**Exhibit 10.10**

**NET**

**LEASE**

 

THISLEASE dated                                 ,198        for reference purposes only Ismade between Lessor and Lessee named below, effective on the later of the datesset forth under their respective signatures.

 

**BasicLease Provisions**

 
| 1.     |   | Premises:                                                                                                                                                                                                                   |   | As  depicted on Exhibit A.                                                                                                                             |                               |                       |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|----------------------------|
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
|   |   | Building  Name:                                                                                                                                                                                                             |   | SANTA  BARBARA TECH CENTER                                                                                                                             |                               |                       |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
|   |   | Premises  Address:                                                                                                                                                                                                          |   | 5540  Ekwill Street, S.B. CA 93111 Floor:      2nd                                                                       |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 2.     |   | Leased  Area:                                                                                                                                                                                                               |   | 14,044  Square Feet                                                                                                                                    |                               |                       |   |   |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 3.     |   | Lessee’s  Percentages: Building:                                                                                                                                                                                       |   | 33.17%                                                                                               | Common  Area 16.59%*          |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   | *(See  Addendum 3.4(a) and 3.4(c)) |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 4.     |   | Initial  Annual Rent:                                                                                                                                                                                                       |   | $156,731.04                                                                                                                                            |                               | ($11.16  Per Square Foot)* |   |   |
|   |   |                                                                                                                                                                                                                        |   | (*See  Addendum 3.1)                                                                                                                                   |                               |                       |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 5.     |   | Monthly  Rental Installments:                                                                                                                                                                                               |   | $13,060.92      ($.93 Pet  Square Foot)*                                                                            |
|   |   |                                                                                                                                                                                                                        |   | (See  Addendum 3.1)                                                                                                                                    |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 6.     |   | Term:   Seven  (7) Years and Zero (0)       Months for  the former Forum System Space                                                                                     |
|   |   | (See  Addendum 2 1(a)).                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 6.5    |   | Option                                                                                                                                                                                                                      |   |                                                                                                                                                   |                               |                       |   |   |
|   |   | See Addendum  2.3)                                                                                                                                                                                                          |   |                                                                                                                                                   |                               |                       |   |   |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 7.     |   | Target  Commencement Date:                                                                                                                                                                                                  |   | August  1, 1989 for the former Forum Systems Space; and  February 13, 1991 or February 13, 1992 for  the former APCD Space (See Addendum 2.1(a)). |
|   |   | Termination  Date:                                                                                                                                                                                                          |   | July  31, 1996                                                                                                                                         |                               |                       |   |   |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 8.     |   | Security  Deposit:                                                                                                                                                                                                          |   | $24,397.41         (See  Addendum 4)                                                                      |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 9.     |   | Broker(s):                                                                                                                                                                                                                  |   | Ed  DeLacy, COLDWELL BANKER REAL ESTATE SERVICES                                                                                                       |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 10.    |   | Parking  Spaces Provided:                                                                                                                                                                                                   |   | 43      (Not  To Be Separately Identified)                                                                               |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 11.    |   | Address  for Payments and Notices:  (if different from below)                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                        |   |                                                                                                                                                   |                               |                       |   |   |
| 12.    |   | Submission  of this Instrument for examination or signature by Lessee does not constitute  a reservation of or option for space and it is not effective as a lease or  otherwise until execution by both Lessee and Lessor. |
|        |        |                                                                                                                                                                                                                             |        |                                                                                                                                                        |                                    |                            |  |  |  |

 

INWITNESS WHEREOF, the parties hereto have executed this Lease, consisting of theforegoing Basic Lease Provisions, Articles 1 through 20 which follow, as of thedate first above written.

 
| LESSOR                            |                | LESSEE                      |
|-----------------------------------|---------------------|-----------------------------|
| EKWILL  PARTNERS, LTD.            |                | McGHAN  MEDICAL CORPORATION |
| a  California Limited Partnership |                |                        |
| 300  Esplanade Drive, Suite 1860  |                | Address:                    |   |
| Oxnard,  CA 93030                 |                |                        |   |
|                              |                | B  y:                       |   |
|                              |                |                        | Signature |
| /s/  Jeffrey C. Dermant           |                | /s/  Donald K. McGhan       |
| By                                | Jeffrey  C. Bermant |                        | Name and Title (Type or Print) |
|                              | General  Partner    |                        | By: |   |
|                              |                |                        | Signature |
|                              |                |                        |
|                              |                | Signature Name and Title    |
|                              |                | Date:                       |   |
|                                   |                     |                             |  |  |  |  |

 

MEMORANDUM

 
| Actual  Commencement Date: |   |   |   |
|----------------------------|--------|--------|--------|

 

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**TABLEOF CONTENTS**

 
| ARTICLE |                                  |
|---------|---------------------------------------|
|    |                                  |   |
|    | Basic Lease Provisions                |   |
|    | Table  of Contents                    |   |
| 1.      | Lease  of Premises                    |   |
| 2.      | Term                                  |   |
| 3.      | Rent                                  |   |
| 4.      | Security  Deposit                     |   |
| 5.      | Use                                   |   |
| 6.      | Maintenance,  Repairs and Alterations |   |
| 7.      | Insurance;  Indemnity                 |   |
| 8.      | Damage or Destruction                 |   |
| 9.      | Personal Property Taxes               |   |
| 10.     | Utilities                             |   |
| 11.     | Assignment and Subletting             |   |
| 12.     | Defaults; Remedies                    |   |
| 13.     | Condemnation or  Restriction on Use   |   |
| 14.     | Brokers                               |   |
| 15.     | Lessor’s Liability               |   |
| 16.     | (Deleted)                             |   |
| 17.     | (Deleted)                             |   |
| 18.     | Parking                               |   |
| 19.     | General Provisions                    |   |
|    | 19.1                                  | Estoppel Certificate |   |
|    | 19.2                                  | Severability |   |
|    | 19.3                                  | Time of Essence |   |
|    | 19.4                                  | Captions |   |
|    | 19.5                                  | Notices |   |
|    | 19.6                                  | Waivers |   |
|    | 19.7                                  | Holding Over |   |
|    | 19.8                                  | Cumulative Remedies |   |
|    | 19.9                                  | Inurement |   |
|    | 19.10                                 | Choice of Law |   |
|    | 19.11                                 | Subordination |   |
|    | 19.12                                 | Attorneys’ Fees |   |
|    | 19.13                                 | Lessor’s Access |   |
|    | 19.14                                 | Corporate Authority |   |
|    | 19.15                                 | Surrender or  Cancellation |   |
|    | 19.16                                 | Entire Agreement |   |
|    | 19.17                                 | Signs |   |
|    | 19.18                                 | Interest on Past Due Obligations |   |
|    | 19.19                                 | Gender; Number |   |
|    | 19.20                                 | Recording of Lease |   |
|    | 19.21                                 | Interstate Land Sales Act |   |
|    | 19.22                                 | Confidentiality of Lease |   |
|    | 19.23                                 | Outlet Enjoyment |   |
|    | 19.24                                 | Meaning |   |
| 20.     | Construction                          |   |
|    |                                  |   |
|    | Exhibit  A:                           | Floor  Plans |   |
|    | Exhibit  B:                           | Site  Plan |   |
|    | Exhibit  C:                           | Rules  and Regulations |   |
|    | Exhibit  D:                           | -  deleted - |   |
|    | Exhibit  E:                           | Estoppel  Certificate |   |
|    | Exhibit  F:                           | Water  Service |   |
|    | Exhibit  G:                           | Diagram  of Premises |   |
|         |                                       |  |  |  |

 

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1.                                       **LEASE OF PREMISES**

 

Lessorhereby leases to Lessee and Lessee leases from Lessor for the term, at therental, and, upon all of the conditions set forth in this Lease, the Premises, identifiedin Item 1 of the Basic Lease Provisions, together with the nonexclusive use, incommon with Lessor and other tenants of the Building(s) and their respective invitees,of common areas in or about the Building and the parking garage (if any) orparking areas adjoining the Building.  Theapproximate anticipated configuration of Santa Barbara Tech Center and the locationof the Building(s).  Premises andassociated common and parking areas is indicated on Exhibit “B”. The size,location and function of the building and related structures depicted here areapproximate.  The configuration of thedevelopment, the design. size, function and location of all other improvements,and the identity and location of other tenants to the extent depicted aresubject to change without notice for any reason deemed sufficient by the owner.Lessor reserves the right to alter the configuration of Santa Barbara Tech Centerto construct additional Improvements thereon, to withdraw areas therefrom fromtime to lime and alter the configuration of the associated common and parkingareas, provided that the number of parking spaces intended for Lessee’s useshall not thereby be materially diminished and provided that Lessee’s access toPremises will not thereby be affected.*  (*SeeAddendum 1)

 

2.                                       **TERM**

 

2.1                                 **Commencement of Term**

 

(a)                                  The term of the Lease shall be as shownin Item 6 of the Basic Lease Provisions, commencing on the Commencement Date,which Lessor and Lessee expect to be the Target Commencement Date as shown inItem 7 of the Basic Lease Provisions but which may be such other date as hereinprovided, and ending on the Termination Date unless sooner terminated pursuantto any provision hereof.

 

(b)                                 Notwithstanding the foregoing, the termof this Lease and the payment of rent shall commence upon delivery ofpossession of the Premises or sooner as provided in Article 20 herein. Deliveryof possession of the Premises shall occur upon written tender ofsame by Lessor.

 

(c)                                  If delivery of possession occurs prior tothe Target Commencement Date, the term of this Lease shall commence on suchdate of delivery of possession, but the Termination Date shall not be advanced.

 

2.2                                 **Delay in Commencement**.  Notwithstandingthe Target Commencement Date, if for any reason Lessor cannot deliverpossession of the Premises to Lessee on or before said date, Lessor shall notbe subject to any liability therefor, nor shall such failure affect thevalidity of this Lease or the obligations of Lessee hereunder or extendthe term thereof provided, however, that if Lessor shall not have deliveredpossession of the Premises within three (3) months after the TargetCommencement Date, as such Date may be extended pursuant to the provisions ofArticle 20 hereof, Lessee may, at Lessee’s option by notice in writing toLessor within ten (10) days thereafter, cancel this Lease, in which event theparties shall be discharged from all obligations hereunder. Subject to theprovisions of Article 20 hereof, if applicable, Lessee shall not be obligatedto pay rent until delivery of possession of the Premises has occurred.

 

2.3                                 **Option and Right of Notification** - (See Addendum 2.3)

 

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3.                                       **RENT**

 

3.1                                 **Initial Annual Rent**.  Lessee shall pay to Lessor as rent for thePremises an Initial Annual Rent in the amount specified in Item 4 of the BasicLease Provisions in equal monthly installments in the amount specified in Item5 of the Basic Lease Provisions in advance on the first day of each month.  (See Addendum 3.1)

 

3.2                                 **Additional Rent**.  Lesseeshall reimburse Lessor, as additional rent, in the manner and at the timesprovided, for Lessee’s proportionate share of all Building Operating Expensesand Common Area Operating Expenses (as hereinafter defined) incurred byLessor.  Lessee’s proportionate share ofsuch Building Operating Expenses and Common Area Operating Expenses shall bebased upon Lessee’s Building Percentage in the case of Building OperatingExpenses and upon Lessee’s Common Area Percentage in the case of Common Area OperatingExpenses, all as defined herein.

 

3.3                                 **Water Service Charges** - See Exhibit F

 

3.3a                           All Rent due under this Lease shall bepayable without deduction, abatement or offset except as may be otherwiseexpressly provided in this Lease.

