act, as amended, and in the regulations promulgated pursuant to
said laws; those substances defined as “hazardous wastes” in section 25117 of
the California Health & Safety Code, or as “hazardous substances” in section
25316 of the California Health & Safety Code, as amended, and in the
regulations promulgated pursuant to said laws; those substances listed in the
United States Department of Transportation Table (49 CFR 172.101 and amendments
thereto) or designated by the Environmental Protection Agency (or any successor
agency) as hazardous substances (see, e.g., 40 CFR Part 302 and amendments
thereto); such other substances, materials and wastes which are or become
regulated or become classified as hazardous or toxic under any Laws, including
without limitation the California Health & Safety Code, Division 20, and Title
26 of the California Code of Regulations; and any material, waste or substance
which is (i) petroleum, (ii) asbestos, (iii) polychlorinated biphenyls, (iv)
designated as a “hazardous substance” pursuant to section 311 of the Clean
Water Act of 1977, 33 U.S.C. sections 1251 et seq. (33 U.S.C. § 1321) or listed
pursuant to section 307 of the Clean Water Act of 1977 (33 U.S.C. § 1317), as
amended; (v) flammable explosives; (vi) radioactive materials; or (vii) radon
gas.



     Landlord shall have the right, upon reasonable advance notice to Tenant,
to inspect, investigate, sample and/or monitor the Premises and Common Area,
including any soil, water, groundwater, or other sampling, to the extent
reasonably necessary to determine whether Tenant is complying with the terms of
this Lease with respect to Hazardous Materials. Unless a previous inspection
has disclosed a violation by Tenant of the covenants contained in this
Paragraph 6.4, such inspections, investigations, sampling and/or monitoring
shall be performed not more often than semi-annually. In connection therewith,
Tenant shall provide Landlord with reasonable access to all portions of the
Premises; provided, however, that Landlord shall avoid any unreasonable
interference with the operation of Tenant’s business on the Premises. All
costs incurred by Landlord in performing such inspections, investigation,
sampling and/or monitoring shall be reimbursed by Tenant to Landlord as
Additional Rent within ten (10) days after Landlord’s demand for payment.



     During the term of this Lease Landlord shall notify Tenant of any change
Landlord becomes aware of in the status of Hazardous Materials at the Premises,
the Common Areas and the land upon which the Premises and Common Areas are
situated.



     7. Taxes



          7.1 Personal Property Taxes. Tenant shall cause Tenant’s trade fixtures,
equipment, furnishings, furniture, merchandise, inventory, machinery,
appliances and other personal property installed or located on the Premises
(collectively the “personal property”) to be assessed and billed separately
from the Premises. Tenant shall pay before delinquency any and all taxes,
assessments and public charges levied, assessed or imposed upon or against
Tenant’s personal property. If any of Tenant’s personal property shall be
assessed with the real property comprising the Common Area or with the
Premises, Tenant shall pay to Landlord, as Additional Rent, the amounts
attributable to Tenant’s personal property within thirty (30) days after
receipt of a written statement from Landlord setting forth the amount of such
taxes, assessments and public charges attributable to Tenant’s personal
property. Tenant shall comply with the provisions of any Law which requires
Tenant to file a report of Tenant’s personal property located on the Premises.



 









 





          7.2 Other Taxes Payable Separately by Tenant. Tenant shall pay (or
reimburse Landlord, as Additional Rent, if Landlord is assessed), prior to
delinquency or within thirty (30) days after receipt of Landlord’s statement
thereof, any and all taxes, levies, assessments or surcharges payable by
Landlord or Tenant and relating to this Lease or the Premises (other than
Landlord’s net income, succession, transfer, gift, franchise, estate or
inheritance taxes, and Taxes, as that term is defined in Paragraph 7.3(a)
below, payable as an Operating Expense), whether or not now customary or within
the contemplation of the parties hereto, whether or not now in force or which
may hereafter become effective, including but not limited to taxes:



               (a) Upon, allocable to, or measured by the area of the Premises or the
Rentals payable hereunder, including without limitation any gross rental
receipts, excise, or other tax levied by the state, any political subdivision
thereof, city or federal government with respect to the receipt of such
Rentals;



               (b) Upon or with respect to the use, possession, occupancy, leasing,
operation and management of the Premises or any portion thereof;



               (c) Upon this transaction or any document to which Tenant is a party
creating or transferring an interest or an estate in the Premises; or



               (d) Imposed as a means of controlling or abating environmental pollution
or the use of energy or any natural resource (including without limitation gas,
electricity or water), including, without limitation, any parking taxes, levies
or charges or vehicular regulations imposed by any governmental agency. Tenant
shall also pay, prior to delinquency, all privilege, sales, excise, use,
business, occupation, or other taxes, assessments, license fees or charges
levied, assessed or imposed upon Tenant’s business operations conducted at the
Premises.



     In the event any such taxes are payable by Landlord and it shall not be
lawful for Tenant to reimburse Landlord for such taxes, then the Rentals
payable hereunder shall be increased to net Landlord the same net Rental after
imposition of any such tax upon Landlord as would have been payable to Landlord
prior to the imposition of any such tax.



          7.3 Common Taxes.



               (a) Definition of Taxes. The term “Taxes” as used in this Lease shall
collectively mean (to the extent any of the following are not paid by Tenant
pursuant to Paragraphs 7.1 and 7.2 above) all real estate taxes and general and
special assessments (including, but not limited to, assessments for public
improvements or benefit); personal property taxes; taxes based on vehicles
utilizing parking areas on the Common Area; taxes computed or based on rental
income or on the square footage of the Premises (including without limitation
any municipal business tax but excluding federal, state and municipal net
income taxes); environmental surcharges; excise taxes; gross rental receipts
taxes; sales and/or use taxes; employee taxes; water and sewer taxes, levies,
assessments and other charges in the nature of taxes or assessments (including,
but not limited to, assessments for public improvements or benefit); and all
other governmental, quasi-governmental or special district impositions of any
kind and nature whatsoever; regardless of whether any of the foregoing are now
customary or within the contemplation of the parties hereto and regardless of
whether resulting from increased rate and/or valuation, or whether
extraordinary or ordinary, general or special, unforeseen or foreseen, or
similar or dissimilar to any of the foregoing and which during the Lease Term
are laid, levied, assessed or imposed upon Landlord and/or become a lien upon
or chargeable against the Premises and/or Common Area under or by virtue of any
present or future laws, statutes, ordinances, regulations, or other
requirements of any governmental, quasi-governmental or special district
authority whatsoever. The term “environmental surcharges” shall include any
and all expenses, taxes, charges or penalties imposed by the Federal Department
of Energy, Federal Environmental Protection Agency, the Federal Clean Air Act,
or any regulations promulgated thereunder, or imposed by any other local, state
or federal governmental agency or entity now or hereafter vested with the power
to impose taxes, assessments or other types of surcharges as a means of
controlling or abating environmental pollution or the use of energy or any
natural resource in regard to the use, operation or occupancy of the Premises
and/or the Common Area. The term “Taxes” shall include (to the extent the same
are not paid by Tenant pursuant to Paragraphs 7.1 and 7.2 above), without
limitation, all taxes, assessments, levies, fees, impositions or charges



 









 




levied, imposed, assessed, measured, or based in any manner whatsoever upon or
with respect to the use, possession, occupancy, leasing, operation or
management of the Premises and/or Common Area or in lieu of or equivalent to
any Taxes set forth in this Paragraph 7.3(a). In the event any such Taxes are
payable by Landlord and it shall not be lawful for Tenant to reimburse Landlord
for such Taxes, then the Rentals payable hereunder shall be increased to net
Landlord the same net Rental after imposition of any such Tax upon Landlord as
would have been payable to Landlord prior to the imposition of any such Tax.




     Notwithstanding anything to the contrary contained in this Lease, Tenant
shall not be required to pay any portion of any tax or assessment (i) in excess
of the amount which would be payable if the tax or assessment were paid in
installments over the longest possible term; or (ii) imposed on land and
improvements other than the Premises and Common Area. If Tenant shall so
elect, upon prior written notice to Landlord, Tenant shall have the right to
audit any Taxes at its sole cost and expense.



               (b) Operating Expenses. All Taxes which are levied or assessed or which
become a lien upon the Premises and/or Common Area or which become due or
accrue during the Lease Term shall be an Operating Expense, and Tenant shall
pay as Additional Rent each month during the Lease Term 1/12th of such Taxes,
based on Landlord’s estimate thereof, pursuant to Paragraph 12 below. Taxes
during any partial tax fiscal year(s) within the Lease Term shall be prorated
according to the ratio which the number of days during the Lease Term or of
actual occupancy of the Premises by Tenant, whichever is greater, during such
year bears to 365.



     8. Insurance; Indemnity; Waiver.



          8.1 Insurance by Landlord. Landlord shall, during the Lease Term,
procure and keep in force the following insurance, the cost of which shall be
an Operating Expense, payable by Tenant pursuant to Paragraph 12 below:



               (a) Property Insurance. “All risk” property insurance, including,
without limitation, boiler and machinery (if applicable); sprinkler damage;
vandalism; malicious mischief; full coverage plate glass insurance; and
demolition, increased cost of construction and contingent liability from change
in building laws on the Premises and Common Area, including any improvements or
fixtures constructed or installed on the Premises and Common Area by Landlord.
Such insurance shall be in the full amount of the replacement cost of the
foregoing, with reasonable deductible amounts, which deductible amounts shall
be an Operating Expense, payable by Tenant pursuant to Paragraph 12. Such
insurance shall also include rental income insurance, insuring that one hundred
percent (100%) of the Rentals (as the same may be adjusted hereunder) will be
paid to Landlord for a period of up to twelve (12) months if the Premises are
destroyed or damaged, or such longer period as may be required by any
beneficiary of a deed of trust or any mortgagee of any mortgage affecting the
Premises. Such insurance shall not cover any leasehold improvements installed
in the Premises by Tenant at its expense, or Tenant’s equipment, trade fixtures
inventory, fixtures or personal property located on or in the Premises;



               (b) Liability Insurance. Comprehensive general liability (lessor’s risk)
insurance against any and all claims for personal injury, death or property
damage occurring in or about the Premises or Common Area. Such insurance shall
have a combined single limit of not less than Three Million Dollars
($3,000,000) per occurrence and Five Million Dollars ($5,000,000) aggregate;
and



               (c) Other. Such other insurance as Landlord deems necessary and
prudent.



          8.2 Insurance by Tenant. Tenant shall, during the Lease Term, at
Tenant’s sole cost and expense, procure and keep in force the following
insurance:



               (a) Personal Property Insurance. “All risk” property insurance,
including, without limitation, coverage for boiler and machinery (if
applicable); sprinkler damage; vandalism; malicious



 









 




mischief; and demolition, increased cost of construction and contingent
liability from changes in building laws on all leasehold improvements installed
in the Premises by Tenant at its expense (if any), and on all equipment, trade
fixtures, inventory, fixtures and personal property located on or in the
Premises, including improvements or fixtures hereinafter constructed or
installed on the Premises. Such insurance shall be in an amount equal to the
full replacement cost of the aggregate of the foregoing and shall provide
coverage comparable to the coverage in the standard ISO all risk form, when
such form is supplemented with the coverages required above.




               (b) Liability Insurance. Comprehensive general liability insurance for
the mutual benefit of Landlord and Tenant, against any and all claims for
personal injury, death or property damage occurring in or about the Premises
and Common Area, or arising out of Tenant’s or Tenant’s agents’ use of the
Common Area, use or occupancy of the Premises or Tenant’s operations on the
Premises. Such insurance shall have a combined single limit of not less than
One Million Dollars ($1,000,000) per occurrence and Three Million Dollars
($3,000,000) aggregate. Such insurance shall contain a cross-liability
(severability of interests) clause and an extended (“broad form”) liability
endorsement, including blanket contractual coverage. The minimum limits
specified above are the minimum amounts required by Landlord, and may be
revised by Landlord from time to time to meet changed circumstances, including
without limitation to reflect (i) changes in the purchasing power of the
dollar, (ii) changes indicated by the amount of plaintiffs’ verdicts in
personal injury actions in the State of California, or (iii) changes consistent
with the standards required by other landlords in the county in which the
Premises are located. Such liability insurance shall be primary and not
contributing to any insurance available to Landlord, and Landlord’s insurance
(if any) shall be in excess thereto. Such insurance shall specifically insure
Tenant’s performance of the indemnity, defense and hold harmless agreements
contained in Paragraph 8.4, although Tenant’s obligations pursuant to Paragraph
8.4 shall not be limited to the amount of any insurance required of or carried
by Tenant under this Paragraph 8.2(b). Tenant shall be responsible for
insuring that the amount of insurance maintained by Tenant is sufficient for
Tenant’s purposes.



