Document:

Exhibit 10(i)D(2)

 

STANDARD INDUSTRIAL/COMMERICAL MULTI-TENANT

LEASE—MODIFIED NET

AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

 

 

1.             Basic Provisions (“Basic

Provisions”).

 

1.1           Parties:  This Lease (“Lease”), dated for reference purposes only, March 20, 2002,

is made by and between Jacqueline M. Clampett Jones (“Lessor”) and Monterey County Bank (“Lessee”), (collectively the “Parties,”

or individually a “Party”).

 

1.2(a)      Premises:  That certain portion of the Building,

including all improvements therein or to be provided by Lessor under the terms

of this Lease, commonly known by the street address of W. S. Dolores, S of 7th,

located in the City of Carmel, County of Monterey, State of California, with

zip code 93921, as outlined on Exhibit B attached hereto (“Premises”).  The “Building” is

that certain building containing the Premises and generally described as

(describe briefly the nature of the Building): The Fleur De Ville Building,

Spaces E & F.  In addition to

Lessee’s rights to use and occupy the Premises as hereinafter specified, Lessee

shall have non-exclusive rights to the Common Areas (as defined in Paragraph

2.7 below) as hereinafter specified, but shall not have any rights to the roof,

exterior walls or utility raceways of the Building or to any other buildings in

the Industrial Center.  The Premises,

the Building, the Common Areas, the land upon which they are located, along

with all other buildings and improvements thereon, are herein collectively

referred to as the “Industrial Center.”

(Also see Paragraph 2.)

 

1.2(b)      Parking:  None unreserved vehicle parking spaces (“Unreserved Parking Spaces”); and None

reserved vehicle parking spaces (“Reserved

Parking Spaces”). (Also see Paragraph 2.6.)

 

1.3           Term:  5 years and 6 months (“Original Term”) commencing April 1, 2002 (“Commencement Date”) and ending September

30, 2007 (“Expiration Date”).  (Also see Paragraph 3.)

 

1.4           Early

Possession:  N/A (“Early Possession Date”). (Also see

Paragraphs 3.2 and 3.3.)

 

1.5           Base

Rent:  $7,000 per month (“Base Rent”), payable on the 1st day of

each month commencing OCT 1, 2002. (Also see Paragraph 4.)

 

ý            If

this box is checked, this Lease provides for the Base Rent to be adjusted per

Addendum #1, attached hereto;

 

1.6(a)      Base Rent

Paid Upon Execution:  $7,000

as Base Rent for the period OCT 1-31, 2002.

 

1.6(b)      Lessee’s

Share of Common Area Operating Expenses:  26.1 percent (xxxx%) (“Lessee’s

Share”) as determined by o

prorata square footage of the Premises as compared to the total square footage

of the Building or o other criteria

as described in Addendum

                .

 

1.7           Security

Deposit:  $7,000 (“Security Deposit”). (Also see Paragraph

5.)

 

1.8           Permitted

Use:  Commercial Bank (“Permitted Use”)  (Also see Paragraph 6.)

 

1.9           Insuring

Party.  Lessor is the “Insuring Party.” (Also see Paragraph 8.)

 

1.10(a)    Real

Estate Brokers.  The

following real estate broker(s) (collectively, the “Brokers”) and brokerage relationships exist in this

transaction and are consented to by the Parties (check applicable boxes):

 

o                                                         represents

Lessor exclusively (“Lessor’s Broker”);

o                                                         represents

Lessee exclusively (“Lessee’s Broker”);

or

o                                                         represents

both Lessor and Lessee  (“Dual Agency”). (Also see Paragraph 15.)

 

1.10(b)    Payment to

Brokers.  Upon the execution

of this Lease by both Parties, Lessor shall pay to said Broker(s) jointly; or

in such separate shares as they may mutually designate in writing, a fee as set

forth in a separate written agreement between Lessor and said Broker(s) (or in

the event there is no separate written agreement between Lessor and said

Broker(s), the sum of

$           ) for brokerage

services rendered by said Broker(s) in connection with this transaction.

 

1.11         Guarantor.  The obligations of the Lessee under this

Lease are to be guaranteed by

                                                                                                                  (“Guarantor”). (Also see Paragraph 37.)

 

1.12         Addenda

and Exhibits.  Attached

hereto is an Addendum or Addenda consisting of Paragraphs 49 through 54, and

Exhibits A through B, all of which constitute a part of this Lease.

 

2.             Premises,

Parking and Common Areas.

 

2.1           Letting.

Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the

Premises, for the term, at the rental, and upon all of the terms, covenants and

conditions set forth in this Lease. 

Unless otherwise provided herein, any statement of square footage set

forth in this Lease, or that may have been used in calculating rental and/or

Common Area Operating Expenses, is an approximation which Lessor and Lessee

agree is reasonable and the rental and Lessee’s Share (as defined in Paragraph

1.6(b)) based thereon is not subject to revision whether or not the actual

square footage is more or less.

 

2.2           Condition.  Lessor shall deliver the Premises to Lessee

clean and free of debris on the Commencement Date and warrants to Lessee that

the existing plumbing, electrical systems, fire sprinkler system, lighting, air

conditioning and heating systems and loading doors, if any, in the Premises,

other than those constructed by Lessee, shall be in good operating condition on

the Commencement Date.  If a

non-compliance with said warranty exists as of the Commencement Date, Lessor

shall, except as otherwise provided in this Lease, promptly after receipt of

written notice from Lessee setting forth with specificity the nature and extent

of such non-compliance, rectify same at Lessor’s expense.  If Lessee does not give Leasor written

notice of a non-compliance with this warranty within thirty (30) days after the

Commencement Date, correction of that non-compliance shall be the obligation of

Lessee at Lessee’s sole cost and expense.

 

2.3           Compliance

with Covenants, Restrictions and Building Code.  Lessor warrants that any improvements (other

than those constructed by Lessee or at Lessee’s direction) on or in the

Premises which have been constructed or installed by Lessor or with Lessor’s consent

or at Lessor’s direction shall comply with all applicable covenants or

restrictions of record and applicable building codes, regulations and

ordinances in effect on the Commencement Date. 

Lessor further warrants to Lessee that Lessor has no knowledge of any

claim having been made by any governmental agency that a violation or

violations of applicable building codes, regulations, or ordinances exist with

regard to the Premises as of the Commencement Date.  Said warranties shall not apply to any Alterations or Utility

Installations (defined in Paragraph 7.3(a)) made or to be made by Lessee.  If the Premises do not comply with said

warranties, Lessor shall, except as otherwise provided in this Lease, promptly

after receipt of written notice from Lessee given within six (6) months

following the Commencement Date and setting forth with specificity the nature

and extent of such non-compliance, take such action, at Lessor’s expense, as

may be reasonable or appropriate to rectify the non-compliance.  Lessor makes no warranty that the Permitted

Use in Paragraph 1.8 is permitted for the Premises under Applicable Laws (as

defined in Paragraph 2.4).

 

2.4           Acceptance

of Premises.  Lessee hereby

acknowledges: (a) that it has been advised by the Broker(s) to satisfy itself

with respect to the condition of the Premises (including but not limited to the

electrical and fire sprinkler systems, security, environmental aspects, seismic

and earthquake requirements, and compliance with the Americans with

Disabilities Act and applicable zoning, municipal, county, state and federal

laws, ordinances and regulations and any covenants or restrictions of record

(collectively, “Applicable Laws”)

and the present and future suitability of the Premises for Lessee’s intended

use; (b) that Lessee has made such investigation as it deems necessary with

reference to such matters, is satisfied with reference thereto, and assumes all

responsibility therefore as the same relate to Lessee’s occupancy of the

Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any

of Lessor’s agents, has made any oral or written representations or warranties

with respect to said matters other than as set forth in this Lease.

 

2.5           Lessee

as Prior Owner/Occupant.  The

warranties made by Lessor in this Paragraph 2 shall be of no force or effect if

immediately prior to the date set forth in Paragraph 1.1 Lessee was the owner

or occupant of the Premises.  In the

event, Lessee shall, at Lessee’s sole cost and expense, correct any

non-compliance of the Premises with said warranties.

 

 

2.6           Vehicle

Parking.  Lessee shall be

entitled to use the number of Unreserved Parking Spaces and Reserved Parking

Spaces specified in Paragraph 1.2(b) on those portions of the Common Areas

designated from time to time by Lessor for parking.  Lessee shall not use more parking spaces than said number.  Said parking spaces shall be used for

parking by vehicles no larger than full-size passenger automobiles or pick-up

trucks, herein called “Permitted Size

Vehicles.”  Vehicles other

than Permitted Size Vehicles shall be parked and loaded or unloaded as directed

by Lessor in the Rules and Regulations (as defined in Paragraph 40) issued by

Lessor.  (Also see Paragraph 2.9)

 

(a)           Lessee shall not permit or allow any

vehicles that belong to or are controlled by Lessee or Lessee’s employees,

suppliers, shippers, customers, contractors or invitees to be loaded, unloaded,

or parked in areas other than those designated by Lessor for such activities.

 

(b)           If Lessee permits or allows any of

the prohibited activities described in this Paragraph 2.6, then Lessor shall

have the right, without notice, in addition to such other rights and remedies

that it may have, to remove or tow away the vehicle involved and charge the

cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

 

(c)           Lessor shall at the Commencement Date

of this Lease, provide the parking facilities required by Applicable Law.

 

2.7           Common

Areas - Definition.  The term

“Common Areas” is defined as all

areas and facilities outside the Premises and within the exterior boundary line

of the Industrial Center and interior utility raceways within the Premises that

are provided and designated by the Lessor from time to time for the general

non-exclusive use of Lessor, Lessee and other lessees of the Industrial Center

and their respective employees, suppliers, shippers, customers, contractors and

invitees, including parking areas, loading and unloading areas, trash areas,

roadways, sideways, walkways, parkways, driveways and landscaped areas.

 

2.8           Common

Areas - Lessee’s Rights. 

Lessor hereby grants to Lessee, for the benefit of Lessee and its

employees, suppliers, shippers, contractors, customers and invitees, during the

term of this Lease, the non-exclusive right to use, in common with others

entitled to such use, the Common Areas as they exist from time to time, subject

to any rights, powers, and privileges reserved by Lessor under the terms hereof

or under the terms of any rules and regulations or restrictions governing the

use of the Industrial Center.  Under no

circumstances shall the right herein granted to use the Common Areas be deemed

to include the right to store any property, temporarily or permanently, in the

Common Areas.  Any such storage shall be

permitted only by the prior written consent of Lessor or Lessor’s designated

agent, which consent may be revoked at any time.  In the event that any unauthorized storage shall occur then

Lessor shall have the right, without notice, in addition to such other rights and

remedies that it may have, to remove the property and charge the cost to

Lessee, which cost shall be immediately payable upon demand by Lessor.

 

2.9           Common

Areas - Rules and Regulations. 

Lessor or such other person(s) as Lessor may appoint shall have the

exclusive control and management of the Common Areas and shall have the right,

from time to time, to establish, modify, amend and enforce reasonable Rules and

Regulations with respect thereto in accordance with Paragraph 40. Lessee agrees

to abide by and conform to all such Rules and Regulations, and to cause its

employees, suppliers, shippers, customers, contractors and invitees to so abide

and conform.  Lessor shall not be

responsible to Lessee for the non-compliance with said rules and regulations by

other lessees of the Industrial Center.

 

2.10         Common

Areas - Changes.  Lessor

shall have the right, in Lessor’s sole discretion, from time to time:

 

(a)           To make changes to the Common Areas,

including, without limitation, changes in the location, size, shape and number

of driveways, entrances, parking spaces, parking areas, loading and unloading

areas, ingress, egress, direction of traffic, landscaped areas, walkways and

utility raceways;

 

(b)           To close temporarily any of the

Common Areas for maintenance purposes so long as reasonable access to the

Premises remains available;

 

(c)           To designate other land outside the

boundaries of the Industrial Center to be a part of the Common Areas;

 

(d)           To add additional buildings and

Improvements to the Common Areas;

 

(e)           To use the Common Areas while engaged

in making additional improvements, repairs or alterations to the Industrial

Center, or any portion thereof; and

 

(f)            To do and perform such other acts

and make such other changes in, to or with respect to the Common Areas and

Industrial Center as Lessor may, in the exercise of sound business judgment,

deem to be appropriate.

 

3.             Term.

 

3.1           Term.  The Commencement Date, Expiration Date and

Original Term of this Lease are as specified in Paragraph 1.3.

 

3.2           Early

Possession.  If an Early

Possession Date is specified in Paragraph 1.4 and if Lessee totally or

partially occupies the Premises after the Early Possession Date but prior to

the Commencement Date, the obligation to pay Base Rent shall be abated for the

period of such early occupancy.  All

other terms of this Lease, however, (including but not limited to the

obligations to pay Lessee’s Share of Common Area Operating Expenses and to

carry the insurance required by Paragraph 8) shall be in effect during such

period.  Any such early possession shall

not affect nor advance the Expiration Date of the Original Term.

 

                3.3           Delay in Possession.  If for any reason Lessor cannot deliver

possession of the Premises to Lessee by the Early Possession Date, if one is

specified in Paragraph 1.4, or if no Early Possession Date is specified, by the

Commencement Date, Lessor shall not be subject to any liability therefor, nor

shall such failure affect the validity of this Lease, or the obligations of

Lessee hereunder, or extend the term hereof, but in such case, Lessee shall

not, except as otherwise provided herein, be obligated to pay rent or perform

any other obligation of Lessee under the terms of this Lease until Lessor

delivers possession of the Premises to Lessee. 

If possession of the Premises is not delivered to Lessee within sixty

(60) days after the Commencement Date, Lessee may, at its option, by notice in

writing to Lessor within ten (10) days after the end of said sixty (60) day

period, cancel this Lease, in which event the parties shall be discharged from

all obligations hereunder; provided further, however, that if such written

notice of Lessee is not received by Lessor within said ten (10) day period,

Lessee’s right to cancel this Lease hereunder shall terminate and be of no

further force or effect.  Except as may

be otherwise provided, and regardless of when the Original Term actually

commences, if possession is not tendered to Lessee when required by this Lease

and Lessee does not terminate this Lease, as aforesaid, the period free of the

obligation to pay Base Rent, if any, that Lessee would otherwise have enjoyed

shall run from the date of delivery of possession and continue for a period

equal to the period during which the Lessee would have otherwise enjoyed under

the terms hereof, but minus any days of delay caused by the acts, changes or

omissions of Lessee.

 

4.             Rent.

 

4.1           Base

Rent.  Lessee shall pay Base

Rent and other rent or charges, as the same may be adjusted from time to time,

to Lessor in lawful money of the United States, without offset or deduction, on

or before the day on which it is due under the terms of this Lease.  Base Rent and all other rent and charges for

any period during the term hereof which is for less than one full month shall

be prorated based upon the actual number of days of the month involved.  Payment of Base Rent and other charges shall

be made to Lessor at the address stated herein or to such other persons or at

such other addresses as Lessor may from time to time designate in writing to

Lessee.

 

4.2           Common

Area Operating Expenses. 

Lessee shall pay to Lessor during the term hereof, in addition to the

Base Rent,  Lessee’s Share (as specified

in Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter

defined, during each calendar year of the term of this Lease, in accordance

with the following provisions:

 

(a)           “Common

Area Operating Expenses”  are

defined, for purposes of this Lease, as all costs incurred by Lessor relating

to the ownership and operation of the Industrial Center, including, but not

limited to, the following:

 

(i)            The operation, repair and

maintenance, in neat, clean, good order and condition, of the following:

 

(aa)         The Common Areas, including parking

areas, loading and unloading areas; trash areas, roadways, sidewalks, walkways,

parkways, driveways, landscaped areas, striping, bumpers, irrigation systems,

Common Area lighting facilities, fences and gates, elevators and roof.

 

(bb)         Exterior signs and any tenant

directories.

 

(cc)         Fire detection and sprinkler systems.

 

(ii)           The cost of water, gas, electricity

and telephone to service the Common Areas.

 

(iii)          Trash disposal, property management

and security services and the costs of any environmental inspections.

 

(iv)          Reserves set aside for maintenance and

repair of Common Areas.

 

(v)           Real Property Taxes (as defined in

Paragraph 10.2) to be paid by Lessor for the Building and the Common Areas

under Paragraph 10 hereof.

 

(vi)          The cost of the premiums for the

insurance policies maintained by Lessor under Paragraph 8 hereof.

 

(vii)         Any deductible portion of an insured

loss concerning the Building or the Common Areas.

 

(viii)        Any other services to be provided by

Lessor that are stated elsewhere in this Lease to be a Common Area Operating

Expense.

 

(b)           Any Common Area Operating Expenses

and Real Property Taxes that are specifically attributable to the Building or

to any other building in the Industrial Center or to the operation, repair and

maintenance thereof, shall be allocated entirely to the Building or to such

other building.  However, any Common

Area Operating Expenses and Real Property Taxes that are not specifically

attributable to the Building or to any other building or to the operation,

repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings

in the Industrial Center.

 

(c)           The inclusion of the improvements,

facilities and services set forth in subparagraph 4.2(a) shall not be deemed to

impose an obligation upon Lessor to either have said improvements or facilities

or to provide those services unless the Industrial Center already has the same,

Lessor already provides the services, or Lessor has agreed elsewhere in his

Lease to provide the same or some of them.

 

(d)           Lessee’s Share of Common Area

Operating Expenses shall be payable by Lessee within ten (10) days after a

reasonably detailed statement of actual expenses is presented to Lessee by

Lessor. At Lessor’s option, however, an amount may be estimated by Lessor from

time to time of Lessee’s Share of annual Common Area Operating Expenses and the

same shall be payable monthly or quarterly, as Lessor shall designate, during

each 12-month period of the Lease term, on the same day as the Base Rent is due

hereunder. Lessor shall deliver to Lessee within sixty (60) days after the

expiration of each calendar year a reasonably detailed statement showing

Lessee’s Share of the actual Common Area Operating Expenses incurred during the

preceding year.  If Lessee’s payments

under this Paragraph 4.2(d) during said preceding year exceed Lessee’s Share as

indicated on said statement, Lessee shall be credited the amount of such over-

 

2

 

payment against Lessee’s Share

of Common Area Operating Expenses next becoming due. If Lessee’s payments under

this Paragraph 4.2(d) during said preceding year were less than Lessee’s Share

as indicated on said statement, Lessee shall pay to Lessor the amount of the

deficiency within ten (10) days after delivery by Lessor to Lessee of said

statement.

 

5.             Security Deposit.  Lessee shall deposit with Lessor upon

Lessee’s execution hereof the Security Deposit set forth in Paragraph 1.7 as

security for Lessee’s faithful performance of Lessee’s obligations under this

Lease. If Lessee fails to pay Base Rent or other rent or charges due hereunder,

or otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor

may use, apply or retain all or any portion of said Security Deposit for the

payment of any amount due Lessor or to reimburse or compensate Lessor for any

liability, cost, expense, loss or damage (including attorneys’ fees) which

Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or

any portion of said Security Deposit, Lessee shall within ten (10) days after

written request therefore deposit monies with Lessor sufficient to restore said

Security Deposit to the full amount required by this Lease. Any time the Base

Rent increases during the term of this Lease, Lessee shall, upon written

request from Lessor, deposit additional monies with Lessor as an addition to

the Security Deposit so that the total amount of the Security Deposit shall at

all times bear the same proportion to the then current Base Rent as the Initial

Security Deposit bears to the Initial Base Rent set forth in Paragraph 1.5.

Lessor shall not be required to keep all or any part of the Security Deposit

separate from its general accounts. Lessor shall, at the expiration or earlier

termination of the term hereof and after Lessee has vacated the Premises,

return to Lessee (or, at Lessor’s option, to the last assignee, if any, of

Lessee’s interest herein), that portion of the Security Deposit not used or

applied by Lessor, Unless otherwise expressly agreed in writing by Lessor, no

part of the Security Deposit shall be considered to be held in trust, to bear

interest or other increment for its use, or to be prepayment for any monies to

be paid by Lessee under this Lease.

 

6.                                      Use.

 

6.1           Permitted

Use.

 

(a)           Lessee shall use and occupy the

Premises only for the Permitted Use set forth in Paragraph 1.8, or any other

legal use which is reasonably comparable thereto, and for no other purpose.

Lessee shall not use or permit the use of the Premises in a manner that is

unlawful, creates waste or a nuisance, or that disturbs owners and/or occupants

of, or causes damage to the Premises or neighboring premises or properties.