 

3.4                                 **Definitions:**For purpose of this Article 3:

 

(a)                                  Lessee’s Building Percentage is apercentage calculated by dividing the Leased Area of the Premises, as shown inItem 2 of the Basic Lease Provisions, during the comparison year by the leasablearea of the Building, and is stipulated to be as shown in Item 3 of the BasicLease Provisions.  (See Addendum 3.4 (a))

 

(b)                                 Building Operating Expense shall mean thesum of all expenses incurred by Lessor in connection with the operation, repairand maintenance of the Building, including but not limited to heating and airconditioning, all real property taxes (as hereinafter defined) imposed upon orwith respect to the Building and related improvements exclusiveof the land underlying all such improvements); all fire and extended coverage,earthquake, loss of rents, vandalism, malicious mischief and other insurancecovering the Building (exclusive of public liability insurance) and lossessuffered which fall below the insurance deductible: utilities; materials andsupplies; salaries, wages and other expenses incurred with respect to theoperation, repair and maintenance of the Building; the cost of repainting, theBuilding; security and fire protection; amortization of capital investments forimprovements which are designed to reduce operating costs, improve operationsor comply with governmental conservation or safety programs over suchreasonable period as Lessor shall determine (together with Interest at five (5)percentage points above the discount rate of the Federal Reserve Bank of SanFrancisco on the unamortized amount); and an amount equal to fifteen percent(15%) of all such expenses to cover Lessees administrative and overheadexpense.  Building Operating Expenses forany year being used as a base year or comparison year shall be adjusted, ifnecessary, to reflect al least 95% occupancy of the leasable area of theBuilding and a full year of operation. Building Operating Expenses attributableto the utilities and services furnished pursuant to Article 10 shall beapportioned among the tenants of the Building receiving such services(excluding those tenants furnishing or paying for their own utilities andjanitorial services) based on the respective leased areas occupied by suchtenants.  *on any such improvements toimprove operations or reduce costs, Lessor will, upon request, reasonablyjustify such improvements to Lessee.

 

(c)                                  Lessee’s Common Area Percentage is apercentage figure calculated by the project architect by dividing the LeasedArea of the Premises during the comparison year by the average leasable area inall improvements, including the Building and other buildings, shown on Exhibit “B”

 

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during such year and is initiallystipulated to be as shown in Item 3 of the Basic Lease Provisions.  Should the Building and/or landscape areabecome a separate legal lot, or should additional improvements or common areabe added to or deleted from Exhibit “B”, Lessor may, at its option, calculateLessee’s Common Area Percentage by comparing the common area attributable tothe Premises with the common area on such legal lot or otherwise within Exhibit“B” as so revised.  (See Addendum 3.4(c))

 

(d)                                 Common Area Operating Expenses shall meanthe sum of all expenses incurred by Lessor In connection with the operation andmaintenance of driveways, landscaping, walkways, plazas, parking facilities,*and perimeter property, including, but not limited to: all real property taxes(as hereinafter defined) imposed upon or with respect to theland included within Exhibit “B”; all public liability Insurance coveringExhibit “B”, and losses suffered which fall below the insurance deductible;security and fire protection salaries, wages and other expenses incurred withrespect to maintenance of the common areas, gardening, landscaping, repaving,repainting and trash removal; depreciation of equipment used in suchmaintenance, amortization of capital investments for improvements which complywith governmental conservation or safety programs over such reasonable periodas Lessor shall determine (together with Interest at five (5) percentage pointsabove the discount rate of the Federal Reserve Bank of San Francisco on theunamortized amount); and an amount equal to fifteen percent (15%) of all such expensesto cover Lessor’s administrative and overhead expense.  General overhead and depreciation of improvementsshall not be included in the expenses except as specifically set forth in theforegoing.  Any governmental surcharge,fee or assessment imposed with respect to the parking facilities within Exhibit“B” shall, to the extent paid by Lessor and not passed on to the users of saidparking facilities, be included in Common Area Operating .Expenses *watersystem per Section F.3 of Exhibit “F”.

 

(e)                                  Real Property Taxes shall mean all realand personal property taxes and assessments Incurred during any calendar year,including, but not limited to; special and extraordinary assessments, water andsewer rates and charges, occupancy taxes or similar taxes imposed on or withrespect to the real or personal property whether or not imposed on ormeasured by the rent payable by Lessee, and other governmental levies andcharges, general and special, ordinary and extraordinary, unforeseen as well asforeseen, of any kind and nature whatsoever relating to the real or personalproperty, and any gross rental, license or business tax measured by or leviedon rent payable or space occupied.  If,by law, any property taxes are payable, or may at the option of the taxpayer bepaid, in Installments (whether or not Interest shall accrue on the unpaidbalance of such property taxes).  Lessormay, at Lessor’s option, pay the same and, in such event, any accrued intereston the unpaid balance of such property taxes shall be deemed to be RealProperty Taxes as defined herein.  RealProperty Taxes shall also include all expenses reasonably incurred by Lessor inseeking a reduction by the taxing authorities of Real Property Taxes applicableto Santa Barbara Tech Center.  RealProperty Taxes shall not include any capital levy, franchise, estate, inheritance,succession, gift or transfer tax of Lessor, or any income, profits or excessprofits tax, assessment, charge or levy upon the income of Lessor; provided,however, that if at any time during the term of this Lease under the laws ofthe United States or the State of California or any political subdivision ofeither, a tax or excise on rents, space or other aspects of real property, islevied or assessed against Lessor, the same shall be deemed to be Real PropertyTaxes. If any such property taxes upon the income of Lessor shall be imposed ona graduated scale, based upon Lessor’s aggregate rental income, Real PropertyTaxes shall include only such portion of such property taxes as would bepayable if the rent payable with respect to the Building and Common Areas werethe only rental Income of Lessor subject thereto.  Real Property Taxes for any year being used asa base year or comparison year shall be adjusted, if necessary, to reflect thesubstantial completion of partitioning and other normal Lessee Improvements inall leasable areas of the Building, and to reflect at least 95% occupancy ofthe leasable area of the Building.

 

3

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3.5                                 **Rent Adjustment for ConsumerPrice Index**. Theannual rent shall be adjusted as of the expiration of each full or partialcalendar year of the lease term (the “adjustment date”) to reflect any change inthe United States Department of Labor, Bureau of Labor Statistics, ConsumerPrice Index, Subgroup “All Items”, entitled, “Consumer Price Index, Urban WageEarners and Clerical Workers (Revised Series), L.A. Anaheim-Riverside: (1982-84 =100).  “The Index for said subgroupapplicable for the month of December (or the month preceding the CommencementDate for the first full or partial calendar year of the lease term) precedingeach adjustment date shall be considered the “base”, and the annual rentfollowing each adjustment date shall be computed by adjusting the annual rentpayable for the preceding calendar year thereof by the percentage change in theIndex as of the adjustment date over the “base”; provided, however, in no eventshall the rent payable for any year be less than the rent payable for thepreceding period on account of the adjustment pursuant to this Section 3.5,notwithstanding the fact that the Index may, as of some adjustment date, be lessthan the ‘‘base” if as of any adjustment date there shall not exist theConsumer Price Index in the same format as set forth above, the parties                               substitute any official index published by                  Bureau of Labor Statistics or any successor or similar Governmental agency asmay then be in existence and shall be most nearly equivalent thereto. If theparties shall be unable to agree upon a successor index, the parties shall referthe choice to arbitration in accordance with the rules of the AmericanArbitration Association. (See Addendum 3.5)

 

3.6                                 **Calculation and Payment**

 

(a)                                  Annual rent shall be payable to Lessorwithout deduction or offset, in lawful money of the United Stales at Lessor’saddress herein or to such other persons or at such other places as Lessordesignates in writing, Rent payable for any period for less than one monthshall be prorated based upon a thirty (30) day month.

 

Priorto the commencement of the lease term and of each December thereafter, Lessorshall give Lessee a written estimate of Lessee’s share of Building and CommonArea Operating Expenses for the ensuing year or portion thereof. Lessee shallpay such estimated amount to Lessor in equal monthly installments, in advance. Withinninety (90) days after the and of each calendar year, Lessor shall furnish toLessee a statement showing in reasonable detail the actual Building and CommonArea Operating Expenses incurred by Lessor during such period, and the partiesshall within thirty (30) days make any payment or allowance necessary to adjustLessee’s estimated payment to Lessee’s actual proportionate share as shown bysuch annual statement.  Any amount due Lesseeshall be credited against installments next coming due under this paragraph. Lesseeor its representatives shall be entitled to examine Lessor’s books and recordspertaining to such costs upon reasonable advance written notice to Lessor.

 

(b)                                                                           

 

(c)                                                                            

 

(d)                                 Within ninety (90) days after eachadjustment date, Lessor shall furnish Lessee a written statement showing thepercentage change in the Index for the period ending on the adjustment date andspecifying the increase, if any, in the annual rent subsequent to theadjustment date, taking into account all prior adjustments to annual rent forthe period preceding the adjustment date pursuant to this paragraph above and applyingany percentage increase in the index to the annual rent as previously adjusted.At the rental payment date next following Lessee’s receipt of such statement,Lessee shall pay Lessor an amount equal to one twelfth (1/12) of the adjustmentpursuant to this Paragraph (d) multiplied by the number of rent payment dates includingthe current one) since the relevant adjustment date. Subsequent rental paymentsshall be increased by one twelfth (1/12) of the adjustment pursuant to thisParagraph (d).

 

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3.7                                 **End of Term**. Upon the expiration or earliertermination of this Lease, Lessee shall pay Lessor, as additional rent, theaggregate rental increase which would have been payable by Lessee pursuant tothis Article 3, except for such expiration or termination, for the portion ofthe year in which termination or expiration occurs through the terminationdate. The amount of such payment shall be calculated by Lessor based uponSections 3.2, 3.3 and 3.5 (using the expiration or termination date as theadjustment data for Section 3.5) and the best information then available toLessor, and shall give effect to all prior adjustments and payments on accountby Lessee pursuant to this Article 3.

 

4.                                       **SECURITY DEPOSIT**

 

Concurrentlywith Lessee’s execution of this Lease, Lessee shall deposit with Lessor the sumspecified in Item 8 of the Basic Lease Provisions as security for the faithfulperformance by Lessee of all covenants and conditions of this Lease*  If Lessee shall breach or default in theperformance of any covenants or conditions of this Lease, including the paymentof rent, Lessor may use, apply or retain the whole or any part of such securitydeposit for the payment of any rent in default or for any other sum whichLessor may spend or be required to spend by reason of Lessee’s default. IfLessor so uses or applies all or any portion of said deposit. Lessee shall,within ten (10) days after written demand therefor, deposit cash with Lessor inan amount sufficient to restore said deposit to the full amount hereinabovestated and Lessee’s failure to do so shall be a material breach of this Lease.Should Lessee comply with all covenants and conditions of this Lease, thesecurity deposit or any balance thereof shall be returned to Lessee (or at theoption of Lessor, to the last assignee of Lessee’s interest in this Lease) atthe expiration of the term. Lessee shall not be entitled to interest on thesecurity deposit and Lessor shall have the right to commingle said securitydeposit with other funds of Lessor. Should Lessor sell its interest in thePremises; Lessor may transfer to the purchaser thereof the then unexpended or unappropriateddeposit and thereupon Lessor shall be discharged from any further liability forsuch funds. *pursuant to the conditions set forth in Addendum 4 hereof (SeeAddendum 4).