               (c) Other. Such other insurance as required by law, including, without
limitation, workers’ compensation insurance.



               (d) Form of the Policies. The policies required to be maintained by
Tenant pursuant to Paragraphs 8.2(a), (b), and (c) above shall be with
companies, on forms, with deductible amounts (if any), and loss payable clauses
reasonably satisfactory to Landlord, shall include Landlord and the beneficiary
or mortgagee of any deed of trust or mortgage encumbering the Premises and/or
the real property comprising the Common Area as additional insureds, and shall
provide that such parties may, although additional insureds recover for any
loss suffered by Tenant’s negligence. Certified copies of policies or
certificates of insurance shall be delivered to Landlord prior to the
Commencement Date; a new policy or certificate shall be delivered to Landlord
at least ten (10) business days prior to the expiration date of the old policy.
Tenant shall have the right to provide insurance coverage which it is
obligated to carry pursuant to the terms hereof in a blanket policy, provided
such blanket policy expressly affords coverage to the Premises and to Tenant as
required by this Lease. Tenant shall obtain a written obligation on the part
of Tenant’s insurer(s) to notify Landlord and any beneficiary or mortgagee of a
deed of trust or mortgage encumbering the Premises and/or the real property
comprising the Common Area in writing of any delinquency in premium payments
and at least thirty (30) days prior to any cancellation or modification of any
policy. Tenant’s policies shall provide coverage on an occurrence basis and
not on a claims made basis. In no event shall the limits of any policies
maintained by Tenant be considered as limiting the liability of Tenant under
this Lease.



          8.3 Failure by Tenant to Obtain Insurance. If Tenant does not take out the
insurance required pursuant to Paragraph 8.2 or keep the same in full force and
effect, Landlord may, but shall not be obligated to, take out the necessary
insurance and pay the premium therefore, and Tenant shall repay to Landlord, as
Additional Rent, the amount so paid promptly upon demand. In addition,
Landlord may recover from Tenant and Tenant agrees to pay, as Additional Rent,
any and all reasonable expenses (including reasonable attorneys’ fees) and
damages which Landlord may sustain by reason of the failure of Tenant to obtain
and maintain such insurance, it being expressly declared that the expenses and
damages of Landlord shall not be limited to the amount of the premiums thereon.




 










 





          8.4 Indemnification. Tenant shall indemnify, hold harmless, and defend
Landlord with competent counsel reasonably satisfactory to Landlord (except for
Landlord’s negligence or willful misconduct, or that of its agents, employees,
contractors or invitees) against all claims, losses, damages, expenses or
liabilities for injury or death to any person or for damage to or loss of use
of any property arising out of any occurrence in, on or about the Premises or
Common Area, if caused or contributed to by Tenant or Tenant’s agents, or
arising out of any occurrence in, upon or at the Premises or on account of the
use, condition, occupational safety or occupancy of the Premises. Tenant’s
indemnification, defense and hold harmless obligations under this Lease shall
include and apply to reasonable attorneys’ fees, investigation costs, and other
costs actually incurred by Landlord. Tenant shall further indemnify, defend
and hold harmless Landlord from and against any and all claims, losses,
damages, liabilities or expenses arising from any breach or default in the
performance of any obligation on Tenant’s part to be performed under the terms
of this Lease. The provisions of this Paragraph 8.4 shall survive Lease
Termination with respect to any damage, injury, death, breach or default
occurring prior to such termination. Except as set forth in this Paragraph
8.4, this Lease is made on the express condition that Landlord shall not be
liable for, or suffer loss by reason of, injury to person or property, from
whatever cause, in any way connected with the condition, use, occupational
safety or occupancy of the Premises specifically including, without limitation,
any liability for injury to the person or property of Tenant or Tenant’s
agents.



          8.5
Claims by Tenant. Except as expressly provided in Paragraph 8.4,
Landlord shall not be liable to Tenant, and Tenant waives all claims against
Landlord, for injury or death to any person, damage to any property, or loss of
use of any property in the Premises or Common Area by and from all causes,
including without limitation, any defect in the Premises or Common Area and/or
any damage or injury resulting from fire, steam, electricity, gas, water or
rain, which may leak or flow from or into any part of the Premises, or from
breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, whether the damage
or injury results from conditions arising upon the Premises or Common Area or
from other sources. Neither Landlord nor Tenant shall be liable for any
damages arising from any act or negligence of any other user of the Common
Area. Tenant or Tenant’s agents shall immediately notify Landlord in writing
of any known defect in the Premises or Common Area. The provisions of this
Paragraph 8.5 shall not apply to any damage or injury caused by Landlord’s
willful misconduct or negligence, or that of its agents, employees, contractors
or invitees.



          8.6 Mutual Waiver of Subrogation. Landlord hereby releases Tenant, and
Tenant hereby releases Landlord, and their respective officers, agents,
employees and servants, from any and all claims or demands of damages, loss,
expense or injury to the Premises or the Common Area, or to the furnishings,
fixtures, equipment, inventory or other property of either Landlord or Tenant
in, about or upon the Premises or the Common Area, which is caused by or
results from perils, events or happenings which are the subject of insurance
carried by the respective parties pursuant to this Paragraph 8 and in force at
the time of any such loss, whether due to the negligence of the other party or
its agents and regardless of cause or origin; provided, however, that such
waiver shall be effective only to the extent permitted by the insurance
covering such loss, to the extent such insurance is not prejudiced thereby, and
to the extent insured against.



     9. Utilities. Tenant shall pay during the Lease Term and prior to
delinquency all charges for water, gas, light, heat, power, electricity,
telephone or other communication service, janitorial service, trash pick-up,
sewer and all other services supplied to Tenant or consumed by Tenant on the
Premises (collectively the “Services”) and all taxes, levies, fees or
surcharges therefor. Tenant shall arrange for Services to be supplied to the
Premises and shall contract for all of the Services in Tenant’s name prior to
the Commencement Date. The Commencement Date shall not be delayed by reason of
any failure by Tenant to so contract for Services. In the event that any of
the Services cannot be separately billed or metered to the Premises, or if any
of the Services are not separately metered as of the Commencement Date, the
cost of such Services shall be an Operating Expense and Tenant shall pay such
cost to Landlord, as Additional Rent, as provided in Paragraph 12 below, except
that Tenant’s proportionate share of such Services shall be the percentage
obtained by dividing the gross leasable square footage contained in the
Premises by the total gross leasable square footage located in all buildings
utilizing such Services. The lack or shortage of any Services due to any cause
whatsoever (except for a lack or shortage proximately caused by the negligent
acts or willful misconduct Landlord or that of its agents, employees,
contractors or invitees) shall not affect any obligation of Tenant



 









 







hereunder,
and Tenant shall faithfully keep and observe all the terms, conditions and
covenants of this Lease and pay all Rentals due hereunder, all without
diminution, credit or deduction.



     10. Repairs and Maintenance.



          10.1 Landlord’s Responsibilities. Subject to the provisions of
Paragraph 15 below, Landlord shall maintain in reasonably good order and repair
the structural roof, roof membrane, structural and exterior walls (including
painting thereof) and foundations of the Premises. In addition, Landlord shall
maintain the service contract (covering periodic inspection and servicing) for
the heating and air conditioning systems of the Premises. Tenant shall give
prompt written notice to Landlord of any known maintenance work required to be
made by Landlord pursuant to this Paragraph 10.1. The costs of (i) repairs and
maintenance of the roof membrane, (ii) periodic inspection and regular
servicing of the heating and air conditioning systems of the Premises, and
(iii) painting the exterior of the Premises which are the obligation of
Landlord hereunder shall be an Operating Expense and Tenant shall pay such
costs to Landlord as Additional Rent, as provided in Paragraph 12 below. The
costs of maintenance, repair, and replacement of the structural parts of the
Premises (including foundations, floor slab, load bearing walls and roof
structure) which are the obligation of Landlord hereunder shall be at the cost
and expense of Landlord and shall not be an Operating Expense, except for any
repairs required because of the wrongful act of Tenant or Tenant’s agents,
which repairs shall be made at the expense of Tenant and as Additional Rent.



          10.2 Tenant’s Responsibilities. Except as expressly provided in
Paragraph 10.1 above, and subject to the provisions of Paragraph 2.3 above,
Tenant shall, at its sole cost, maintain the entire Premises and every part
thereof, including without limitation, windows, skylights, window frames, plate
glass, freight docks, doors and related hardware, interior walls and
partitions, and the electrical, plumbing, lighting, heating and air
conditioning systems in good order, condition and repair. Tenant’s obligations
with respect to the heating and air conditioning systems of the Premises shall
include the replacement of components thereof. If Tenant fails to make repairs
or perform maintenance work required of Tenant hereunder within fourteen (14)
days after written notice from Landlord specifying the need for such repairs or
maintenance work, Landlord or Landlord’s agents may, in addition to all other
rights and remedies available hereunder or by law and without waiving any
alternative remedies, enter into the Premises and make such repairs and/or
perform such maintenance work. If Landlord makes such repairs and/or performs
such maintenance work, Tenant shall reimburse Landlord upon demand and as
Additional Rent, for the cost of such repairs and/or maintenance work.
Landlord shall use reasonable efforts to avoid causing any inconvenience to
Tenant or interference with the use of the Premises by Tenant or Tenant’s
agents during the performance of any such repairs or maintenance. Landlord
shall have no liability to Tenant for any damage, inconvenience or interference
with the use of the Premises by Tenant or Tenant’s agents as a result of
Landlord performing any such repairs or maintenance (except for the negligent
acts or willful misconduct Landlord or that of its agents, employees,
contractors or invitees). Tenant shall reimburse Landlord, on demand and as
Additional Rent, for the cost of damage to the Premises and/or Common Area
caused by Tenant or Tenant’s agents. Tenant expressly waives the benefits of
any statute now or hereafter in effect (including without limitation the
provisions of subsection 1 of Section 1932, Section 1941 and Section 1942 of
the California Civil Code and any similar law, statute or ordinance now or
hereafter in effect) which would otherwise afford Tenant the right to make
repairs at Landlord’s expense (or to deduct the cost of such repairs from
Rentals due hereunder) or to terminate this Lease because of Landlord’s failure
to keep the Premises in good and sanitary order.



     11. Common Area.



          11.1 In General. Subject to the terms and conditions of this Lease and
such rules and regulations as Landlord may from time to time prescribe, Tenant
and Tenant’s agents shall have the nonexclusive right to use during the Lease
Term the access roads, sidewalks, landscaped areas and other facilities on the
Common Area. This right to use the Common Area shall terminate upon Lease
Termination. Neither Tenant nor Tenant’s agents shall at any time park or
permit the parking of their vehicles in any portion of the Common Area not
designated by Landlord as a parking area.



     Landlord reserves the right to promulgate such reasonable rules and
regulations relating to the use of all or any portion of the Common Area and to
amend such rules and regulations from time to time, with or without advance
notice,



 









 







as Landlord may deem appropriate. Any amendments to the rules and
regulations shall be effective as to Tenant, and binding on Tenant, upon
delivery of a copy of such rules and regulations to Tenant. Tenant and
Tenant’s agents shall observe such rules and regulations and any failure by
Tenant or Tenant’s agents to observe and comply with the rules and regulations
shall be a Default by Tenant. Landlord shall not be responsible for the
nonperformance of the rules and regulations by any tenants or occupants of the
buildings or improvements which now exist or may hereafter be constructed upon
the Common Area or upon the real property owned by Landlord adjacent to the
Common Area or by any other user authorized by Landlord.



     Provided that Tenant’s use, occupancy and enjoyment of the Premises or
access to the Premises is not unreasonably interfered with, Landlord shall have
the right to close, at reasonable times, all or any portion of the
Common Area for any reasonable purpose, including without limitation, the
prevention of a dedication thereof, or the accrual of rights of any person or
public therein.