 

(b)           Lessor hereby agrees to not

unreasonably withhold or delay its consent to any written request by Lessee,

Lessee’s assignees or subtenants, and by prospective assignee and subtenants of

Lessee, its assignees and subtenants, for a modification of said Permitted Use,

so long as the same will not impair the structural integrity of the

improvements on the Premises or in the Building or the mechanical or electrical

systems therein, does not conflict with uses by other lessees, is not

significantly more burdensome to the Premises or the Building and the

improvements thereon, and is otherwise permissible pursuant to this Paragraph

6.  If Lessor elects to withhold such

consent, Lessor shall within five (5) business days after such request give a

written notification of same, which notice shall include an explanation of

Lessor’s reasonable objections to the change in use.

 

6.2           Hazardous

Substances.

 

(a)           Reportable

Uses Require Consent.  The

term “Hazardous Substance” as used

in this Lease shall mean any product, substance, chemical, material or waste

whose presence, nature, quantity and/or intensity of existence, use,

manufacture, disposal, transportation, spill, release or effect, either by

itself or in combination with other materials expected to be on the Premises,

is either: (i) potentially injurious to the public health, safety or welfare,

the environment, or the Premises; (ii) regulated or monitored by any

governmental authority; or (iii) a basis for potential liability of Lessor to

any governmental agency or third party under any applicable statute or common

law theory. Hazardous Substance shall include, but not be limited to,

hydrocarbons, petroleum, gasoline, crude oil or any products or by-products

thereof.  Lessee shall not engage in any

activity in or about the Premises which constitutes a Reportable Use (as

hereinafter defined) of Hazardous Substances without the express prior written consent

of Lessor and compliance in a timely manner (at Lessee’s sole cost and expense)

with all Applicable Requirements (as defined in Paragraph 6.3).  “Reportable

Use” shall mean (i) the installation or use or any above or below

ground storage tank,  (ii) the

generation, possession, storage, use, transportation, or disposal of a

Hazardous Substance that requires a permit from, or with respect to which a

report, notice, registration or business plan is required to be filed with, any

governmental authority, and  (iii) the

presence in, on or about the Premises of a Hazardous Substance with respect to

which any Applicable Laws require that a notice be given to persons entering or

occupying the Premises or neighboring properties. Notwithstanding the

foregoing, Lessee may, without Lessor’s prior consent, but upon notice to

Lessor and in compliance with all Applicable Requirements, use any ordinary and

customary materials reasonably required to be used by Lessee in the normal

course of the Permitted Use, so long as such use is not a Reportable Use and does

not expose the Premises or neighboring properties to any meaningful risk of

contamination or damage or expose Lessor to any liability therefor. In

addition, Lessor may (but without any obligation to do so) condition its

consent to any Reportable Use of any Hazardous Substance by Lessee upon

Lessee’s giving Lessor such additional assurances as Lessor, in its reasonable

discretion, deems necessary to protect itself, the public, the Premises and the

environment against damage, contamination or injury and/or liability therefor,

including but not limited to the installation (and, at Lessor’s option, removal

on or before Lease expiration or earlier termination) of reasonably necessary

protective modifications to the Premises (such as concrete encasements) and/or

the deposit of an additional Security Deposit under Paragraph 5 hereof.

 

(b)           Duty

to Inform Lessor.  If Lessee

knows, or has reasonable cause to believe, that a Hazardous Substance has come

to be located in, on, under or about the Premises or the Building, other than

as previously consented to by Lessor, Lessee shall immediately give Lessor

written notice thereof, together with a copy of any statement, report, notice,

registration, application, permit, business plan, license, claim, action, or

proceeding given to, or received from, any governmental authority or private

party concerning the presence, spill, release, discharge of, or exposure to,

such Hazardous Substance including but not limited to all such documents as may

be involved in any Reportable Use involving the Premises. Lessee shall not

cause or permit any Hazardous Substance to be spilled or released in, on, under

or about the Premises (including, without limitation, through the plumbing or

sanitary sewer system).

 

(c)           Indemnification.  Lessee shall indemnify, protect,

defend and hold Lessor, its agents, employees, lenders and ground lessor, if

any, and the Premises, harmless from and against any and all damages,

liabilities, judgments, costs, claims, liens, expenses, penalties, loss of

permits and attorneys’ and consultants’ fees arising out of or involving any

Hazardous Substance brought onto the Premises by or for Lessee or by anyone

under Lessee’s control. Lessee’s obligations under this Paragraph 6.2(c) shall

include, but not be limited to, the effects of any contamination or injury to

person, property or the environment created or suffered by Lessee, and the cost

of investigation (including consultants’ and attorneys’ fees and testing),

removal, remediation, restoration and/or abatement thereof, or of any

contamination therein involved, and shall survive the expiration or earlier

termination of this Lease. No termination, cancellation or release agreement

entered into by Lessor and Lessee shall release Lessee from its obligations

under this Lease with respect to Hazardous Substances, unless specifically so

agreed by Lessor in writing at the time of such agreement.

 

                6.3           Lessee’s Compliance with

Requirements.  Lessee shall,

at Lessee’s sole cost and expense, fully, diligently and in a timely manner,

comply with all “Applicable Requirements,” which

term is used in this Lease to mean all laws, rules, regulations, ordinances,

directives, covenants, easements and restrictions of record, permits, the

requirements of any applicable fire insurance underwriter or rating bureau, and

the recommendations of Lessor’s engineers and/or consultants, relating in any

manner to the Premises (including but not limited to matters pertaining to (i)

industrial hygiene, (ii) environmental conditions on, in, under or about the

Premises, including soil and groundwater conditions, and (iii) the use,

generation, manufacture, production, installation, maintenance, removal,

transportation, storage, spill, or release of any Hazardous Substance), now in

effect or which may hereafter come into effect.  Lessee shall, within five (5) days after receipt of Lessor’s

written request, provide Lessor with copies of all documents and information,

including but not limited to permits, registrations, manifests, applications,

reports and certificates, evidencing Lessee’s compliance with any Applicable

Requirements specified by Lessor, and shall immediately upon receipt, notify

Lessor in writing (with copies of any documents involved) of any threatened or

actual claim, notice, citation, warning, complaint or report pertaining to or

involving failure by Lessee or the Premises to comply with any Applicable

Requirements.

 

6.4           Inspection;

Compliance with Law.  Lessor,

Lessor’s agents, employees, contractors and designated representatives, and the

holders of any mortgages, deeds of trust or ground leases on the Premises (“Lenders”) shall have the right to enter

the Premises at any time in the case of an emergency, and otherwise at

reasonable times, for the purpose of inspecting the condition of the Premises

and for verifying compliance by Lessee with this Lease and all Applicable

Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to

employ experts and/or consultants in connection therewith to advise Lessor with

respect to Lessee’s activities, including but not limited to Lessee’s

installation, operation, use, monitoring, maintenance, or removal of any

Hazardous Substance on or from the Premises. 

The costs and expenses of any such inspections shall be paid by the

party requesting same, unless a Default or Breach of this Lease by Lessee or a

violation of Applicable Requirements or a contamination, caused or materially

contributed to by Lessee, is found to exist or to be imminent, or unless the

inspection is requested or ordered by a governmental authority as the result of

any such existing or imminent violation or contamination. In such case, Lessee

shall upon request reimburse Lessor or Lessor’s Lender, as the case may be, for

the costs and expenses of such inspections.

 

7.             Maintenance, Repairs, Utility

Installations, Trade Fixtures and Alterations.

 

7.1           Lessee’s

Obligations.

 

(a)           Subject to the provisions of

Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and

Building Code), 7.2 (Lessor’s Obligations), 9 (Damage or Destruction), and 14

(Condemnation), Lessee shall, at Lessee’s sole cost and expense and at all

times, keep the Premises and every part thereof in good order, condition and

repair (whether or not such portion of the Premises requiring repair, or the

means of repairing the same, are reasonably or readily accessible to Lessee,

and whether or not the need for such repairs occurs as a result of Lessee’s

use, any prior use, the elements or the age of such portion of the Premises),

including, without limiting the generality of the foregoing, all equipment or

facilities specifically serving the Premises, such as plumbing, heating, air

conditioning, ventilating, electrical, lighting facilities, boilers, fired or

unfired pressure vessels, fire hose connections if within the Premises,

fixtures, interior walls, interior surfaces of exterior walls, ceilings,

floors, windows, doors, plate glass, and skylights, but excluding any items

which are the responsibility of Lessor pursuant to Paragraph 7.2 below. Lessee,

in keeping the Premises in good order, condition and repair, shall exercise and

perform good maintenance practices. Lessee’s obligations shall include

restorations, replacements or renewals when necessary to keep the Premises and

all improvements thereon or a part thereof in good order, condition and state

of repair.

 

(b)           Lessee shall, at Lessee’s sole cost

and expense, procure and maintain a contract, with copies to Lessor , in

customary form and substance for and with a contractor specializing and

experienced in the inspection, maintenance and service of the heating, air

conditioning and ventilation system for the Premises. However, Lessor reserves

the right, upon notice to Lessee, to procure and maintain the contract for the

heating, air conditioning and ventilating systems, and if Lessor so elects,

Lessee shall reimburse Lessor, upon demand, for the cost thereof.

 

(c)           If Lessee fails to perform Lessee’s

obligations under this Paragraph 7.1, Lessor may enter upon the Premises after

ten (10) days’ prior written notice to Lessee (except in the case of an

emergency, in which case no notice shall be required), perform such obligations

on Lessee’s behalf, and put the Premises in good order, condition and repair,

in accordance with Paragraph 13.2 below.

 

7.2           Lessor’s

Obligations.  Subject to the

provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants,

Restrictions and Building Code), 4.2 (Common Area Operating Expenses), 6 (Use),

7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation),

Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good

order, condition and repair the foundations, exterior walls, structural

condition of interior bearing walls, exterior roof, fire sprinkler and/or

standpipe and hose (if located in the Common Areas) or other automatic fire

extinguishing system including fire alarm and/or smoke

 

3

 

detection systems and

equipment, fire hydrants, parking lots, walkways, parkways, driveways, landscaping,

fences, signs and utility systems serving the Common Areas and all parts

thereof, as well as providing the services for which there is a Common Area

Operating Expense pursuant to Paragraph 4.2. 

Lessor shall not be obligated to paint the exterior or interior surfaces

of exterior walls nor shall Lessor be obligated to maintain, repair or replace

windows, doors or plate glass of the Premises. 

Lessee expressly waives the benefit of any statute now or hereafter in

effect which would otherwise afford Lessee the right to make repairs at

Lessor’s expense or to terminate this Lease because of Lessor’s failure to keep

the Building, Industrial Center or Common Areas in good order, condition and

repair.

 

7.3           Utility

Installations, Trade Fixtures, Alterations.

 

(a)           Definitions;

Consent Required.  The term “Utility Installations” is used in this

Lease to refer to all air lines, power panels, electrical distribution,

security, fire protection systems, communications systems, lighting fixtures,

heating, ventilating and air conditioning equipment, plumbing, and fencing in,

on or about the Premises.  The term “Trade Fixtures” shall mean Lessee’s

machinery and equipment which can be removed without doing material damage to

the Premises.  The term “Alterations” shall mean any modification

of the improvements on the Premises which are provided by Lessor under the

terms of this Lease, other than Utility Installations or Trade Fixtures.  “Lessee-Owned

Alterations and/or Utility Installations” are defined as Alterations

and/or Utility Installations made by Lessee that are not yet owned by Lessor

pursuant to Paragraph 7.4(a).  Lessee

shall not make nor cause to be made any Alterations or Utility Installations

in, on, under or about the Premises without Lessor’s prior written

consent.  Lessee may, however, make

non-structural Utility Installations to the interior of the Premises (excluding

the roof) without Lessor’s consent but upon notice to Lessor, so long as they

are not visible from the outside of the Premises, do not involve puncturing,

relocating or removing the roof or any existing walls, or changing or

interfering with the fire sprinkler or fire detection systems and the

cumulative cost thereof during the term of this Lease as extended does not

exceed $2,500.00

 

(b)           Consent.  Any Alterations or Utility Installations

that Lessee shall desire to make and which require the consent of the Lessor

shall be presented to Lessor in written form with detailed plans.  All consents given by Lessor, whether by

virtue of Paragraph 7.3(a) or by subsequent specific consent, shall be deemed

conditioned upon: (i) Lessee’s acquiring all applicable permits required by

governmental authorities; (ii) the furnishing of copies of such permits

together with a copy of the plans and specifications for the Alteration or

Utility Installation to Lessor prior to commencement of the work thereon; and

(iii) the compliance by Lessee with all conditions of said permits in a prompt

and expeditious manner.  Any Alterations

or Utility Installations by Lessee during the term of this Lease shall be done

in a good and workmanlike manner, with good and sufficient materials, and be in

compliance with all Applicable Requirements. 

Lessee shall promptly upon completion thereof furnish Lessor with as

built plans and specifications therefor. 

Lessor may, (but without obligation to do so) condition its consent to

any requested Alteration or Utility Installation that costs $2,500.00 or more

upon Lessee’s providing Lessor with a lien and completion bond in an amount

equal to one and one-half times the estimated cost of such Alteration or

Utility Installation.

 

(c)           Lien

Protection.  Lessee shall pay

when due all claims for labor or materials furnished or alleged to have been

furnished to or for Lessee at or for use on the Premises, which claims are or

may be secured by any mechanic’s or materialmen’s lien against the Premises or

any interest therein.  Lessee shall give

Lessor not less than ten (10) days' notice prior to the commencement of any

work in, on, or about the Premises, and Lessor shall have the right to post

notices of non-responsibility in or on the Premises as provided by law.  If Lessee shall, in good faith, contest the

validity of any such lien, claim or demand, then Lessee shall, at its sole

expense, defend and protect itself, Lessor and the Premises against the same

and shall pay and satisfy any such adverse judgment that may be rendered

thereon before the enforcement thereof against the Lessor of the Premises.  If Lessor shall require, Lessee shall

furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to

one and one-half times the amount of such contested lien claim or demand,

indemnifying Lessor against liability for the same, as required by law for the

holding of the Premises free from the effect of such lien or claim.  In addition, Lessor may require Lessee to

pay Lessor’s attorneys’ fees and costs in participating in such action if

Lessor shall decide it is to its best interest to do so.

 

7.4           Ownership,

Removal, Surrender, and Restoration.

 

(a)           Ownership.  Subject to Lessor’s right to

require their removal and to cause Lessee to become the owner thereof as

hereinafter provided in this Paragraph 7.4, all Alterations and Utility

Installations made to the Premises by Lessee shall be the property of and owned

by Lessee, but considered a part of the Premises. Lessor may, at any time and

at its option, elect in writing to Lessee to be the owner of all or any

specified part of the Lessee-Owned Alterations and Utility Installations.  Unless otherwise instructed per Subparagraph

7.4(b) hereof, all Lessee-Owned Alterations and Utility Installations shall, at

the expiration or earlier termination of this Lease, become the property of

Lessor and remain upon the Premises and be surrendered with the Premises by

Lessee.

 

(b)           Removal.  Unless otherwise agreed in

writing, Lessor may require that any or all Lessee-Owned Alterations or Utility

Installations be removed by the expiration or earlier termination of this

Lease, notwithstanding that their installation may have been consented to by

Lessor.  Lessor may require the removal

at any time of all or any part of any Alterations or Utility Installations made

without the required consent of Lessor.

 

(c)           Surrender/Restoration.  Lessee shall surrender the

Premises by the end of the last day of the Lease term or any earlier

termination date, clean and free of debris and in good operating order,

condition and state of repair, ordinary wear and tear excepted.  Ordinary wear and tear shall not include any

damage or deterioration that would have been prevented by good maintenance

practice or by Lessee performing all of its obligations under this Lease.  Except as otherwise agreed or specified

herein, the Premises, as surrendered, shall include the Alterations and Utility

Installations.  The obligation of Lessee

shall include the repair of any damage occasioned by the installation,

maintenance or removal of Lessee’s Trade Fixtures, furnishings, equipment, and

Lessee-Owned Alternations and Utility Installations, as well as the removal of

any storage tank installed by or for Lessee, and the removal, replacement, or

remediation of any soil, material or ground water contaminated by Lessee, all

as may then be required by Applicable Requirements and/or good practice,

Lessee’s Trade Fixtures shall remain the property of Lessee and shall be

removed by Lessee subject to its obligation to repair and restore the Premises

per this Lease.

 

8.             Insurance;

Indemnity.

 

8.1           Payment

of Premiums.  The cost of the

premiums for the insurance policies maintained by Lessor under this Paragraph 8

shall be a Common Area Operating Expense pursuant to Paragraph 4.2 hereof.  Premiums for policy periods commencing prior

to, or extending beyond, the term of this Lease shall be prorated to coincide

with the corresponding Commencement Date or Expiration Date.

 

8.2           Liability

Insurance.

 

(a)           Carried

by Lessee.  Lessee shall

obtain and keep in force during the term of this Lease a Commercial 

General Liability policy of

insurance protecting Lessee, Lessor and any Lender(s) whose names have been

provided to Lessee in writing (as additional insureds) against claims for

bodily injury, personal injury and property damage based upon, involving or

arising out of the ownership, use, occupancy or maintenance of the Premises and

all areas appurtenant thereto.  Such

insurance shall be on an occurrence basis providing single limit coverage in an

amount not less than $1,000,000 per occurrence with an “Additional

Insured-Managers or Lessors of Premises” endorsement and contain the “Amendment

of the Pollution Exclusion” endorsement for damage caused by heat, smoke or

fumes from a hostile fire.  The policy

shall not contain any Intra-insured exclusions as between insured persons or

organizations, but shall include coverage for liability assumed under this

Lease as an “Insured contract” for

the performance of Lessee’s indemnity obligations under this Lease.  The limits of said insurance required by

this Lease or as carried by Lessee shall not, however, limit the liability of

Lessee nor relieve Lessee of any obligation hereunder.  All insurance to be carried by Lessee shall

be primary to and not contributory with any similar insurance carried by

Lessor, whose insurance shall be considered excess insurance only.

 

(b)           Carried

by Lessor.  Lessor shall also

maintain liability insurance described in Paragraph 8.2(a) above, in addition

to and not in lieu of, the insurance required to be maintained by Lessee.  Lessee shall not be named as an additional

insured therein.

 

8.3           Property

Insurance-Building, Improvements and Rental Value.

 

(a)           Building

and Improvements.  Lessor

shall obtain and keep in force during the term of this Lease a policy or

polices in the name of Lessor, with loss payable to Lessor and to any

Lender(s), insuring against loss or damage to the Premises.  Such insurance shall be for full replacement

cost, as the same shall exist from time to time, or the amount required by any

Lender(s), but in no event more than the commercially reasonable and available

insurable value thereof if, by reason of the unique nature or age of the

improvements involved, such latter amount is less than full replacement

cost.  Lessee-Owned Alterations and

Utility Installations, Trade Fixtures and Lessee’s personal property shall be

insured by Lessee pursuant to Paragraph 8.4. 

If the coverage is available and commercially appropriate, Lessor’s

policy or policies shall insure against all risks of direct physical loss or

damage (except the perils of flood and/or earthquake unless required by a

Lender), including coverage for any additional costs resulting from debris

removal and reasonable amounts of coverage for the enforcement of any ordinance

or law regulating the reconstruction or replacement of any undamaged sections

of the Building required to be demolished or removed by reason of the

enforcement of any building, zoning, safety or land use laws as the result of a

covered loss, but not including plate glass insurance.  Said policy or policies shall also contain an

agreed valuation provision in lieu of any co-insurance clause, waiver of

subrogation, and inflation guard protection causing an increase in the annual

property insurance coverage amount by a factor of not less than the adjusted

U.S. Department of Labor Consumer Price Index for All Urban Consumers for the

city nearest to where the Premises are located.

 

(b)           Rental

Value.  Lessor shall also

obtain and keep in force during the term of this Lease a policy or policies in

the name of Lessor, with loss payable to Lessor and any Lender(s), insuring the

loss of the full rental and other charges payable by all lessees of the

Building to Lessor for one year (including all Real Property Taxes, insurance

costs, all Common Area Operating Expenses and any scheduled rental increases).  Said insurance may provide that in the event

the Lease is terminated by reason of an insured loss, the period of indemnity

for such coverage shall be extended beyond the date of the completion of

repairs or replacement of the Premises, to provide for one full year’s loss of

rental revenues from the date of any such loss.  Said insurance shall contain an agreed valuation provision in

lieu of any co-insurance clause, and the amount of coverage shall be adjusted

annually to reflect the projected rental income, Real Property Taxes, insurance

premium costs and other expenses, if any, otherwise payable, for the next

12-month period.  Common Area Operating

Expenses shall include any deductible amount in the event of such loss.

 

(c)           Adjacent

Premises.  Lessee shall pay

for any increase in the premiums for the property insurance of the Building and

for the Common Ares or other buildings in the Industrial Center if said

increase is caused by Lessee’s acts, omissions, use or occupancy of the

Premises.