 

5.                                       **USE**

 

5.1                                 **Use**.  The Premises shall be used and occupied forlawful general office or industrial purposes permitted under applicableordinances and other Governmental requirements, the covenants, conditions andrestrictions affecting Santa Barbara Tech Center and the Rules and Regulationsas Lessor may from time 10 lime reasonably adopt for the safety, careand cleanliness of the Building and Santa Barbara Tech Center or thepreservatior of good order. The Rules and Regulations presently in effect areattached hereto as Exhibit “C”. Lessor shall not be responsible to Lessee forthe nonperformance of any of said Rules and Regulations by any other tenant ofthe Building. (See Addendum 5.1)

 

5.1.1                        **Hazardous Substances** - (See Addendum 5.1.1)

 

5.2                                 **Compliance With Law**. Lessee shall, at Lessee’s expense,comply promptly with all applicable statutes, ordinances, rules, regulations, ordersand requirements in effect regulating the use by Lessee of the Premises. Lesseeshall not use or permit the use of the Premises in any manner that will tend tocreate waste or a nuisance of which disturbs other tenants of the Building,

 

5.3                                 **Insurance Cancellation**. Notwithstanding the provisions ofParagraph 5.1 above, Lessee shall not do or permit anything to be done in orabout the Premises nor bring or keep anything therein which will in any way increasethe existing rate of or affect any fire or other Insurance upon the Building orany other part thereof or any of its consents, and if Lessee’s use of thePremises causes an increase in said insurance rates. Lessee shall pay asadditional rent the amount of such increase.

 

6.                                                                               

 

5

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6.1                                 **Lessor’s Obligations**. Lessor shall cause to be maintained, ingood order, condition and repair, the ** and exterior walls and windows of theBuilding (excluding the interior surface thereof),* and any public and Commonareas in the Building, as well as all parking areas, driveways, sidewalks,private roads or streets, landscaping and all other areas located within SantaBarbara Tech Center other than areas occupied by other buildings (such nonbuildingareas being herein referred to as “Common Areas”). *heating, venting and airconditioning systems **foundation, structural walls

 

6.2                                 **Lessee’s Obligations**. Lessee shall during the term of thisLease keep in good order, condition and repair the interior of the Premises andevery part thereof, including, but not limited to, all interior windows anddoors in and to the Premises. Lessor shall incur no expense nor have anyobligation of any kind whatsoever in connection with themaintenance of the interior of the Premises and Lessee expressly waives thebenefits of any statute now or hereafter in effect which would otherwise affordLessee the right to make repairs at Lessor’s expense or to terminate this Leasebecause of any failure to keep the interior of the Premises in good order,condition and repair. Notwithstanding the foregoing, Lessor shall be liable formaintenance or repairs which are caused by Lessor’s gross negligence. *the roofand roof membrane,

 

6.3                                 **Alterations and Additions.**

 

(a)                                  Lessee shall not, without Lessor’s priorwritten consent, make any alterations, improvements, additions or utilityinstallations in, on or about the Premises. As used in this Paragraph 6.3, the term “utility installations” shall includebus ducting, power panels, fluorescent fixtures, space heaters, conduits andwiring. As a condition to giving such consent, Lessor may require that Lessee (i)agree to remove any such alterations, improvements, additions or utility installationsat the expiration or sooner termination of the term, and to restore thePremises to their prior condition and/or (ii) provide Lessor, at Lessee’s solecost and expense, a lien and completion bond in an amount equal to one andone-half (1 1/2) times the estimated cost of such improvements, to insureLessor against any liability for mechanics’ and materialmen’s liens and toinsure completion of work *unless such work is nonstructural and does notexceed $20,000.00. For all work Lessee will provide Lessor withas-built drawings reflecting any changes to Premises.

 

(b)                                 All alterations, improvements andadditions to the Premises shall be performed by Lessor’s contractor for SantaBarbara Tech Center or other licensed contractor approved by Lessor. Lesseeshall pay, when due, all claims for labor or materials furnished to or forLessee at or for use in the Premises, which claims are or may be secured by anymechanics or materialmen’s lien against the Premises or any interest therein,and Lessor shall have the right to post notices of nonresponsibility in or onthe Premises as provided by law.

 

6.4                                 **Surrender**. On the last day of the term hereof, oron any sooner termination, Lessee shall surrender to Lessor the Premises and,subject to the provisions of Paragraph 6.3 (a) hereof, all alterations, additions,and improvements thereto, in the same condition as when received or made,ordinary wear and tear excepted; provided, however, that Lessee’smachinery, equipment and trade fixtures (including utility installations) whichmay be removed without irreparable or material damage to the Premises, shallremain the property of Lessee and be removed by Lessee. Lessee shall repair anydamage to the Premises occasioned by the removal of Lessee’s furnishings,machinery, equipment and trade fixtures, which repair shall include thepatching and filling of holes and repair of structural damage.

 

6.5                                 **Lessor’s Rights**. If Lessee falls to perform Lessee’sobligations under this Article 6, Lessor may, at its option (but shall not berequired to), and without notice to Lessee, perform such obligations on behalfof Lessee, and the cost thereof, together with interest thereon at the ratespecified in Paragraph 12.2(a) hereof, shall immediately become due and payableas additional rent to Lessor.

 

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7.                                       **INSURANCE**

 

Lessee, at its sole cost and expense, shall, commencing on the dateLessee is given access to the Premises for any purpose, and during the entireterm hereof, procure, pay for and keep in full force and effect:

 

7.1                                 **Lessee’sLiability Insurance**. Comprehensive general liability insurance withrespect to the Premises and the operations of or on behalf of Lessee in, on orabout the Premises, including but not limited to: personal injury, productliability (if applicable), blanket contractual, owner’s protective, broad formproperty damage liability coverage, host liquor liability and owned andnon-owned automobile liability in an amount not less than $1,000,000 CombinedSingle Limit. Such policy shall contain (i) severability of interest, (ii)cross liability, and (iii) an endorsement stating* “Such insurance as isafforded by this policy for the benefit of Lessor shall be primary as respectsany liability or claims arising out of the occupancy of the Premises by Lessee,or out of Lessee’s operations, and any insurance carried by Lessor shall beexcess and non-contributory”. *in substance that

 

7.2                                 **Lessee’s Worker’s CompensationInsurance**. Worker’sCompensation coverage as required by law, together with EmployerLiability coverage.

 

7.3                                 **Lessee’s Fire and ExtendedCoverage Insurance**.Insurance against fire, vandalism, malicious mischief and such other additionalperils as now are or hereafter may be included in a standard “All Risks”coverage, insuring all improvements and betterments made to the Promises,Lessee’s trade fixtures, furnishings, equipment, stock, loss of incomeor extra expense, and other items of personal property in an amount not lessthan 100% of replacement value. Such insurance shall contain (i) no coinsuranceor contribution clauses, (ii) a Replacement Cost Endorsement, and (iii)deductible amounts acceptable to Lessor.

 

7.4                                 **Policy Requirements**. All policies of insurance required tobe carried by Lessee pursuant to these requirements shall be written by responsibleinsurance companies authorized to do business in the State of California.  Any such insurance required by Lesseehereunder may be furnished by Lessee under any blanket policy carriedby it or under a separate policy therefor.  A true and exact copy of each paid up policyevidencing such insurance or a certificate of the insurer, certifying that suchpolicy has been issued, providing the coverage required and containing theprovisions specified herein, shall be delivered to Lessor prior to the date Lesseeis given the right to possession of the Premises and upon renewals, not lessthan thirty (30) days prior to the expiration of such coverage.  Lessor may, at any time, and from time totime, inspect and/or copy any and all insurance policies required hereunder.  In no event shall the then limits of anypolicy be considered as limiting the liability of Lessee under this Lease.

 

Eachpolicy evidencing insurance inquired to be carried by Lessee pursuant to theserequirements shall contain, in form and substance satisfactory to Lessor: (i) aprovision including Lessor, Lender and any other parties in interest designatedby Lessor as an additional insured; (ii) a waiver by Lessee’s insurers of anyright to subrogation against Lessor, its agents, employees and representativeswhich arises or might arise by reason of any payment under such policy or byreason of any act or omission of Lessor, its agents, employees orrepresentatives; and (iii) a provision that the insurer will not cancel or materiallychange the coverage provided by such policy without first giving Lessor thirty (30)days prior written notice.

 

7.5                                 **Lessor’s Rights**. If Lessee fails to procure, maintain and/orpay for at the times and for the durations specified in this Lease, the insurancerequired hereunder, or fails to carry insurance required by any governmentalrequirement, Lessor may (but without obligation to do so), and without noticeto Lessee, perform such obligations on behalf of Lessee, and the cost thereof,together with interest thereon

 

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at the rate specified inParagraph 12.2 (a) hereof, shall immediately become due and payable asadditional rent to Lessor.

 

7.6                                 **Lessor’s Insurance**. Lessor shall maintain during the termof this Lease such insurance against physical damage to the Building,comprehensive liability insurance and other insurance as Lessor may from timeto time determine. Lessor will determine the limits of coverage, deductiblesand specific perils insured against. Lessor may, but shall not be obliged to,take out and carry any other form or forms of insurance as it or the mortgagees ofLessor may reasonably determine advisable. Notwithstanding any contributions byLessee to the cost at insurance premiums, with respect to the Building or anyalterations of the Premises, as may be provided herein, Lessee acknowledges thatit has no right to receive any proceeds from any such insurance policies carriedby Lessor. (See Addendum 7.6)

 

7.7                                 (See Addendum 7.7)

 

7.8                                 **Exemption of Lessor from Liability**.  Lessorshall not be liable for injury to Lessee’s business or any loss of income therefromor for damage to the property of Lessee, Lessee’s employees, invitees,customers, or any other person in or about the Premises, nor shall Lessor beliable for injury to the person of Lessee, Lessee’s employees, agents acontractors, whether such damage or injury is caused by or results from fire, explosion,falling plaster, electricity, gas, water or rain, or from the breakage,leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,plumbing, air conditioning or lighting fixtures, or from any other cause,whether such damage or injury results from conditions arising upon the Premisesor upon other portions of the Building, or from other sources or places, andregardless of whether the cause of such damage a injury or the means ofrepairing the same is inaccessible. Lessor shall not be liable for incorporealhereditaments including interference or obstruction of light, air a view.Lessor shall not be liable for any damages arising from any act or neglect ofany other tenant of the Building or the other portions of Santa Barbara TechCenter.  Such exemption shall not extendto any acts of gross negligence or willful misconduct.

 

8.                                       **DAMAGE OR DESTRUCTION**

 

8.1                                 **Partial Damage**. If the Premises, or so much of theBuilding as to cause the Premises to be uninhabitable, are damaged by any casualty,and the damage (exclusive of any property or improvements installed by Lessee inthe Premises) can be repaired within ninety (90) days without the payment ofovertime. Lessor shall at Lessor’s expense repair such damage(exclusive of any property of Lessee or improvements installed by Lessee in thePremises) as soon as practicable and this Lease shall continue in full forceand effect. If the Premises, or so much of time Building as to cause thePremises to be uninhabitable, are damaged by any casualty, and the damage(exclusive of any property of Lessee or improvements installed by Lessee in thePremises) cannot be repaired within ninety (90) days without the payment ofovertime or other premiums. Lessor may, at Lessor’s option, either (i) repair suchdamage as soon as practicable at Lessor’s expense, in which event this Leaseshall continue in full force and effect, or (ii) give written notice to Lesseewithin thirty (30) days after the date of the occurrence of such damage of Lessor’sintention to terminate this Lease, in which event this Lease shall terminate asof the date of the occurrence of such damage.