          11.2 Maintenance by Landlord. Landlord shall maintain the Common Area
in good repair and condition and shall manage the Common Area to reasonable and
customary standards. The expenditures for such maintenance shall be at the
reasonable discretion of Landlord. The cost of such maintenance shall be an
“Operating Expense”, and Tenant shall pay such costs to Landlord, as Additional
Rent, as provided in Paragraph 12 below. Alternatively, Landlord may elect at
any time, at its option, to require Tenant to operate, manage and maintain all
or any portion of the Common Area. If Landlord so elects, Tenant shall
operate, manage and maintain that portion of the Common Area designated by
Landlord at Tenant’s sole cost and expense.



     12. Operating Expenses.



          12.1 Definition. “Operating Expense” or “Operating Expenses” as used in
this Lease shall mean and include all items identified in other paragraphs of
this Lease as an Operating Expense and the total cost paid or incurred by
Landlord for the operation, maintenance, repair, and management of the Premises
and Common Area, which costs shall include, without limitation: the cost of
Services and utilities supplied to the Premises and Common Area (to the extent
the same are not separately charged or metered to Tenant); water; sewage; trash
removal; fuel; electricity; heat; lighting systems; professional management fee
(not to exceed three percent (3%) of the Premises’ gross rental income); fire
protection systems; storm drainage and sanitary sewer systems; periodic
inspection and regular servicing of the heating and air conditioning systems of
the Premises; maintaining, repairing and replacing the roof membrane; property
and liability insurance covering the Premises and any other insurance carried
by Landlord pursuant to Paragraph 8 above; window cleaning; cleaning, sweeping,
striping, resurfacing of parking and driveway areas; cleaning the Common Area
following storms or other severe weather; cleaning and repairing of sidewalks,
curbs, stairways; costs related to irrigation systems; the cost of complying
with Laws, including, without limitation, maintenance, alterations and repairs
required in connection therewith (subject to the provisions of Paragraph 12.3
hereof); costs related to landscape maintenance; and the cost of contesting the
validity or applicability of any governmental enactments which may affect
Operating Expenses. If the Common Area is used by more than one (1) building
at any time during the Lease Term, then the term “Operating Expenses” shall
mean and include all of the Operating Expenses allocable to the Premises and a
proportionate share (based on the square footage of gross leasable area in the
Premises as a percentage of the total of square footage of gross leasable area
of the buildings utilizing the Common Area at the time in question) of all
Operating Expenses which are related to such buildings in general and are not
allocated to any one building utilizing the Common Area. Operating Expenses
shall not include any accounting fee by Landlord. The cost of (i) capital
repair items (i.e., items which Landlord is required to capitalize and not
expense in the current year for federal income tax purposes), (ii) replacement
of the roof membrane, (iii) resurfacing the parking lot, and (iv) repainting
the exterior of the Premises, shall be amortized at ten percent (10%) over the
useful life of the repair or item, and be paid monthly by Tenant from the date
of installation or repair through Lease Termination.



     The specific examples of Operating Expenses stated in this Paragraph 12.1
are in no way intended to and shall not limit the costs comprising Operating
Expenses, nor shall such examples be deemed to obligate Landlord to incur such
costs or to provide such services or to take such actions except as Landlord
may be expressly required in other portions of this Lease, or except as
Landlord, in its reasonable discretion, may elect. All reasonable costs
incurred by



 









 







Landlord in good faith for the operation, maintenance, repair and
management of the Premises and Common Area shall be deemed conclusively binding
on Tenant.



     Notwithstanding anything to the contrary contained in this Lease, within
thirty (30) days after receipt by Tenant of Landlord’s statement of Operating
Expenses prepared pursuant to Paragraph 12.2 hereof for any prior annual period
during the Lease Term, Tenant or its authorized representative shall have the
right to inspect the books of Landlord during the business hours of Landlord at
Landlord’s office or, at Landlord’s option, such other location as Landlord
reasonably may specify, for the purpose of verifying the information contained
in the statement. Unless Tenant asserts specific errors within thirty (30)
days after receipt of the statement, the statement shall be deemed correct as
between Landlord and Tenant, except as to individual components subsequently
determined to be in error by future audit.



          12.2 Payment of Operating Expenses by Tenant. Prior to the Commencement
Date, and annually thereafter, Landlord shall deliver to Tenant an estimate of
Operating Expenses for the succeeding year. Tenant’s payment of Operating
Expenses shall be based upon Landlord’s estimate of Operating Expenses and
shall be payable in equal monthly installments in advance on the first day of
each calendar month commencing on the date
specified in Paragraph 1.6 and continuing throughout the Lease Term. Tenant
shall pay the Operating Expenses to Landlord as Additional Rent and without
deduction or offset.



     Landlord shall revise its estimate of Operating Expenses on an annual
basis, and Landlord may adjust the amount of Tenant’s monthly installment in
the event of a material change in Operating Expenses during any year. Landlord
shall furnish Tenant an annual statement (and a statement within one hundred
eighty (180) days after Lease Termination) showing the actual Operating
Expenses for the period to which Landlord’s estimate pertains and shall
concurrently either bill Tenant for the balance due (payable upon demand by
Landlord) or credit Tenant’s account for the excess previously paid.



     Alternatively, Operating Expenses actually incurred or paid by Landlord
but not theretofore billed to Tenant, as invoiced by Landlord, shall be payable
by Tenant within ten (10) days after receipt of Landlord’s invoice, but not
more often than once each calendar month.



          12.3 Exclusions From Common Area Charges. Notwithstanding anything to
the contrary contained in this Lease, in no event shall Tenant have any
obligation to perform, to pay directly, or to reimburse Landlord for, all or
any portion of the following repairs, maintenance, improvements, replacements,
premiums, claims, losses, fees, commissions, charges, disbursements, attorneys’
fees, experts’ fees, costs and expenses (collectively, “Costs”).



               (a) Losses Caused by Others and Construction Defects. Costs occasioned
by the act, omission or violation of Law by Landlord, or Landlord’s agents,
employees or contractors, or Costs to correct any construction defect in the
Premises (other than alterations constructed by Tenant), or costs arising out
of the failure to construct the Premises, tenant improvements installed by
Landlord pursuant to Paragraph 2.2, or Common Areas in accordance with Laws and
private restrictions applicable at the time of construction thereof.



               (b) Condemnation Costs. Costs occasioned by the exercise of the power of
eminent domain.



               (c) Reimbursable Expenses. Costs for which Landlord has a right of
reimbursement from others, or Costs which Tenant pays directly to a third
person.



               (d) Reserves. Depreciation, amortization or other expense reserves.



 









 





               (e) Mortgages. Interest, charges and fees incurred on debt, payments or
mortgages and rent under ground leases.



               (f) Hazardous Materials. Costs incurred to investigate the presence of
any Hazardous Material, Costs to respond to any claim of Hazardous Material
contamination or damage, Costs to remove any Hazardous Material from the
Premises or Common Area or to remediate any Hazardous Material contamination,
and any judgments or other Costs incurred in connection with any Hazardous
Material exposure or release, except to the extent such Costs are incurred by
Landlord in accordance with Paragraph 6.4 or incurred by Landlord or caused by
reason of the storage, use or disposal of the Hazardous Material in question by
Tenant, its agents, employees, contractors or invitees.



               (g) Management. Any fee, profit or compensation retained by Landlord or
its affiliates for management and administration of the Premises in excess of
the management fee specified in Paragraph 12.1, or any accounting fee.



               (h) Capital Improvements Required by Law. Costs for structural
alterations required by Law that do not relate solely to Tenant’s particular
use or occupancy of the Premises, and Costs of retrofitting any part of the
Common Area in order to comply with the ADA (other than as may be required in
connection with the improvements installed by Landlord pursuant to Paragraph
2.2.).



     13. Alterations and Improvements.



          13.1 In General. Tenant shall not make, or permit to be made, any
alterations, removals, changes, enlargements, improvements or additions
(collectively “Alterations”) in, on, about or to the Premises, or any part
thereof, including Alterations required pursuant to Paragraph 6.2, without the
prior written consent of Landlord (which consent shall not be unreasonably
withheld or delayed) and without acquiring and complying with the conditions of
all permits required for such Alterations by any governmental authority having
jurisdiction thereof. The term “Alterations” as used in this Paragraph 13
shall also include all heating, lighting, electrical (including all wiring,
conduit, outlets, drops, buss ducts, main and subpanels), air conditioning, and
partitioning in the Premises made by Tenant, regardless of how affixed to the
Premises. As a condition to the giving of its consent, Landlord may impose
such reasonable requirements as Landlord reasonably may deem necessary,
including without limitation, the manner in which the work is done; a right of
approval of the contractor by whom the work is to be performed; the requirement
that Tenant post a completion bond in an amount and form reasonably
satisfactory to Landlord; and the requirement that Tenant reimburse Landlord,
as Additional Rent, for Landlord’s actual costs for outside consultants
incurred in reviewing any proposed Alteration, whether or not Landlord’s
consent is granted. In the event Landlord consents to the making of any
Alterations by Tenant, the same shall be made by Tenant at Tenant’s sole cost
and expense, in accordance with the plans and specifications approved by
Landlord. Tenant shall give written notice to Landlord five (5) days prior to
employing any laborer or contractor to perform services related to, or
receiving materials for use upon the Premises, and prior to the commencement of
any work of improvement on the Premises. Any Alterations to the Premises made
by Tenant shall be made in accordance with applicable Laws and in a first-class
workmanlike manner. Tenant further agrees to provide Landlord with updated CAD
architectural drawings whenever any Alterations are completed. In making any
such Alterations, Tenant shall, at Tenant’s sole cost and expense, file for and
secure and comply with any and all permits or approvals required by any
governmental departments or authorities having jurisdiction thereof and any
utility company having an interest therein. In no event shall Tenant make any
structural changes to the Premises or make any changes to the Premises which
would weaken or impair the structural integrity of the Premises.



 









 





          13.2 Removal Upon Lease Termination. At the time Tenant requests
Landlord’s consent for extraordinary Alterations not in the nature of regular
office or research and development Alterations (“Extraordinary Improvements”),
Tenant shall request a decision from Landlord in writing as to whether Landlord
will require Tenant, at Tenant’s expense, to remove any such Extraordinary
Improvements and restore the Premises to their prior condition at Lease
Termination. In the event Tenant fails to earlier obtain Landlord’s written
decision as to whether Tenant will be required to remove any Extraordinary
Improvements, then no less than ninety (90) nor more than one hundred twenty
(120) days prior to the expiration of the Lease Term, Tenant by written notice
to Landlord shall request Landlord to inform Tenant whether or not Landlord
desires to have any of such Extraordinary Improvements by Tenant removed at
Lease Termination. Following receipt of such notice, Landlord may elect to
have all or a portion of such Extraordinary Improvements removed from the
Premises at Lease Termination, and Tenant shall, at its sole cost and expense,
remove at Lease Termination such Extraordinary Improvements designated by
Landlord for removal and repair all damage to the Premises and Common Area
arising from such removal. In the event Tenant fails to so request Landlord’s
decision or fails to remove any such Extraordinary Improvements designated by
Landlord for removal, Landlord may remove any Extraordinary Improvements made
to the Premises by Tenant and repair all damage to the Premises and Common Area
arising from such removal, and may recover from Tenant all reasonable costs and
expenses incurred thereby. Tenant’s obligation to pay such costs and expenses
to Landlord shall survive Lease Termination. Unless Landlord elects to have
Tenant remove (or, upon Tenant’s failure to obtain Landlord’s decision,
Landlord removes) any such Extraordinary Improvements, all such Extraordinary
Improvements, except for moveable furniture, personal property and equipment,
and trade fixtures of Tenant not affixed to the Premises, shall become the
property of Landlord upon Lease Termination (without any payment therefore) and
remain upon and be surrendered with the Premises at Lease Termination.



          13.3 Landlord’s Improvements. All fixtures, improvements or equipment
which are installed, constructed on or attached to the Premises or Common Area
by Landlord shall be a part of the realty and belong to Landlord.