 

(d)           Lessee’s

Improvements.  Since Lessor

is the Insuring Party, Lessor shall not be required to insure Lessee-Owned

Alterations and Utility Installations unless the item in question has become

the property of Lessor under the terms of this Lease.

 

8.4           Lessee’s

Property Insurance.  Subject

to the requirements of Paragraph 8.5, Lessee at its cost shall either by

separate policy or, at Lessor’s option, by endorsement to a policy already

carried, maintain insurance coverage on all of Lessee’s personal property,

Trade Fixtures and Lessee-Owned Alterations and Utility Installations in, on,

or about the Premises similar in coverage to that carried by Lessor as the

Insuring Party under Paragraph 8.3(a). 

Such insurance shall be full replacement cost coverage with a deductible

not to exceed $1,000 per occurrence. 

The proceeds from any such insurance shall be used by Lessee for the

replacement of personal property and the restoration of Trade Fixtures and

Lessee-Owned Alterations and Utility Installations.  Upon request from Lessor, Lessee shall provide Lessor with

written evidence that such insurance is in force.

 

8.5           Insurance

Policies.  Insurance required

hereunder shall be in companies duly licensed to transact business in the state

where the Premises are located, and maintaining during the policy term a “General

Policyholders Rating” of at least B+, V, or such other rating as may required

by a Lender, as set forth in the most current issue of “Best’s Insurance

Guide.” Lessee shall not do or permit to be done anything which shall

invalidate the insurance polices referred to in

 

4

 

this Paragraph 8. Lessee shall

cause to be delivered to Lessor, within seven (7) days after the earlier of the

Early Possession Date or the Commencement Date, certified copies of, or certificates

evidencing the existence and amounts of, the insurance required under Paragraph

8.2(a) and 8.4.  No such policy shall be

cancelable or subject to modification except after thirty (30) days’ prior

written notice to Lessor.  Lessee shall

at least thirty (30) days prior to the expiration of such policies, furnish

Lessor with evidence of renewals or “Insurance binders” evidencing renewal

thereof, or Lessor may order such insurance and charge the cost thereof to

Lessee, which amount shall be payable by Lessee to Lessor upon demand.

 

8.6           Waiver

of Subrogation. Without affecting any other rights or remedies,

Lessee and Lessor each hereby release and relieve the other, and waive their

entire right to recover damages (whether in contract or in tort) against the

other, for loss or damage to their property arising out of or incident to the

perils required to be Insured against under Paragraph 8. The effect of such

releases and waivers of the right to recover damages shall not be limited by

the amount of Insurance carried or required, or by any deductibles applicable

thereto.  Lessor and Lessee agree to

have their respective insurance companies issuing property damage Insurance

waive any right to subrogation that such companies may have against Lessor or

Lessee, as the case may be, so long as the insurance is not invalidated

thereby.

 

8.7           Indemnify.  Except for Lessor’s negligence and/or breach

of express warranties, Lessee shall indemnify, protect, defend and hold

harmless the Premises, Lessor and its agents, Lessor’s master or ground lessor,

partners and Lenders, from and against any and all claims, loss of rents and/or

damages, costs, liens, judgments, penalties, loss of permits, attorneys’ and

consultants’ fees, expenses and/or liabilities arising out of, involving, or in

connection with, the occupancy of the Premises by Lessee, the conduct of

Lessee’s business, any act, omission or neglect of Lessee, its agents,

contractors, employees or invitees, and out of any Default of Breach by Lessee

in the performance in a timely manner of any obligation on Lessee’s part to be

performed under this Lease.  The

foregoing shall include, but not to be limited to, the defense or pursuit of

any claim or any action or proceeding involved therein, and whether or not (in

the case of claims made against Lessor) litigated and/or reduced to judgment.

In case any action or proceeding be brought against Lessor by reason of any of

the foregoing matters, Lessee upon notice from Lessor shall defend the same at

Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor shall

cooperate with Lessee in such defense. Lessor need not have first paid any such

claim in order to be so indemnified.

 

8.8           Exemption

of Lessor from Liability. Lessor shall not be liable for injury or

damage to the person or goods, wares, merchandise or other property of Lessee,

Lessee’s employees, contractors, invitees, customers, or any other person in or

about the Premises, whether such damage or injury is caused by or results from

fire, steam, electricity, gas, waters or rain, or from the breakage, leakage,

obstruction or other defects of pipes, fire sprinklers, wires, appliances,

plumbing, air conditioning or lighting fixtures, or from any other cause,

whether said injury or damage results from conditions arising upon the Premises

or upon other portions of the Building of which the Premises are a part, from

other sources or places, and regardless of whether the cause of such damage or

injury or the means of repairing the same is accessible or not, Lessor shall

not be liable for any damages arising from any act or neglect of any other

lessee of Lessor nor from the failure by Lessor to enforce the provisions of

any other lease in the Industrial Center. 

Notwithstanding Lessor’s negligence or breach of this Lease, Lessor

shall under no circumstances be liable for injury to Lessee’s business or for

any loss of income or profit therefrom.

 

9.             Damage or Destruction.

 

9.1           Definitions.

 

(a)           “Premises

Partial Damage” shall mean damage or destruction to the Premises,

other than Lessee-Owned Alterations and Utility Installations, the repair cost

of which damage or destruction is less than fifty percent (50%) of the then

Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises (excluding

Lessee-Owned Alternations and Utility Installations and Trade Fixtures)

immediately prior to such damage or destruction.

 

(b)           “Premises

Total Destruction” shall mean damage or destruction to the Premises,

other than Lessee-Owned Alterations and Utility Installations, the repair cost

of which damage or destruction is fifty percent (50%) or more of the then

Replacement Cost of the Premises (excluding Lessee-Owned Alterations and

Utility Installations and Trade Fixtures) immediately prior to such damage or

destruction.  In addition, damage or

destruction to the Building, other than Lessee-Owned Alterations and Utility

Installations and Trade Fixtures of any lessees of the Building, the cost of

which damage or destruction is fifty percent (50%) or more of the then

Replacement Cost (excluding Lessee-Owned Alterations and Utility Installations

and Trade Fixtures of any lessees of the Building) of the Building shall, at

the option of Lessor, be deemed to be Premises Total Destruction.

 

(c)           “Insured

Loss” shall mean damage or destruction to the Premises, other than

Lessee-Owned Alterations and Utility Installations and Trade Fixtures, which

was caused by an event required to be covered by the insurance described in

Paragraph 8.3(a) irrespective of any deductible amounts or coverage limits

involved.

 

(d)           “Replacement

Cost” shall mean the cost to repair or rebuild the improvements

owned by Lessor at the time of the occurrence to their condition existing

immediately prior thereto, including demolition, debris removal and upgrading

required by the operation of applicable building codee, ordinances or laws, and

without deduction or depreciation.

 

(e)           “Hazardous

Substance Condition” shall mean the occurrence or discovery of a

condition involving the presence of, or a contamination by, a Hazardous

Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.

 

9.2           Premises

Partial Damage - Insured Loss. 

If Premises Partial Damage that is an Insured Loss occurs, then Lessor

shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures

or Lessee-Owned Alterations and Utility Installations) as soon as reasonably

possible and this Lease shall continue in full force and effect.  In the event, however, that there is a

shortage of insurance proceeds and such shortage is due to the fact that, by

reason of the unique nature of the improvements in the Premises, full

replacement cost insurance coverage was not commercially reasonable and

available, Lessor shall have no obligation to pay for the shortage in insurance

proceeds or to fully restore the unique aspects of the premises unless Lessee

provides Lessor with the funds to cover same, or adequate assurance thereof,

within ten (10) days following receipt of written notice of such shortage and

request therefor.  If Lessor receives said

funds or adequate assurance thereof within said ten (10) day period, Lessor

shall complete them as soon as reasonably possible and this Lease shall remain

in full force and effect.  If Lessor

does not receive such funds or assurance within said period, Lessor may

nevertheless elect by written notice to Lessee within ten (10) days thereafter

to make such restorations and repair as is commercially reasonable with Lessor

paying any shortage in proceeds, in which case this Lease shall remain in full

force and effect.  If Lessor does not

receive such funds or assurance within such ten (10) day period, and if Lesser

does not so elect to restore and repair, then this Lease shall terminate sixty

(60) days following the occurrence of the damage or destruction.  Unless otherwise agreed, Lessee shall in no

event have any right to reimbursement from Lessor for any funds contributed by

Lessee to repair any such damage or destruction.  Premises Partial Damage due to flood or earthquake shall be

subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there

may be some insurance coverage, but the net proceeds of any such Insurance

shall be made available for the repairs it made by either Party.

 

9.3           Partial

Damage - Uninsured Loss.  If

Premises Partial Damage that is not an insured Loss occurs, unless caused by a

negligent or willful act of Lessee (in which event Lessee shall make the

repairs at Lessee’s expense and this Lease shall continue in full force and

effect), Lessor may at Lessor’s option either (i) repair such damage as soon as

reasonably possible at Lessor’s expense, in which event this Lease shall

continue in full force and effect, or (ii) give written notice to Lessee within

thirty (30) days after receipt by Lessor of knowledge of the occurrence of such

damage of Lessor’s desire to terminate this Lease as of the date sixty (60)

days following the date of such notice. 

In the event Lessor elects to give such notice of Lessor’s intention to

terminate this Lease, Lessee shall have the right within ten (10) days after

the receipt of such notice to give written notice to Lessor of Lessee’s

commitment to pay for the repair of such damage totally at Lessee’s expense and

without reimbursement from Lessor. 

Lessee shall provide Lessor with the required funds or satisfactory

assurance thereof within thirty (30) days following such commitment from

Lessee.  In such event this Lease shall

continue in full force and effect and Lessor shall proceed to make such repairs

as soon as reasonably possible after the required funds are available.  If Lessee does not give such notice and

provide the funds or assurance thereof with in the times specified above, this

Lease shall terminate as of the date specified in Lessor’s notice of

termination.

 

9.4           Total

Destruction. Notwithstanding any other provision hereof, if Premises

Total Destruction occurs (including any destruction required by any authorized

public authority), this Lease shall terminate sixty (60) days following the

date of such Premises Total Destruction, whether or not the damage or

destruction is an insured Loss or was caused by a negligent or willful act of

Lessee.  In the event, however, that the

damage or destruction was caused by Lessee, Lessor shall have the right to

recover Lessor’s damages from Lessee except as released and waived in Paragraph

9.7.

 

9.5           Damage

Near End of Term. If at any time during the last six (6) months of

the term of this Lease there is damage for which the cost to repair exceeds one

month’s Base Rent, whether or not an insured Loss, Lessor may, at Lessor’s

option, terminate this Lease effective sixty (60) days following the date of

occurrence of such damage by giving 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, if Lessee at

that time has an exercisable option to extend this Lease or to purchase the

Premises, then Lessee may preserve this Lease by (a) exercising such option,

and (b) providing Lessor with any shortage in insurance proceeds (or adequate

assurance thereof) needed to make the repairs on or before the earlier of (i)

the date which is ten (10) days after Lessee’s receipts of Lessor’s written

notice purporting to terminate this Lease, or (ii) the day prior to the date

upon which such option expires. If Lessee duly exercises such option during

such period and provides Lessor with funds (or adequate assurance thereof) to

cover any shortage in insurance proceeds, Lessor shall, at Lessor’s expense

repair such damage as soon as reasonably possible and this Lease shall continue

in full force and effect.  If Lessee

fails to exercise such option and provide such funds or assurance during such

period, then this Lease shall terminate as of the date set forth in the first

sentence of this Paragraph 9.5.

 

9.6           Abatement

of Rent; Lease’s Remedies.

 

(a)           In the event of (I) Premises Partial

Damage or (II) Hazardous Substance Condition for which Lessee is not legally

responsible, the Base Rent Common Area Operating Expenses and other charges, if

any, payable by Lessee hereunder for the period during which such damage or

condition, its repair, remediation or restoration continues, shall be abated in

proportion to the degree to which Lessee’s use of the Premises is impaired, but

not in excess of proceeds from insurance required to be carried under Paragraph

8.3(b).  Except for abatement of Base

Rent, Common Area Operating Expenses and other charges, if any, as aforesaid,

all other obligations of Lessee hereunder shall be performed by Lessee and

Lessee shall have no claim against Lessor for any damage suffered by reason of

any such damage, destruction, repair, remediation or restoration.

 

(b)           If Lesser shall be obligated to

repair or restore the Premises under the provisions of this Paragraph 9 and

shall not commence, in a substantial and meaningful way, the repair or

restoration of the Premises within ninety (90) days after such obligation shall

accrue, Lessee may, at any time prior to the commencement of such repair or

restoration, give written notice to Lessor and to any Lenders of which Lessee

has a actual notice of Lessee’s election to terminate this Lease on a date not

less than sixty (60) days following the giving of such notice.  If Lessee gives such notice to Lesser and

such Lenders and such repair or restoration is not commenced within thirty (30)

days after receipt of such notice, this Lease shall terminate as of the date

specified in said notice.  If Lessor or

a Lender commences the repair or restoration of the Premises within (30) days

after the receipt of such notice, this Lease shall continue in full force and

effect.  “Commence” as used in this Paragraph 9.6 shall mean either the

unconditional authorization of the preparation of the required plans, or the

beginning of the actual work on the Premises, whichever occurs first.

 

9.7           Hazardous

Substance Conditions.  If a

Hazardous Substance Condition occurs, unless Lessee is legally responsible

therefor (In which case Lessee shall make the investigation and remediation

thereof required by Applicable Requirements and this Lease shall continue in

full force and effect, but subject

 

5

 

to Lessor’s rights under

Paragraph 6.2(c) and Paragraph 13), Lessor may at Lessor’s option either (i)

Investigate and remediate such Hazardous Substance Condition, if required, as

soon as reasonably possible at Lessor’s expense, in which event this Lease

shall continue in full force and effect, or (ii) if the estimated cost to

investigate and remediate such condition exceeds twelve (12) times the then

monthly Base Rent or $100,000 whichever is greater, give written notice to

Lessee within thirty (30) days after receipt by Lessor of knowledge of the

occurrence of such Hazardous Substance Condition of Lessor’s desire to terminate

this Lease as of the date sixty (60) days following the date of such

notice.  In the event Lessor elects to

give such notice of Lessor’s intention to terminate this Lease, Lessee shall

have the right within ten (10) days after the receipt of such notice to give

written notice to Lessor of Lessee’s commitment to pay for the excess costs of

(a) Investigation and remediation of such Hazardous Substance Condition to the

extent required by Applicable Requirements, over (b) an amount equal to twelve

(12) times the then monthly Base Rent or $100,000, whichever is greater.  Lessee shall provide Lessor with the funds

required of Lessee or satisfactory assurance thereof within thirty (30) days

following said commitment by Lessee, in such event this Lease shall continue in

full force and effect, and Lessor shall proceed to make such investigation and

remediation as soon as reasonably possible after the required funds are

available.  If Lessee does not give such

notice and provide the required funds or assurance thereof within the time

period specified above, this Lease shall terminate as of the date specified in

Lessor’s notice of termination.

 

9.8           Termination

- Advance Payments.  Upon

termination of this Lease pursuant to this Paragraph 9, Lessor shall return to

Lessee any advance payment made by Lessee to Lessor and so much of Lessee’s

Security Deposit as has not been, or is not then required to be, used by Lessor

under the terms of this Lease.

 

9.9           Waiver

of Statutes.  Lessor and

Lessee agree that the terms of this Lease shall govern the effect of any damage

to or destruction of the Premises and the Building with respect to the

termination of this Lease and hereby waive the provisions of any present or

future statute to the extent it is inconsistent herewith.

 

10.          Real Property Taxes.

 

10.1         Payment

of Taxes.  Lessor shall pay

the Real Property Taxes, as defined in Paragraph 10.2, applicable to the

Industrial Center, and except as otherwise provided in Paragraph 10.3, any such

amounts shall be included in the calculation of Common Area Operating Expenses

in accordance with the provisions of Paragraph 4.2.

 

10.2         Real

Property Tax Definition.  As

used herein, the term “Real Property Taxes”

shall include any form of real estate tax or assessment, general, special,

ordinary or extraordinary, and any license fee, commercial rental tax,

improvement bond or bonds, levy of tax (other than inheritance, personal income

or estate taxes) imposed upon the Industrial Center by any authority having the

direct or indirect power to tax, including any city, state or federal

government, or any school, agricultural, sanitary, fire, street, drainage, or

other improvement district thereof, levied against any legal or equitable

interest of Lessor in the Industrial Center or any portion thereof, Lessor’s

right to rent or other income therefrom, and/or Lessor’s business of leasing

the Premises.  The term “Real Property Taxes” shall also include

any tax, fee, levy, assessment or charge, or any increase therein.  Imposed by reason of events occurring, or

changes in Applicable Law taking effect, during the term of this Lease,

including but not limited to a change in the ownership of the Industrial Center

or in the Improvements thereon, the execution of this Lease, or any

modification, amendment or transfer thereof, and whether or not contemplated by

the Parties. In calculating Real Property Taxes for any calendar year, the Real

Property Taxes for any real estate tax year shall be included in the

calculation of Real Property Taxes for such calendar year based upon the number

of days which such calendar year and tax year have in common.

 

10.3         Additional

Improvements.  Common Area

Operating Expenses shall not include Real Property Taxes specified in the tax

assessor’s records and work sheets as being caused by additional improvements

placed upon the Industrial Center by other lessees or by Lessor for the

exclusive enjoyment of such other lessees. 

Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to

Lessor at the time Common Area Operating Expenses are payable under Paragraph

4.2, the entirety of any increase in Real Property Taxes if assessed solely by

reason of Alterations, Trade Fixtures of Utility Installations placed upon the

Premises by Lessee or at Lessee’s request.

 

10.4         Joint

Assessment.  If the Building

is not separately assessed, Real Property Taxes allocated to the Building shall

be an equitable proportion of the Real Property Taxes for all of the land and

improvements included within the tax parcel assessed, such proportion to be

determined by Lessor from the respective valuations assigned in the assessor’s

work sheets or such other information as may be reasonably available.  Lessor’s reasonable determination thereof,

in good faith, shall be conclusive.

 

10.5         Lessee’s

Property Taxes.  Lessee shall

pay prior to delinquency all taxes assessed against and levied upon

Lessee-Owned Alterations and Utility Installations, Trade Fixtures,

furnishings, equipment and all personal property of Lessee contained in the

Premises or stored within the Industrial Center.  When possible, Lessee shall cause its Lessee-Owned Alterations

and Utility Installations, Trade Fixtures, furnishings, equipment and all other

personal property to be assessed and billed separately from the real property

of Lessor.  If any of Lessee’s said

property shall be assessed with Lessor’s real property, Lessee shall pay Lessor

the taxes attributable to Lessee’s property within ten (10) days after receipt

of a written statement setting forth the taxes applicable to Lessee’s property.

 

11.          Utilities.  Lessee shall pay directly for all utilities

and services supplied to the Premises, including but not limited to

electricity, telephone, security, gas and cleaning of the Premises, together

with any taxes thereon.  If any such utilities

or services are not separately metered to the Premises or separately billed to

the Premises, Lessee shall pay to Lessor a reasonable proportion to be

determined by Lessor of all such charges jointly metered or billed with other

premises in the Building, in the manner and within the time periods set forth

in Paragraph 4.2(d).

 

12.          Assignment and Subletting.

 

12.1         Lessor’s

Consent Required.

 

(a)           Lessee shall not voluntarily or by

operation of law assign, transfer, mortgage or otherwise transfer or encumber

(collectively, “assign”) or sublet all or any part of Lessee’s interest in this

Lease or in the Premises without Lessor’s prior written consent given under and

subject to the terms of Paragraph 36.

 

(b)           A change in the control of Lessee

shall constitute an assignment requiring Lessor’s consent.  The transfer, on a cumulative basis, of

twenty-five percent (25%) or more of the voting control of Lessee shall

constitute a change in control for this purpose.

 

(c)           The involvement of Lessee or its

assets in any transaction, or series of transactions (by way of merger, sale,

acquisition, financing, refinancing, transfer, leveraged buy-out or otherwise),

whether or not a formal assignment or hypothecation of this Lease or Lessee’s

assets occurs, which results or will result in a reduction of the Net Worth of

Lessee, as hereinafter defined, by an amount equal to or greater than

twenty-five percent (25%) of such Net Worth of Lessee as it was represented to

Lessor at the time of full execution and delivery of this Lease or at the time

of the most recent assignment to which Lessor has consented, or as it exists

immediately prior to said transaction or transactions constituting such

reduction, at whichever time said Net Worth of Lessee was or is greater, shall

be considered as assignment of this Lease by Lessee to which Lessor may

reasonably withhold its consent.  “Net Worth of Lessee” for purposes of this

Lease shall be the net worth of Lessee (excluding any Guarantors) established

under generally accepted accounting principles consistently applied.