 

8.2                                 **Damage Near End of Term**. If the Premises, or so much of the Buildingas to cause the Premises to be uninhabitable, are damaged during the last six (6)months of the term of this Lease or any renewal thereof, Lessor may, at Lessor’soption, terminate this Lease as of the date of occurrence of such damage bygiving written notice to Lessee of Lessor’s election to do so within thirty (30)days after the date of occurrence of such damage; provided, however, that ifthe term of this Lease has been extended for any reason whatsoever, Lessor’sright to terminate this Lease shall only apply during the last six (6) monthsof the then current term of this Lease.

 

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(a)                                  If Lessor is obligated or elects torepair the Premises as provided above, the rent payable for the period *                             shall be abated, in proportion to the degree to which Lessee’s use of thePremises is impaired; provided, however, that the aggregate period of abatementhereunder shall not exceed six (6) months. Except for suchabatement, if any, Lessee shall have no claim against Lessor for any damagesuffered by reason of any such damage, destruction, repair or, restoration. *fromcommencement until completion of repair

 

(b)                                 If Lessor is obligated or elects torepair the Premises as provided above, but does not commence such repair withinninety (90) days after such obligation shall accrue, subject to an extension ofup to another ninety (90) days for delays beyond the reasonable control ofLessor, Lessee may, at Lessee’s option, terminate this Lease by giving Lessorwritten notice of Lessee’s election to do so at any time prior to thecommencement of such repair or restoration, in which event this Lease shallterminate as of the date of such destruction.

 

8.3                                 **Insurance Proceeds UponTermination**. Ifthis Lease Is terminated pursuant to any right given Lessee or Lessor to do sounder this Article 8, all insurance proceeds payable under Section 7.5 withrespect to the damage giving rise to such right of termination shall be paid toLessor and any encumbrancer of the Premises, as their interests may appear.

 

8.4                                 **Restoration**. Lessor’s obligation to restore shallnot include the restoration or replacement of Lessee’s furnishings, machinery,equipment, trade fixtures or other personal property or any improvements oralterations made by Lessee to the Premises.

 

9.                                       **PERSONAL PROPERTY TAXES**

 

Lesseeshall pay prior to delinquency all Real Property Taxes and other taxes assessedagainst, levied upon or attributable to its furnishings, machinery, equipment,trade fixtures or other personal property contained in the Premises orelsewhere, and, if required, all improvements to the Premises in excess ofLessor’s “building standard” improvements, provided, however, that nothingcontained herein shall require Lessor to insure the accuracy of any segregationof the same for purposes of Section 3.4(b) hereof. When practicable, Lesseeshall cause said furnishings, machinery, equipment, trade fixtures and allother personal property to be assessed and billed separately from the realproperty of Lessor.

 

10.                                 **UTILITIES**

 

Lesseeshall pay for all water, gas, heat, light, power, janitorial services and otherutilities and services supplied to the Premises, together with any taxesthereon. If any such services are not separately metered or charged to Lessee, Lesseeshall pay a pro rata proportion, as part of operating expenses, based onrentable area, of all charges jointly metered or charged with other premises.Lessor shall not be liable in damages or otherwise unless due to Lessor’s grossnegligence for any failure or interruption of any utility services beingfurnished to the building and no such failure or interruption shall entitleLessee to terminate this lease. The operation and control of utilities, airconditioning and any other energy system is subject to compliance with anygovernment authority governing the regulation and use of energy systems withinthe commercial office building structure. See Exhibit F

 

11.                                 **ASSIGNMENT AND SUBLETTING**

 

11.1                           Lessee shall not voluntarily or byoperation of law sublet, assign, transfer, mortgage or otherwise encumber, orgrant concessions, licenses or franchises with respect to all or any part ofLessee’s interest in this Lease or the Premises without the prior writtenconsent of Lessor. If Lessee desires at any

 

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time to assign this Lease orto sublet the Premises or any portion thereof, it shall first notify Lessor ofits desire to do so and shall submit in writing to Lessor (i) the name of theproposed sublessee or assignee, (ii) the nature of the proposed sublessee’s orassignee’s business to be carried on in the Premises; (iii) the terms andprovisions of the proposed sublease or assignment; (iv) such reasonablefinancial information as Lessor may request concerning the proposed sublesseeor assignee, including, but not limited to a balance sheet as of a date withinninety (90) days of the request for Lessor’s consent, statements of income orprofit and loss for the two year period preceding the request for Lessor’sconsent and a written statement in reasonable detail as to the business experienceof the proposed sublessee or assignee during the five (5) years preceding therequest for Lessor’s consent; and (v) the name and address of sublessee’s orassignee’s present or previous landlord. Lessor may, as a condition to grantingsuch consent, require that the obligations of any assignee which is asubsidiary or affiliate of another corporation be guaranteed by the parent orcontrolling corporation. Any sublease, license, concession, franchise or otherpermission to use the Premises shall be expressly subject and subordinate toall applicable terms and conditions of this Lease. Any purported or attemptedassignment, transfer, mortgage, encumbrance, subletting, license, concession,franchise or other permission to use the Premises contrary to the provisions ofthis paragraph shall be void and, at the option of Lessor, shall terminate thisLease.

 

11.2                           If Lessee is a corporation, any transferof its stock, or any dissolution, merger or consolidation, which results in achange in the control of Lessee from the person or persons owning a majority ofits voting stock immediately prior thereto, or the sale or other transfer ofall or substantially all of the assets of Lessee, * shall constitute anassignment of Lessee’s interest in this Lease within the meaning of thisArticle 11 and the provisions requiring consent contained herein. Lessor mayrequire as a condition to giving such consent that the new controlling person(s)execute a guaranty of this Lease. If Lessee is a corporation which, under thencurrent guidelines published by the California Commissioner of Corporations, isnot deemed to be a public corporation, the transfer, assignment orhypothecation of any Interest in such corporation in the aggregate in excess of25% (other than a transfer occurring by operation of law upon the death of theholder of such interest)* shall be deemed an assignment within the provisionsof this Article. *and which results in a reduction in the net worth of theentity following such action.

 

11.3                                                                                                                       concession, franchise or other permission to use the Premises shall relieveLessee of its obligations to pay the rent or to perform all                                   other obligations to be performed by Lessee hereunder.                      acceptance of rent by Lessor from any other person shall not be deemed to be awaiver by Lessor of any provisions of this Lease.

 

11.4                           At any time within ten (10) days afterLessor’s receipt of the information specified in Section 11.1 above, Lessor mayby written consent to Lessee elect (a) to sublease the Premises or the portionthereof so proposed to be subleased by Lessee, or to take an assignment of Lessee’sleasehold estate hereunder, upon the same terms as those offered to theproposed sublessee or assignee, as the case may be; or (b) deleted; or (c)disapprove such assignment or subletting. If Lessor does not act within the twenty (20) days, such failure to actis deemed a disapproval of such request for assignment or subletting.

 

11.5                           Each assignee or transferee, other thanLessor, shall assume, all obligations of Lessee under this Lease and shall beand remain liable jointly and severally with Lessee for the payment of therent, and for the due performance of all the terms, covenants, conditions andagreements to be performed by Lessee hereunder; provided, however, that atransferred other than an assignee shall be liable to Lessor for rent only inthe amount set forth in the assignment or transfer.  No assignment shall be binding on Lessorunless such assignee or Lessee shall deliver to Lessor a counterpart of suchassignment and an instrument in recordable form which contains a covenant ofassumption by such assignee satisfactory in substance and form toLessor, consistent with the requirements of this Section 11.5, but the failureor

 

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refusalof such assignee to execute such instrument of assumption shall not release ordischarge such assignee from its liability as set forth above.

 

11.6                           Consent by Lessor to any subletting or assignmentshall be conditioned upon payment by Lessee to Lessor of all “TransferConsideration” (as hereafter defined) received or to be received, directly orindirectly, by Lessee on account of such assignment of subletting.  Transfer Consideration shall be paid toLessor at the same time or times as the same is due by Lessee.  Failure to pay Lessor the TransferConsideration, or any portion or installment thereof, shall be deemed a defaultunder this Lease, entitling Lessor to exercise all remedies available to itunder law including, but not limited to, those specified in Article 12 of thisLease.  “Transfer Consideration” shallmean (a) in the case of a subletting, any consideration paid or given, directlyor indirectly, by the sublessee to Lessee pursuant to the sublease for the useof the Premises, or any portion thereof, over and above the rent and anyadditional rent, however denominated, in this Lease, payable by Lessee toLessor for the use of the Premises (or portion thereof), prorating asappropriate the amount payable by Lessee to Lessor under this Lease if lessthan all of the Premises is sublet, and (b) in the case of an assignment or asublease, any consideration paid or given, directly or indirectly, by thesublessee or assignee to Lessee in exchange for entering in the sublease orassignment, but shall not include reimbursement for any security deposit,reimbursement of any improvements, fixtures or furnishings installed in thePremises by Lessee or any payment for personal property of Lessee not in excessof Lessee’s book value thereof.  As usedherein, consideration shall include consideration in any form, including butnot limited to, money, property, assumption of liabilities other than thosearising under this Lease, discounts, services, credits or any other item orthing of value, irrespective of the form of such consideration, Lessor shall beentitled to be paid in cash in an amount equivalent to the aggregate of thecash portion of the Transfer Consideration and the value of any non-cashportion of the Transfer Consideration. If any Transfer Consideration is to be paid or given in installments,Lessee shall pay each such installment at the time the same is to be paid orgiven.

 

11.7                           deleted

 

12.                                 **DEFAULTS; REMEDIES**

 

12.1                           **Default by Lessee**. The occurrence of any one or more of the following events shallconstitute a default of this Lease by Lessee:

 

(a)                                  The vacating orabandonment of the Premises by Lessee combined with the failure to pay rent;

 

(b)                                 The failure of Lessee to make any paymentof rent or any other payment required to be made by Lessee hereunder, as andwhen due, where such failure shall continue to for a period of ten (10) daysafter written notice thereof from Lessor to Lessee; provided, however, that anysuch notice shall be in lieu of, and not in addition to, any notice requiredunder California Code of Civil Procedure Section 1161;

 

(c)                                  The failure byLessee to observe or perform any of the covenants, conditions or provisions ofthis Lease (or the covenants, conditions and restrictions governing SantaBarbara Tech Center to be observed or performed by Lessee, other than describedin Paragraph 12.1 (b) hereof, where such failure shall continue for a period ofthirty (30) days after written notice thereof from Lessor to Lessee; provided,however, that any such notice shall be in lieu of, and not in addition to, anynotice required under California Code of Civil Procedure Section 1161; providedfurther, that if the nature of Lessee’s default is such that more than thirty(30) days are reasonably required for its cure, then Lessee shall not be deemedto be in default if Lessee commences such cure within said thirty (30) dayperiod and thereafter diligently prosecutes such cure to completion; or

 

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(d)                                 The making by Lessee of any generalassignment or general arrangement for the benefit of creditors; the filing byor against Lessee of a petition to have Lessee adjudged a bankrupt or apetition for reorganization or arrangement under any law relating to bankruptcy(unless, in the case of a petition filed against Lessee, the same is dismissedwithin sixty (60) days); the appointment of a trustee or receiver to takepossession of substantially all of Lessee’s assets located at the Premises, orof Lessee’s interest in this Lease, where possession is not restored to Lesseewithin thirty (30) days; or the attachment, execution or other judicial seizureof substantially all of Lessee’s assets located at the Premises or of Lessee’s interestin this Lease, where such seizure is not discharged within thirty (30) days.