     14. Default and Remedies.



          14.1 Events of Default. The term “Default by Tenant” as used in this
Lease shall mean the occurrence of any of the following events:



               (a) Tenant’s failure to pay when due any Rentals;



               (b) Commencement and continuation for at least sixty (60) days of any
case, action or proceeding by, against or concerning Tenant under any federal
or state bankruptcy, insolvency or other debtor’s relief law, including without
limitation, (i) a case under Title 11 of the United States Code concerning
Tenant, whether under Chapter 7, 11, or 13 of such Title or under any other
Chapter, or (ii) a case, action or proceeding seeking Tenant’s financial
reorganization or an arrangement with any of Tenant’s creditors;



               (c) Voluntary or involuntary appointment of a receiver, trustee, keeper,
or other person who takes possession for more than sixty (60) days of
substantially all of Tenant’s assets or of any asset used in Tenant’s business
on the Premises, regardless of whether such appointment is as a result of
insolvency or any other cause;



               (d) Execution of an assignment for the benefit of creditors of
substantially all assets of Tenant available by law for the satisfaction of
judgment creditors;



               (e) Commencement of proceedings for winding up or dissolving (whether
voluntary or involuntary) the entity of Tenant, if Tenant is a corporation or a
partnership;



               (f) Levy of a writ of attachment or execution on Tenant’s interest under
this Lease, if such writ continues for a period of thirty (30) days;



 









 





               (g) Transfer or attempted Transfer of this Lease or the Premises by Tenant
contrary to the provisions of Paragraph 24 below; or



               (h) Breach by Tenant of any term, covenant, condition, warranty, or other
provision contained in this Lease or of any other obligation owing or due to
Landlord.



          14.2 Remedies. Upon any Default by Tenant, Landlord shall have the
following remedies, in addition to all other rights and remedies provided by
law, to which Landlord may resort cumulatively, or in the alternative:



               14.2.1 Termination. Upon any Default by Tenant, Landlord shall have the
right (but not the obligation) to give written notice to Tenant of such default
and terminate this Lease and Tenant’s right to possession of the Premises if
(i) such default is in the payment of Rentals and is not cured within seven (7)
days after any such notice, or, (ii) with respect to the defaults referred to
in subparagraphs 14.1(d), (e), (g) and (h), such default is not cured within
thirty (30) days after any such notice (or if a default under subparagraph
14.1(h) cannot be reasonably cured within thirty (30) days, if Tenant does not
commence to cure the default within the thirty (30) day period or does not
diligently and in good faith prosecute the cure to completion), or, (iii) with
respect to the defaults specified in subparagraphs 14.1(b), (c) and (f), such
default is not cured within the respective time periods specified in those
subparagraphs. The parties agree that any notice given by Landlord to Tenant
pursuant to this Paragraph 14.2.1 shall be sufficient notice for purposes of
California Code of Civil Procedure Section 1161 and Landlord shall not be
required to give any additional notice in order to be entitled to commence an
unlawful detainer proceeding. Upon termination of this Lease and Tenant’s
right to possession of the Premises, Landlord shall have the right to recover
from Tenant:



                    (a) The worth at the time of award of the unpaid Rentals which had been
earned at the time of termination;



                    (b) The worth at the time of award of the amount by which the Rentals
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that Tenant proves could have been reasonably
avoided;



                    (c) The worth at the time of award (computed by discounting at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent) of the amount by which the Rentals for the balance of the
Lease Term after the time of award exceed the amount of such rental loss that
Tenant proves could be reasonably avoided;



                    (d) Any other amounts necessary to compensate Landlord for all detriment
proximately caused by the Default by Tenant or which in the ordinary course of
events would likely result, including without limitation the following:



                         (i) Expenses in retaking possession of the Premises;



                         (ii) Expenses for cleaning, repairing or restoring the Premises;



                         (iii) Any unamortized real estate brokerage commission paid in connection
with this Lease;



                         (iv) Expenses for removing, transporting, and storing any of Tenant’s
property left at the Premises (although Landlord shall have no obligation to
remove, transport, or store any such property);



 









 





                         (v) Expenses of reletting the Premises, including without limitation,
brokerage commissions and reasonable attorneys’ fees;



                         (vi) Reasonable attorneys’ fees and court costs; and



                         (vii) Costs of carrying the Premises such as repairs, maintenance, taxes
and insurance premiums, utilities and security precautions (if any).



                    (e) The “worth at the time of award” of the amounts referred to in
subparagraphs (a) and (b) of this Paragraph 14.2.1 is computed by allowing
interest at an annual rate equal to the greater of: ten percent (10%); or five
percent (5%) plus the rate established by the Federal Reserve Bank of San
Francisco, as of the twenty-fifth (25th) day of the month immediately preceding
the Default by Tenant, on advances to member banks under Sections 13 and 13(a)
of the Federal Reserve Act, as now in effect or hereafter from time to time
amended, not to exceed the maximum rate allowable by law.



               14.2.2 Continuance of Lease. Upon any Default by Tenant and unless and
until Landlord elects to terminate this Lease pursuant to Paragraph 14.2.1
above, this Lease shall continue in effect after the Default by Tenant and
Landlord may enforce all its rights and remedies under this Lease, including
without limitation, the right to recover payment of Rentals as they become due.
Neither efforts by Landlord to mitigate damages caused by a Default by Tenant
nor the acceptance of any Rentals shall constitute a waiver by Landlord of any
of Landlord’s rights or remedies, including the rights and remedies specified
in Paragraph 14.2.1 above.



     15. Damage or Destruction.



          15.1 Definition of Terms. For the purposes of this Lease, the term: (a)
“Insured Casualty” means damage to or destruction of the Premises from a cause
actually insured against, or required by this Lease to be insured against, for
which the insurance proceeds paid or made available to Landlord are sufficient
to rebuild or restore the Premises under then-existing building codes to the
condition existing immediately prior to the damage or destruction; and (b)
“Uninsured Casualty” means damage to or destruction of the Premises from a
cause not actually insured against, or not required to be insured against, or
from a cause actually insured against but for which the insurance proceeds paid
or made available to Landlord are for any reason insufficient to rebuild or
restore the Premises under then-existing building codes to the condition
existing immediately prior to the damage or destruction, or from a cause
actually insured against but for which the insurance proceeds are not paid or
made available to Landlord within ninety (90) days of the event of damage or
destruction.



          15.2 Insured Casualty.



               15.2.1 Rebuilding Required. In the event of an Insured Casualty where the
extent of damage or destruction is less than twenty-five percent (25%) of the
then full replacement cost of the Premises, Landlord shall rebuild or restore
the Premises to the condition existing immediately prior to the damage or
destruction, provided the damage or destruction was not a result of a negligent
or willful act of Tenant, and that there exist no governmental codes or
regulations that would interfere with Landlord’s ability to so rebuild or
restore.



               15.2.2 Landlord’s Election. In the event of an Insured Casualty where the
extent of damage or destruction is equal to or greater than twenty-five percent
(25%) of the then full replacement cost of the Premises, Landlord may, at its
option and at its sole discretion, rebuild or restore the Premises to the
condition existing immediately prior to the damage or destruction, or terminate
this Lease. Landlord shall notify Tenant in writing within sixty (60) days
after the event of damage or destruction of Landlord’s election to either
rebuild or restore the Premises or terminate this Lease.



 









 





               15.2.3 Continuance of Lease. If Landlord is required to rebuild or
restore the Premises pursuant to Paragraph 15.2.1 or if Landlord elects to
rebuild or restore the Premises pursuant to Paragraph 15.2.2, this Lease shall
remain in effect and Tenant shall have no claim against Landlord for
compensation for inconvenience or loss of business during any period of repair
or restoration.



          15.3 Uninsured Casualty.



               15.3.1 Landlord’s Election. In the event of an Uninsured Casualty,
Landlord may, at its option and at its sole discretion (i) rebuild or restore
the Premises as soon as reasonably possible at Landlord’s expense (unless the
damage or destruction was caused by a negligent or willful act of Tenant, in
which event Tenant shall pay all costs of rebuilding or restoring), in which
event this Lease shall continue in full force and effect or (ii) terminate this
Lease, in which event Landlord shall give written notice to Tenant within sixty
(60) days after the event of damage or destruction of Landlord’s election to
terminate this Lease as of the date of the event of damage or destruction, and
if the damage or destruction was caused by a negligent or willful act of
Tenant, Tenant shall be liable therefore to Landlord.



               15.3.2 Tenant’s Ability to Continue Lease. If Landlord elects to
terminate this Lease and the extent of damage or destruction is less than
twenty-five percent (25%) of the then full replacement cost of the Premises or
the proceeds paid or made available to Landlord are for any reason insufficient
to rebuild or restore the Premises under then-existing building codes to the
condition existing immediately prior to the damage or destruction, and if there
exist no governmental codes or regulations that would interfere with Landlord’s
ability to so repair or restore, then Tenant may nevertheless cause the Lease
to continue in effect by (i) notifying Landlord in writing within ten (10) days
after Landlord’s notice of termination of Tenant’s agreement to pay all costs
of rebuilding or restoring not covered by insurance, and (ii) providing
Landlord with reasonable security for or assurance of such payment. Tenant
shall pay to Landlord in cash no later than thirty (30) days prior to the date
of commencement of construction the reasonable estimated cost of rebuilding or
restoring. In the event Tenant fails to pay such cost to Landlord by the date
specified, Landlord may immediately terminate the Lease and recover from Tenant
all reasonable costs incurred by Landlord in preparation for construction. If
the actual cost of rebuilding or restoring exceeds the estimated cost of such
work, Tenant shall pay the difference to Landlord in cash upon notification by
Landlord of the final cost. If the cost of rebuilding or restoring is less
than the estimated cost of such work, Tenant shall be entitled to a refund of
the difference upon completion of the rebuilding or restoring and determination
of final cost.



          15.4 Tenant’s Election. Notwithstanding anything to the contrary
contained in this Paragraph 15, Tenant may elect to terminate this Lease in the
event the Premises are damaged or destroyed and, in the reasonable opinion of
Landlord’s architect or construction consultants, the restoration of the
Premises cannot be substantially completed within one hundred eighty (180) days
after the event of damage or destruction. Tenant’s election shall be made by
written notice to Landlord within ten (10) days after Tenant receives from
Landlord the estimate of the time needed to complete repair or restoration of
the Premises. If Tenant does not deliver said notice within said ten (10) day
period, Tenant may not later terminate this Lease even if substantial
completion of the rebuilding or restoration occurs subsequent to said one
hundred eighty (180) day period, provided that Landlord is proceeding with
diligence to rebuild or restore the Premises. If Tenant delivers said notice
within said ten (10) day period, this Lease shall terminate as of the date of
the event of damage or destruction.



          15.5 Damage or Destruction Near End of Lease Term. Notwithstanding
anything to the contrary contained in this Paragraph 15, in the event the
Premises are damaged or destroyed in whole or in part (regardless of the extent
of damage) from any cause during the last twelve (12) months of the Lease Term,
Landlord or Tenant may, at its option, terminate this Lease as of the date of
the event of damage or destruction by giving written notice to the other of its
election to do so within thirty (30) days after the event of such damage or
destruction. For purposes of this Paragraph 15.5, if Tenant has been granted
an option to extend or renew the Lease Term pursuant to
another provision of this Lease, then the damage or destruction shall be deemed
to have occurred during the last twelve (12) months of the Lease Term if Tenant
fails to exercise its option to extend or renew within twenty (20) days after
the event of damage or destruction.



 









 





          15.6 Termination of Lease. If the Lease is terminated pursuant to this
Paragraph 15, the unused balance of the Security Deposit shall be refunded to
Tenant. The current Rent shall be proportionately reduced during the period
following the event of damage or destruction until the date on which Tenant
surrenders the Premises, based upon the extent to which the damage or
destruction interferes with Tenant’s business conducted in the Premises, as
reasonably determined by Landlord and Tenant, to the extent such loss is
covered as an insured peril by the insurance carried by Landlord pursuant to
Paragraph 8.1. All other Rentals due hereunder shall continue unaffected
during such period. The proceeds of insurance carried by Tenant pursuant to
Paragraph 8.2 shall be paid to Landlord and Tenant, as their interests appear.