 

(d)           An assignment of subletting of

Lessee’s interest in this Lease without Lessor’s specific prior written consent

shall, at Lessor’s option, be a Default curable after notice per Paragraph

13.1, or a non-curable Breach without the necessity of any notice and grace

period.  If Lessor elects to treat such

unconsented to assignment or subletting as a non-curable Breach, Lessor shall

have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)

days’ written notice (“Lessor’s Notice”),

increase the monthly Base Rent for the Premises to the greater of the then fair

market rental value of the Premises, as reasonably determined by Lessor, or one

hundred ten percent (110%) of the Base Rent then in effect.  Pending determination of the new fair market

rental value, if disputed by Lessee, Lessee shall pay the amount set forth in

Lessor’s Notice, with any overpayment credited against the next installment(s)

of Base Rent coming due, and any underpayment for the period retroactively to

the effective date of the adjustment being due and payable immediately upon the

determination thereof.  Further, in the

event of such Breach and rental adjustment, (i) the purchase price of any

option to purchase the Premises held by Lessee shall be subject to similar

adjustment to the then fair market value as reasonably determined by Lessor

(without the Lease being considered an encumbrance or any deduction for

depreciation or obsolescence, and considering the Premises at its highest and

best use and in good condition) or one hundred ten percent (110%) of the price

previously in effect, (ii) any index-oriented rental or price adjustment

formulas contained in this Lease shall be adjusted to require that the base

Index be determined with reference to the Index applicable to the time of such

adjustment, and (iii) any fixed rental adjustments scheduled during the

remainder of the Lease term shall be increased in the same ratio as the new

rental bears to the Base Rent in effect immediately prior to the adjustment

specified in Lessor’s Notice.

 

(e)           Lessee’s remedy for any breach of

this Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or

injunctive relief.

 

12.2         Terms

and Conditions Applicable to Assignment and Subletting

 

(a)           Regardless of Lessor’s consent, any

assignment or subletting shall not (i) be effective without the express written

assumption by such assignee or sublessee of the obligations of Lessee under

this Lease, (ii) release Lessee of any obligations hereunder, nor (iii) alter

the primary liability of Lessee for the payment of Base Rent and other sums due

Lessor hereunder or for the performance of any other obligations to be

performed by Lessee under this Lease.

 

(b)           Lessor may accept any rent or

performance of Lessee’s obligations from any person other than Lessee pending

approval or disapproval of an assignment. 

Neither a delay in the approval or disapproval of such assignment nor

the acceptance of any rent for performance shall constitute a waiver or

estoppel of Lessor’s right to exercise its remedies for the Default or Breach

by Lessee of any of the terms, covenants or conditions of this Lease.

 

(c)           The consent of Lessor to any

assignment or subletting shall not constitute a consent to any subsequent

assignment or subletting by Lessee or to any subsequent or successive

assignment or subletting by the assignee or sublessee.  However, Lessor may consent to subsequent

sublettings and assignments of the sublease or any amendments or modifications

thereto without notifying Lessee or anyone else liable under this Lease or the

sublease and without obtaining their consent, and such action shall not relieve

such persons from liability under this Lease or the sublease.

 

(d)           In the event of any Default or Breach

of Lessee’s obligation under this Lease, Lessor may proceed directly against

Lessee, any Guarantors or anyone else responsible for the performance of the

Lessee’s obligations under this Lease, including any sublessee, without first

exhausting Lessor’s remedies against any other person or entity responsible

therefor to Lessor, or any security held by Lessor.

 

(e)           Each request for consent to an

assignment or subletting shall be in writing, accompanied by information

relevant to Lessor’s determination as to the financial and operational

responsibility and appropriateness of the proposed assignee or sublessee,

including but not limited to the intended use and/or required modification of

the Premises, if any, together with a non-refundable deposit of $1,000 or ten

percent (10%) of the monthly Base Rent applicable to the portion of the

Premises which is the subject of the proposed assignment or sublease, whichever

is greater, as reasonable consideration for Lessor’s considering and processing

the request for consent.  Lessee agrees

to provide Lessor with such other or additional information and/or

documentation as may be reasonably requested by Lessor.

 

(f)            Any assignee of, or sublessee under,

this Lease shall, by reason of accepting such assignment or entering into such

sublease, be deemed, for the benefit of Lessor, to have assumed and agreed to

conform and comply with each and every term, covenant, condition and obligation

herein to be observed or performed by Lessee during the term of said assignment

or sublease, other than such obligations as are contrary to or inconsistent

with provisions of an assignment or sublease to which Lessor has specifically

consented in writing.

 

6

 

(g)           The occurrence of a transaction

described in Paragraph 12.2(c) shall give Lessor the right (but not the

obligation) to require that the Security Deposit be increased by an amount

equal to six (6) times the then monthly Base Rent, and Lessor may make the

actual receipt by Lessor of the Security Deposit increase a condition to

Lessor’s consent to such transaction.

 

(h)           Lessor, as a condition to giving its

consent to any assignment or subletting, may require that the amount and

adjustment schedule of the rent payable under this Lease be adjusted to what is

then the market value and/or adjustment schedule for property similar to the

Premises as then constituted, as determined by Lessor.

 

12.3     Additional Terms and Conditions Applicable to Subletting.  The following terms and conditions shall

apply to any subletting by Lessee of all or any part of the Premises and shall

be deemed included in all subleases under this Lease whether or not expressly

incorporated therein:

 

(a)           Lessee hereby assigns and transfers

to Lessor all of Lessee’s interest in all rentals and income arising from any

sublease of all or a portion of the Premises heretofore or hereafter made by

Lessee, and Lessor may collect such rent and income and apply same toward

Lessee’s obligations under this Lease; provided, however, that until a Breach

(as defined in Paragraph 13.1) shall occur in the performance of Lessee’s

obligations under this Lease, Lessee may, except as otherwise provided in this

Lease, receive, collect and enjoy the rents accruing under such sublease.  Lessor shall not, by reason of the foregoing

provision or any other assignment of such sublease to Lessor, nor by reason of

the collection of the rents from a sublessee, be deemed liable to the sublessee

for any failure of Lessee to perform and comply with any of Lessee’s

obligations to such sublessee under such Sublease.  Lessee hereby irrevocably authorizes and directs any such

sublessee, upon receipt of a written notice from Lessor stating that a Breach

exists in the performance of Lessee’s obligations under this Lease, to pay to

Lessor the rents and other charges due and to become due under the

sublease.  Sublessee shall rely upon any

such statement and request from Lessor and shall pay such rents and other

charges to Lessor without any obligation or right to inquire as to whether such

Breach exists and notwithstanding any notice from or claim from Lessee to the

contrary.  Lessee shall have no right or

claim against such sublessee, or, until the Breach has been cured, against

Lessor, for any such rents and other charges so paid by said sublessee to

Lessor.

 

(b)           In the event of a Breach by Lessee in

the performance of its obligations under this Lease, Lessor, at its option and

without any obligation to do so, may require any sublessee to attorn to Lessor,

in which event Lessor shall undertake the obligations of the sublessor under

such sublease from the time of the exercise of said option to the expiration of

such sublease; provided, however, Lessor shall not be liable for any prepaid

rents or security deposit paid by such sublessee to such sublessor or for any

other prior defaults or breaches of such sublessor under such sublease.

 

(c)           Any matter or thing requiring the

consent of the sublessor under a sublease shall also require the consent of

Lessor herein.

 

(d)           No sublessee under a sublease

approved by Lessor shall further assign or sublet all or any part of the

Premises without Lessor’s prior written consent.

 

(e)           Lessor shall deliver a copy of any

notice of Default or Breach by Lessee to the sublessee, who shall have the

right to cure the Default of Lessee within the grace period, if any, specified

in such notice. The sublessee shall have a right of reimbursement and offset

from and against Lessee for any such Defaults cured by the sublessee.

 

13.      Default; Breach; Remedies.

 

13.1     Default; Breach. Lessor and Lessee agree that if an attorney

is consulted by Lessor in connection with a Lessee Default or Breach (as

hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence

for legal services and costs in the preparation and service of a notice of

Default, and that Lessor may include the cost of such services and costs in

said notice as rent due and payable to cure said default. A “Default” by Lessee is defined as a

failure by Lessee to observe, comply with or perform any of the terms,

covenants, conditions or rules applicable to Lessee under this Lease. A “Breach” by Lessee is defined as the

occurrence of any one or more of the following Defaults, and, where a grace

period for cure after notice is specified herein, the failure by Lessee to cure

such Default prior to the expiration of the applicable grace period, and shall

entitle Lessor to pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:

 

(a)           The vacating of the Premises without

the intention to reoccupy same, or the abandonment of the Premises.

 

(b)           Except as expressly otherwise

provided in this Lease, the failure by Lessee to make any payment of Base Rent,

Lessee’s Share of Common Area Operating Expenses, or any other monetary payment

required to be made by Lessee hereunder as and when due, the failure by Lessee

to provide Lessor with reasonable evidence of insurance or surety bond required

under this Lease, or the failure of Lessee to fulfill any obligation under this

Lease which endangers or threatens life or property, where such failure

continues for a period of three (3) days following written notice thereof by or

on behalf of Lessor to Lessee.

 

(c)           Except as expressly otherwise

provided in this Lease, the failure by Lessee to provide Lessor with reasonable

written evidence (in duly executed original form, if applicable) of (i)

compliance with Applicable Requirements per Paragraph 6.3, (ii) the inspection,

maintenance and service contracts required under Paragraph 7.1(b), (iii) the

rescission of an unauthorized assignment or subletting per Paragraph 12.1, (iv)

a Tenancy Statement per Paragraphs 16 or 37, (v) the subordination or

non-subordination of this Lease per Paragraph 30, (vi) the guaranty of the

performance of Lessee’s obligations under this Lease if required under

Paragraphs 1.11 and 37, (vii) the execution of any document requested under

Paragraph 42 (easements), or (viii) any other documentation or information

which Lessor may reasonably require of Lessee under the terms of this lease,

where any such failure continues for a period of ten (10) days following

written notice by or on behalf of Lessor to Lessee.

 

(d)           A Default by Lessee as to the terms,

covenants, conditions or provisions of this Lease, or of the rules adopted

under Paragraph 40 hereof that are to be observed, complied with or performed

by Lessee, other than those described in Subparagraphs 13.1(a), (b) or (c),

above, where such Default continues for a period of thirty (30) days after

written notice thereof by or on behalf of Lessor to Lessee; provided, however,

that if the nature of Lessee’s Default is such that more than thirty (30) days

are reasonably required for its cure, then it shall not be deemed to be a

Breach of this Lease by Lessee if Lessee commences such cure within said thirty

(30) day period and thereafter diligently prosecutes such cure to completion.

 

                                (e)           The

occurrence of any of the following events: (i) the making by Lessee of any

general arrangement or assignment for the benefit of creditors; (ii) Lessee’s

becoming a “debtor” as defined in 11 U.S. Code Section 101 or any successor

statute thereto (unless, in the case of a petition filed against Lessee, the

same is dismissed within sixty (60) days); (iii) the appointment of a trustee

or receiver to take possession of substantially all of Lessee’s assets located

at the Premises or of Lessee’s interest in this Lease, where possession is not

restored to Lessee within thirty (30) days; or (iv) the attachment, execution

or other judicial seizure of substantially all of Lessee’s assets located at

the Premises or of Lessee’s interest in this Lease, where such seizure is not

discharged within thirty (30) days; provided, however, in the event that any

provision of this Subparagraph 13.1(e) is contrary to any applicable law, such

provision shall be of no force or effect, and shall not affect the validity of

the remaining provisions.

 

(f)            The discovery by Lessor that any

financial statement of Lessee or of any Guarantor, given to Lessor by Lessee or

any Guarantor, was materially false.

 

(g)           If the performance of Lessee’s

obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii)

the termination of a Guarantor’s liability with respect to this Lease other

than in accordance with the terms of such guaranty, (iii) a Guarantor’s

becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s

refusal to honor the guaranty, or (v) a Guarantor’s breach of its guaranty

obligation on an anticipatory breach basis, and Lessee’s failure, within sixty

(60) days following written notice by or on behalf of Lessor to Lessee of any

such event, to provide Lessor with written alternative assurances of security,

which, when coupled with the then existing resources of Lessee, equals or

exceeds the combined financial resources of Lessee and the Guarantors that

existed at the time of execution of this Lease.

 

13.2     Remedies.  If Lessee fails to perform any affirmative

duty or obligation of Lessee under this Lease, within ten (10) days after

written notice to Lessee (or in case of an emergency, without notice), Lessor

may at its option (but without obligation to do so), perform such duty or

obligation on Lessee’s behalf, including but not limited to the obtaining of

reasonably required bonds, insurance policies, or governmental licenses, permits

or approvals.  The costs and expenses of

any such performance by Lessor shall be due and payable by Lessee to Lessor

upon invoice therefor.  If any check

given to Lessor by Lessee shall not be honored by the bank upon which it is

drawn, Lessor, at its own option, may require all future payments to be made

under this Lease by Lessee to be made only by cashier’s check.  In the event of a Breach of this Lease by

Lessee (as defined in Paragraph 13.1), with or without further notice or

demand, and without limiting Lessor in the exercise of any right or remedy

which Lessor may have by reason of such Breach, Lessor may:

 

(a)           Terminate Lessee’s right to

possession of the Premises by any lawful means, in which case this Lease and

the term hereof shall terminate and Lessee shall immediately surrender

possession of the Premises to Lessor. 

In such event Lessor shall be entitled to recover from Lessee: (i) the

worth at the time of the award of the unpaid rent which had been earned at the

time of termination; (ii) the worth at the time of award of the amount by which

the unpaid rent which would have been earned after termination until the time

of award exceeds the amount of such rental loss that the Lessee proves could

have been reasonably avoided; (iii) the worth at the time of award of the

amount by which the unpaid rent for the balance of the term after the time of

award exceeds the amount of such rental loss that the Lessee proves could be

reasonably avoided; and (iv) any other amount necessary to compensate Lessor

for all the detriment proximately caused by the Lessee’s failure to perform its

obligations under this Lease or which in the ordinary course of things would be

likely to result therefrom, including but not limited to the cost of recovering

possession of the Premises, expenses of reletting, including necessary

renovation and alteration of the Premises, reasonable attorneys’ fees, and that

portion of any leasing commission paid by Lessor in connection with this Lease

applicable to the unexpired term of this Lease.  The worth at the time of award of the amount referred to in

provision (iii) of the immediately preceding sentence shall be computed by

discounting such amount at the discount rate of the Federal Reserve Bank of San

Francisco or the Federal Reserve Bank District in which the Premises are

located at the time of award plus one percent (1%).  Efforts by Lessor to mitigate damages caused by Lessee’s Default

or Breach of this Lease shall not waive Lessor’s right to recover damages under

this Paragraph 13.2.  If termination of

this Lease is obtained through the provisional remedy of unlawful detainer,

Lessor shall have the right to recover in such proceeding the unpaid rent and

damages as are recoverable therein, or Lessor may reserve the right to recover

all or any part thereof in a separate suit for such rent and/or damages.  If a notice and grace period required under

Subparagraph 13.1(b), (c) or (d) was not previously given, a notice to pay rent

or quit, or to perform or quit, as the case may be, given to Lessee under any

statute authorizing the forfeiture of leases for unlawful detainer shall also

constitute the applicable notice for grace period purposes required by

Subparagraph 13.1(b), (c) or (d).  In

such case, the applicable grace period under the unlawful detainer statue shall

run concurrently after the one such statutory notice, and the failure of Lessee

to cure the Default within the greater of the two (2) such grace periods shall

constitute both an unlawful detainer and a Breach of this Lease entitling

Lessor to the remedies provided for in this Lease and/or by said statute.

 

(b)           Continue the Lease and Lessee’s right

to possession in effect (in California under California Civil Code Section

1951.4) after Lessee’s Breach and recover the rent as it becomes due, provided

Lessee has the right to sublet or assign, subject only to reasonable

limitations.  Lessor and Lessee agree

that the limitations on assignment and subletting in this Lease are reasonable.  Acts of maintenance or preservation, efforts

to relet the Premises, or the appointment of a receiver to protect the Lessor’s

interest under this Lease, shall not constitute a termination of the Lessee’s

right to possession.

 

(c)           Pursue any other remedy now or

hereafter available to Lessor under the laws or judicial decisions of the state

wherein the Premises are located.

 

7

 

(d)           The expiration or termination of this

Lease and/or the termination of Lessee’s right to possession shall not relieve

Lessee from liability under any indemnity provisions of this Lease as to

matters occurring or accruing during the term hereof or by reason of Lessee’s

occupancy of the Premises;

 

13.3     Inducement Recapture In Event of Breach.  Any agreement by Lessor for the free or

abated rent or other, charges applicable to the Premises, or for the giving or

paying by Lessor to or for Lessee of any cash or other bonus, inducement or

consideration for Lessee’s entering into this Lease, all of which concessions

are hereinafter referred to as “Inducement

Provisions” shall be deemed conditioned upon Lessee’s full and

faithful performance of all of the terms, covenants and conditions of this

Lease to be performed or observed by Lessee during the term hereof as the same

may be extended.  Upon the occurrence of

a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such

Inducement Provision shall automatically be deemed deleted from this Lease and

of no further force or effect, and any rent, other charge, bonus, inducement or

consideration theretofore abated, given or paid by Lessor under such an

Inducement Provision shall be immediately due and payable by Lessee to Lessor,

and recoverable by Lessor, as additional rent due under this Lease,

notwithstanding any subsequent cure of said Breach by Lessee.  The acceptance by Lessor of rent or the cure

of the Breach which initiated the operation of this Paragraph 13.3 shall not be

deemed a waiver by Lessor of the provisions of this Paragraph 13.3 unless

specifically so stated in writing by Lessor at the time of such acceptance.

 

13.4     Late Charges:  Lessee

hereby acknowledges that late payment by Lessee to Lessor of rent and other

sums due hereunder will cause Lessor to incur costs not contemplated by this

Lease, the exact amount of which will be extremely difficult to ascertain.  Such costs include, but are not limited to,

processing and accounting charges, and late charges which may be imposed upon

Lessor by the terms of any ground lease, mortgage or deed of trust covering the

Premises. Accordingly, if any installment of rent or other sum due from Lessee

shall not be received by Lessor or Lessor’s designee within ten (10) days after

such amount shall be due, then, without any requirement for notice to Lessee,

Lessee shall pay to Lessor a late charge equal to six percent (6%) of such

overdue amount.  The parties hereby

agree that such late charge represents a fair and reasonable estimate of the

costs Lessor will incur by reason of late payment by Lessee.  Acceptance of such late charge by Lessor

shall in no event constitute a waiver of Lessee’s Default or Breach with

respect to such overdue amount, nor prevent Lessor from exercising any of the

other rights and remedies granted hereunder, in the event that a late charge is

payable hereunder, whether or not collected, for three (3) consecutive

installments of Base Rent, then notwithstanding Paragraph 4.1 or any other

provision of this Lease to the contrary, Base Rent shall, at Lessor’s option,

become due and payable quarterly in advance.

 

13.5     Breach by Lessor.  Lessor

shall not be deemed in breach of this Lease unless Lessor falls within a

reasonable time to perform an obligation required to be performed by

Lessor.  For purposes of this Paragraph

13.5, a reasonable time shall in no event be less than thirty (30) days after

receipt by Lessor, and by and Lender(s) whose name and address shall have been

furnished to Lessee in writing for such purpose, of written notice specifying

wherein such notice specifying wherein such obligation of Lessor has not been

performed; provided, however, that if the nature of Lessor’s obligation is such

that more than thirty (30) days after such notice are reasonably required for

its performance, then Lessor shall not be in breach of this Lease if

performance is commenced within such thirty (30) day period and thereafter

diligently pursed to completion.

 

14.       Condemnation.  If the

Premises or any portion thereof are taken under the power of eminent domain or

sole under the threat of the exercise of said power (all of which are herein

called “condemnation”), this Lease shall terminate as to the part so taken as

of the date the condemning authority takes title or possession, whichever first

occurs. If more than ten percent (10%) of the floor area of the Premises, or

more than twenty-five percent (25%) of the portion of the Common Areas

designated for Lessee’s parking, is taken by condemnation, Lessee may, at

Lessee’s option, to be exercised in writing within ten (10) days after Lessor

shall have given Lessee written notice of such taking (or in the absence of

such notice, within (10) days after the condemning authority shall have taken

possession) terminate this Lease as of the date the condemning authority takes

such possession. If Lessee does not terminate this Lease in accordance with the

foregoing, this Lease shall remain in full force and effect as to the portion

of the Premises remaining, except that the Base Rent shall be reduced in the

same proportion as the rentable floor area of the Premises taken bears to the

total rentable floor area of the Premises. 