 

12.2                           **Remedies for Default of Lessee**.  Inthe event of any such default, Lessor may at any time thereafter, upon noticeand demand and without limiting Lessor in the exercise of any other right orremedy which Lessor may have by reason of such default or breach:

 

(a)                                  Terminate Lessee’s right to possession ofthe Premises by any lawful means, in which case this Lease shall terminate andLessee shall immediately surrender possession of the Promises to Lessor, insuch event Lessor shall be entitled to recover from Lessee:

 

(1)                                  The worth at the time of award of theunpaid rent which has been earned at the time of termination;

 

(2)                                  The worth at the time of award of theamount by which the unpaid rent which would have been earned after terminationuntil the time of award exceeds the amount of such rental loss that Lesseeproves could have been reasonably avoided:

 

(3)                                  The worth at the time of award of theamount by which the unpaid rent for the balance of the term after the time ofaward exceeds the amount of such rental loss that Lessee proves could bereasonably avoided; and

 

(4)                                  Any other amount necessary to compensateLessor for all the detriment proximately caused by Lessee’s failure to performits obligations under this Lease or which in the ordinary course of thingswould be likely to result therefrom, including, but not limited to; the cost ofrecovering possession of the Premises, expenses of releasing includingnecessary renovation and alteration of the Premises, reasonable attorneys’ feesand any other reasonable cost. The “worth of the time of award” of the amountsreferred to in subparagraphs (1) and (2) above shall be computed by allowinginterest at five (5) percentage points above the discount rate of the FederalReserve Bank of San Francisco at the time of the award. The worth at the timeof award of the amount referred to in subparagraph (3) above shall be computedby discounting such amount at one (1) percentage point above such discountrate.

 

(b)                                 deleted

 

(c)                                  Require Lessee to make payment of allrental obligations in cash or by certified cashiers check.

 

(d)                                 Pursue any other remedy now or hereafteravailable to Lessor under the laws or judicial decisions of the State ofCalifornia, including, but not limited to, the remedy provided In CaliforniaCivil Code Section 1951.4 to continue this Lease in affect.

 

12.3                           **Default by Lessor**. Lessor shall not be In default of anyof the obligations of Lessor under this Lease unless Lessor fails to performsuch obligations within a reasonable time, but in no event

 

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less than thirty (30)days after written notice by Lessee to Lessor specifying wherein Lessor hasfailed to perform such obligations; provided, however, thatif the nature of Lessor’s default is such that more than thirty (30) days arerequired for its cure, Lessor shall not be in default if Lessor commences suchcure within such thirty (30) day period and thereafter diligently prosecutesthe same to completion. In the event of any such default by Lessor, Lessee maypursue any remedy now or hereafter available to Lessee under the laws ofjudicial decisions of the State of California, except that Lessee shall nothave the right to terminate this Lease except as expressly provided herein.(See Addendum 12.3)

 

12.4                           **Late Charges**. Lessee acknowledges that the latepayment by Lessee to Lessor of rent and other sums due hereunder will causeLessor to incur costs not contemplated by this Lease, the exact amount of whichwill be extremely difficult to ascertain. Such costs include, but are notlimited to, processing and accounting charges and late chargeswhich may be imposed on Lessor by the terms of any mortgage or trust deedcovering the Premises. Accordingly, if any installment of rent or any other sumdue from Lessee shall not be received by Lessor or Lessor’s designee within ten(10) days after the same is due, Lessee shall pay to Lessor a late charge equalto fifteen percent (15%) of such overdue amount monthly until such overdueamount is paid. Lessee acknowledges that such late charge represents a fair andreasonable estimate of the cost Lessor will incur by reason of a late paymentby Lessee. Acceptance of such late charge by Lessor shall in no eventconstitute a waiver of Lessee’s default with respect to such overdue amounts,nor prevent Lessor from exercising any of the other rights and remedies grantedhereunder.

 

13.                                 **CONDEMNATION OR RESTRICTION ONUSE**

 

13.1                           **Eminent Domain**.  Ifthe whole of the Premises or so much thereof as to render the balance unusableby Lessee shall be taken under power of eminent domain, this Lease shallautomatically terminate as of the date of such condemnation, or as of the datepossession is taken by the condemning authority, whichever is earlier. Noaward for any partial or entire taking shall be apportioned, and Lessee herebyassigns to Lessor any award which may be made in such taking or condemnation,together with any and all rights of Lessee now at hereafter arising in or tothe same or any part thereof; provided, however, that nothing contained hereinshall be deemed to give Lessor any interest in or to require Lessee to assignto Lessor any award made to Lessee for its relocation expenses, the taking ofpersonal property and fixtures belonging to Lessee, the interruption of ordamage to Lessee’s business and/or for Lessee’s unamortized cost of leasehold improvements.The unamortized portion of the Lessee’s expenditures for improving the Premisesshall be determined by multiplying such expenditures by a fraction, thenumerator of which shall be the number of years of the term of this Lease                         ,and the denomination of which shall be the number of years of           term of this Lease which shall not have expired at the time of improving thePremises. In no event shall options to renew or extend be taken intoconsideration in determining the payment to be made to the Lessee. Lessee’sright to receive compensation or damages for its fixtures and personal propertyshall not be affected in any manner thereby.

 

13.2                           **Abatement of Rent**. In the event of a partial or temporary takingwhich does not result in a termination of this Lease, rent shall be abated inproportion to that part of the Premises so made unusable by Lessee.

 

13.3                           **Temporary Taking**. No temporary taking of the Premises and/orof Lessee’s rights therein or under this Lease shall terminate this Lease, andany award made by reason of any such temporary taking shall belong entirely to Lessor.

 

13.4                           **VoluntarySale as Taking**. A voluntary sale by Lessor to any public body oragency having the power of eminent domain, either under threat of condemnation orwhile condemnation

 

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proceedingsare pending, shall be deemed to be a taking under the power of eminent domainfor the purpose of this Article 13.

 

14.                                 **BROKERS**

 

Lessoracknowledges its obligation to pay a single commission to the broker(s)specified in Item 9 of the Basic Lease Provisions, if any. Lessee representsand warrants that it has neither incurred nor is aware of any other broker’s,finder’s, or similar fee in connection with the origin, negotiation, executionor performance of this Lease and agrees to indemnify and hold harmless Lessorfrom any loss, liability, damage, cost or expense incurred by reason of abreach of this representation.

 

15.                                 **LESSOR’S LIABILITY**

 

15.1                           The term “Lessor” as used herein shallmean only the owner or owners at the time in question of the fee title or a lessee’sinterest in a ground lease of the Building. In the event of any transfer ofsuch title or interest, Lessor herein named (and in case of any subsequenttransfers, the then grantor) shall be relieved from, and after the date ofsuch transfers of all liability for Lessor’s obligations thereafter to beperformed; provided, however, that any funds in the hands of Lessor or the thengrantor at the time of such transfer in which Lessee has an interest shall bedelivered to the grantee. The obligations contained in this Lease to beperformed by Lessor shall, subject as aforesaid, be binding on Lessor’ssuccessors and assigns only during their respective periods of ownership and nosuch successor or assignee shall be liable for the obligations of itspredecessor Lessor hereunder.

 

15.2                           The initial Lessor hereunder is a jointventure operating as an unincorporated association. In consideration of thebenefits accruing hereunder, Lessee, its successors and assigns, agree that, inthe event of any actual or alleged failure, breach or default hereunder by the initialLessor;

 

(a)                                  The sole and exclusive remedy shall beagainst the assets of the joint venture;

 

(b)                                 No joint venturer shall be sued or named ina party in any suit or action (except as may be necessary to securejurisdiction of the joint venture);

 

(c)                                  No service of process shall be madeagainst any joint venturer (except as may be necessary to secure jurisdictionof the joint venture);

 

(d)                                 No joint venturer shall be required toanswer or otherwise plead to any service of process;

 

(e)                                  No judgment will be taken against anyjoint venturer;

 

(f)                                    Any judgment taken against any jointventurer may be vacated and set aside at any time nunc pro tunc;

 

(g)                                 No writ of execution will ever be leviedagainst the assets of any joint venturer; and

 

(h)                                 These covenants and agreements areenforceable by Lessor and also by any joint venturer thereof.

 

16.                                 **(DELETED)**

 

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17.                                 **(DELETED)**

 

18.                                 

 

During the term of this Lease, Lessee shall have the right in commonwith other tenants of the Building (if any) and any adjacent buildings, to usethe parking area available to tenants of the Building. Lessee’s use of suchparking facilities or that of its invitees shall be limited to a maximum of thenumber of parking spaces shown in Item 10 of the Basic Lease Provisions (butsuch space will not be separately identified and Lessor shall have noobligation to monitor the use of such parking facility), and shall be subjectto such rules and regulations as may be established from time to time by Lessorfor the effective use of such parking facilities. Such rules and regulationsmay include, but shall not be limited to; designation of specific areas for useby invitees of Lessee and Lessor, hours during which parking shall be availablefor use; parking attendants; a parking validation or other assessment system*;and such other matters affecting the parking operation to the end that said facilitiesshall be utilized to maximum efficiency and in the best interest of Lessor,Lessee and their respective invitees. Lessor may temporarily close any part ofthe Common Area for such periods of time as may be necessary to prevent thepublic from obtaining prescriptive rights or to make repair or alterations.Lessee’s right to use any area for parking purposes shall be subject torestrictions or other limitations resulting from any laws, statutes, ordinancesand governmental rules, regulations or requirements now in force or which mayhereafter be in force, and no such event shall in any way affect this Lease,abate rent, relieve Lessee of any liabilities or obligations under this Leaseor give rise to any claim whatsoever against Lessor. If Lessor reasonablydetermines that Lessee is regularly using in excess of the number of parkingspaces specified in Item 10 of the Basic Lease Provisions, Lessor may, inaddition to any other remedy, impose a reasonable charge for such excess usage,payable by Lessee upon demand.*to prevent parking abuse

 

19.                                 **GENERAL PROVISIONS**

 

19.1                           **Estoppel Certificate**

 

(a)                                  Lessee shall at any time and from time totime upon not less than ten (10) days prior written notice from Lessor execute,acknowledge and deliver to Lessor a statement in writing (i) certifying thatthis Lease is unmodified and in full force and effect (or, if modified, statingthe nature of such modification and certifying that this Lease,as so modified, is in full force and effect) and the date to which the rent andother charges are paid in advance, if any, and (ii) acknowledging that then areno, to Lessee’s knowledge, uncured defaults on the part of Lessor hereunder, orspecifying such defaults if any are claimed. Any such statement may beconclusively relied upon by any prospective purchaser or encumbrancer of thePremises. (See Addendum 19.1(a))

 

(b)                                 Lessee’s failure to deliver suchstatement within such time shall be conclusive upon Lessee that (i) this Leaseis in full force and effect without modification except as may be representedby Lessor, (ii) there are no uncured defaults in Lessor’s performance and (iii)not more than one month’s rent has been paid in advance.

 

(c)                                  deleted. (See Addendum 19.1(c))

 

19.2                           **Severability**. The invalidity of any provision of this Lease as determined by a courtof competent jurisdiction, shall in no way affect the validity of any otherprovision hereof.

 

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19.3                           **Time of Essence**. Time is of the essence in theperformance of all terms and conditions of this Lease in which time is anelement.

 

19.4                           **Captions**. Article and paragraph captions havebeen inserted solely as a matter of convenience and such captions in no waydefine or limit the scope or intent of any provision of this Lease.

 

19.5                           **Notices**. Any notice required or permitted to begiven hereunder shall be in writing and may be served personally or by regularmail, addressed to Lessor and Lessee respectively at the addresses set forthbefore their signatures in Item 11 of the Basic Lease Provisions, or to suchother or additional persons or at such other addresses as mayfrom time to time be designated in writing by Lessor or Lessee by noticepursuant hereto.