          15.7 Abatement of Rentals. If the Premises are to be rebuilt or restored
pursuant to this Paragraph 15, the then current Rentals shall be
proportionately reduced during the period of repair or restoration, based upon
the extent to which the making of repairs interferes with Tenant’s business
conducted in the Premises, as reasonably determined by Landlord and Tenant, to
the extent such loss is covered as an insured peril by the insurance carried,
or required to be carried, by Landlord pursuant to Paragraph 8.1.



          15.8 Liability for Personal Property. Except for the negligent acts or
willful misconduct Landlord or that of its agents, employees, contractors or
invitees, in no event shall Landlord have any liability for, nor shall it be
required to repair or restore, any injury or damage to any Alterations to the
Premises made by Tenant, trade fixtures, equipment, merchandise, furniture, or
any other property installed by Tenant or at the expense of Tenant. If
Landlord or Tenant do not elect to terminate this Lease pursuant to this
Paragraph 15, Tenant shall be obligated to promptly rebuild or restore the same
to the condition existing immediately prior to the damage or destruction in
accordance with the provisions of Paragraph 13.1.



          15.9 Waiver of Civil Code Remedies. Landlord and Tenant acknowledge that
the rights and obligations of the parties upon damage or destruction of the
Premises are as set forth herein; therefore Tenant hereby expressly waives any
rights to terminate this Lease upon damage or destruction of the Premises,
except as specifically provided by this Lease, including without limitation any
rights pursuant to the provisions of Subdivision 2 of Section 1932 and
Subdivision 4 of Section 1933 of the California Civil Code, as amended from
time to time, and the provisions of any similar law hereinafter enacted, which
provisions relate to the termination of the hiring of a thing upon its
substantial damage or destruction.



     16. Condemnation.



          16.1 Definition of Terms. For the purposes of this Lease, the term: (a)
“Taking” means a taking of the Premises or Common Area or damage related to the
exercise of the power of eminent domain and includes, without limitation, a
voluntary conveyance, in lieu of court proceedings, to any agency, authority,
public utility, person or corporate entity empowered to condemn property; (b)
“Total Taking” means the Taking of the entire Premises or so much of the
Premises or Common Area as to prevent or substantially impair the use thereof
by Tenant for the uses herein specified; provided, however, that in no event
shall the Taking of less than twenty percent (20%) of the Premises be
considered a Total Taking; (c) “Partial Taking” means the Taking of only a
portion of the Premises or Common Area which does not constitute a Total
Taking; (d) “Date of Taking” means the date upon which the title to the
Premises or Common Area or a portion thereof, passes to and vests in the
condemnor or the effective date of any order for possession if issued prior to
the date title vests in the condemnor; and (e) “Award” means the amount of any
award made, consideration paid, or damages ordered as a result of a Taking.



 









 





          16.2 Rights. The parties agree that in the event of a Taking all rights
between them or in and to an Award shall be as set forth herein.



          16.3 Total Taking. In the event of a Total Taking during the Lease Term:
(a) the rights of Tenant under this Lease and the leasehold estate of Tenant in
and to the Premises shall cease and terminate as of the Date of Taking; (b)
Landlord shall refund to Tenant any prepaid Rent and the unused balance of the
Security Deposit; (c) Tenant shall pay Landlord any Rentals due Landlord under
the Lease, prorated as of the Date of Taking; (d) to the extent the Award is
not payable to the beneficiary or mortgagee of a deed of trust or mortgage
affecting the Premises, Tenant shall receive from the Award those portions of
the Award attributable to trade fixtures of Tenant; and (e) the remainder of
the Award shall be paid to and be the property of Landlord. Nothing contained
in this Paragraph 16.3 shall be deemed to deny Tenant its right to recover
awards made by the condemning authority for moving costs, relocation costs, and
costs attributable to goodwill and leasehold improvements installed by Tenant.



          16.4 Partial Taking. In the event of a Partial Taking during the Lease
Term: (a) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the portion of the Premises taken shall cease and terminate as
of the Date of Taking; (b) from and after the Date of Taking the Rent shall be
an amount equal to the product obtained by multiplying the then current Rent by
the quotient obtained by dividing the fair market value of the Premises
immediately after the Taking by the fair market value of the Premises
immediately prior to the Taking; (c) to the extent the Award is not payable to
the beneficiary or mortgagee of a deed of trust or mortgage affecting the
Premises, Tenant shall receive from the Award the portions of the Award
attributable to trade fixtures of Tenant; and (d) the remainder of the Award
shall be paid to and be the property of Landlord. Each party waives the
provisions of California Code of Civil Procedure Section 1265.130 allowing
either party to petition the Superior Court to terminate this Lease in the
event of a Partial Taking. Nothing contained in this Paragraph 16.4 shall be
deemed to deny Tenant its right to recover awards made by the condemning
authority for moving costs, relocation costs, and costs attributable to
goodwill and leasehold improvements installed by Tenant.



     17. Liens.



          17.1 Premises to Be Free of Liens. Tenant shall pay for all labor and
services performed for, and all materials used by or furnished to Tenant,
Tenant’s agents, or any contractor employed by Tenant with respect to the
Premises. Tenant shall indemnify, defend and hold Landlord harmless from and
keep the Premises and Common Area free from any liens, claims, demands,
encumbrances, or judgments, including all costs, liabilities and attorneys’
fees with respect thereto, created or suffered by reason of any labor or
services performed for, or materials used by or furnished to Tenant or Tenant’s
agents or any contractor employed by Tenant with respect to the Premises.
Landlord shall have the right, at all times, to post and keep posted on the
Premises any notices permitted or required by law, or which Landlord shall deem
proper, for the protection of Landlord and the Premises and Common Area, and
any other party having an interest therein, from mechanics’ and materialmen’s
liens, including without limitation a notice of non-responsibility. In the
event Tenant is required to post an improvement bond with a public agency in
connection with any work performed by Tenant on or to the Premises, Tenant
shall include Landlord as an additional obligee.



          17.2 Notice of Lien; Bond. Should any claims of lien be filed against, or
any action be commenced affecting, the Premises, Tenant’s interest in the
Premises or the Common Area, Tenant shall give Landlord notice of such lien or
action within five (5) business days after Tenant receives notice of the filing
of the lien or the commencement of the action. In the event that Tenant shall
not, within twenty (20) days following the imposition of any such lien, cause
such lien to be released of record by payment or posting of a proper bond,
Landlord shall have, in addition to all other remedies provided herein and by
law, the right, but not the obligation, to cause the same to be released by
such means as Landlord shall deem proper, including payment of the claim giving
rise to such lien or posting of a proper bond. All such sums paid by Landlord
and all expenses incurred by Landlord in connection therewith, including
attorneys’ fees and costs, shall be payable to Landlord by Tenant as Additional
Rent on demand.



 









 





     18. Landlord’s Right of Access to Premises. Landlord reserves and shall
have the right and Tenant and Tenant’s agents shall permit Landlord and
Landlord’s agents to enter the Premises at any reasonable time during normal
business hours (except in the event of an emergency) and subject to any
security measures of Tenant that are applied to visitors to the Premises on a
non-discriminatory basis for the purpose of (i) inspecting the Premises, (ii)
performing Landlord’s maintenance and repair responsibilities set forth herein,
(iii) posting notices of non-responsibility, (iv) placing upon the Premises at
any time “For Sale” signs, (v) placing on the Premises ordinary “For Lease”
signs at any time
within one hundred eighty (180) days prior to Lease Termination, or at any time
Tenant is in uncured default hereunder, or at such other times as agreed to by
Landlord and Tenant, (vi) protecting the Premises in the event of an emergency,
and (vii) exhibiting the Premises to prospective purchasers or lenders at any
reasonable time or to prospective tenants within one hundred eighty (180) days
prior to Lease Termination. In the event of an emergency, Landlord shall have
the right to use any and all means which Landlord reasonably may deem proper to
gain access to the Premises. Any entry to the Premises by Landlord or
Landlord’s agents in accordance with this Paragraph 18 or any other provision
of this Lease shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into, or a detainer of the Premises, or an eviction
of Tenant from the Premises or any portion thereof nor give Tenant the right to
abate the Rentals payable under this Lease. Except to the extent caused by the
negligence or willful misconduct of Landlord, its agents, employees,
contractors or invitees, Tenant hereby waives any claims for damages for any
injury or inconvenience to or interference with Tenant’s business, any loss of
occupancy or quiet enjoyment of the Premises, and any other loss occasioned by
Landlord’s or Landlord’s agents’ entry into the Premises as permitted by this
Paragraph 18 or any other provision of this Lease. Notwithstanding anything to
the contrary contained in this Lease, Landlord and Landlord’s agents, except in
the case of emergency, shall provide Tenant with twenty-four (24) hours’ notice
prior to entry of the Premises. Any entry by Landlord and Landlord’s agents
shall not impair Tenant’s operations more than reasonably necessary, and Tenant
shall have the right to have an employee accompany Landlord at all times that
Landlord is present on the Premises.



     19. Landlord’s Right to Perform Tenant’s Covenants. Except as otherwise
expressly provided herein, if Tenant shall at any time fail to make any payment
or perform any other act required to be made or performed by Tenant under this
Lease, Landlord may upon ten (10) days written notice to Tenant, but shall not
be obligated to and without waiving or releasing Tenant from any obligation
under this Lease, make such payment or perform such other act to the extent
that Landlord may deem desirable, and in connection therewith, pay expenses and
employ counsel. All reasonable sums so paid by Landlord and all penalties,
interest and reasonable costs in connection therewith shall be due and payable
by Tenant as Additional Rent upon demand.



     20. Lender Requirements.



          20.1 Subordination. This Lease, at Landlord’s option, shall be subject
and subordinate to the lien of any mortgages or deeds of trust (including all
advances thereunder, renewals, replacements, modifications, supplements,
consolidations, and extensions thereof) in any amount(s) whatsoever now or
hereafter placed on or against or affecting the Premises and/or the real
property comprising the Common Area or Landlord’s interest or estate therein,
without the necessity of the execution and delivery of any further instruments
on the part of Tenant to effectuate such subordination. If any mortgagee or
beneficiary shall elect to have this Lease prior to the lien of its mortgage or
deed of trust, and shall give written notice thereof to Tenant, this Lease
shall be deemed prior to such mortgage or deed of trust, whether this Lease is
dated prior or subsequent to the date of such mortgage or deed of trust or the
date of the recording thereof.



          20.2 Subordination Agreements. Tenant shall execute and deliver without
charge therefore, such further instruments evidencing subordination of this
Lease to the lien of any mortgages or deeds of trust affecting the Premises
and/or real property comprising the Common Area as may be required by Landlord
within ten (10) days following Landlord’s request therefore; provided that such
mortgagee or beneficiary under such mortgage or deed of trust agrees in writing
that this Lease shall not be terminated or modified in any material way in the
event of any foreclosure if Tenant is not in default



 









 




under this Lease. Failure
of Tenant to execute such instruments evidencing subordination of this Lease
shall constitute a Default by Tenant hereunder.




          20.3 Approval by Lenders. Tenant recognizes that the provisions of this
Lease may be subject to the approval of any financial institution that may make
a loan secured by a new or subsequent deed of trust or mortgage affecting the
Premises and/or real property comprising the Common Area. If the financial
institution should require, as a condition to such financing, any modifications
of this Lease in order to protect its security interest in the Premises,
including without limitation, modification of the provisions relating to damage
to and/or condemnation of the Premises, Tenant agrees to negotiate in good
faith with Landlord and such financial institution to agree on mutually
acceptable modifications and execute the appropriate amendments; provided,
however, that no modification shall substantially change the size, location or
dimension of the Premises, or increase the Rentals payable by Tenant hereunder.
If Tenant refuses to execute any such amendment, Landlord may, in Landlord’s
reasonable discretion, terminate this Lease.



          20.4 Attornment. In the event of foreclosure or the exercise of the power
of sale under any mortgage or deed of trust made by Landlord and covering the
Premises and/or real property comprising the Common Area, Tenant shall attorn
to the purchaser upon any such foreclosure or sale and recognize such purchaser
as the Landlord under this Lease, provided such purchaser expressly agrees in
writing to be bound by the terms of the Lease, including, but not limited to,
the quiet enjoyment provisions of Paragraph 40.