No reduction of Base Rent shall occur if the condemnation does not apply

to any portion of the Premises.  Any

award for the taking of all or any part of the Premises under the power of

eminent domain or any payment made under threat of the exercise of such power

shall be the property of Lessor, whether such award shall be made as

compensation for diminution of value of the leasehold or for the taking of the

fee, or as severance damages; provided, however, that Lessee shall be entitled

to any compensation, separately awarded to Lessee for Lessee’s relocation

expenses and/or loss of Lessee’s Trade Fixtures.  In the event that this Lease is not terminated by reason of such

condemnation, Lessor shall to the extent of its net severance damages received,

over and above Lessee’s Share of the legal and other expenses incurred by

Lessor in the condemnation matter, repair any damage to the Premises caused by

such condemnation authority, Lessee shall be responsible for the payment of any

amount in excess of such net severance damages required to complete such

repair.

 

15.      Brokers’ Fees.

 

15.1         Procuring

Cause.  The Broker(s) named

in Paragraph 1.10 is/are the procuring cause of this Lease.

 

15.2         Additional

Terms.  Under Lessor and

Broker(s). have otherwise agreed in writing, Lessor agrees that: (a) if Lessee

exercise any Option (as defined in Paragraph 39.1) granted under this Lease or

any Option subsequently granted, or (b) if Lessee acquires any rights to the

Premises or other premises in which Lessor has an interest, or (c) if Lessee

remains in possession of the Premises with the consent of Lessor after the

expiration of the term of this Lease after having failed to exercise an Option,

or (d) if said brokers are the procuring cause of any other lease or sale

entered into between the Parties pertaining to the Premises and/or any adjacent

property in which Lessor has an interest, or (e) if Base Rent is increased,

whether by agreement or operation of an escalation clause herein, then as to

any of said transactions, Lessor shall pay said Broker(s) a fee in accordance

with the schedule of said Broker(s) in effect at the time of the execution of

this Lease.

 

15.3         Assumption

of Obligations.  Any buyer or

transferee of Lessor’s interest in this Lease, whether such transfer is by

agreement or by operation of law, shall be deemed to have assumed Lessor’s

obligation under this Paragraph 15. 

Each Broker shall be an intended third party beneficiary of the

provisions of Paragraph 1.10 and of this Paragraph 15 to the extent of its

interest in any commission arising from this Lease and may enforce that right

directly against Lessor and its successors.

 

15.4         Representations

and Warranties.  Lessee and

Lessor each represent and warrant to the other that it has had no dealings with

any person, firm, broker or finder other than as named in Paragraph 1.10(a) in

connection with the negotiation of this Lease and/or the consummation of the

transaction contemplated hereby, and that no broker or other person, firm or

entity other than said named Broker(s) is entitled to any commission or

finder’s fee in connection with said transaction .  Lessee and Lessor do each hereby agree to indemnify, protect,

defend and hold the other harmless from and against liability for compensation

or charges which may be claimed by any such unnamed broker, finder or other

similar party by reason of any dealings of actions of the indemnifying Party,

including any costs, expenses, and/or attorneys’ fees reasonably incurred with

respect thereto.

 

16.          Tenancy and Financial Statements.

 

16.1         Tenancy

Statement.  Each Party (as “Responding Party”) shall within ten (10)

days after written notice from the other Party (the “Requesting Party”.) execute, acknowledge and deliver to the

Requesting Party a statement in writing in a form similar to the then most

current “Tenancy Statement” form

published by the American Industrial Real Estate Association, plus such

additional information, confirmation and/or statements as may be reasonably

requested by the Requesting Party.

 

16.2         Financial

Statement.  If Lessor desires

to finance, refinance, or sell the Premises or the Building, or any part

thereof, Lessee and all Guarantors shall deliver to any potential lender or

purchaser designated by Lessor such financial statements of Lessee and such

Guarantors as may be reasonably required by such lender or purchaser, including

but not limited to Lessee’s financial statements for the past three (3)

years.  All such financial statements

shall be received by Lessor and such lender or purchaser in confidence and

shall be used only for the purposes herein set forth.

 

17.      Lessor’s

Liability.  The term “Lessor” as used herein shall mean the

owner or owners at the time in question of the fee title to the Premises.  In the event of a transfer of Lessor’s title

or Interest in the Premises or in this Lease, Lessor shall deliver to the

transferee or assignee (in cash or by credit) any unused Security Deposit held

by Lessor at the time of such transfer or assignment.  Except as provided in Paragraph 15.3, upon such transfer or

assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor

shall be relieved of all liability with respect to the obligations and/or

covenants under this Lease thereafter to be performed by the Lessor.  Subject to the foregoing, the obligations

and/or covenants in this Lease to be performed by the Lessor shall be binding

only upon the Lessor as hereinabove defined.

 

18.      Severability.   The invalidity of any provision of this

Lease, as determined by a court of competent jurisdiction, shall in no way

affect the validity of any other provision hereof.

 

19.      Interest on

Past-Due Obligations.  Any monetary

payment due Lessor hereunder, other than late charges, not received by Lessor

within ten (10) days following the date on which it was due, shall bear

interest from the date due at the prime rate charged by the largest state

chartered bank in the state in which the Premises are located plus four percent

(4%) per annum, but not exceeding the maximum rate allowed by law, in addition

to the potential late charge provided for in Paragraph 13.4.

 

20.      Time of Essence.  Time is of the essence with respect to the

performance of all obligations to be performed or observed by the Parties under

this Lease.

 

21.      Rent

Defined.  All monetary obligations

of Lessee to Lessor under the terms of this Lease are deemed to be rent.

 

22.      No Prior or

other Agreements; Broker Disclaimer.  This

Lease contains all agreements between the Parties with respect to any matter

mentioned herein, and no other prior or contemporaneous agreement or

understanding shall be effective. 

Lessor and Lessee each represents and warrants to the Brokers that it

has made, and is relying solely upon, its own investigation as to the nature,

nature, quality, character and financial responsibility of the other Party to

this Lease and as to the nature, quality and character of the Premises.  Brokers have no responsibility with respect

thereto or with respect to any default or breach hereof by either Party.  Each Broker shall be an intended third party

beneficiary of the provisions of this Paragraph 22.

 

23.      Notices.

 

23.1         Notice

Requirements.  All notices

required or permitted by this Lease shall be in writing and may be delivered in

person (by hand or by messenger or courier service) or may be sent by regular,

certified or registered mail or U.S. Postal Service Express Mail, with postage

prepaid, or by facsimile transmission during normal business hours, and shall

be deemed sufficiently given if served in manner specified in this Paragraph

23.  The addresses noted adjacent to a

Party’s signature on this Lease shall be that Party’s address for delivery or

mailing of notice purposes.  Either

Party may by written notice to the other specify a different address for notice

purposes, except that upon Lessee’s taking possession of the Premises, the

Premises shall constitute Lessee’s address for the purpose of mailing or

delivering notices to Lessee.  A copy of

all notices required or permitted to be given to Lessor hereunder shall be

concurrently transmitted to such party or parties at such addresses as Lessor

may from time to time hereafter designate by written notice to Lessee.

 

23.2         Date of

Notice.  Any notice sent by

registered or certified mail, return receipt requested, shall be deemed given

on the date of delivery shown on the receipt card, or if no delivery date is

shown, the postmark thereon.  If sent by

regular mail, the notice shall be deemed given forty-eight (48) hours after the

same is addressed as required herein and mailed with postage prepaid.  Notices delivered by United States Express

Mail or overnight courier that guarantees next day

 

8

 

delivery shall be deemed given

twenty-four (24) hours after delivery of the same to the United States Postal

Service or courier.  If any notice is

transmitted by facsimile transmission or similar means, the same shall be

deemed served or delivered upon telephone or facsimile confirmation of receipt

of the transmission thereof, provided a copy is also delivered via delivery or

mail. If notice is received on a Saturday or a Sunday or a legal holiday, it

shall be deemed received on the next business day.

 

24.      Waivers.  No waiver by Lessor of the Default or Breach

of any term, covenant or condition hereof by Lessee, shall be deemed a waiver

of any other term, covenant or condition hereof, or of any subsequent Default

or Breach by Lessee of the same or any other term, covenant or condition

hereof. Lessor’s consent to, or approval of, any such act shall not be deemed

to render unnecessary the obtaining of Lessor’s consent to, or approval of, any

subsequent or similar act by Lessee, or be construed as the basis of an

estoppel to enforce the provision or provisions of this Lease requiring such

consent.  Regardless of Lessor’s

knowledge of a Default or Breach at the time of accepting rent, the acceptance

of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of

any provision hereof.  Any payment given

Lessor by Lessee may be accepted by Lessor on account of moneys or damages due

Lessor, notwithstanding any qualifying statements or conditions made by Lessee

in connection therewith, which such statements and/or conditions shall be of no

force or effect whatsoever unless specifically agreed to in writing by Lessor

at or before the time of deposit of such payment.

 

25.      Recording.  Either Lessor or Lessee shall, upon request

of the other, execute, acknowledge and deliver to the other a short form

memorandum of this Lease for recording purposes.  The Party requesting recordation shall be responsible for payment

of any fees or taxes applicable thereto.

 

26.      No Right To

Holdover.  Lessee has no right to

retain possession of the Premises or any part thereof beyond the expiration or

earlier termination of this Lease.  In

the event that Lessee holds over in violation of this Paragraph 26 then the

Base Rent payable from and after the time of the expiration or earlier termination

of this Lease shall be increased to two hundred percent (200%) of the Base rent

applicable during the month immediately preceding such expiration or earlier

termination.  Nothing contained herein

shall be construed as a consent by Lessor to any holding over by Lessee.

 

27.      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.

 

28.      Covenants and

Conditions.  All provisions of this

Lease to be observed or performed by Lessee are both covenants and conditions.

 

29.      Binding Effect;

Choice of Law.  This Lease shall be

binding upon the Parties, their personal representatives, successors and

assigns and be governed by the laws of the State in which the Premises are

located.  Any litigation between the

Parties hereto concerning this Lease shall be initiated in the country in which

the Premises are located.

 

30.      Subordination;

Attornment; Non-Disturbance.

 

30.1         Subordination.  This Lease and any Option granted

hereby shall be subject and subordinate to any ground lease, mortgage, deed of

trust, or other hypothecation or security device (collectively, “Security Device”), now or hereafter placed

by Lessor upon the real property of which the Premises are a part, to any and

all advances made on the security thereof, and to all renewals, modifications,

consolidations, replacements and extensions thereof.  Lessee agrees that the Lenders holding any such Security Device

shall have no duty, liability or obligation to perform any of the obligations of

Lessor under this Lease, but that in the event of Lessor’s default with respect

to any such obligation, Lessee will give any Lender whose name and address have

been furnished Lessee in writing for such purpose notice of Lessor’s default

pursuant to Paragraph 13.5.  If any

Lender shall elect to have this Lease and/or any Option granted hereby superior

to the lien of its Security Device and shall give written notice thereof to

Lessee, this Lease and such Options shall be deemed prior to such Security

Device, notwithstanding the relative dates of the documentation or recordation

thereof.

 

30.2         Attornment.  Subject to the non-disturbance

provisions of Paragraph 30.3, Lessee agrees to attorn to a Lender or any other

party who acquires ownership of the Premises by reason of a foreclosure of a

Security Device, and that in the event of such foreclosure, such new owner

shall not: (i) be liable for any act or omission of any prior lessor or with

respect to events occurring prior to acquisition of ownership, (ii) be subject

to any offsets or defenses which Lessee might have against any prior lessor, or

(iii) be bound by prepayment of more than one month’s rent.

 

30.3         Non-Disturbance.  With respect to Security Devices

entered into by Lessor after the execution of this lease, Lessee’s

subordination of this Lease shall be subject to receiving assurance (a

“non-disturbance agreement”) from the Lender that Lessee’s possession and this

Lease, including any options to extend the term hereof, will not be disturbed

so long as Lessee is not in Breach hereof and attorns to the record owner of

the Premises.

 

30.4         Self-Executing.  The agreements contained in this

Paragraph 30 shall be effective without the execution of any further documents;

provided, however, that upon written request from Lessor or a Lender in

connection with sale, financing or refinancing of Premises, Lessee and Lessor

shall execute such further writings as may be reasonably required to separately

document any such subordination or non-subordination, attornment and/or

non-disturbance agreement as is provided for herein.

 

31.          Attorney’s Fees.  If any Party or

Broker brings an action or proceeding to enforce the terms hereof or declare

rights hereunder, the Prevailing Party (as hereafter defined) in any such

proceeding, action, or appeal thereon, shall be entitled to reasonable

attorneys’ fees.  Such fees may be

awarded in the same suit or recovered in a separate suit,  whether or not such action or proceeding is

pursued to decision or judgment.  The

terms “Prevailing Party” shall

include, without limitation, a Party or Broker who substantially obtains or

defeats the relief sought, as the case may be, whether by compromise,

settlement, judgment, or the abandonment by the other Party or Broker of its

claim or defense.  The attorneys' fee

award shall not be computed in accordance with any court fee schedule, but

shall be such as to fully reimburse all attorneys' fees reasonably

incurred.  Lessor shall be entitled to

attorneys’ fees, costs and expenses incurred in preparation and service of

notices of Default and consultations in connection therewith, whether or not a

legal action is subsequently commenced in connection with such Default or

resulting Breach.  Broker(s) shall be

intended third party beneficiaries of this Paragraph 31.

 

32.          Lessor’s Access; Showing Premises;

Repairs. Lessor and Lessor’s agents shall have the

right to enter the Premises at any time, in the case of an emergency, and

otherwise at reasonable times for the purpose of showing the same to

prospective purchasers, lenders, or lessees, and making such alterations,

repairs, improvements or additions to the Premises or to the Building, as

Lessor may reasonably deem necessary. 

Lessor may at any time place on or about the Premises or Building any

ordinary “For Sale” signs and Lessor may at any time during the last one

hundred eighty (180) days of the term hereof place on or about the Premises any

ordinary “For Lease” signs.  All such

activities of Lessor shall be without abatement of rent or liability to Lessee.

 

33.          Auctions. Lessee  shall not conduct, nor permit to be

conducted, either voluntarily or involuntarily, any auction upon the Premises

without first having obtained Lessor’s prior written consent.  Notwithstanding anything to the contrary in

this Lease, Lessor shall not be obligated to exercise any standard of

reasonableness in determining whether to grant such consent.

 

34.          Signs. Lessee

shall not place any sign upon the exterior of the Premises or the Building,

except that Lessee may, with Lessor’s prior written consent, install (but not

on the roof) such signs as are reasonably required to advertise Lessee’s own

business so long as such signs are in a location designated by Lessor and

comply with Applicable Requirements and the signage criteria established for

the Industrial Center by Lessor.  The

installation of any sign on the Premises by or for Lessee shall be subject to

the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations,

Trade Fixtures and Alterations).  Unless

otherwise expressly agreed herein, Lessor reserves all rights to the use of the

roof of the Building, and the right to install advertising signs on the

Building, including the roof, which do not unreasonably interfere with the

conduct of Lessee’s business; Lessor shall be entitled to all revenues from

such advertising signs.

 

35.          Termination; Merger.  Unless specifically

stated otherwise in writing by Lessor, the voluntary or other surrender of this

Lease by Lessee, the mutual termination or cancellation hereof, or a termination

hereof by Lessor for Breach by Lessee, shall automatically terminate any

sublease or lesser estate in the Premises; provided, however, Lessor shall, in

the event of any such surrender, termination or cancellation, have the option

to continue any one or all of any existing subtenancies.  Lessor’s failure within ten (10) days

following any such event to make a written election to the contrary by written

notice to the holder of any such lesser interest, shall constitute Lessor’s

election to have such event constitute the termination of such interest.

 

36.          Consents.

 

(a)           Except for Paragraph 33 hereof

(Auctions) or as otherwise provided herein, wherever in this Lease the consent

of a Party is required to an act by or for the other Party, such consent shall

not be unreasonably withheld or delayed. 

Lessor’s actual reasonable costs and expenses (including but not limited

to architects’, attorneys’, engineers’, and other consultants’ fees) incurred

in the consideration of, or response to, a request by Lessee for any Lessor

consent pertaining to this Lease or the Premises, including but not limited to

consents to an assignment a subletting or the presence or use of a Hazardous

Substance, shall be paid by Lessee to Lessor upon receipt of an invoice and supporting

documentation therefor.  In addition to

the deposit described in Paragraph 12.2(e), Lessor may, as a condition to

considering any such request by Lessee, require that Lessee deposit with Lessor

an amount of money (in addition to the Security Deposit held under Paragraph 5)

reasonably calculated by Lessor to represent the cost Lessor will incur in

considering and responding to Lessee’s request.  Any unused portion of said deposit shall be refunded to Lessee

without interest.  Lessor’s consent to

any act, assignment of this Lease or subletting of the Premises by Lessee shall

not constitute an acknowledgement that no Default or Breach by Lessee of this

Lease exists, nor shall such consent be deemed a waiver of any then existing

Default or Breach, except as may be otherwise specifically stated in writing by

Lessor at the time of such consent.

 

(b)           All conditions to Lessor’s consent

authorized by this Lease are acknowledged by Lessee as being reasonable.  The failure to specify herein any particular

condition to Lessor’s consent shall not preclude the impositions by Lessor at

the time of consent of such further or other conditions as are then reasonable

with reference to the particular matter for which consent is being given.

 

37.          Guarantor.

 

37.1     Form of Guaranty.  If there are to be any Guarantors of

this Lease per Paragraph 1.11, the form of the guaranty to be executed by each

such Guarantor shall be in the form most recently published by the American

Industrial Real Estate Association, and each such Guarantor shall have the same

obligations as Lessee under this lease, including but not limited to the

obligation to provide the Tenancy Statement and information required in

Paragraph 16.

 

37.2     Additional

Obligations of Guarantor.  It shall

constitute a Default of the Lessee under this Lease if any such Guarantor fails

or refuses, upon reasonable request by Lessor to give: (a) evidence of the due

execution of the guaranty called for by this Lease, including the authority of

the Guarantor (and of the party signing on Guarantor’s behalf) to obligate such

Guarantor on said guaranty, and resolution of its board of directors

authorizing the making of such guaranty, together with a certificate of

incumbency showing the signatures of the persons authorized to sign on its

behalf, (b) current financial statements of Guarantor as may from time to time

be requested by Lessor, (c) a Tenancy Statement, or (d) written confirmation

that the guaranty is still in effect.

 

38.      Quiet

Possession.  Upon payment by Lessee

of the rent for the Premises and the performance of all of the covenants,

conditions and provisions on Lessee’s part to be observed and performed under

this Lease, Lessee shall have quiet possession of the Premises for the entire

term hereof subject to all of the provisions of this Lease.

 

9

 

39.      Options.

 

39.1     Definition.  As used in

this Lease, the word “Option” has

the following meaning: (a) the right to extend the term of this Lease or to

renew this Lease or to extend or renew any lease that Lessee has on other

property of Lessor; (b) the right of first refusal to lease the Premises or the

right of first offer to lease the Premises or the right of first refusal to

lease other property of Lessor or the right of first offer to lease other

property of Lessor; (c) the right to purchase the Premises, or the right of

first refusal to purchase the Premises, or the right of first offer to purchase

the Premises, or the right to purchase other property of Lessor, or the right of

first refusal to purchase other property of Lessor, or the right of first offer

to purchase other property of Lessor.

 

39.2     Options Personal to Original Lessee.  Each Option granted to Lessee in this Lease is personal to the

original Lessee named in Paragraph 1.1 hereof, and cannot be voluntarily or

involuntarily assigned or exercised by any person or entity other than said

original Lessee while the original Lessee is in full and actual possession of

the Premises and without the intention of thereafter assigning or

subletting.  The Options, if any, herein

granted to Lessee are not assignable, either as a part of an assignment of this

Lease or separately or apart therefrom, and no Option may be separated from

this Lease in any manner, by reservation or otherwise.

 

39.3     Multiple Options.  In

the event that Lessee has any multiple Options to extend or renew this Lease, a

later option cannot be exercised unless the prior Options to extend or renew

this Lease have been validly exercised.

 

39.4     Effect of Default on Options.

 

(a)           Lessee shall have no right to

exercise an Option, notwithstanding any provision in the grant of Option to the

contrary: (i) during the period commencing with the giving of any notice of

Default under Paragraph 13.1 and continuing until the noticed Default is cured,

or (ii) during the period of time any monetary obligation due Lessor from

Lessee is unpaid (without regard to whether notice thereof is given Lessee), or

(iii) during the time Lessee is in Breach of this Lease, or (iv) in the event

that Lessor has given to lessee three (3) or more notices of separate Defaults

under Paragraph 13.1 during the twelve (12) month period immediately preceding

the exercise of the Option, whether or not the Defaults are cured.