 

19.6                           **Waivers**. No waiver of any provision hereof shall be deemed awaiver of any other provision hereof. Consent to or approval of any act by oneof the parties hereto shall not be deemed to render unnecessary the obtainingof such party’s consent to or approval of any subsequent act. The acceptance ofrent hereunder by Lessor shall not be a waiver of any preceding breachby Lessee of any provision hereof, other than the failure of Lessee to pay theparticular rent so accepted, regardless of Lessor’s knowledge of such precedingbreach at the time of acceptance of such rent.

 

19.7                           **Holding Over**. If Lessee holds over after theexpiration or earlier termination of the term hereof without the expresswritten consent of Lessor, Lessee shall become a tenant at sufferance only atthe then prevailing market rate as determined by Lessor in its sole andabsolute discretion for the space in effect upon the date of such expirationor earlier termination (subject to adjustment as provided in Article 3 hereofand prorated on a dally basis), and otherwise upon the terms, covenants and conditionsherein specified, so far as applicable. Acceptance by Lessor of rent after suchexpiration or earlier termination shall not constitute a consent to a holdoverhereunder or result in a renewal. The foregoing provisions of this Paragraphare in addition to and do not affect Lessor’s right of re-entry or any otherrights of Lessor hereunder or as otherwise provided by law.

 

19.8                           **Cumulative Remedies**. No remedy or election hereunder shall be deemed exclusive but shall,wherever possible, be cumulative with all other remedies at law or in equity.

 

19.9                           **Inurement**. Subject to any provisions hereof restrictingassignment or subletting by Lessee and subject to the provisions of Article 15hereof, the terms and conditions contained in this Lease shall bind theparties, their personal representatives, successors and assigns.

 

19.10                     **Choice of Law**. This Lease shall be governed by thelaws of the State of California.

 

19.11                     **Subordinate**. This Lease shall, at Lessor’s option, be either superior or subordinateto mortgages or deeds of trust on the Premises, whether now existing orhereinafter created. Lessee shall, upon written demand by Lessor, execute suchinstruments as may be required from time to time to subordinate the rights andinterest of Lessee under this Lease to the lien of any mortgage or deed of truston the Building. Notwithstanding any such subordination, so long as Lessee isnot in default hereunder, this Lease shall not be terminated or Lessee’s quietenjoyment of the Premises disturbed in the event such mortgage or deed of trustis foreclosed. In the event of such foreclosure, Lessee shall thereupon becomea lessee of, and attorn to, the successor-in-interest to Lessor on the sameterms and conditions as are contained in this Lease.  (See Addendum 19.11)

 

19.12                     **Attorneys’ Fees**. If either party hereto brings an actionto enforce the terms hereof or declare the rights of the parties hereunder, theprevailing party in any such action, on trial or appeal, shall be entitled torecover from the other party the reasonable costs and attorneys fees incurredin connection

 

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with such action. Forpurposes of this provision, in any action or proceeding instituted by Lessorbased upon any default or alleged default by Lessee hereunder, Lessor shall bedeemed the prevailing party if (i) judgment is entered in favor of Lessor or(ii) prior to trial or judgment Lessee shall pay all or any portion of the rentand charges claimed by Lessor, eliminate the condition(s), cease the act(s)or otherwise cure the omission(s) claimed by Lessor to constitute a default byLessee hereunder. Any expenses incurred in collecting sums due, whether actionis brought or not, and any attorneys’ fees incurred in collecting payment willbe charged to Lessee.

 

19.13                     **Lessor’s Access**. Lessor and Lessor’s agents shall havethe right to enter the Premises * at reasonable times for the purpose ofinspecting the same, showing the same to prospective purchasers, lessees, orlenders, and making such alterations, repairs, improvements or additions to thePremises or to the Building as Lessor may deem necessary or desirable.Lessor may at any time place on or about the Building any ordinary “For Sale”signs and Lessor may at any time during the last one hundred eighty (180) daysof the term hereof place on or about the Building any ordinary “For Sale”, “ForLease” or similar signs, all without rebate of rent or liability to Lessee.*with reasonable notice

 

19.14                     **Corporate Authority**. If Lessee is a corporation, Lessee shall, at Lessor’s request,require that each individual executing this Lease on behalf of said corporationrepresent and warrant that he is duly authorized to execute and deliver thisLease on behalf of said corporation in accordance with a duly adoptedresolution of the Board of Directors of said corporation or in accordance with theBy-Laws of said corporation, and that this Lease is binding upon saidcorporation in accordance with its terms. Lessee shall also, at Lessor’srequest, within thirty (30) days after execution of this Lease, deliver toLessor a certified copy of a resolution of the Board of Directors of saidcorporation authorizing or ratifying the execution of this Lease.

 

19.15                     **Surrender or Cancellation**. The voluntary or other surrender of this Lease byLessee, or a mutual cancellation thereof, shall not work a merger, and shallterminate all or any existing subleases, unless Lessor elects to treat suchsurrender or cancellation as an assignment to Lessor of any or all of such subleases.

 

19.16                     **Entire Agreement**. This Lease, the Exhibits hereto which bythis reference are incorporated herein as though set forth in full herein,covers in full each and every agreement of every kind or nature whatsoeverbetween the parties hereto concerning the Premises and the Building, and allpreliminary negotiations and agreements of whatsoever kind or nature aremerged herein. Lessor has made no representations or promises whatsoever withrespect to the Premises or the Building, or the design configuration of thedevelopment of Santa Barbara Tech Center, except those contained herein, and noother person, form or corporation has at any time had any authority from Lessorto make any representations or promises on behalf of Lessor. If any such representationsor promises have been made by others, Lessee hereby waives all right to relythereon. No verbal agreement or implied covenant shall be held to vary theprovisions hereof, any statute, law or custom to the contrary notwithstanding.

 

Exceptas otherwise provided herein, nothing expressed or implied herein is intendedor shall be construed to confer upon or grant any person any rights or remediesunder or by reason of any term or condition contained in this Lease.

 

19.17                     **Signs**. No sign, placard, picture, advertisement, name or notice shall beinscribed, displayed, printed or affixed to or near any part of the outside orinside of the Building without the written consent of Lessor first had andobtained. Lessor shall have the right to remove any such sign, placard,picture, advertisement, name or notice without notice to and at theexpense of Lessee. All approved signs shall be installed at Lessee’s sole costand expense. (See Addendum 19.17)

 

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19.18                     deleted.

 

19.19                     **Gender; Number**. Whenever the context ofthis Lease requires the masculine gender includes the feminine or neuter, andthe singular number includes the plural.’

 

19.20                     **Recording Of Lease**.Lessee shall not record this lease without the express written consent ofLessor. If such permission granted, at the expiration or sooner termination ofthis Lease, Lessee shall execute, acknowledge and deliver to Lessor, withinten (10) days after written demand from Lessor, any quitclaim deed or otherdocument reasonably required by any reputable title company to remove the cloudof this Lease from the title of the real property subject to the Lease.  (See Addendum 19.20)

 

19.21                     deleted

 

19.22                     **Confidentiality of Lease**. Lessee acknowledges and agrees that the terms ofthis Lease are confidential and constitute proprietary information of Lessor.Disclosure of the terms hereof could adversely affect the ability of Lessor tonegotiate other leases with respect to the Building and impair Lessor’srelationship with other tenants of the Building. Lessee agrees that it, itspartners, officers, directors, employees and attorneys, shall not disclose theterms and conditions of this Lease to any other person without the priorwritten consent of Lessor. It is understood and agreed that damages would be aninadequate remedy for the breach of this provision by Lessee, and Lessor shallhave the right to specific performance of this provision and to injunctiverelief to prevent its breach or continued breach.  (See Addendum 19.22)

 

19.23                     **Quiet Enjoyment**. Provided Lessee has performed all ofthe terms, covenants, agreements and conditions of this Lease, including thepayment of rent and all other sums due hereunder, Lessee shall peaceably andquietly hold and enjoy the Premises for the term hereof, but subject to theprovisions and conditions of this Lease against Lessor and all personsclaiming by, through or under Lessor, Lessee’s right to use the Premises andthe Common Area as herein provided shall be subject to restrictions or otherlimitations or prohibitions resulting from any laws, statutes, ordinances andgovernmental rules, regulations or requirements now in force or which mayhereafter be in force and no such event shall in any way affect this Lease,abate rent, relieve Lessee of any liabilities or obligations under this Leaseor give rise to any claim whatsoever against Lessor.

 

19.24                     **Meaning** - (See Addendum 19.24)

 

20.                                 **CONSTRUCTION**

 

20.1                           Lessor shall cause the construction ofLessee’s improvements in the Premises in accordance with mutually approvedLessee’s improvement plans and outline specifications which will be initialedby Lessor and Lessee on or before May 20, 1989. No changes shallbe made in the initially approved plans and specifications without the priorwritten approval of Lessor and Lessee. Any such changes or additions caused byLessee or any Governmental authority shall be made at the sole cost of Lesseeand all additional expenses incurred by Lessor with respect to these changes(except changes requested by Lessor) shall be reimbursed to Lessor by Lesseeupon demand. Any such changes which cause a delay or any other delays caused byLessee or Lessee’s agents may postpone occupancy of the Premises beyond theTarget Commencement date (in which case the same shall be adjusted to theaggregate delays) but there shall be no abatement of Lessee’s rent as a resultof any such delay. Failure by Lessee to accomplish, complete and approve plansand specifications for Lessee’s improvements in a timely fashion shall be amaterial breach of this Lease and, at Lessor’s option, this Lease may becancelled or the monthly rent shall begin on the date indicated in Item #7 ofthe Basic Lease Provisions. Under no

 

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circumstancesshall Lessor be charged with any delay whatsoever as a result of nonstandardimprovement work.

 

20.2                           Lessee hereby acknowledges and agreesthat all of Lessee’s improvement work, including suite design and decorating,within the Premises shall be accomplished by parties acceptable to Lessor andthen only upon such conditions as Lessor may impose.

 

20.3                           Lessor shall at its expense promptlycorrect all items not conforming with the plans and specifications of whichLessor is notified by Lessee in writing within sixty (60) days after Lesseetakes possession of the Premises.

 

20.4                           Lessor warrants the Building and Lessee’simprovements installed un the Premises by Lessor against any defects inmaterials and workmanship of which Lessor is notified by Lessee in writingwithin one (1) year after date of completion of the work in question. Lessorfurther warrants that the construction of the Building and such tenantimprovements will upon completion comply with all applicable statutes,ordinances, rules, regulations, orders and requirements of Governmentalauthorities in effect as of the commencement of the lease term.

 

20.5                           **Construction Allowance**. Lessee shall have a maximumconstruction allowance of $-0- for the completion of Lessee’s improvements.Lessor shall be deemed the owner of these tenant improvements. Prior to thecommencement of construction, Lessee shall approve the Lessee improvement costbreakdown. Within ten (10) days following said approval, Lessee shall depositwith Lessor cash equal to the coat of any Lessee improvements over theallowance. Failure to make such deposit shall be deemed a material breach ofthis Lease and, at Lessor’s option, this Lease may be cancelled. Lessee shallbe deemed the owner of any improvements in excess of the allowance during theterm of this Lease, but the ownership of such improvements shall revert toLessor upon the expiration of this Lease. Any change orders to the originallyapproved contract which are requested by Lessee shall be forwarded to Lessor orLessor’s designated contractor for costing and approval. Lessee shall be givena written cost estimate for the completion of said change order which must beapproved and paid for by Lessee prior to the commencement of work.