Landlord and Tenant shall diligently seek to obtain and execute a
Subordination, Attornment, and Non-Disturbance Agreement upon execution of the
Lease. Landlord makes no representation as to Landlord’s ability to obtain
such Subordination, Attornment, and Non-Disturbance Agreement upon execution of
the Lease.




          20.5 Estoppel Certificates and Financial Statements.



               (a) Delivery by Tenant. Tenant shall, within ten (10) business days
following request by Landlord therefore and without charge, execute and deliver
to Landlord any and all documents, estoppel certificates, and current financial
statements of Tenant reasonably requested by Landlord in connection with the
sale or financing of the Premises and/or real property comprising the Common
Area, or requested by any lender making a loan affecting the Premises and/or
real property comprising the Common Area. Landlord may require that Tenant in
any estoppel certificate shall (i) certify that this Lease is unmodified and in
full force and effect (or, if modified, state the nature of such modification
and certify that this Lease, as so modified, is in full force and effect) and
has not been assigned, (ii) certify the date to which Rentals are paid in
advance, if any, (iii) acknowledge that there are not, to Tenant’s knowledge,
any uncured defaults on the part of Landlord hereunder, or specify such
defaults if claimed, (iv) evidence the status of this Lease as may be required
either by a lender making a loan to Landlord to be secured by a deed of trust
or mortgage covering the Premises and/or real property comprising the Common
Area or a purchaser of the Premises and/or real property comprising the Common
Area from Landlord, (v) warrant that in the event any beneficiary of any
security instrument encumbering the Premises and/or real property comprising
the Common Area forecloses on the security instrument or sells the Premises
and/or real property comprising the Common Area pursuant to any power of sale
contained in such security instrument, such beneficiary shall not be liable for
the Security Deposit, unless the Security Deposit actually has been received by
the beneficiary from Landlord, (vi) certify the date Tenant entered into
occupancy of the Premises and that Tenant is conducting business at the
Premises, (vii) certify that all improvements to be constructed on the Premises
by Landlord have been substantially completed except for punch list items which
do not prevent Tenant from using the Premises for its intended use, and (viii)
certify such other matters relating to the Lease and/or Premises as may be
reasonably requested by a lender making a loan to Landlord or a purchaser of
the Premises and/or real property comprising the Common Area from Landlord.
Any such estoppel certificate may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises and/or real property
comprising the Common Area. Any financial statements of Tenant shall include
an opinion of a certified public accountant (if available) and a balance sheet
and profit and loss statement for the most recent fiscal year, or a reasonable
substitute for the form of such financial information, all prepared in
accordance with generally accepted accounting principles consistently applied.



 









 





               (b) Nondelivery by Tenant. Tenant’s failure to deliver an estoppel
certificate as required pursuant to Paragraph 20.5(a) above shall be conclusive
upon Tenant that (i) this Lease is in full force and effect, without
modification except as may be represented by Landlord and has not been
assigned, (ii) there are now no uncured defaults in Landlord’s performance,
(iii) no Rentals have been paid in advance except those that are set forth in
this Lease, (iv) no beneficiary of any security instrument encumbering the
Premises and/or real property comprising the Common Area shall be liable for
the Security Deposit in the event of a foreclosure or sale under such security
instrument, unless the Security Deposit actually has been received by the
beneficiary from Landlord, (v) the improvements to be constructed on the
Premises by Landlord have been substantially completed except for punch list
items which do not prevent Tenant from using the Premises for its intended use,
and (vi) Tenant has entered into occupancy of the Premises on such date as may
be represented by Landlord and is open and conducting business at the Premises.
Tenant’s failure to deliver any financial statements, estoppel certificates or
other documents as required pursuant to Paragraph 20.5(a) above shall be a
Default by Tenant.



     21. Holding Over. This Lease shall terminate without further notice at
the expiration of the Lease Term. It is the desire of Landlord either to enter
into a new lease with Tenant for the Premises prior to the expiration of the
Lease Term, or to have Tenant vacate the Premises upon expiration of the Lease
Term pursuant to Paragraph 35 below. Therefore, any holding over by Tenant
after Lease Termination shall not constitute a renewal or extension of the
Lease Term, nor give Tenant any rights in or to the Premises except as
expressly provided in this Lease. Any holding over after Lease Termination
with the consent of Landlord shall be construed to be a tenancy from month to
month, at one
hundred fifty percent (150%) of the monthly Rent for the month preceding Lease
Termination in addition to all Additional Rent payable hereunder, and shall
otherwise be on the terms and conditions herein specified insofar as
applicable. If Tenant remains in possession of the Premises after Lease
Termination without Landlord’s consent, Tenant shall indemnify, defend and hold
Landlord harmless from and against any loss, damage, expense, claim or
liability resulting from Tenant’s failure to surrender the Premises, including
without limitation, any claims made by any succeeding tenant based on delay in
the availability of the Premises.



     22. Notices. Any notice required or desired to be given under this Lease
shall be in writing, and all notices shall be given by personal delivery or
mailing. All notices personally given on Tenant may be delivered to any person
apparently in charge at the Premises, on any corporate officer or agent of
Tenant if Tenant is a corporation, or on any one signatory party if more than
one party signs this Lease on behalf of Tenant; any notice so given shall be
binding upon all signatory parties as if served upon each such party
personally. Any notice given pursuant to this Paragraph 22 shall be deemed to
have been given when personally delivered, or if mailed, when three (3)
business days have elapsed from the time when such notice was deposited in the
United States mail, certified or registered mail and postage prepaid, addressed
to the party at the last address given for purposes of notice pursuant to the
provisions of this Paragraph 22. At the date of execution of this Lease, the
addresses of Landlord and Tenant are set forth in Paragraph 1.11 above.



     23. Attorneys’ Fees. In the event either party hereto shall bring any
action or legal proceeding for damages for an alleged breach of any provision
of this Lease, to recover Rentals, to enforce an indemnity defense or hold
harmless obligation, to terminate the tenancy of the Premises, or to enforce,
protect, interpret, or establish any term, condition, or covenant of this Lease
or right or remedy of either party, the prevailing party shall be entitled to
recover, as a part of such action or proceeding, reasonable attorneys’ fees and
court costs, including reasonable attorneys’ fees and costs for appeal, as may
be fixed by the court or jury. Notwithstanding anything to the contrary
contained in this Lease, “prevailing party” as used in this paragraph shall
include the party who dismisses an action for recovery hereunder in exchange
for sums allegedly due, performance of covenants allegedly breached or
considerations substantially equal to the relief sought in the action.



     24. Assignment, Subletting and Hypothecation.



          24.1 In General. Tenant shall not voluntarily sell, assign or transfer
all or any part of Tenant’s interest in this Lease or in the Premises or any
part thereof, sublease all or



 









 




any part of the Premises, or permit all or any
part of the Premises to be used by any person or entity other than Tenant or
Tenant’s employees, except as specifically provided in this Paragraph 24.




          24.2 Voluntary Assignment and Subletting.



               (a) Notice to Landlord. Tenant shall, by written notice, advise Landlord
of Tenant’s desire on a stated date (which date shall not be less than fifteen
(15) days nor more than ninety (90) days after the date of Tenant’s notice) to
assign this Lease or to sublet all or any part of the Premises for any part of
the Lease Term. Said notice shall state that the notice constitutes an offer
to terminate the Lease pursuant to Paragraph 24.2(b) if the notice applies to a
proposed assignment of the Lease or Tenant’s interest herein. Tenant’s notice
shall state the name, legal composition and address of the proposed assignee or
subtenant, and Tenant shall provide the following information to Landlord with
said notice: a true and complete copy of the proposed assignment agreement or
sublease; a financial statement of the proposed assignee or subtenant prepared
in accordance with generally accepted accounting principles within one year
prior to the proposed effective date of the assignment or sublease; the nature
of the proposed assignee’s or subtenant’s business to be carried on in the
Premises; the payments to be made or other consideration to be given on account
of the assignment or sublease; a current financial statement of Tenant; and
such other pertinent information as may be requested by Landlord, all in
sufficient detail to enable Landlord to evaluate the proposed assignment or
sublease and the prospective assignee or subtenant. Tenant’s notice shall not
be deemed to have been served or given until such time as Tenant has provided
Landlord with all information reasonably requested by Landlord pursuant to this
Paragraph 24.2. Tenant shall immediately notify Landlord of any modification
to the proposed terms of such assignment or sublease. Tenant may withdraw its
notice at any time prior to or after exercise by Landlord of Landlord’s right
to terminate as described in Paragraph 24.2(b).



               (b) Offer to Terminate. If Tenant notifies Landlord of its desire to
assign this Lease or Tenant’s interest herein, Tenant’s notice shall constitute
an offer to terminate this Lease and Landlord shall have the right, to be
exercised by giving written notice to Tenant within fifteen (15) days after
receipt of Tenant’s notice, to
terminate the Lease. If Landlord elects to terminate, then within ten
(10) days after receipt of Landlord’s election, Tenant shall have the right to
rescind its request to assign, and this Lease shall continue in full force and
effect. If Tenant does not rescind its request, this Lease shall terminate on
the date stated in the notice given by Tenant pursuant to Paragraph 24.2(a),
subject to any obligations which have accrued and are unfulfilled as of such
date.



               (c) Landlord’s Consent. If Landlord does not exercise its right to
terminate pursuant to Paragraph 24.2(b) within fifteen (15) days after receipt
of Tenant’s notice or if Tenant proposes a sublease, Landlord shall not
unreasonably withhold or delay its consent to the proposed assignment or
subletting, on the terms and conditions specified in said notice. If Tenant’s
notice fails to state that it constitutes an offer to terminate the Lease as
may be required pursuant to Paragraph 24.2(a), such notice shall be deemed
insufficient for the purposes of this Paragraph 24.2, and Landlord may withhold
its consent to the proposed assignment in Landlord’s absolute discretion.
Without otherwise limiting the criteria upon which Landlord may withhold its
consent to any proposed assignment or sublease, if Landlord withholds its
consent where Tenant is in default at the time of the giving of Tenant’s notice
or at any time thereafter, or where the net worth of the proposed assignee
(according to generally accepted accounting principles) is less than the
greater of (i) the net worth of Tenant immediately prior to the assignment (ii)
or the net worth of Tenant at the time this Lease is executed, such withholding
of consent shall be presumptively reasonable. Fifty percent (50%) of any and
all rent paid by an assignee or subtenant in excess of the Rentals to be paid
under this Lease (prorated in the event of a sublease of less than the entire
Premises), after Tenant’s deduction therefrom of all reasonable costs to effect
the assignment or subletting, including without limitation, brokerage
commissions, attorneys’ fees, and the cost of leasehold improvements or
alterations installed or redecorating performed by Tenant for the sublessee,
shall be paid directly to Landlord, as Additional Rent, at the time and place
specified in this Lease. For the purposes of this Paragraph 24, the term
“rent” shall include any consideration of any kind received, or to be received,
by Tenant from an assignee or subtenant, if such sums are related to Tenant’s
interest in this Lease or in the Premises, including, but not limited to key
money, bonus money, and payments (in excess of the fair market value thereof)
for Tenant’s assets, fixtures, trade fixtures, inventory, accounts, goodwill,
equipment, furniture, general intangibles, and any capital stock or other
equity ownership interest of Tenant. Any assignment or subletting without
Landlord’s consent shall be voidable at



 









 




Landlord’s option, and shall constitute
a Default by Tenant. Landlord’s consent to any one assignment or sublease
shall not constitute a waiver of the provisions of this Paragraph 24 as to any
subsequent assignment or sublease nor a consent to any subsequent assignment or
sublease; further, Landlord’s consent to an assignment or sublease shall not
release Tenant from Tenant’s obligations under this Lease, and Tenant shall
remain jointly and severally liable with the assignee or subtenant.




               (d) Assumption of Obligations. In the event Landlord consents to any
assignment, such consent shall be conditioned upon the assignee expressly
assuming and agreeing to be bound by each of Tenant’s covenants, agreements and
obligations contained in this Lease, pursuant to a written assignment and
assumption agreement in a form reasonably approved by Landlord. Landlord’s
consent to any assignment or sublease shall be evidenced by Landlord’s
signature on said assignment and assumption agreement or on said sublease or by
a separate written consent. In the event Landlord consents to a proposed
assignment or sublease, such assignment or sublease shall be valid and the
assignee or subtenant shall have the right to take possession of the Premises
only if an executed original of the assignment or sublease is delivered to
Landlord, and such document contains the same terms and conditions as stated in
Tenant’s notice to Landlord given pursuant to Paragraph 24.2(a) above, except
for any such modifications to which Landlord has consented in writing.