 

(b)           The period of time within which an

Option may be exercised shall not be extended or enlarged by reason of Lessee’s

inability to exercise an Option because of the provisions of Paragraph 39.4(a).

 

(c)           All rights of Lessee under the

provisions of an Option shall terminate and be of no further force or effect,

notwithstanding Lessee’s due and timely exercise of the Option, if, after such

exercise and during the term of this Lease, (i) Lessee fails to pay to Lessor a

monetary obligation of Lessee for a period of thirty (30) days after such

obligation becomes due (without any necessity of Lessor to give notice thereof

to Lessee), or (ii) Lessor gives to Lessee three (3) or more notices of

separate Defaults under Paragraph 13.1 during any twelve (12) month period,

whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of

this Lease.

 

40.          Rules

and Regulations.  Lessee

agrees that it will abide by, and keep and observe all reasonable rules and

regulations (“Rules and Regulations”) which Lessor may make from time to time

for the management, safety, care, and cleanliness of the grounds, the parking

and unloading of vehicles and the preservation of good order, as well as for

the convenience of other occupants or tenants of the Building and the

Industrial Center and their invitees.

 

41.          Security

Measures.  Lessee hereby

acknowledges that the rental payable to Lessor hereunder does not include the

cost of guard service or other security measures, and that Lessor shall have no

obligation whatsoever to provide same. 

Lessee assumes all responsibility for the protection of the Premises,

Lessee, its agents and invitees and their property from the acts of third

parties.

 

42.          Reservations.  Lessor reserves the right, from time to

time, to grant, without the consent or joinder of Lessee, such easements,

rights of way, utility raceways, and dedications that Lessor deems necessary,

and to cause the recordation of parcel maps and restrictions, so long as such

easements, rights of way, utility raceways, dedications, maps and restrictions

do not reasonably interfere with the use of the Premises by Lessee.  Lessee agrees to sign any documents

reasonably requested by Lessor to effectuate any such easement rights,

dedication, map or restrictions.

 

43.          Performance

Under Protest.  If at any

time a dispute shall arise as to any amount or sum of money to be paid by one

Party to the other under the provisions hereof, the Party against whom the

obligation to pay the money is asserted shall have the right to make payment

“under protest” and such payment shall not be regarded as a voluntary payment

and there shall survive the right on the part of said Party to institute suit

for recovery of such sum.  If it shall

be adjudged that there was no legal obligation on the part of said Party to pay

such sum or any part thereof, said Party shall be entitled to recover such sum

or so much thereof as it was not legally required to pay under the provisions

of this Lease.

 

44.          Authority.  If either Party hereto is a

corporation, trust, or general or limited partnership, each individual

executing this Lease on behalf of such entity represents and warrants that he

or she is duly authorized to execute and deliver this Lease on its behalf.  If Lessee is a corporation, trust or partnership,

Lessee shall, within thirty (30) days after request by Lessor, deliver to

Lessor evidence satisfactory to Lessor of such authority.

 

45.          Conflict.  Any conflict between the printed provisions

of this Lease and the typewritten or handwritten provisions shall be controlled

by the typewritten or handwritten provisions.

 

46.          Offer.  Preparation of this Lease by

either Lessor or Lessee or Lessor’s agent or Lessee’s agent and submission of

same to Lessee or Lessor shall not be deemed an offer to lease.  This Lease is not intended to be binding until

executed and delivered by all Parties hereto.

 

47.          Amendments.  This Lease may be modified only in writing,

signed by the parties in interest at the time of the modification.  The Parties shall amend this Lease from time

to time to reflect any adjustments that are made to the Base Rent or other rent

payable under this Lease.  As long as

they do not materially change Lessee’s obligations hereunder, Lessee agrees to

make such reasonable non-monetary modifications to this Lease as may be

reasonably required by an institutional insurance company or pension plan

Lender in connection with the obtaining of normal financing or refinancing of

the property of which the Premises are a part.

 

48.          Multiple

Parties.  Except as otherwise

expressly provided herein, if more than one person or entity is named herein as

either Lessor or Lessee, the obligations of such multiple parties shall be the

joint and several responsibility of all persons or entities named herein as

such Lessor or Lessee.

 

10

 

LESSOR AND LESSEE HAVE

CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED

HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY

CONSENT THERETO.  THE PARTIES HEREBY AGREE

THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE

COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND

LESSEE WITH RESPECT TO THE PREMISES.

 

IF THIS LEASE

HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY’S REVIEW AND

APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE CONDITION OF THE

PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR

HAZARDOUS SUBSTANCES.  NO REPRESENTATION

OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR

BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE

LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE

TRANSACTION TO WHICH IT RELATES;  THE

PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL

AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER

THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED

SHOULD BE CONSULTED.

 

The parties hereto have

executed this Lease at the place and on the dates specified above their

respective signatures.

 

	

  Executed at:

  

  	

  Carmel, CA

  	

   

  	

  Executed at:

  

  	

  Monterey, CA

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  on: 

  	

   

  	

   

  	

  on:

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

  By LESSOR:

  	

  By LESSEE:

  
	

   

  	

   

  
	

   

  	

   

  	

  Monterey

  County Bank

  	

   

  
	

   

  	

   

  
	

   

  	

   

  	

  /s/ Charles

  T. Chrietzberg Jr.

  	

   

  
	

   

  	

   

  
	

  By: 

  	

  /s/

  Jacqueline M. Clampett Jones

  	

   

  	

  By:

  	

  Charles T.

  Chrietzberg Jr.

  	

   

  
	

   

  	

   

  
	

  Name

  Printed: 

  	

  Jacqueline

  M. Clampett Jones

  	

   

  	

  Name

  Printed:

  	

  Charles T.

  Chrietzberg Jr.

  	

   

  
	

   

  	

   

  
	

  Title: 

  	

  Owner of

  Building

  	

   

  	

  Title:

  	

  President

  & CEO

  	

   

  
	

   

  	

   

  
	

  By: 

  	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  
	

  Name

  Printed:

  	

   

  	

   

  	

  Name

  Printed:

  	

   

  	

   

  
	

   

  	

   

  
	

  Title: 

  	

   

  	

   

  	

  Title:

  
	

   

  	

   

  
	

  Address: 

  	

  P.O. Box

  3523

  	

   

  	

  Address:

  	

  601 Munras

  Ave.

  	

   

  
	

   

  	

   

  
	

   

  	

  Carmel, CA

  93921

  	

   

  	

   

  	

  Monterey, CA

  93940

  	

   

  
	

   

  	

   

  
	

  Telephone:(831)

  	

  625-3595

  	

   

  	

  Telephone:

  (831)

  	

   649-4600

  	

   

  
	

   

  	

   

  
	

  Facsimile:

  (831)

  	

  625-3594

  	

   

  	

  Facsimile:

  (831)

  	

   642-6075

  	

   

  
	

   

  	

   

  
	

  BROKER:

  	

   

  	

  BROKER:

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Executed at:

  	

   

  	

   

  	

  Executed at:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  on:

  	

   

  	

   

  	

  on:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

   

  
	

  Name

  Printed:

  	

   

  	

   

  	

  Name

  Printed:

  	

   

  	

   

  
	

   

  	

   

  
	

  Title:

  	

   

  	

   

  	

  Title:

  	

   

  	

   

  
	

   

  	

   

  
	

  Address:

  	

   

  	

   

  	

  Address:

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  
	

  Telephone:

  (    )

  	

   

  	

   

  	

  Telephone:(   )

  	

   

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Facsimile:

  (    )

  	

   

  	

   

  	

  Facsimile:

  (   )

  	

   

  	

   

  
																																				

 

NOTE:            These

forms are often modified to meet changing requirements of law and needs of the

industry.  Always write or call to make

sure you are utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE

ASSOCIATION, 345 So, Flgueroa St., M-1, Los Angeles, CA 90071 (213)

687-8777.

 

© 1993 by American Industrial

Real Estate Association.  All Rights

Reserved.  No part of these words may be

reproduced in any form without permission in writing.

 

11

 

ADDENDUM #1 TO:

 

THE LEASE BETWEEN JACQUELINE M. CLAMPETT

JONES

(“LESSOR”) AND MONTEREY COUNTY BANK

(“LESSEE”) FOR

PROPERTY ON THE WEST SIDE OF DOLORES SOUTH OF

7TH

 

PARAGRAPH

1.6(b): Lessee shall commence paying its share of

Common Area Operating Costs on July 1, 2002.

 

PARAGRAPH

4.2(a): The following sub-paragraphs are modified as

follows:

(i) (aa)  Maintenance of exterior walls, roof and

foundations are not to be included in the Common Area Operating expenses.

(v) Real

Property Taxes:  During the initial 5

year term and the first 5 year option Lessee shall not be liable for any

increases in Real Estate Taxes resulting from an Increased assessment based on

a transfer of ownership of the property. Beginning with the second option

period and throughout the balance of Lessee’s occupancy its obligation for

increases in taxes resulting from an increased assessment based on a transfer

of the property shall be limited to $.15 per square foot per month.  The agreed rentable area of Lessee’s space

is 2704 square feet.

 

PARAGRAPH

7.2:  The costs

for maintenance of foundations, exterior walls, structural condition of

interior bearing walls and are not to be included in the operating expenses

which Lessee is responsible for reimbursing.

 

PARAGRAPH

7.4 (b):  Notwithstanding

the provisions of this paragraph in the body of the lease, Lessor agrees that

Lessee’s obligation to remove the vault (but not the vault door) shall be

reduced by 4% of the actual demolition cost (or cost estimate agreed to by both

parties) for each year that Lessee occupies the premises.

 

PARAGRAPH

10.1:  The

following language shall be added to this paragraph: During the initial 5 year

term and the first 5 year option Lessee shall not be liable for any increases

in Real Estate Taxes resulting from an increased assessment based on a transfer

of ownership of the property. Beginning with the second option period and

throughout the balance of Lessee’s occupancy its obligation for increases in

taxes resulting from an increased assessment based on a transfer of the

property shall be limited to $.15 per square foot per month.

 

PARAGRAPH

12.4 PARTIAL SUBLETTING:  Notwithstanding the provisions in the prior sections of Paragraph

12, Lessor acknowledges that Lessee intends to sublease up to 50% of the

premises to another tenant and Lessor agrees that Lessee may do so with the

prior consent of Lessor, which shall not be unreasonably withheld.

 

PARAGRAPH

49 LESSEE’S CANCELLATION RIGHT: Lessee shall have a

one-time right to cancel this lease prior to July 1, 2002 if Lessee is unable

to obtain approvals from the State of California Department of Financial

Institutions and the City of Carmel-by-the-Sea to open a branch office in the

space.

 

OPTION

TO EXTEND ADDENDUM:  Notwithstanding the provisions of this Addendum regarding rental

adjustments, the parties hereby agree that the rent for the first option period

shall be adjusted (both at the beginning of the option and each 12 months

thereafter) in accordance with the Cost of Living Adjustment provisions of

Paragraph A(iv)(1)(a) of this Addendum.

 

[SEAL]

 

12

 

RENT ADJUSTMENTS(S)

 

ADDENDUM TO 

#2

STANDARD LEASE

 

	

  Dated March 20, 2002

  
	

  By and Between (Lessor) Jacqueline M.

  Clampett Jones

  
	

  (Lessee) Monterey

  County Bank

  
	

  Property Address: W.S. Dolores, S. of 7th

  

Paragraph  53

 

A.            RENT

ADJUSTMENTS:

 

The monthly

rent for each month of adjustment period(s) specified below shall be increased

using the method(s) indicated below:

 

(Check Method(s) to be Used and

Fill in Appropriately)

 

o            I.              Cost

of Living Adjustment(s) (COL)

 

(a)           On (Fill in COL Adjustment

Date(s): 

                   

                                                                                                                                     

the monthly rent payable under paragraph 1.5 (“Base Rent”) of the attached

Lease shall be adjusted by the change, if any, from the Base Month specified

below, in the Consumer Price Index of the Bureau of Labor Statistics of the

U.S. Department of Labor for (select one): o

CPIW (Urban Wage Earners and Clerical Workers) of o

CPIU (All Urban Consumers), for (Fill in Urban Area):

                                                        .  All items (1982-1984 = 100), herein referred

to as “C.P.I.”

 

(b)           The

monthly rent payable in accordance with paragraph AI (a) of this Addendum shall

be calculated as follows: the Base Rent set forth in paragraph 1.5 of the

attached Lease, shall be multiplied by a fraction the numerator of which shall

be the C.P.I. of the calendar month 2 (two) months prior to the month(s)

specified in paragraph AI(a) above during which the adjustment is to take

effect, and the denominator of which shall be the C.P.I. of the calendar month

which is two (2) months prior to (select one): o

the first month of the term of this Lease as set forth in paragraph 1.3 (“Base

Month”) or o (Fill in Other “Base Month”): 

                         .

The sum so calculated shall constitute the new monthly rent hereunder, but in

no event, shall any such new monthly rent be less than the rent payable for the

month immediately preceding the date for rent adjustment.

 

(c)           In the event the compilation and/or

publication of the C.P.I. shall be transferred to any other governmental

department or bureau or agency or shall be discontinued, then the index most

nearly the same as the C.P.I. shall be used to make such calculation.  In the event that Lessor and Lessee cannot

agree on such alternative index, then the matter shall be submitted for

decision to the American Arbitration Association in accordance with the then

rules of said association and the decision of the arbitrators shall be binding

upon the parties. The cost of said Arbitrators shall be paid equally by Lessor

and Lessee.

 

o            II.            Market

Rental Value Adjustment(s) (MRV)

 

(a)           On (Fill in MRV Adjustment Date(s):

                         

                                                                                                                                                         the

monthly rent payable under paragraph 1.5 (“Base Rent”) of the attached Lease

shall be adjusted to the “Market Rental Value” of the property as follows:

 

1)             Four months prior to the Market

Rental Value (MRV) Adjustment Date(s) described above, Lessor and Lessee shall

meet to establish an agreed upon new MRV for the specified term. If agreement

cannot be reached, then:

 

i)              Lessor and Lessee shall

immediately appoint a mutually acceptable appraiser or broker to establish the

new MRV within the next 30 days. Any associated costs will be split equally

between the parties, or

 

ii)             Both Lessor and Lessee shall each

immediately select and pay the appraiser or broker of their choice to establish

a MRV within the next 30 days. If, for any reason, either one of the appraisals

is not completed within the next 30 days, as stipulated, then the appraisal

that is completed at that time shall automatically become the new MRV. If both

appraisals are completed and the two appraisers/brokers cannot agree on a

reasonable average MRV then they shall immediately select a third mutually

acceptable appraiser/broker to establish a third MRV within the next 30 days.

The average of the two appraisals closest in value shall then become the new

MRV. The costs of the third appraisal will be split equally between the parties.

 

	

  Initials: 

  	

   

  	

   

  	

   

  	

  Initials: 

  	

  /s/ CTC

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  /s/ JMCJ

  	

   

  

 

RENT ADJUSTMENT(S)

 

NOTICE:                                             These

forms are often modified to meet changing requirements of law and industry

needs.  Always write or call to make

sure you are utilizing the most current form: American Industrial Real Estate

Association, 345 South. Flgueroa Street, Suite M-1, Los Angeles, CA 90071.

 (213) 687-8777. Fax No. (213) 687-8616.

 

©

1991 American Industrial Real Estate Association

 

13

 

2)             In any event, the

new MRV shall not be less than the rent payable for the month immediately

preceding the date for rent adjustment.

 

(b)           Upon the establishment of each New Market Rental

Value as described in paragraph AII:

 

1)  the monthly rental sum so calculated for each term as

specified in paragraph AII(a) will become the new “Base Rent” for the purpose of calculating any further Cost of Living

Adjustments as specified in paragraph AI (a) above and

2)  the first month of each Market Rental Value term as specified

in paragraph AII(a) shall become the new “Base Month” for the purpose of

calculating any further Cost of Living Adjustments as specified in paragraph

AI(b).

 

ý            III.           Fixed

Rental Adjustment(s) (FRA)

 

The

monthly rent payable under paragraph 1.5 (“Base Rent”) of the attached Lease

shall be increased to the following amounts on the dates set forth below:

 

	

  On (Fill in FRA Adjustment Date(s)):

  	

   

  	

  The New Base  Rental shall be:

  
	

   

  	

   

  	

   

  
	

  October 1,

  2003

  	

   

  	

  $ 

  	

  7140

  	

   

  
	

  October 1,

  2005

  	

   

  	

  $ 

  	

  7283

  	

   

  
	

   

  	

   

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

  $

  	

   

  	

   

  

 

B.            NOTICE:  Unless specified otherwise herein, notice of

any escalations other than Fixed Rental Adjustment(s) shall be made as

specified in paragraph 23 of the attached Lease.

 

	

  Initials: 

  	

   

  	

   

  	

   

  	

  Initials: 

  	

  /s/ CTC

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  /s/ JMCJ

  	

   

  

 

RENT ADJUSTMENT(S)

 

14

 

OPTION(S) TO EXTEND

 

ADDENDUM TO  #3

STANDARD LEASE

 

 

 

	

  Dated  March

  20, 2002

  
	

  By and Between (Lessor)  Jacqueline

  M. Clampett Jones

  
	

  (Lessee) 

  Monterey County Bank

  
	

  Property address: W. S. Dolores, S. of 7th

  

 

 

Paragraph

54

 

A.            OPTION(S)

TO EXTEND:

 

Lessor hereby grants to Lessee the option to extend the term of this

Lease for 4 additional 60 month period(s) commencing when the prior term

expires upon each and all of the following terms and conditions:

 

(i)      Lessee gives to Lessor,

and Lessor actually receives on a date which is prior to the date that the

option period would commence (if exercised) by at least 6 and not more than 12

months, a written notice of the exercise of the option(s) to extend this Lease

for said additional term(s), time being of essence. If said notification of the

exercise of said option(s) is (are) not so given and received, the option(s)

shall automatically expire; said option(s) may (if more than one) only be

exercised consecutively;

 

(ii)     The provisions of

paragraph 39, including the provision relating to default of Lessee set forth

in paragraph 39.4 of this Lease are conditions of this Option;

 

(iii)    All of the terms and

conditions of this Lease except where specifically modified by this option

shall apply;

 

(iv)    The monthly rent for each

month of the option period shall be calculated as follows, using the method(s)

indicated below:

 

(Check

Method(s) to be Used and Fill in Appropriately)

 

ý            I.              Cost

of Living Adjustment(s) (COL)

 

(a)           On (Fill in COL

Adjustment Date(s): 12 months following commencement of each option period and

each 12 months thereafter the monthly rent payable under paragraph 1.5 (“Base

Rent”) of the attached Lease shall be adjusted by the change, if any, from the

Base Month specified below, in the Consumer Price Index of the Bureau of Labor

Statistics of the U.S. Department of Labor for (select one): o CPI W (Urban Wage Earners and Clerical Workers) or ý CPI U (All Urban Consumers), for (Fill in Urban Area): San

Francisco/Oakland/San Jose, All items (1982-1984 = 100), herein referred to as

“C.P.I.”

 

(b)           The monthly rent

payable in accordance with paragraph AI(a) of this Addendum shall be calculated

as follows:  the Base Rent set forth in

paragraph 1.5 of the attached Lease, shall be multiplied by a fraction the

numerator of which shall be the C.P.I. of the calendar month 2 (two) months

prior to the month(s) specified in paragraph AI(a) above during which the

adjustment is to take effect, and the denominator of which shall be the C.P.I.

of the calendar month which is two (2) months prior to (select one):  o the first month of the term of this Lease as set forth in paragraph 1.3

(“Base Month”) or o (Fill in Other “Base Month”):

                .  The sum so calculated shall constitute the

new monthly rent hereunder, but in no event, shall any such new monthly rent be

less than the rent payable for the month immediately preceding the date for

rent adjustment.

 

(c)           In the event the

compilation and/or publication of the C.P.I. shall be transferred to any other

governmental department or bureau or agency or shall be discontinued, then the

Index most nearly the same as the C.P.I. shall be used to make such

calculation. In the event that Lessor and Lessee cannot agree on such

alternative index, then the matter shall be submitted for decision to the

American Arbitration Association in accordance with the then rules of said

association and the decision of the arbitrators shall be binding upon the

parties.  The cost of said Arbitrators

shall be paid equally by Lessor and Lessee.