 

20.5.1                  Improvements to be Constructed at Lessor’sSole Expense (See Addendum 20.5.1)

 

20.6                           **Construction**. Tender of possession of the Premises byLessor to Lessee may not take place prior to the time the Building and thePremises have been completed The Premises shall be deemed completed when constructionhas been substantially completed in accordance with the plans andspecifications as set forth in this Article 20. The Building shall be deemedcompleted when a Certificate of Occupancy has been received. Taking ofpossession by Lessee of the Premises shall constitute an acknowledgement thatthe Building and the Premises have been satisfactorily completed and Lessorshall have no further responsibility with respect to construction, except asexpressly set forth in Section 20.3 and 20,4 hereof. (See Addendum 20.6)

 

20.7                           **Punchlist**. (See Addendum 20.7)

 

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ADDENDA

 

1.                                       The Premises consists of approximately 14,044square feet depicted on Exhibit “G” as the “Former Forum Systems Space” andapproximately 11,451 square feet depicted on Exhibit “G” as the “Former APCDSpace.”

 

2.1(a)                   As of the date of execution of this Lease,that portion of the Premises identified as “Former APCD Space” is occupied bySanta Barbara County Air Pollution Control District.  APCD’s current lease with Lessor terminateson February 12, 1991, subject to an option to extend the term of the lease forone (1) year through and including February 12, 1992. Lessee’s term forpossession of the Former APCD Space in the Premises shall commence upon thetermination of APCD’s lease. Such termination will occur no later than February12, 1992, or on such earlier date as APCD or Lessor may terminate APCD’s lease.Lessee agrees that it will commence this term for the Former APCD Spaceimmediately upon APCD’s termination, whether that be at the current APCD leasetermination date or prior to such date. Lessee’s term for the Former APCD Spaceshall terminate concurrently with the termination of Lessee’s term for theFormer Forum Systems Space. Any default by Lessee with respect to itspossession of the Former APCD Space shall expressly constitute a default of theentire lease (including the Former Forum Systems Space) pursuant to Section12.1 hereof.

 

2.3                                 Option and Right of Notification. Lessor hereby grants the Lessee the rightto renew this Lease for one successive period of seven (7) years, upon the sameterms, covenants and conditions as are provided in this Lease.

 

Lesseeshall give notice to Lessor in writing of Lessee’s election to exercise suchoption no less than six (6) months prior to the expiration of the term. Lesseeshall not be entitled to exercise the option if, at the time of such exercise,Lessee is in default of any provision of this Lease.

 

Theannual rent for the first year of the option period, including the commencementthereof, shall be adjusted as of the commencement of said period, and as of theexpiration of each full or partial calendar year of the option term (the “Adjustmentdate”) to reflect any change in the United States Department of Labor, Bureauof Labor Statistics, Consumer Price Index, Subgroup “All Items”, entitled “ConsumerPrice Index, Urban Wage Earners and Clerical Workers (Revised Series), L.A. -Anaheim - Riverside Average (1982-84 = 100).” The index for said subgroupapplicable for the month of December (or the month preceding the CommencementDate for the first full or partial calendar year of the lease term) precedingeach adjustment date shall be considered the “base” and the annual rentfollowing each adjustment date shall be computed by adjusting the annual rentpayable for the preceding calendar year thereof by the percentage change in theindex as of the adjustment date over the “base”; provided, however, in no eventshall the rent payable for any year be less than the rent payable for thepreceding period on account of the adjustment pursuant to this Section 2.3,notwithstanding the fact that the index may, as of some adjustment date, beless than the “base.” If as of any adjustment date there shall not exist theConsumer Price Index in the same format as set forth above, the parties shallsubstitute any official index published by the Bureau of Labor Statistics orany successor or similar governmental agency as may then be in existence andshall be most nearly equivalent thereto. If the parties shall be unable toagree upon a successor index, the parties shall refer the choice to arbitrationin accordance with the rules of the

 

 
|  /s/ JCD           |   |  /s/ DKM           |
|-------------------------|--------|-------------------------|
| Lessor’s  Initials |   | Lessee’s  Initials |

 

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AmericanArbitration Association. The annual rent adjustment for any year of the optionperiod shall in no event be less than three (3%) percent or greater than seven(7%) percent per annum.

 

Shouldthe leasehold interest of any other lessee in the Building known as 5540 Ekwillterminate at the conclusion of a lease or option term for such other lessee, orsooner (hereafter “Vacated Space”), Lessor shall provide Lessee with notice ofsuch leasehold termination. Lessor shall have no obligation to enter into alease or lease negotiations with Lessee regarding such Vacated Space. Lessorand Lessee agree that this provision does not constitute a first right oroption for Lessee to lease any Vacated Space at 5540 Ekwill.

 

3.1                                 The Initial Annual Rent for the Former APCDSpace shall be computed upon the commencement of the term therefor bycommencing with the rent which would have been paid if Lessee were to occupythe Former APCD Space at the same time the Former Forum Systems Space isoccupied (which is $11,336.49, or 11,451 square feet multiplied by $.99 persquare foot), and escalating that rent in the exact same proportion as the rentfor the Former Forum Systems Space will be and will have been escalated.

 

3.4(a)                   Lessee’s Building Percentage as shown in Item3 of the Basic Lease Provisions will be adjusted at the commencement of theterm for the Former APCD Space to 60.22%.

 

3.4(c)                   Lessee’s Common Area Percentage as shown inItem 3 of the Basic Lease Provisions will be adjusted at the commencement ofthe term for the Former APCD Space to 30.11%.

 

3.5                                 The Annual Rent Adjustment for any year ofthe initial term shall in no event be less than three percent (3%) or greaterthan seven percent (7%) per annum.

 

4.                                       The sum of $24,397.41 reflected in Item 8 ofthe Basic Lease Provisions consists of $13,060.92 applicable to the FormerForum Systems Space and $11,336.49 applicable to the Former APCD Space. Untilthe Commencement Date for the Former APCD Space, the $11,336.49 shallconstitute a rental deposit and shall be placed by Lessor into aninterest-bearing account at a commercial bank of Lessor’s choosing, with theinterest therefrom accruing to the benefit of Lessee. Upon the CommencementDate for the Former APCD Space, said deposit shall serve as a security depositfor the Former APCD Space, shall be removed from said interest-bearing account,and shall no longer bear interest payable to Lessee.

 

5.1                                 Materials Storage Restrictions. The fire protection system planned forSanta Barbara Tech Center was National Fire Protection Association Standards,Pamphlet No. 13 and No. 231.  Suchstandards allow for the stacking of Class III or less combustibles up to 18feet high on floor pallets or in single row metal racks. All stacking islimited to 12 feet high if Class IV combustibles are present unless such ClassIV combustibles are segregated in a separate room or rooms in accordance withapplicable codes and stacked not in excess of 12 feet high. Lessee agrees toconduct its business so as not to violate or exceed the design standards of thefire protection system or any insurance policies maintained by Lessor pursuantto Article 7.

 

5.1.1                        Hazardous Substances. Any toxic or hazardous substances,pollutants or contaminants (hereinafter sometimes referred to as “materials”)shall be handled or disposed of as

 

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directedby applicable State, Federal, County and City regulations. Lessee shall handle,store, or dispose of such materials in a careful and prudent manner. At thetermination of the Lease, or any option period thereof, Lessee shall fullyclean the Premises in such a manner that no residue of such materials shallremain on the Premises. Lessee shall notify the appropriate governmentalauthority of the presence and amount of any such materials, and shall complywith all conditions imposed by such authority. Lessee shall contact theappropriate governmental authority prior to occupancy to determine theexistence of any records for the Building and/or Premises. Specifically, thirty(30) days prior to occupancy, Lessee shall submit a Hazardous MaterialsManagement Plan (“HMMP”) and a Hazardous Materials Floorplan (“HMF”) to Lessorand the appropriate governmental authority for approval.  These plans shall be attached in full to thisLease.

 

TheHMMP shall include the following:

 

1.                                       The company name, address, and contactperson.

2.                                       General facility description with map showinglocation of all buildings and structures.

3.                                       Facility hazardous material storage mapshowing the location of each proposed hazardous material storage area andaccess to such facilities. The map shall be updated annually by the occupantand submitted by January lst each year.

4.                                       A floorplan showing the location of eachhazardous material storage area, storage area access, and the location ofemergency equipment.

 

The HMF shall include the following:

 

1.                                       Hazardous Materials Handling Reportdescribing the safe handling of hazardous materials to prevent accidents.

2.                                       Separation of Hazardous Material Reportoutlining the methods to be utilized to ensure separation and protection ofhazardous materials from such factors that could cause fire, explosion, spills,etc.

3.                                       Inspection and Record Keeping Plan indicatingthe procedures for inspecting each storage facility. An authorized record ofinspection shall be maintained by the Lessee.

4.                                       Employee Training Program to ensure thatemployees know how to safely handle hazardous materials.

5.                                       Hazardous Materials Contingency that clearlydescribes appropriate response procedures and measures in case of an accident.

6.                                       A floorplan identifying the location andquantity of each hazardous material, including the chemical name and quantitylimit for each class.

 

Lesseeshall indemnify, defend and hold Lessor and its officers, employees and agentsharmless from any claims, judgments, damages, penalties, fines, costs,liabilities and losses, including attorneys’ fees, which arise during or afterthe term of this Lease from or in connection with the presence of toxic orhazardous substances, pollutants or contaminants in the soil or groundwater onor under the Premises, or from or in connection with the bringing onto thePremises, handling or storing any toxic or hazardous substances, pollutants orcontaminants, but only to the extent such toxic or hazardous substances,pollutants or contaminants are present as a result

 

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ofactions of Lessee, its officers, employees or agents. Except to the extentdescribed in the preceding sentence, Lessor agrees to indemnify, defend, andhold Lessee and its officers, employees, and agents harmless from any claim,judgments, damages, penalties, fines, costs, liabilities and losses, includingattorneys’ fees, which arise before, during or after the term of this Leasefrom or in connection with the presence of toxic or hazardous substances,pollutants or contaminants in the soil or groundwater on or under the Premises.The terms “toxic or hazardous substances” and “pollutants or contaminants” asutilized in this clause shall have the meaning as defined in the ComprehensiveEnvironmental Response Compensation and Liability Act of 1980, as amended.

 

7.6                                 Waiver of Subrogation. Lessee and Lessor each hereby waive any and all rights of recoveryagainst the other, or against the officers, employees, agents andrepresentatives of the other, for loss of or damage to such waiving party orits property or the property of others under its control to the extent thatsuch loss or damage is insured against under any valid and collectible insurancepolicy in force at the time of such loss or damages. Lessee shall, uponobtaining the policies of insurance required hereunder, give notice to theinsurance carrier or carriers that the foregoing mutual waiver of subrogationis contained in this Lease.

 

7.7.                              Mutual Indemnification. To the fullest extent permitted by law, theparties hereto shall each defend, indemnify and hold harmless one another fromand against any and all claims arising from the indemnifying party’s use of thePremises, the building or the common areas, or the conduct of its business orfrom any activity, work or thing done, permitted or suffered by theindemnifying party, its agents, contractors, employees or invitees in or aboutthe Premises, the building or the common areas, and shall further indemnify andhold harmless one another from and against any and all claims arising from anybreach or default in the performance of any obligation on the indemnifyingparty’s part to be performed hereunder or arising from any act, neglect, faultor omission of such indemnifying party or of its agents, employees, or inviteesand from and against all costs, attorneys’ fees, expenses and liabilitiesincurred in or about such claim or any action or proceeding brought thereon. Incase any action or proceeding be brought against one party by reasons of anysuch claim, the other party, upon notice from the first, shall defend the sameat the other’s expense by counsel reasonably acceptable to the first party.