          24.3 Collection of Rent. Tenant hereby irrevocably gives to and confers
upon Landlord, as security for Tenant’s obligations under this Lease, the
right, power and authority to collect all rents from any assignee or subtenant
of all or any part of the Premises as permitted by this Paragraph 24, or
otherwise, and Landlord, as assignee of Tenant, or a receiver for Tenant
appointed on Landlord’s application, may collect such rent and apply it toward
Tenant’s obligations under this Lease; provided, however, that until the
occurrence of any Default by Tenant, subject to applicable cure periods, or
except as provided by the provisions of Paragraph 24.2(c) above, Tenant shall
have the right to collect such rent. Upon the occurrence of any Default by
Tenant, Landlord may at any time without notice in Landlord’s own name sue for
or otherwise collect such rent, including rent past due and unpaid, and apply
the same, less costs and expenses of operation and collection, including
reasonable attorneys’ fees, toward Tenant’s obligations under this Lease.
Landlord’s collection of such rents shall not constitute an acceptance by
Landlord of attornment by such subtenants. In the event of a Default by
Tenant, Landlord shall have all rights provided by this Lease and by law, and
Landlord may, upon re-entry and taking possession of the Premises, eject all
parties in possession or eject some and not others, or eject none, as Landlord
shall determine in Landlord’s sole discretion.



          24.4 Corporations and Partnerships. If Tenant is a partnership, any
withdrawal or substitution (whether voluntary, involuntary, or by operation of
law and whether occurring at one time or over a period of time) of any
partner(s) owning fifty percent (50%) or more (cumulatively) of the
partnership, any assignment(s) of fifty percent (50%) or more (cumulatively) of
any interest in the capital or profits of the partnership, or the dissolution
of the partnership shall be deemed an assignment of this Lease requiring the
prior written consent of Landlord. If Tenant is a corporation, any
dissolution, merger, consolidation or other reorganization of Tenant, any sale
or transfer (or cumulative sales or transfers) of the capital stock of Tenant
in excess of fifty percent (50%), or any sale (or cumulative sales) of all of
the assets of Tenant shall be deemed an assignment of this Lease requiring the
prior written consent of Landlord. Any such withdrawal or substitution of
partners or assignment of any interest in or dissolution of a partnership
tenant, and any such sale of stock or assets of a corporate tenant without the
prior written consent of Landlord shall be a Default by Tenant hereunder. The
foregoing notwithstanding, the sale or transfer of any or all of the capital
stock of a corporation, the capital stock of which is now or hereafter becomes
publicly traded, shall not be deemed an assignment of this Lease.



 









 





     Notwithstanding anything to the contrary contained in this Lease, Tenant,
without Landlord’s prior written consent (but with notice to Landlord), may
sublet the Premises or assign this Lease to (i) a subsidiary, affiliate,
division or corporation controlled by or under common control with Tenant; (ii)
a successor corporation related to Tenant by merger, consolidation,
non-bankruptcy reorganization or government action; or (iii) a purchaser of
substantially all of Tenant’s assets located at the Premises, provided that in
either of the latter two instances the successor or purchaser has a net worth
not less than the net worth of Tenant at the time that Tenant executes this
Lease (each, a “Permitted Assignee”). Notwithstanding that a Transfer is made
to a Permitted Assignee, Tenant shall not be released from any of its
obligations under this Lease and such Permitted Assignee shall be required to
assume all of Tenant’s obligations hereunder as a condition to such transfer
being permitted without Landlord’s prior written consent.



          24.5 Reasonable Provisions. Tenant expressly agrees that the provisions
of this Paragraph 24 are not unreasonable standards or conditions for purposes
of Section 1951.4(b)(2) of the California Civil Code, as amended from time to
time, under bankruptcy laws, or for any other purpose.



          24.6 Professional Fees. Tenant shall pay, as Additional Rent,
Landlord’s reasonable attorneys’ fees for reviewing, investigating, processing
and/or documenting any requested assignment or sublease, whether or not
Landlord’s consent is granted.



          24.7 Involuntary Transfer. No interest of Tenant in this Lease shall be
assignable, involuntarily or by operation of law, including, without
limitation, the transfer of this Lease by testacy or intestacy. Each of the
following acts shall be considered an involuntary assignment:



               (a) If Tenant is or becomes bankrupt or insolvent, makes an assignment for
the benefit of creditors, or a proceeding under any bankruptcy law is
instituted in which Tenant is the bankrupt; or, if Tenant is a partnership or
consists of more than one person or entity, if any partner of the partnership
or other person or entity is or becomes bankrupt or insolvent, or makes an
assignment for the benefit of creditors;



               (b) Levy of a writ of attachment or execution on this Lease;



               (c) Appointment of a receiver with authority to take possession of the
Premises in any proceeding or action to which Tenant is a party; or



               (d) Foreclosure of any lien affecting Tenant’s interest in the Premises,
which lien was not consented to by Landlord pursuant to Paragraph 24.9.


An involuntary assignment shall constitute a Default by Tenant and Landlord
shall have the right to terminate this Lease, in which case this Lease shall
not be treated as an asset of Tenant. In the event the Lease is not
terminated, the provisions of Paragraph 24.2(c) regarding rents paid by an
assignee or subtenant shall apply. If a writ of attachment or execution is
levied on this Lease, or if any involuntary proceeding in bankruptcy is brought
against Tenant or a receiver is appointed, Tenant shall have sixty (60) days in
which to cause the attachment or execution to be removed, the involuntary
proceeding dismissed, or the receiver removed.




          24.8 Hypothecation. Tenant shall not hypothecate, mortgage or encumber
Tenant’s interest in this Lease or in the Premises or otherwise use this Lease
as a security device in any manner without the consent of Landlord, which
consent Landlord may withhold in its sole and absolute discretion. Consent by
Landlord to any such hypothecation or creation of a lien or mortgage shall not
constitute consent to an assignment or other transfer of this Lease following
foreclosure of any permitted lien or mortgage.



          24.9 Binding on Successors. The provisions of this Paragraph 24 expressly
apply to all heirs, successors, sublessees, assignees and transferees of
Tenant.



 









 





     25. Successors. Subject to the provisions of Paragraph 24 above and
Paragraph 30.2(a) below, the covenants, conditions, and agreements contained in
this Lease shall be binding on the parties hereto and on their respective
heirs, successors and assigns.



     26. Landlord Default; Mortgagee Protection. Landlord shall not be in
default under this Lease unless Tenant shall have given Landlord written notice
of the breach and, within thirty (30) days after notice, Landlord has not cured
the breach or, if the breach is such that it cannot reasonably be cured under
the circumstances within thirty (30) days, has not commenced diligently to
prosecute the cure to completion. Any money judgment obtained by Tenant based
upon Landlord’s breach of this Lease shall be satisfied only out of the
proceeds of the sale or disposition of Landlord’s interest in the Premises
(whether by Landlord or by execution of judgment). In the event of any default
on the part of Landlord under this Lease, Tenant shall give notice by
registered or certified mail to any beneficiary of a deed of trust or any
mortgagee of a mortgage affecting the Premises and/or the real property
comprising the Common Area whose address shall have been furnished to Tenant,
and shall offer such beneficiary or mortgagee a reasonable opportunity to cure
the default, including time to obtain possession of the Premises by power of
sale or judicial foreclosure, if such should prove necessary to effect a cure.



     27. Exhibits. All exhibits attached to this Lease shall be deemed to be
incorporated herein by the individual reference to each such exhibit, and all
such exhibits shall be deemed to be a part of this Lease as though set forth in
full in the body of the Lease.



     28. Surrender of Lease Not Merger. The voluntary or other surrender of
this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger
and shall, at the option of Landlord, terminate all or any existing subleases
or subtenants, or may, at the option of Landlord, operate as an assignment to
Landlord of any or all such subleases or subtenants.



     29. Waiver. The waiver by Landlord of any breach of any term, covenant or
condition herein contained (or the acceptance by Landlord of any performance by
Tenant after the time the same shall become due) shall not be deemed to be a
waiver of such term, covenant or condition or any subsequent breach thereof or
of any other term, covenant or condition herein contained, unless otherwise
expressly agreed to by Landlord in writing. The acceptance by Landlord of any
sum less than that which is required to be paid by Tenant shall be deemed to
have been received only on account of the obligation for which it is paid (or
for which it is allocated by Landlord, in Landlord’s reasonable discretion, if
Tenant does not designate the obligation as to which the payment should be
credited), and shall not be deemed an accord and satisfaction notwithstanding
any provisions to the contrary written on any check or contained in any letter
of transmittal. The acceptance by Landlord of any sum tendered by a purported
assignee or transferee of Tenant shall not be deemed a consent by Landlord to
any assignment or transfer of Tenant’s interest herein. No custom or practice
which may arise between the parties hereto in the administration of the terms
of this Lease shall be construed as a waiver or diminution of Landlord’s right
to demand performance by Tenant in strict accordance with the terms of this
Lease.



     30. General.



          30.1 Captions and Headings. The captions and paragraph headings used in
this Lease are for convenience of reference only. They shall not be construed
to limit or extend the meaning of any part of this Lease, and shall not be
deemed relevant in resolving any question of interpretation or construction of
any paragraph of this Lease.



          30.2 Definitions.



               (a) Landlord. The term Landlord as used in this Lease, so far as the
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner at the time in question of the fee
title to the Premises. In the event of any transfer(s) of such interest, the
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall have no further liability under this Lease to Tenant
except as to matters of liability which have accrued and are unsatisfied as



 









 




of
the date of such transfer, it being intended that the covenants and obligations
contained in this Lease on the part of Landlord shall be binding on Landlord
and its successors and assigns only during and in respect of their respective
periods of ownership of the fee; provided that any funds in the possession of
Landlord or the then grantor and as to which Tenant has an interest, less any
deductions permitted by law or this Lease, shall be turned over to the grantee.
The covenants and obligations contained in this Lease on the part of Landlord
shall, subject to the provisions of this Paragraph 30.2(a), be binding upon
each Landlord and such Landlord’s heirs, personal representatives, successors
and assigns only during its respective period of ownership. Except as provided
in this Paragraph 30.2(a), this Lease shall not be affected by any transfer of
Landlord’s interest in the Premises, and Tenant shall attorn to any transferee
of Landlord provided that all of Landlord’s obligations hereunder are assumed
in writing by such transferee.




               (b) Agents. For purposes of this Lease and without otherwise affecting
the definition of the word “agent” or the meaning of an “agency”, the term
“agents” shall be deemed to include the agents, employees, officers, directors,
servants, invitees, contractors, successors, representatives subcontractors,
guests, customers, suppliers, partners, affiliated companies, and any other
person or entity related in any way to the respective party, Tenant or
Landlord.



               (c) Interpretation of Terms. The words “Landlord” and “Tenant” as used
herein shall include the plural as well as the singular. Words in the neuter
gender include the masculine and feminine and words in the masculine or
feminine gender include the neuter.



          30.3 Copies. Any executed copy of this Lease shall be deemed an original
for all purposes.



          30.4 Time of Essence. Time is of the essence as to each and every
provision in this Lease requiring performance within a specified time.



          30.5 Severability. In case any one or more of the provisions contained
herein shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had not been contained herein.
However, if Tenant’s obligation to pay the Rentals is determined to be invalid
or unenforceable, this Lease at the option of Landlord shall terminate.



          30.6 Governing Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California.



          30.7 Joint and Several Liability. If Tenant is more than one person or
entity, each such person or entity shall be jointly and severally liable for
the obligations of Tenant hereunder. If Tenant is a husband and wife, the
obligations hereunder shall extend to their sole and separate property as well
as community property.



          30.8 Construction of Lease Provisions. Although printed provisions of
this Lease were prepared by Landlord, this Lease shall not be construed either
for or against Tenant or Landlord, but shall be construed in accordance with
the general tenor of the language to reach a fair and equitable result.