 

ý            II.            Market

Rental Value Adjustment(s) (MRV)

 

(a)           On (Fill in MRV

Adjustment Date(s): The commencement of each option period the monthly rent

payable under paragraph 1.5 (“Base Rent”) of the attached Lease shall be adjusted

to the “Market Rental Value” of the property as follows:

 

1)             Four months prior

to the Market Rental Value (MRV) Adjustment Date(s) described above, Lessor and

Lessee shall meet to establish an agreed upon new MRV for the specified

term.  If agreement cannot be reached,

then:

 

	

  Initials: 

  	

   

  	

   

  	

   

  	

  Initials: 

  	

  /s/ CTC

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  /s/ JMCJ

  	

   

  

 

OPTION(S) TO EXTEND

 

15

 

i)              Lessor and Lessee shall

immediately appoint a mutually acceptable appraiser or broker to establish the

new MRV within the next 30 days. Any associated costs will be split equally

between the parties, or

ii)             Both Lessor and Lessee shall each

immediately select and pay the appraiser or broker of their choice to establish

a MRV within the next 30 days. If, for any reason, either one of the appraisals

is not completed within the next 30 days, as stipulated, then the appraisal

that is completed at that time shall automatically become the new MRV. If both

appraisals are completed and the two appraisers/brokers cannot agree on a

reasonable average MRV then they shall immediately select a third mutually

acceptable appraiser/broker to establish a third MRV within the next 30 days.

The average of the two appraisals closest in value shall then become the new

MRV. The costs of the third appraisal will be split equally between the

parties.

 

2)             In any event, the new MRV shall not

be less than the rent payable for the month immediately proceeding the date for

rent adjustment.

 

(b)           Upon the establishment of each New

Market Rental Value as described in paragraph Aii:

 

1)             the monthly rental sum so

calculated for each term as specified in paragraph AII(a) will become the new

“Base Rent” for the purpose of calculating any further Cost of Living

Adjustments as specified in paragraph AI(a) above and

2)             the first month of each Market

Rental Value term as specified in paragraph AII(a) shall become the new “Base

Month” for the purpose of calculating any further Cost of Living Adjustments as

specified in paragraph AI(b).

 

o            III.           Fixed

Rental Adjustment(s) (FRA)

 

The monthly rent payable under

paragraph 1.5 (“Base Rent”) of the attached Lease shall be increased to the

following amounts on the dates set forth below:

 

 

	

  On (Fill in FRA Adjustment Date(s)):

  	

   

  	

  The New Base  Rental shall be:

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

  $ 

  	

   

  	

   

  
	

   

  	

   

  	

  $ 

  	

   

  	

   

  
	

   

  	

   

  	

  $

  	

   

  	

   

  
	

   

  	

   

  	

  $

  	

   

  	

   

  

 

B.            NOTICE:

Unless specified otherwise herein, notice of any escalations other than Fixed

Rental Adjustments shall be made as specified in paragraph 23 of the attached

Lease.

 

 

	

  Initials: 

  	

   

  	

   

  	

   

  	

  Initials: 

  	

  /s/ CTC

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

  /s/ JMCJ

  	

   

  

 

OPTION(S) TO EXTEND

 

16

 

Rules and Regulations

 

EXHIBIT A.

 

1.                                       Sidewalks,

halls, passages, exits, entrances, elevators, escalators and stairways shall

not be obstructed by Tenants or used by them for any purpose other than for

ingress to and egress from their respective premises. The halls, passages,

exits, entrances, elevators and stairways are not for the use of the general

public and Landlord shall in all cases retain the right to control and prevent

access thereto by all persons whose presence, in the judgment of Landlord,

shall be prejudicial to the safety, character, reputation and interests of the

Building and its Tenants, provided that nothing herein contained shall be

construed to prevent such access to persons with whom any Tenant normally deals

in the ordinary course of such Tenant’s business unless such persons are

engaged in illegal activities. No Tenant, and no employees or invitees of any

Tenant, shall go upon the roof of the Building, except as authorized by

Landlord.

 

2.                                       No

sign, placard, picture, name, advertisement or notice, visible from the

exterior of leased premises shall be inscribed, painted, affixed, installed or

otherwise displayed by any Tenant either on its premises or any part of the

Building without the prior written consent of Landlord, and Landlord shall have

the right to remove any such sign, placard, picture, name, advertisement, or

notice without notice to and at the expense of the Tenant.

 

If Landlord shall have given such consent to any Tenant at any time,

whether before or after the execution of the lease, such consent shall in no

way operate as a waiver or release of any of the provisions hereof or of such

lease, and shall be deemed to relate only to the particular sign, placard,

picture, name, advertisement or notice so consented to by Landlord and shall

not be construed as dispensing with the necessity of obtaining the specific

written consent of Landlord with respect to any other such sign, placard,

picture, name, advertisement or notice.

 

All approved signs or lettering on doors and walls shall be printed,

painted, affixed or inscribed at the expense of the Tenant by a person approved

by Landlord.

 

4.                                       No

curtains, draperies, blinds, shutters, shades, screens or other coverings,

awnings, hangings or decorations shall be attached to, hung or placed in, or

used in connection with, any window or door on any premises without the prior

written consent of Landlord. In any event with the prior written consent of

Landlord, all such items shall be installed inboard of Landlord’s standard

window covering and shall in no way be visible from the exterior of the

Building.  No articles shall be placed

or kept on the window sills so as to be visible from the exterior of the

Building.  No articles shall be placed

against glass partitions or doors which might appear unsightly from outside

Tenant’s Premises.

 

5.                                       Landlord

reserves the right to exclude from the Building between the hours of 6 pm and 8

am and at all hours on Saturdays, Sundays and holidays all persons who are not

Tenants or their accompanied guests in the Building.  Each Tenant shall be responsible for all persons for whom it

allows to enter the building and shall be liable to Landlord for all acts of

such persons.

 

Landlord shall in no case be liable for damages for error with regard

to the admission to or exclusion from the Building of any person.

 

During the continuance of any invasion, mob, riot, public excitement or

other circumstance rendering such action advisable in Landlord’s opinion,

Landlord reserves the right to prevent access to the Building by closing the

doors, or otherwise, for the safety of Tenants and protection of the Building

and property in the Building.

 

8.                                       Each

Tenant shall see that all doors of its premises are closed and securely locked

and must observe strict care and caution that all water faucets or water

apparatus are entirely shut off before the Tenant or its employees leave such

premises, and that all utilities shall likewise be carefully shut off, so as to

prevent  waste or damage, and for any

default or carelessness the Tenant shall make good all injuries sustained by

other Tenants or occupants of the Building or Landlord. On multiple-tenancy

floors, all Tenants shall keep the door or doors to the Building corridors

closed at all times except for ingress or egress.

 

9.                                       As

more specifically provided in the Tenant’s Lease of the Premises, Tenant shall

not waste electricity, water or air-conditioning and agrees to cooperate fully

with Landlord to assure the most effective operation of the Building's heating

and air-conditioning, and shall refrain from attempting to adjust any controls

other than room thermostats installed for Tenant’s use.

 

10.                                 No

Tenant shall alter any lock or access device or install a new additional lock

or access device or any bolt on any door of its premises without the prior

written consent of Landlord. If Landlord shall give its consent, the Tenant

shall in each case furnish Landlord with a key for any such lock.

 

11.                                 No

Tenant shall make or have made additional copies of any keys or access devices

provided by Landlord. Each Tenant, upon the termination of the Tenancy, shall

deliver to Landlord all the keys or access devices for the Building, offices,

rooms and toilet rooms which shall have been furnished the Tenant or which the

Tenant shall have had made. In the event of the loss of any keys or access

devices so furnished by Landlord, Tenant shall pay Landlord therefor.

 

12.                                 The

toilet rooms; toilets, urinals, wash bowls and other apparatus shall not be

used for any purpose other than that for which they were constructed and no

foreign substance of any kind whatsoever shall be thrown therein, and the

expense of any breakage, stoppage or damage resulting from the violation of this

rule shall be borne by the Tenant who, or whose employees or invitees, shall

have caused it.

 

13.                                 No

Tenant shall use or keep in its premises or the Building any kerosene, gasoline

or inflammable or combustible fluid or material other than limited quantities

necessary for the operation or maintenance of office or office equipment.  No Tenant shall use any method of heating or

air-conditioning other than that supplied by Landlord.

 

14.                                 No

Tenant shall use, keep or permit to be used or kept in its premises any foul or

noxious gas or substance or permit or suffer such premises to be occupied or

used in a manner offensive or objectionable to Landlord or other occupants of

the Building by reason of noise, odors and/or vibrations or interfere in any

way with other Tenants or those having business therein, nor shall any animals

or birds be brought or kept in or about any premises of the Building.

 

15.                                 No

cooking shall be done or permitted by any Tenant on its premises (except that

use by the Tenant of Underwriters' Laboratory approved equipment for the

preparation of coffee, tea, hot chocolate and similar beverages for Tenants and

their employees shall be permitted, provided that such equipment and use is in

accordance with all applicable federal, state and city laws, codes, ordinances,

rules and regulations), nor shall premises be used for lodging.

 

17

 

17.                                 If

Tenant requires telegraphic, telephonic, burglar alarm or similar services, it

shall first obtain, and comply with, Landlord’s instructions in their

installation.

 

18.                                 Landlord

will direct electricians as to where and how telephone, telegraph and

electrical wires are to be introduced or installed.  No boring or cutting for wires will be allowed without the prior written

consent of Landlord.  The location of

burglar alarms, telephones, call boxes and other office equipment affixed to

all premises shall be subject to the written approval of Landlord.

 

19.                                 No

Tenant shall install any radio or television antenna, loudspeaker or any other

device on the exterior walls or the roof of the Building.  Tenant shall not interfere with radio or

television broadcasting or reception from or in the Building or elsewhere.

 

20.                                 No

Tenant shall lay linoleum, tile, carpet or any other floor covering so that the

same shall be affixed to the floor of its premises in any manner except as

approved in writing by Landlord.  The

expense of repairing any damage resulting from a violation of this rule or the

removal of any floor covering shall be borne by the Tenant by whom, or by whose

contractors, employees or invitees, the damage shall have been caused.

 

21.                                 No

furniture, freight, equipment, materials, supplies, packages, merchandise or

other property will be received in the Building or carried up or down the

elevators except between such hours and in such elevators as shall be

designated by Landlord.

 

Landlord shall have the right to prescribe

the weight, size and position of all safes, furniture or other heavy equipment

brought into the Building.  Safes or

other heavy objects shall, if considered necessary by Landlord, stand on wood

strips of such thickness as determined by Landlord to be necessary to properly

distribute the weight thereof.  Landlord

will not be responsible for loss of or damage to any such safe, equipment or

property from any cause, and all damage done to the Building by moving or

maintaining any such safe, equipment or other property shall be repaired at the

expense of Tenant.

 

Business machines and mechanical equipment

belonging to Tenant which cause noise or vibration that may be transmitted to

the structure of the Building or to any space therein to such a degree as to be

objectionable to Landlord or to any tenants in the Building shall be placed and

maintained by Tenant, at Tenant’s expense, on vibration eliminators or other

devices sufficient to eliminate noise or vibration.  The persons employed to move such equipment in or out of the

Building must be acceptable to Landlord.

 

22.                                 No

Tenant shall place a load upon any floor of the premises which exceeds the load

per square foot which such floor was designed to carry and which is allowed by

law.

 

24.                                 There

shall not be used in any space, or in the public areas of the Building, either

by any Tenant or others, any hand trucks except those equipped with rubber

tires and side guards or such other material-handling equipment as Landlord may

approve.  No other vehicles of any kind

shall be brought by any Tenant into or kept in or about the premises.

 

25.                                 Each

Tenant shall store all its trash and garbage within the interior of its

premises.  No material shall be placed

in the trash boxes or receptacles if such material is of such nature that it

may not be disposed of in the ordinary and customary manner of removing and

disposing of trash and garbage in the city without violation of any law or

ordinance governing such disposal.  All

trash, garbage and refuse disposal shall be made only through entryways and

elevators provided for such purposes and at such times as Landlord shall designate.

 

26.                                 Canvassing,

soliciting, distribution of handbills or any other written material, and

peddling in the Building are prohibited and each Tenant shall cooperate to

prevent the same.  No Tenant shall make

room-to-room solicitation of business from other tenants in the building.

 

27.                                 Landlord

shall have the right, exercisable without notice and without liability to any

Tenant, to change the name and address of the Building.

 

28.                                 Landlord

reserves the right to exclude or expel from the Building any person who, in

Landlord’s judgment is intoxicated or under the influence of liquor or drugs or

who is in violation of any of the rules and regulations of the Building.

 

29.                                 Without

the prior written consent of Landlord, Tenant shall not use the name of the Building

in connection with or in promoting or advertising the business of Tenant except

as Tenant’s address.

 

30.                                 Tenant

shall comply with all safety, fire protection and evacuation procedures and

regulations established by Landlord or any governmental agency.

 

31.                                 Tenant

assumes any and all responsibility for protecting its Premises from theft,

robbery and pilferage, which includes keeping doors locked and other means of

entry to the Premises closed.

 

32.                                 The

requirements to Tenants will be attended to only upon application at the office

of the Building by an authorized individual. 

Employees of Landlord shall not perform any work or do anything outside

of their regular duties unless under special instructions from Landlord, and no

employees will admit any person (Tenant or otherwise) to any office without

specific instructions from Landlord.

 

33.                                 Landlord

may waive any one or more of these Rules and Regulations for the benefit of any

particular Tenant or Tenants, but no such waiver by Landlord shall be construed

as a waiver of such Rules and Regulations in favor of any other Tenant or

Tenants, nor prevent Landlord from thereafter enforcing any such Rules and

Regulations against any or all Tenants of the Building.

 

34.                                 Landlord

reserves the right to make such other and reasonable rules and regulations as

in its judgment may from time to time be needed for safety and security, for

care and cleanliness of the Building and for the preservation of good order

therein.  Tenant agrees to abide by all

such Rules and Regulations hereinabove stated and any additional rules and

regulations which are adopted.

 

35.                                 Landlord

reserves the right to designate the use of the parking spaces on the premises.

 

36.                                 Tenant

shall use carpet protectors under all desk chairs.

 

40.                                 Tenant

shall be responsible for the observance of all of the foregoing Rules and

Regulations by Tenant’s employees, agents, clients, customers, invitees and

guests.

 

41.                                 The

Rules and Regulations are in addition to, and shall not be construed to in any

way modify, alter or amend, in whole or in part, the terms, covenants,

agreements and conditions of any Lease of Premises in the Building.  The word “Building” as used herein means the

building of which the premises are part.

 

18

 

EXHIBIT B

 

 

Map of Office Space:

 

LEASE SPACE D

1302 LEASEABLE

 

LEASE SPACE E

1294 LEASEABLE

 

LEASE SPACE F

1410 LEASEABLE

 

LEASE SPACE G

1175 LEASEABLE

 

 

19Exhibit 10(ii)A(1)

 

EMPLOYMENT CONTRACT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made as of the 1st day of

January 2003, between MONTEREY COUNTY BANK, a California corporation (Bank”), and CHARLES T. CHRIETZBERG,

JR. (“Executive”)

 

W  I  T  N  E  S

S  E  T  H

 

WHEREAS, Executive has served as the Chairman and Chief Executive

Officer of Bank since 1987 with distinction, leading the Bank to a “Premier

Performing” rating in 1992, reducing the level of non—performing loans from one

far in excess of state averages to one which is far below state averages, and

becoming the only Chief Executive Officer in the Bank’s history whose tenure

generated net profits; and

 

WHEREAS, the latest Employment Agreement between Executive and Bank

expired as of December 31, 2002; and

 

WHEREAS, Bank desires that Executive continue to be employed as Bank’s

Chairman, President and Chief Executive Officer, and to document the terms of

such employment; and

 

WHEREAS, Executive is willing to be employed as Bank’s Chairman,

President and Chief Executive Officer under the terms and conditions herein

stated.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements

hereinafter contained, and other good and valuable consideration, it  is hereby agreed by and between the

parties hereto as follows:

 

A.            TERM OF

EMPLOYMENT

 

1.             Term.

Bank hereby agrees to continue to employ Executive, and Executive hereby

accepts employment with Bank, for the period of three (3) years, commencing on

January 1, 2003, subject however, to prior termination of this Agreement as

hereinafter provided (the “Term”).  When

used herein, “Term” shall refer to the entire period of employment of Executive

by Bank hereunder commencing January 1, 2003 (the “Effective Date”), whether for

the period provided above, or whether terminated earlier as hereinafter

provided.

 

B.                                      DUTIES OF

EXECUTIVE

 

1.             Duties.

Executive shall perform the duties of Chairman of the Board, President and

Chief Executive Officer of Bank, subject to the powers by law vested in the

Board of Directors of Bank and in Bank’s shareholders, and shall serve as a

Director of Bank if elected by the shareholders.  During the Term, Executive shall perform exclusively the services

herein contemplated to be performed by Executive with due care, faithfully,

diligently, to the best of Executive’s ability and in compliance with all

applicable laws, policies adopted by the Board of Directors, and Bank’s

Articles of Incorporation and Bylaws.

 

 

2.             Exclusivity.

Executive shall devote Executive’s entire productive time, ability and

attention to the business of Bank during the Term. Executive shall not directly

or indirectly render any services of a business, commercial or professional

nature to any other person, firm or corporation, whether for compensation or

otherwise, without prior consent evidenced by a resolution duly adopted by the

Board of Directors of the Bank, or the Executive Committee thereof.

Notwithstanding the foregoing, Executive may make investments of a passive

nature in any business or venture, provided however, that such business or

venture is neither in competition or conflict,

 

3.             Uniqueness  of Executive’s  Services. The Executive hereby represents that the services

to be performed by him under the terms of this contract are of a special,

unique, unusual, extraordinary, and intellectual character, which give them a

peculiar value, the loss of which cannot be reasonably or adequately

compensated in damages in an action at law. The Executive therefore expressly

agrees that the Bank, in addition to any other rights or remedies which the

Bank may possess, shall be entitled to injunctive and other equitable relief to

prevent a breach of this contract by the Executive.

 

4.             Physical

Examination. Executive shall take an annual physical examination during

each year during the Term of this contract. Said physical examination(s) shall

be conducted at the expense of the Bank.

 

C.                                      COMPENSATION

 

1.             Salary.

For Executive’s services hereunder, Bank shall pay or cause to be paid as

annual gross base salary to Executive the amount of not less than $180,000

during each of the years of the Term, beginning with the Effective Date.

Executive shall also, so long as he serves on the Board of Directors, be

entitled to director’s fees on the same basis as paid to outside directors, if the

Board of Directors does not exclude him from such directors fees.  The Board of Directors shall also, from time

to time, and at least once each calendar year grant such additional “merit”

increases, if any, in the base salary as are determined after review to be

appropriate in the discretion of the Board of Directors.  Executive’s salary shall be payable in equal

installments in conformity with Bank’s normal payroll periods as in effect from

time to time.

 

D.                                   EXECUTIVE BENEFITS

 

1.             Vacation.

Executive shall be entitled to a vacation leave of four (4) weeks during each

year of the Term, of which two (2) weeks must be taken consecutively in each

calendar year.  Executive shall be

entitled to vacation pay, in lieu of up to two (2) weeks of vacation during each

calendar year, with the consent of the Board of Directors.

 

2.             Automobile

Allowance. During the term hereunder, Bank shall provide Executive, for

Executive’s sole use, a suitable full—size automobile, or if the Executive

desires to use his own automobile, Bank shall pay Executive a comparable auto

allowance (not less than $750 per month) as determined by the Board of

Directors. Bank shall pay all operating expenses of any nature whatsoever with

regard to such automobile.

 

 

 

Executive shall use reasonable

efforts to furnish to Bank substantially adequate records and other documentary

evidence required by federal and state statutes and regulations issued by the

appropriate taxing authorities substantiating the extent to which such payments

are deductible business expenses of Bank and not deductible additional

compensation to Executive.  Bank shall

also procure, pay for and maintain in force adequate insurance coverage for

such automobile. Bank and Executive agree that the value of Executive’s

personal use of the automobile is twenty (20%) of the annual cost of the

automobile lease, repairs, and gasoline which shall be treated for tax purposes

as additional compensation to Executive, subject to appropriate withholding.

 

3.             Group

Medical and Life Insurance Benefits. Bank shall provide for Executive, at

Bank’s expense to the extent permitted by Bank policy, participation in a

comprehensive major medical, dental, and optical plan, with accident benefits,

equivalent to either (i) the maximum available from time to time under the

California Bankers Association Group Insurance Program for an employee of

Executive’s salary level; or (ii) the benefits under an insurance program

adopted on a non—discriminatory basis for the employees of the Bank generally.  Life insurance benefits shall be provided to

Executive, at Bank’s expense to the extent not prohibited by Bank policy during

the term hereof in an amount not less than $200,000, with Executive to

designate beneficiary thereunder.

 

4.             Salary

Continuation Plan.  Bank shall

provide for Executive a Salary Continuation Plan that provides for payments of

$90,000 per year, for Mr. Chrietzberg’s lifetime, if he remains with the Bank

until normal retirement, commencing age 65.  