 

12.3                           Lender’s Notice and Cure. Copies of any notice required per Article 12.3 shall also be sent toLender. The Lender should have thirty (30) days to effect a cure beyond the30-day cure period granted to the Lessor under Article 12.3. If the default isnot one which is capable of cure within the Lender’s 30-day cure period, theLessor shall not be in default if Lender commences such cure within the 30-dayperiod and thereafter diligently prosecutes the same to completion.

 

19.1(a)             Estoppel. Attached as Exhibit E is the form of tenant estoppel certificaterequired by Lessor’s current Lender. Lessee agrees as part of the initialsigning of the Lease and whenever requested in accordance with Article 19.1 todeliver to Lessor or Lender a fully executed tenant estoppel certificate in theform of Exhibit E.

 

19.1(c)             If Lessor desires to finance, or refinancethe Premises, or any part thereof, Lessee shall deliver directly to

 

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anylender, bank or financial institution designated by Lessor Lessee’s most recentForm l0k documents filed with the Securities & Exchange Commission.

 

19.17                     Subject to compliance with all otherprovisions of this Section 19.17, Lessee shall have the right to installsignage on the building comparable in location, size and quality (as determinedby Lessor) with that of the “Forum Systems” signage currently in place on theBuilding. Lessee’s signage will be in full compliance with all governmentalrequirements. Lessee further agrees to maintain any approved signs in goodcondition or repair at all times. Lessee shall not place any sign on a vehicleor movable or non-movable object in or on any street adjacent to the Premises.

 

19.20                     Lessee may prepare a memorandum of leasewhich shall be signed by Lessor, provided said memorandum meets with Lessor’sapproval, which will not be unreasonably withheld.  Lessee may record said memorandum of leasewith the Santa Barbara County Recorder, provided a conformed copy is furnishedto Lessor. Lessee shall be responsible for all costs in preparing and recordingthe memorandum of lease.

 

19.22                     As an exception to the provisions of Section19.22, Lessee consents to the disclosure of the terms of this Lease to anylender, bank or financial institution designated by Lessor, and Lessor consentsto the disclosure of the terms of this Lease to the Securities and ExchangeCommission (SEC) if required as part of any reports which Lessee must provideto the SEC.

 

19.24                     Meaning. The provisions and language of this Agreement shall be interpreted inaccordance with the plain meaning thereof and shall not be construed for oragainst any of the parties hereto, as all parties have participated in, andhave approved, the drafting of this document.

 

20.5.1                  Lessor shall construct, at Lessor’s sole costand expense, the following improvements to the Premises:

 

(a)                                  A private, secure “front approach” entranceto the Premises utilizing the present lobby, comparable to the design depictedon the attached Exhibit “D”;

 

(b)                                 Semi-gloss paint on all interior walls;

 

(c)                                  Office demising walls as depicted on theattached Exhibit “A”.

 

Theestimated cost of $66,000.00 to accomplish such improvements shall becontributed by Forum Systems, Inc., in the sum of $56,000.00 and by Lessor inthe sum of $10,000.00.

 

Inaddition, Lessor will provide to Lessee prior to tender of possession of thePremises a report prepared by a qualified air conditioning maintenance firmdemonstrating that the air conditioning system for the Premises is in goodorder and repair.

 

20.6                           Lessee shall receive the Premises in an “asis” condition, including the existence of nails and screws inserted into thewalls by a prior lessee of the Premises. All existing electrical power andother utilities will be in good working condition upon tender of possession ofthe Premises by Lessor to Lessee.

 

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20.7                           Punchlist.  Lessee shall have a “walk-through”with Lessor and Lessor’s architect, upon substantial completion of Lessee’simprovements in the Premises, in order to ascertain whether such improvementscomply with the improvement plans and specifications (“Plans”). In the eventLessee determines that the improvements do not comply with the plans, then a “punchlist” will be prepared by Lessee within five (5) days of said “walk-through,”indicating such deviations. Lessor shall correct those items reasonably notedby Lessee to be not in substantial compliance with the plans. Lessee may notwithhold acceptance of the Premises except for deviations from the Plans whichsubstantially interfere with Lessee’s utilization of the Premises. Punchlistitems of a minor nature shall not delay delivery of possession of the Premisesfrom Lessor to Lessee. If no conditions noted on the punchlist—either in anunrepaired form or through the likely course of repair—substantially interferewith Lessee’s utilization of the Premises, Lessee shall sign off the punchlistand Lessor may offer written tender of possession pursuant to Section 2.1(b)hereof. If Lessee determines, using commercially reasonable standards, that theconditions noted would substantially interfere with Lessee’s utilization of thePremises, Lessee may withhold signing off on such punchlist items until aftertheir correction by Lessor. If the punchlist is not so provided, Lessee shallbe deemed to have accepted the Premises and Building “as is”, subject to theprovisions of Section 18.4 hereof.

 

Inthe event Lessee and Lessor cannot agree upon whether or not the items on thepunchlist reflect a non-compliance with the plans, then the compliance ornon-compliance with the plans shall be determined by a neutral arbitrator (whoshall be an architect) in accordance with the commercial rules of the AmericanArbitration Association.

 

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SECOND AMENDMENT OF LEASE

 

THISSECOND AMENDMENT OF LEASE is made and entered into on May        ,1996, between EKWILL PARTNERS, Ltd., a California limited Partnership (“Lessor”)and McGHAN MEDICAL CORPORATION, a California corporation (“Lessee”).

 

RECITALS:

 

A.                                   Lessor and Lessee entered into a Lease datedfor reference May 23, 1989 (the “Lease”) pursuant to which Lessor leased toLessee and Lessee hired from Lessor 27,992 sq.ft. (the “Premises”) on the firstand second floors of the building commonly known as 5540 Ekwill Street, SantaBarbara, California (the “Building”),

 

B.                                     The Lease was amended by a First Amendment ofLease dated for reference August 20, 1992 (the “First Amendment”).

 

C.                                     The term of the Lease, as amended, expiresJuly 31, 1996.

 

D.                                    The Lease grants Lessee an option to extendthe term for an additional period of 7 years. The parties have agreed to deletethis option right in consideration of Lessee’s agreement to lease the Premisesfor an additional period of 10 years commencing August 1, 1996.

 

E.                                      The parties desire to memorialize theextension of the term of the Lease, as amended.

 

NOW,THEREFORE, in consideration of the premises described above, and other good andvaluable consideration, the parties agree as follows:

 

1.                                       INCORPORATION OF RECITALS

 

Therecitals set forth above are incorporated herein as if fully set forth at thispoint.

 

2.                                       EXTENSION OF TERM

 

Lesseeagrees to lease the Premises for a 10-year period commencing August 1, 1996,and expiring July 31, 2006. Lessee acknowledges that it has accepted andcurrently is in possession of the Premises.

 

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3.                                       RENT

 

TheInitial Annual Rent for the Premises during the extended term shall be$382,930.56, payable in equal monthly installments of $31,910.88 commencingAugust 1, 1996, and commencing monthly thereafter.

 

EffectiveJanuary 1, 1997, and effective January 1 of each subsequent year during theextended term, the Initial Annual Rent shall be adjusted as provided in Section3.5. of the Lease. The rental adjustment effective January 1, 1997, shall bebased upon the change in the Index for the full prior 12 months.

 

4.                                       ADDITIONAL RENT

 

Inaddition to the Initial Annual Rent, Lessee shall pay the Additional Rent asprovided in Section 3.2 of the Lease. For purposes of Article 3 of the Lease,Lessee’s Building Percentage is 66.12% and Lessee’s Common Area Percentage is33.06%. Lessee shall continue to pay 49% of the electrical charges for commonmeter shared by Lessee and EG&G.

 

5.                                       SECURITY DEPOSIT

 

Onor before August 1, 1996, Lessee shall deliver to Lessor cash in an amountsufficient to increase the total security deposit held by Lessor to $31,910.88.The increased security deposit shall be used, applied, and retained by Lessoron the terms and conditions described in the Lease.

 

6.                                       FURTHER AMENDMENTS TO LEASE

 

Article20 of the Lease is deleted in its entirety.

 

Paragraphs1, 2.1, 2.3, 3.1, 3.4(a), 3.4(c), 3.5, 4, 20.5.1, 20.6, and 20.7 of the Addendato the Lease are deleted in their entirety.

 

7.                                       FIRST RIGHT TO LEASE ADDITIONAL SPACE

 

Inthe event that additional space within the Building (the “Additional Space”)shall become available during the term of this Lease and Lessee is not then indefault under the terms of this Lease or the 5520 Lease (described below),Lessor shall give Lessee written notice of Lessee’s first right to lease suchAdditional Space.  The Notice from Lessorshall describe the Additional Space, including any

 

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uniquefeatures thereof, and the date upon which the lease for the Additional Spacewill commence. The lease for the Additional Space shall commence upon the datethat the Additional Space is first available for occupancy and shall continuefor a term coincidental with the term of this Lease.  The terms and conditions of the lease for theAdditional Space shall be the same as the terms of this Lease, includingwithout limitation the per square foot rental payable hereunder and theobligation of the Lessee to pay Additional Rent. Rental adjustments for thelease for the Additional Space shall be made to coincide with rentaladjustments under this Lease. The lease of the Additional Space shall bestrictly on an “AS IS” basis, and Lessor shall have no obligation to make anychanges, alterations, modifications or repairs whatsoever to the AdditionalSpace.

 

Lesseeshall have 10 business days from the date of receipt of Lessor’s written noticeto agree to lease the Additional Space. Lessee’s election to lease the AdditionalSpace shall only be effective if its written agreement to lease is received byLessor within said time period and is accompanied by a check in an amount equalto the full first month’s rent plus a security deposit of one month’s rent(collectively the “Additional Space Deposit”). In the event Lessee fails togive timely written notice to Lessor of its agreement to lease the AdditionalSpace together with the required Additional Space Deposit, Lessee’s rightshereunder shall terminate and Lessor shall be free to lease or otherwise treatthe Additional Space as it sees fit. Upon receipt of Lessee’s agreement tolease the Additional Space and the Additional Space Deposit, Lessor shallprepare an amendment to this Lease and deliver it to Lessee. Lessee shallexecute and return the amendment to Lessor within 10 business days of receipt.

 

8.                                       5520 LEASE

 

Concurrentlywith execution of this Second Amendment to Lease, Lessee has executed a Leasewith Lessor for certain space in an adjacent building at 5520 Ekwill Street,Santa Barbara, California (the “5520 Lease”). Any default by the Lessee underthe 5520 Lease shall constitute a default under the terms of this Lease, asamended.

 

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9.                                       NO FURTHER CHANGES

 

Exceptas expressly modified and amended herein, all of the terms and provisions ofthe Lease, as modified by the First Amendment, are hereby ratified andapproved.

 

INWITNESS WHEREOF, the parties have executed this Second Amendment as of the datefirst written above.

 

 
| LESSOR: | EKWILL  PARTNERS, LTD., a California limited |
|---------|----------------------------------------------|
|    | partnership                                  |
|    |                                         |
|    |                                         |
|    | By                                           |  /s/ JEFFREY C. BERMANT |
|    |                                         | Jeffrey C. Bermant, |
|    |                                         | General Partner |
|    |                                         |   |
|    |                                         | 130 Cremona Drive, Suite D |
|    |                                         | Goleta, CA 93117 |
|    |                                         |
|    |                                         |
| LESSEE: | McGHAN  MEDICAL CORPORATION                  |
|    |                                         |
|    |                                         |
|    | By                                           |  /s/ DONALD K. MCGHAN |
|    |                                         | Donald K. McGhan, |
|    |                                         | Chief Executive Officer |
|    |                                         |   |
|    |                                         | 5540 Ekwill Street |
|    |                                         | Santa Barbara, CA 93111 |

 

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