          30.9 [Intentionally Deleted].



          30.10 Tenant’s Financial Statements. Tenant hereby warrants that all
financial statements delivered by Tenant to Landlord are true, correct, and
complete, and prepared in accordance with generally accepted accounting
principles. Tenant acknowledges and agrees that Landlord is relying on such
financial statements in accepting this Lease, and that a breach of Tenant’s
warranty as to such financial statements shall constitute a Default by Tenant.
Notwithstanding anything to the contrary contained in



 









 




this Lease, Landlord
shall keep confidential all such financial information received from Tenant,
except that Landlord may provide such financial information to Landlord’s
lenders or prospective lenders with respect to the Premises.




          30.11 Withholding of Landlord’s Consent. Notwithstanding any other
provision of this Lease, where Tenant is required to obtain the consent
(whether written or oral) of Landlord to do any act, or to refrain from the
performance of any act, Tenant agrees that if Tenant is in default with respect
to any term, condition, covenant or provision of this Lease, then Landlord
shall be deemed to have acted reasonably in withholding its consent if said
consent is, in fact, withheld.



     31. Signs. Tenant shall not place or permit to be placed any sign or
decoration on the Common Area or the exterior of the Premises or that would be
visible from the exterior of the Premises, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed. Tenant
may place “for lease” signs in connection with efforts to assign or sublease
the Premises, subject to the prior written consent of Landlord, which consent
shall not be unreasonably withheld or delayed; provided that all such signs
shall be removed not later than the one hundred eightieth (180th) day prior to
Lease Termination. In no event shall any such sign revolve, rotate, move or
create the illusion of revolving, rotating or moving or be internally
illuminated and there shall be no exterior spotlighting or other illumination
on any such sign. Tenant, upon written notice by Landlord, shall immediately
remove any of Tenant’s signs or decorations that are visible from the exterior
of the Premises or that Tenant has placed or permitted to be placed on the
Common Area or the exterior of the Premises without the prior written consent
of Landlord, or which remain beyond the one hundred eightieth (180th) day prior
to Lease Termination. If Tenant fails to so remove such sign or decoration
within five (5) days after Landlord’s written notice, Landlord may enter the
Premises and remove such sign or decoration and Tenant shall pay Landlord, as
Additional Rent upon demand, the cost of such removal. All signs placed on the
Premises or Common Area by Tenant shall comply with all recorded documents
affecting the Premises, including but not limited to any Declaration of
Conditions, Covenants and Restrictions: the sign criteria attached hereto as
Exhibit E, if applicable (as the same may be amended from time to time); and
applicable statutes, ordinances, rules and regulations of governmental agencies
having jurisdiction thereof. At Landlord’s option, Tenant shall at Lease
Termination remove any sign which it has placed on the Premises or the Common
Area, and shall, at its sole cost, repair any damage caused by the installation
or removal of such sign.



     32. Landlord as Party Defendant. If, by reason of any act or omission by
Tenant or Tenant’s agents, Landlord is made a party defendant concerning this
Lease, the Premises, or the Common Area, Tenant shall indemnify Landlord
against all liability actually incurred (or threatened against) Landlord as a
party defendant, including all damages, costs and reasonable attorneys’ fees.



     33. Landlord Not a Trustee. Landlord shall not be deemed to be a trustee
of any funds paid to Landlord by Tenant (or held by Landlord for Tenant)
pursuant to this Lease, including without limitation the Security Deposit.
Landlord shall not be required to keep any such funds separate from Landlord’s
general funds. Any funds held by Landlord pursuant to this Lease shall not
bear interest.



     34. Interest. Any payment due from Tenant to Landlord, except for Rent
received by Landlord within thirty (30) days after the same is due, shall bear
interest from the date due until paid, at an annual rate equal to the greater
of: ten percent (10%); or five percent (5%) plus the rate established by the
Federal Reserve Bank of San Francisco, as of the twenty-fifth (25th) day of the
month immediately preceding the due date, on advances to member banks under
Sections 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter
from time to time amended. In addition, Tenant shall pay all costs and
reasonable attorneys’ fees incurred by Landlord in the collection of such
amounts.



     35. Surrender of Premises. On the last day of the Lease Term or upon the
sooner termination of this Lease, Tenant shall, to the reasonable satisfaction
of Landlord, surrender the Premises to Landlord in good condition (reasonable
wear and tear excepted) with all originally painted interior walls washed, or
re-painted if marked or damaged, and other interior walls cleaned and repaired
or replaced, all carpets cleaned and in good condition, the air conditioning,
ventilating and heating equipment inspected, serviced and repaired by a
reputable and licensed service firm (unless Landlord has elected to maintain
heating and air conditioning



 









 







systems pursuant to Paragraph 10.1 above), and all
floors cleaned and waxed. Tenant shall remove all of Tenant’s personal
property and trade fixtures from the Premises, and all property not so removed
shall be deemed abandoned by Tenant. Furthermore, Tenant shall immediately
remove all Extraordinary Alterations designated by Landlord for removal under
the provisions of Article 13 of this Lease, repair all damage to the Premises
and Common Area caused by any such removal. If the Premises are not so
surrendered at Lease Termination, Tenant shall indemnify, defend and hold
Landlord harmless from and against any loss, damage, expense, claim or
liability resulting from delay by Tenant in so surrendering the Premises
including, without limitation, any claims made by any succeeding tenant or
losses to Landlord due to lost opportunities to lease to succeeding tenants.



     36. Labor Disputes. In the event Tenant shall in any manner be involved
in or be the object of a labor dispute which subjects the Premises or any part
of the Project to any picketing, work stoppage or other concerted activity
which in the reasonable opinion of Landlord is detrimental to the operation of
the Project or its tenants, Landlord shall have the right to require Tenant, at
Tenant’s own expense and within a reasonable period of time, to use Tenant’s
best efforts to either resolve such labor dispute or terminate or control any
such picketing, work stoppage or other concerted activity to the extent
necessary to eliminate any interference with the operation of the Project. To
the extent such labor dispute interferes with the performance of Landlord’s
duties hereunder, Landlord shall be excused from the performance of such
duties. Failure by Tenant to use its best efforts to so resolve such dispute
or terminate or control such picketing, work stoppage or other concerted
activity within a reasonable period of time shall constitute a Default by
Tenant hereunder. Nothing contained in this Paragraph 36 shall be construed as
placing Landlord in an employer/employee relationship with any of Tenant’s
employees or with any other employees who may be involved in such labor
dispute.



     37. No Partnership or Joint Venture. Nothing in this Lease shall be
construed as creating a partnership or joint venture between Landlord, Tenant,
or any other party, or cause Landlord to be responsible for the debts or
obligations of Tenant or any other party.



     38. Entire Agreement. Any agreements, warranties, or representations not
expressly contained herein shall in no way bind either Landlord or Tenant, and
Landlord and Tenant expressly waive all claims for damages by reason of any
statement, representation, warranty, promise or agreement, if any, not
contained in this Lease. This Lease supersedes and cancels any and all
previous negotiations, arrangements, brochures, agreements and understandings,
whether written or oral, between Landlord and its agents and Tenant and its
agents with respect to the Premises, Common Area or this Lease. This Lease
constitutes the entire agreement between the parties hereto and no addition to,
or modification of, any term or provision of this Lease shall be effective
until and unless set forth in a written instrument signed by both Landlord and
Tenant.



     39. Submission of Lease. Submission of this instrument for Tenant’s
examination or execution does not constitute a reservation of space nor an
option to lease. This instrument shall not be effective until executed by both
Landlord and Tenant. Execution of this Lease by Tenant shall constitute an
offer by Tenant to lease the Premises, which offer shall be deemed accepted by
Landlord when this Lease is executed by Landlord and delivered to Tenant.



     40. Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon
Tenant paying Rentals and performing its covenants and conditions under the
Lease, Tenant shall and may peaceably and quietly have, hold and enjoy the
Premises for the Lease Term, subject, however, to the terms of this Lease and
of any mortgages or deeds of trust affecting the Premises and/or the real
property comprising the Common Area, and the rights reserved by Landlord
hereunder. Any purchaser upon any foreclosure or exercise of the power of sale
under any mortgage or deed of trust made by Landlord and covering the Premises
to whom Tenant attorns pursuant to Paragraph 20.4 above shall be bound by the
terms of this Paragraph 40.



     42. Authority. The undersigned parties hereby warrant that they have
proper authority and are empowered to execute this Lease on behalf of the
Landlord and Tenant, respectively. If Tenant is a corporation (or
partnership), each individual executing this Lease on behalf of said
corporation (or partnership) represents and warrants that he is duly authorized
to execute and deliver this Lease on behalf of said



 









 







corporation in accordance
with a duly adopted resolution of the Board of Directors of said corporation or
in accordance with the by-laws of said corporation (or on behalf of said
partnership in accordance with the partnership agreement of such partnership),
and that this Lease is binding upon said corporation (or partnership) in
accordance with its terms. If Tenant is a corporation, and this Lease is not
executed by two corporate officers, Tenant shall upon execution of this Lease,
deliver to Landlord evidence of the authority of the individual executing this
Lease on behalf of Tenant to execute this Lease on behalf of Tenant. In the
event Tenant should fail to deliver such evidence to Landlord upon execution of
this Lease, Landlord shall not be deemed to have waived its right to require
delivery of such evidence, and at any time during the Lease Term Landlord may
request Tenant to deliver the same, and Tenant agrees it shall thereafter
promptly deliver such evidence to Landlord. If Tenant is a corporation, Tenant
warrants that:



               (a) Tenant is a valid and existing corporation;



               (b) Tenant is qualified to do business in California;



               (c) All fees and all franchise and corporate taxes are paid to date, and
will be paid when due;



               (d) All required forms and reports will be filed when due; and



               (e) The signers of this Lease are properly authorized to execute this
Lease.



 









 





     IN WITNESS WHEREOF, the parties have executed this Lease effective as of
the date set forth below.



	 	 	 	 	 	 	 	 	 	 	 
	LANDLORD:	 	TENANT:
	 
	 	 	 	 	 	 	 	 	 	 
	REALTEC PROPERTIES, I,L.P.	 	LASERSCOPE
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/Larry Russell
	 	By
	 	/s/ Eric Reuter	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title

	 	General Partner
	 	Title
	 	President and CEO	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date

	 	October 11, 2004
	 	Date
	 	October 11, 2004	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Thomas Masters
	 	By
	 	/s/ Dennis LaLumandiere	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title

	 	General Partner
	 	Title
	 	Vice President, Finance and Chief Financial Officer	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date

	 	October 11, 2004
	 	Date
	 	October 11, 2004	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 







 









 






EXHIBITS




	 	 	 	 	 
	A (a) and A (b)

	 	Legal Description
	 	Paragraph 1.4
	 
	 	 	 	 
	B

	 	Personal Property
	 	Paragraph
	 
	 	 	 	 
	C

	 	Improvements
	 	Paragraph 2.2
	 
	 	 	 	 
	D

	 	[Intentionally Deleted]	 	 
	 
	 	 	 	 
	E

	 	Sign Criteria
	 	Paragraph 31
	 
	 	 	 	 
	F

	 	[Intentionally Deleted]	 	 
	 
	 	 	 	 
	G

	 	Tenant Hazardous Materials List	 	 








 










 




NET LEASE AGREEMENT

(Single Tenant)


by and between


LASERSCOPE

(“Tenant”)


and


REALTEC PROPERTIES I, L.P.


EXHIBIT “A”


 









 





Site Plan


Attached


 









 





EXHIBIT “B”


Personal Property


The attached Bill of Sale shall be verified by the Parties for completeness
prior to the Lease Commencement Date.


 









 





EXHIBIT “C”


Improvements


To be attached


 









 





EXHIBIT “D”


[INTENTIONALLY DELETED]


 









 





EXHIBIT “E”


Sign Criteria


Tenant shall be allowed signage on the property consistent with the other
tenants in the project and other signage on the Premises subject to approval of
the City of San Jose and the Landlord, which shall not be unreasonably
withheld.


 









 





EXHIBIT “F”


[INTENTIONALLY DELETED]


 








 





EXHIBIT “G”


Tenant Hazardous Materials List


To be attached