The Salary Continuation Plan shall provide the following with regard to

the division of death proceeds should Mr. Chrietzberg die before his

sixty-fifth (65th) birthday; his beneficiary(ies) shall be entitled

to an amount equal to $2,940,000 or the net at risk insurance portion of the

proceeds, whichever amount is less.  The

net at risk insurance portion is the total proceeds less the cash value of the

policy.  Should Mr. Chrietzberg die on

or subsequent to his sixty-fifth (65th) birthday, his

beneficiary(ies) shall be entitled to an amount equal to $1,000,000 plus the

present value of the remaining retirement benefits due to Mr. Chrietzberg or

the net at risk insurance portion of the proceeds, whichever is less, and the

Bank shall be entitled to the remainder of such proceeds.

 

5.             Bonus.

For the calendar year 2003, and for each full calendar year of the Term

completed by Executive pursuant to this Agreement, he shall be entitled to an

Incentive Bonus determined in accordance with this paragraph.  The Incentive Bonus shall equal the lesser

of (i) $220,000, or (ii) the sum of the ROA Bonus and the ROE Bonus, determined

in accordance with the Exhibit D-4. 

This bonus shall be payable in January of the year following completion

of the year on which it is based, or as soon thereafter as is practical after

the Bank’s certified public accountants have delivered their report on the

Bank’s condition and results of operations for the year.

 

6.             Sick

Leave.            Executive shall be

entitled to days of  paid sick leave in

accordance with Bank policy.

 

 

 

E.                                       BUSINESS EXPENSES

AND REIMBURSEMENT.

 

1.             Business

Expenses. Executive shall be entitled to reimbursement by Bank for any

ordinary and necessary business expenses incurred by Executive in the

performance of Executive’s duties and in acting for Bank during the Term.  Types of expenses qualifying for such

reimbursement shall be determined by the Board of Directors. Executive shall

furnish to Bank adequate records and other documentary evidence required by

federal and state statutes and regulations issued by the appropriate taxing

authorities for the substantiation of such payments as deductible business

expenses of Bank and not as deductible compensation to Executive; provided,

however, that reimbursement of such expenses shall not be dependent on proving

deductibility of such expenses for tax purposes if such expenses are otherwise

determined by the Board of Directors, in its sole discretion, to be

appropriate.

 

F.                                       TERMINATION.

 

1.             Termination

With Cause. Except as otherwise provided herein, this Agreement may be

terminated by Bank, at Bank’s option with notice to Executive, upon the

occurrence of any of the following events:

 

(a)           A

material breach by Executive of any of the terms or provisions of this

Agreement;

 

(b)           Executive

is convicted of illegal activity by a court of competent jurisdiction or pleads

guilty to or nolo contendere to, illegal activity, which activity materially

adversely affects Bank’s reputation in the community or which evidences the

lack of Executive’s fitness or ability to perform Executive’s duties, as

determined by the Board of Directors in good faith; or

 

(c)           Executive

has committed any illegal or dishonest act which would cause termination of

coverage under Bank’s Bankers Blanket Bond as to Employee, as distinguished

from termination of coverage as to Bank as a whole; or

 

(d)           Executive

materially fails to perform or habitually neglects Executive’s duties or

commits a material act of malfeasance or misfeasance in connection therewith;

or

 

(e)           Executive

becomes permanently disabled as such is defined in his or Bank’s disability

insurance policy and such disability makes Executive eligible for benefits

thereunder (or if no such definition, as defined by federal law or regulation

pursuant to the Social Security Act or a rebated statute).  Any controversy concerning Executive’s

disability shall be settled by arbitration in accordance with the rules of the

American Arbitration Association.  Any

termination pursuant to this subsection (d) shall not affect the continued

operation of any disability income continuation plan, which may be established

for the benefit of Executive;

 

(f)            An

order under 12 U.S.C. 1818(b) or (e) or any

 

 

 

similar statute is issued

against Executive or Bank which calls for his suspension or removal from

office; or

 

(g)           The

Superintendent of Banks, or other supervisory or regulatory authority having

jurisdiction takes possession of the property and business of Bank pursuant to

applicable statute or regulation.

 

2.                                        Termination

Without Cause.

 

(a)           During

the Term, this Agreement may be terminated by Bank without cause upon written

notice to Executive.

 

(b)           During

the Term, this Agreement may be terminated by Executive without cause upon

sixty (60) days’ prior written notice to Bank. Executive and Bank agree that it

would be impractical or extremely difficult to fix the actual damage caused by

Executive’s breach of this Section F.2(b). 

Accordingly, the amount of damage suffered and recoverable by Bank in

the event of Executive’s breach of this provision shall be equal to the amount

of Base Salary for Executive for two months. Bank and Executive agree such sum

is a reasonable estimate of damage under the circumstances at the date this

Agreement is made.

 

3.             Compensation

Upon Termination.   (a) If

Executive’s employment with Bank is terminated by Bank pursuant to Section F.1.

hereof or by Executive pursuant to Section F.2. hereof, Executive shall then

only be entitled to receive salary through the effective date of such

termination (without pro-ration of the Incentive Bonus described in Section D.4

above) and shall receive any incurred but not reimbursed business expenses

(subject to the provisions of Section E.1. hereof).

 

(b)           If

Executive’s employment is terminated by Bank pursuant to Section F.2. hereof,

Executive shall be entitled to receive Executive’s salary through the effective

date of such termination; any incurred but not reimbursed business expenses

(subject to the provisions of Section E.1. hereof); plus Executive’s salary (as

in effect immediately prior to termination) for the “Severance Period”, which

shall be the greater of two (2) years from the effective date of termination or

the remainder of the Term to be paid in equal installments in conformity with

Bank’s normal payroll periods as in effect from time to time.  However, if Executive’s employment is

terminated by the Bank pursuant to Section F.2 within one year (1) after the

announcement or consummation, or during the pendency, of a Change in Control

Transaction, the Severance Period shall be the greater of 24 months from the effective

date of termination, or the remainder of the Term.  A “Change in Control Transaction” shall be limited to an

acquisition by a person, or group of persons acting in concert, of shares

having the power to elect a majority of the directors of the Bank, or a merger

or other acquisition of the Bank or its assets and business, in which the power

to elect a majority of the directors of the surviving corporation is in the

hands of persons who were not shareholders of the Bank as of one of the date

hereof or a date two years prior to such merger or other acquisition.  In addition to compensation for the

Severance Period, Executive shall be entitled to a lump sum payment of his

Incentive Bonus (when calculated in accordance with the timing set forth in

Section D.4) for any calendar year in which his employment is terminated by the

Bank pursuant Section F.2 in an amount equal to a pro—rated portion of the

Incentive Bonus provided in Section D.4

 

 

 

above (calculated as though the

period from the beginning of the year until the end of the month prior to the

termination were a full year)

 

G. GENERAL PROVISIONS.

 

1.              Ownership

of Books and Records; Confidentiality. (a) All records or copies thereof of

the accounts of customers, and any other records and books relating in any

manner whatsoever to the customers of Bank, and all other files, books and

records and other materials owned by Bank or used by it in connection with the

conduct of its business, whether prepared by Executive or otherwise coming into

his possession, shall be the exclusive property of Bank regardless of who

actually prepared the original material, book or record.  All such books and records and other

materials, together with all copies thereof, shall be immediately returned to

Bank by Executive on any termination of his employment.

 

(b)           During

the Term, Executive will have access to and become acquainted with what

Executive and Bank acknowledge are trade secrets, to wit, knowledge or data

concerning Bank, including its operations and business, and the identity of

customers of Bank, including knowledge of their financial condition, their

financial needs, as well as their methods of doing business.  Executive shall not disclose any of the

aforesaid trade secrets, directly or indirectly, or use them in any way, either

during the Term or thereafter, except as required in the course of Executive’s

employment with Bank.  Executive shall

not solicit any employee or customer of Bank to become an employee or customer

of another institution until the later of six (6) months following the end of

the Term or the end of the Severance Period.

 

2.              Assignment

and Modification. This Agreement, and the rights and duties hereunder, may

not be assigned by either party hereto without the prior written consent of the

other, and the parties expressly agree that any attempt to assign the rights of

any party hereunder without such consent will be null and void; provided,

however, that Bank’s rights and obligations hereunder shall be assignable

without consent by operation of law in the event of a merger or similar

transaction involving the Bank.

 

3.              Further

Assurance. From time to time each party will execute and deliver such further

instruments and will take such other action as the other party reasonably may

request in order to discharge and perform the obligations and agreements

hereunder.

 

4.              ARBITRATION

- If the Parties hereto shall be unable to reach an agreement on material

provisions of this Agreement or on other issues then such disputes shall be

submitted to the American Arbitration Association (“AAA”) of closest to

Monterey, California for resolution, in accordance with the Commercial

Arbitration Rules of the AAA (or by some other arbitrator mutually agreed to by

the parties) . Such arbitration shall be conducted in the following manner:

 

a.             The

Party desiring to resolve the dispute through arbitration shall serve upon the

Party a written notice of intent to exercise rights under this

 

 

 

arbitration provision.  One arbitrator shall be required, and that

arbitrator shall be selected by the arbitration service, in a manner determined

by the AAA.  The arbitrator shall be

furnished with a statement of issues in dispute and a summary of each party’s

position.

 

b.             The

arbitrator shall set a date for a hearing which shall be no less than thirty

(30) days and no more than one hundred twenty (120) days after the arbitrator

is selected.  At the arbitration, each

party shall present to the arbitrator the reasons why the respective positions

of the parties should be upheld.  In considering

such arguments, the arbitrator may consider any evidence reasonably believed by

him to be credible and relevant to the determination which he is called upon to

make. The arbitrator may consider such hearsay and opinions of the parties as

he desires and may consider copies of any writings.  The best evidence rule will not apply nor any formal

prerequisites required by the California Evidence Code for the introduction of

documents.  Nothing contained herein

shall prevent either party from arguing about the weight to be given any

evidence under the Evidence Code or otherwise. 

The arbitrator shall not be bound by either the Evidence Code, or the

Code of Civil Procedure in determining the evidence to be presented, admitted

by him, or the method by which evidence and arguments may be presented.  All methods of discovery permitted by the

Code of Civil Procedure shall be permitted except use of requests for

admissions.  Furthermore, a party shall

only have fifteen (15) days from receipt of interrogatories, or request for

production to respond to the propounding party.  Each party shall have the right to take the deposition of the

other on twenty (20) days notice.  The

arbitrator shall determine a method for resolution of any discovery dispute,

which may include selecting one arbitrator to resolve disputes by telephone

conference.  The arbitrator may

establish such rules as he deems reasonable for the conduct of the arbitration,

including requirements for the filing of memoranda supporting the parties’ positions.

 

c.             The

decision of the arbitrator shall be binding upon the Parties and shall

constituted a complete determination of the issues considered by the

arbitrator.  The provisions this Section

shall constitute a binding arbitration agreement between the Parties pursuant

to Code of Civil Procedure Section 1321 et seq.

 

d.             Each

party shall be responsible for one—half of all costs of the arbitration. Each

party shall deposit with the AAA, one—half (1/2) of all required deposits.  The failure of either party to make such

deposit within thirty (30) days of notice of such cost shall automatically

entitle the other party to an arbitration determination favorable to the party

making the  required deposit.  Each party shall pay their own fees and

attorneys’ fees and costs for the arbitration.

 

e.             No

arbitrator shall have ever been employed by either party or their successors in

interest or any of their Shareholders, officers, directors, partners nor shall

they be related to any of such individuals by any relationship closer than

consanguinity in the third degree.

 

NOTICE. BY

INITIALING IN THE SPACE BELOW YOU ARE AGREEING TOHAVE ANY DISPUTE ARISING OUT

OF THE MATTERS INCLUDED IN THE “ARBITRATION OF DISPUTES” PROVISIONS DECIDED BY

NEUTRAL ARBITRATION, AS PROVIDED HEREIN AND BY CALIFORNIA

 

 

 

LAW,

AND YOU HEREBY AGREE TO WAIVE ANY RIGHTS YOU MAY POSSESS TO HAVE SUCH DISPUTE

LITIGATED AND RESOLVED IN A COURT OR JURY TRIAL.

 

BY INITIALING IN THE SPACE BELOW YOU HEREBY

WAIVE YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE

INCLUDED IN THIS ARBITRATION OF DISPUTES PROVISION.

 

IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER

AGREEING TO THISPROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE

AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR EXECUTION OF THIS

AGREEMENT AND YOUR APPROVAL, SPECIFICALLY OF THIS PARAGRAPH 16, ACKNOWLEDGES

THAT YOUR EXECUTION OF THIS PROVISION IS VOLUNTARY AND THAT PRIOR TO SUCH

EXECUTION YOU HAVE CONSULTED WITH INDEPENDENT COUNSEL CONCERNING THE EFFECTS OF

SUCH PROVISION TO THE EXTENT YOU HAVE DEEMED NECESSARY, PRIOR TO YOUR EXECUTION

OF THIS PROVISION.

 

THE PARTIES HEREBY ACKNOWLEDGE, UNDERSTAND AND AGREE TO, THE

TERMS

HEREOF AND TO THE SUBMISSION OF ANY DISPUTES TO ARBITRATION BY THE AAA, AS SET

FORTH HEREIN.

 

	

  /s/ BNW

  	

   

  	

  /s/ CTC

  
	

  Bank’s Initials

  	

   

  	

  Executive’s Initials

  

 

4.              Notices.       All notices required or permitted

hereunder shall be in writing and shall be delivered in person or sent by

certified or registered mail, return receipt requested, postage prepaid as

follows:

 

	

  To Bank:

  	

   

  	

  Monterey

  County Bank

  
	

   

  	

   

  	

  601 Munras

  Ave

  
	

   

  	

   

  	

  Monterey,

  California 93940

  
	

   

  	

   

  	

  Attn: Board

  of Directors

  
	

   

  	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  To

  Executive:

  	

   

  	

  Charles T.

  Chrietzberg, Jr.

  
	

   

  	

   

  	

  P.O. Box

  1344

  
	

   

  	

   

  	

  Carmel, CA

  93921

  

 

or to such other party or

address as either of the parties may designate in a written notice served upon

the other party in the manner provided herein. 

All notices required or permitted hereunder shall be deemed duly given

and received on the date of delivery if delivered in person or on the second

day next succeeding the date of mailing if sent by certified or registered

mail, postage prepaid.

 

 

 

5.              Successors.   This Agreement shall be binding upon, and

shall inure to the benefit of, the successors and assigns of the parties.

 

6.              Entire  Agreement. Except as provided herein,

this Agreement constitutes the entire agreement between the parties, and all

prior negotiations, representations, or agreements between the parties, whether

oral or written, are merged into this Agreement.  This Agreement may only be modified by an agreement in writing

executed by both of the parties hereto.

 

7.              Governing

Law.   This Agreement shall be

construed in accordance with the laws of the State of California.

 

8.              Executed

Counterparts.   This Agreement

may be executed in one or more counterparts, all of which together shall

constitute a single agreement and each of which shall be an original for all

purposes.

 

9.              Section  Headings.   The various section headings are inserted for convenience of

reference only and shall not affect the meaning or interpretation of this

Agreement or any section hereof.

 

10.            Calendar

Days/Close of Business. Unless the context so requires, all periods

terminating on a given day, period of days or date shall terminate on the close

of business on that day or date and references to “days” shall refer to

calendar days.

 

11.            Severability.

In the event that any of the provisions, or portions thereof, of this

Agreement are held to be unenforceable or invalid by any court of competent

jurisdiction, the validity and enforceability of the remaining provisions or

portions thereof, shall not be affected thereby.

 

 

 

12.            Attorneys’  Fees. In the event that any party shall

bring an action or arbitration in connection with the performance, breach or

interpretation hereof, then the prevailing party in such action as determined

by the court or other body having jurisdiction shall be entitled to recover

from the losing party in such action, as determined by the court or other body

having jurisdiction, all reasonable costs and expenses of litigation or

arbitration, including reasonable attorneys’ fees, court costs, costs of

investigation and other costs reasonably related to such proceeding, in such

amounts as may be determined in the discretion of the court or other body having

jurisdiction.

 

IN WITNESS

WHEREOF, this Agreement is executed as of the day and year first above written.

 

	

   

  	

  BANK:

  	

   

  	

  MONTEREY COUNTY BANK

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Bruce Warner

  	

   

  
	

   

  	

   

  	

  Bruce Warner

  
	

   

  	

   

  	

  Executive Vice President and

  
	

   

  	

   

  	

  Chief Operating Officer

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  EXECUTIVE:

  	

  /s/ Charles T. Chrietzberg, Jr.

  	

   

  
	

   

  	

   

  	

  CHARLES T. CHRIETZBERG, JR.

  
									

 

 

 

EXHIBIT D-4

 

CALCULATION

OF BONUS

 

The ROA and

ROE Bonuses shall be based on the Bank’s pretax return on average assets and

beginning equity using the following amounts.

 

	

  ROA

  	

   

  	

  ROA BONUS

  	

   

  	

  ROE

  	

   

  	

  ROE BONUS

  	

   

  
	

  1.1%

  	

   

  	

  $

  	

  10,000

  	

   

  	

  11

  	

  %

  	

  $

  	

  10,000

  	

   

  
	

  1.2%

  	

   

  	

  $

  	

  20,000

  	

   

  	

  12

  	

  %

  	

  $

  	

  20,000

  	

   

  
	

  1.3%

  	

   

  	

  $

  	

  30,000

  	

   

  	

  13

  	

  %

  	

  $

  	

  30,000

  	

   

  
	

  1.4%

  	

   

  	

  $

  	

  40,000

  	

   

  	

  14

  	

  %

  	

  $

  	

  40,000

  	

   

  
	

  1.5%

  	

   

  	

  $

  	

  50,000

  	

   

  	

  15

  	

  %

  	

  $

  	

  50,000

  	

   

  
	

  1.6%

  	

   

  	

  $

  	

  60,000

  	

   

  	

  16

  	

  %

  	

  $

  	

  60,000

  	

   

  
	

  1.7%

  	

   

  	

  $

  	

  70,000

  	

   

  	

  17

  	

  %

  	

  $

  	

  70,000

  	

   

  
	

  1.8%

  	

   

  	

  $

  	

  80,000

  	

   

  	

  18

  	

  %

  	

  $

  	

  80,000

  	

   

  
	

  1.9%

  	

   

  	

  $

  	

  90,000

  	

   

  	

  19

  	

  %

  	

  $

  	

  90,000

  	

   

  
	

  2.0%

  	

   

  	

  $

  	

  100,000

  	

   

  	

  20

  	

  %

  	

  $

  	

  100,000

  	

   

  
	

  2.1%

  	

   

  	

  $

  	

  110,000

  	

   

  	

  21

  	

  %

  	

  $

  	

  110,000

  	

   

  
	

  2.2%

  	

   

  	

  $

  	

  120,000

  	

   

  	

  22

  	

  %

  	

  $

  	

  120,000

  	

   

  
	

  2.3%

  	

   

  	

  $

  	

  130,000

  	

   

  	

  23

  	

  %

  	

  $

  	

  130,000

  	

   

  
	

  2.4%

  	

   

  	

  $

  	

  140,000

  	

   

  	

  24

  	

  %

  	

  $

  	

  140,000

  	

   

  
	

  2.5%

  	

   

  	

  $

  	

  150,000

  	

   

  	

  25

  	

  %

  	

  $

  	

  150,000

  	

   

  
	

  2.6%

  	

   

  	

  $

  	

  160,000

  	

   

  	

  26

  	

  %

  	

  $

  	

  160,000

  	

   

  
	

  2.7%

  	

   

  	

  $

  	

  170,000

  	

   

  	

  27

  	

  %

  	

  $

  	

  170,000

  	

   

  
	

  2.8%

  	

   

  	

  $

  	

  180,000

  	

   

  	

  28

  	

  %

  	

  $

  	

  180,000

  	

   

  
	

  2.9%

  	

   

  	

  $

  	

  190,000

  	

   

  	

  29

  	

  %

  	

  $

  	

  190,000

  	

   

  
	

  3.0%

  	

   

  	

  $

  	

  200,000

  	

   

  	

  30

  	

  %

  	

  $

  	

  200,000

  	

   

  
	

  3.1%

  	

   

  	

  $

  	

  210,000

  	

   

  	

  31

  	

  %

  	

  $

  	

  210,000

  	

   

  
	

  3.2%

  	

   

  	

  $

  	

  220,000

  	

   

  	

  32

  	

  %

  	

  $

  	

  220,000

  	

   

  

 

MAXIMUM

COMBINED — $220,000, or $400,000 minus non—bonus salary excluding compensation,

if any, for vacation not taken) for the year. The return’s shall be calculated

before deduction for any annual performance bonuses, but after deduction for

commissions and bonuses paid on a monthly basis.

 

11

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